BP 2013 Annual Report Download - page 265

through the judicial process.” On 5 December 2013, the district court
amended its preliminary injunction related to business economic loss
claims to temporarily suspend the issuance of final determination notices
and payments of business economic loss claims, pending resolution of
the business economic loss issues that are the subject of the pending
remand.
On 24 December 2013, the district court ruled on the issues remanded to
it by the business economic loss panel of the Fifth Circuit, ordering that
the claims administrator, in administering business economic loss claims,
must match revenue with the variable expenses incurred by claimants in
conducting their business, even where the revenues and expenses were
recorded at different times. The district court assigned to the claims
administrator the development of more detailed matching requirements.
On 12 February 2014, the claims administrator issued a draft policy
addressing the matching of revenue and expenses for business
economic loss claims. The parties have made written submissions on the
draft policy and the claims administrator will issue a final policy to which
BP and the PSC have the right to object and seek review by the district
court. As to the issue of causation, the district court ruled that the
Economic and Property Damages Settlement Agreement contained no
causation requirement beyond the revenue and related tests set out in an
exhibit to that agreement, and that BP was judicially estopped from
arguing otherwise. The district court also held that the absence of a
further causation requirement does not defeat class certification nor
invalidate the settlement under the federal class certification rule or
Article III of the US Constitution. On 26 December 2013, BP filed a
motion to consolidate that appeal with the related appeals pending
before the business economic loss panel of the Fifth Circuit. BP
subsequently filed a renewed motion for a permanent injunction that
would prevent the claims administrator from making awards to claimants
whose alleged injuries are not traceable to the spill and a motion to
expedite the court’s resolution of that renewed motion. On 3 March
2014, the business economic loss panel (in a 2 to 1 decision) affirmed the
district court’s ruling on causation and denied BP’s motion for a
permanent injunction. BP is considering its appeal options, including a
potential petition that all the active judges of the Fifth Circuit review the 3
March decision. Under the terms of the business economic loss panel’s
ruling, the injunction temporarily suspending issuance of final
determination notices and payments of business economic loss claims
will be lifted when the matter is transferred back to the district court; the
timing of this would be affected by the status of any such petition by BP.
For more information about BP’s current estimate of the total cost of the
PSC settlements, see Financial Statements – Note 2.
PSC settlements – investigation of the DHCSSP
On 2 July 2013, the district court in MDL 2179 appointed former federal
district court judge Louis Freeh as Special Master to lead an independent
investigation of the DHCSSP in connection with allegations of potential
ethical violations or misconduct within the DHCSSP. On 6 September
2013, Judge Freeh submitted a written report to the district court in
which he presented his findings that the conduct of two attorneys in the
office of the claims administrator may have violated federal criminal
statutes regarding fraud, money laundering, conspiracy or perjury. In an
order issued the same day, the court instructed Judge Freeh to promptly
recommend, design, and test enhanced internal compliance, anti-
corruption, anti-fraud and conflicts of interest policies and procedures,
and assist the claims administrator in the implementation of such policies
and procedures. On 23 September 2013, BP filed a response to Judge
Freeh’s report and requested that the court enter a preliminary injunction
temporarily suspending all payments from the DHCSSP until such time
as improved anti-fraud and other efficiency controls are put in place at the
DHCSSP to the satisfaction of Judge Freeh, the Claims Administrator,
and the court. The court has not yet ruled on BP’s request for a
preliminary injunction. On 17 January 2014, Judge Freeh submitted a
second written report that described the behaviour at the DHCSSP that
led to the resignations of senior staff members.
PSC settlements – Seafood Compensation Fund
On 17 December 2013, BP filed a civil lawsuit in MDL 2179 against
former PSC lawyer Mikal C. Watts, accusing him of having fraudulently
claimed to represent more than 40,000 deckhands who allegedly
suffered economic injuries as a result of the Incident. BP’s action alleges
that BP relied on Mr. Watts’s representations when it agreed to pay
$2.3 billion to the Seafood Compensation Fund (the Fund), which was
established under the Economic and Property Damages Settlement to
compensate those who earn their livelihood from Gulf waters and were
directly affected by the spill, and that the Economic and Property
Damages Class stands to benefit unjustly from the full distribution of the
money remaining in the Fund. In addition, BP filed two motions asking
the district court to suspend further distributions from the Fund and to
determine the extent of the fraud and what portion, if any, of the Fund
should be returned as a result. On 17 January 2014, Mr Watts filed a
motion to stay the litigation pending a parallel criminal investigation and
the PSC also filed a brief opposing BP’s motion seeking an injunction. On
26 February 2014, the district court granted Mr Watts’s motion to stay
the litigation and denied BP’s motion to suspend further distributions, on
the basis that no further payment from the Fund is imminent. The district
court deferred ruling on BP’s motion seeking to determine the extent of
the fraud and what portion, if any, of the seafood fund should be returned
as a result.
State and local civil claims, including under OPA 90
On 12 August 2010, the State of Alabama filed a lawsuit seeking
damages for alleged economic and environmental harms, including
natural resource damages, civil penalties under state law, declaratory and
injunctive relief, and punitive damages as a result of the Incident. On
3 March 2011, the State of Louisiana filed a lawsuit to declare various BP
entities (as well as other entities) liable for removal costs and damages,
including natural resource damages under federal and state law, to
recover civil penalties, attorney’s fees and response costs under state
law, and to recover for alleged negligence, nuisance, trespass, fraudulent
concealment and negligent misrepresentation of material facts regarding
safety procedures and BP’s (and other defendants’) ability to manage the
oil spill, unjust enrichment from economic and other damages to the
State of Louisiana and its citizens, and punitive damages.
On 10 December 2010, the Mississippi Department of Environmental
Quality issued a Complaint and Notice of Violation alleging violations of
several state environmental statutes.
The Louisiana Department of Environmental Quality has issued an
administrative order seeking environmental civil penalties and other relief
under state law. On 23 September 2011, BP removed this matter to
federal district court, and it has been consolidated with MDL 2179.
District Attorneys of 11 parishes in the State of Louisiana have filed suits
under state wildlife statutes seeking penalties for damage to wildlife as a
result of the Incident. On 9 December 2011 and 28 December 2011, the
district court in MDL 2179 granted BP’s motions to dismiss the District
Attorneys’ complaints, holding that those claims are pre-empted by the
Clean Water Act. All 11 of the District Attorneys of parishes in the State
of Louisiana filed notices of appeal. The State of Alabama’s attempt to
intervene in the case was denied. Since May 2012, amicus briefs have
been filed in those appeals by the states of Alabama, Louisiana, and
Mississippi. Oral argument was held on 5 March 2013 and the Fifth
Circuit affirmed the district court’s ruling on 24 February 2014.
On 14 November 2011, the district court in MDL 2179 granted in part
BP’s motion to dismiss the complaints filed by the states of Alabama and
Louisiana. The court’s order dismissed the states’ claims brought under
state law, including claims for civil penalties and the State of Louisiana’s
request for a declaratory judgment under the Louisiana Oil Spill
Prevention and Response Act, holding that those claims were pre-
empted by federal law. It also dismissed the State of Louisiana’s claims
of nuisance and trespass under general maritime law. The court’s order
further held that the states have stated claims for negligence and
products liability under general maritime law, have sufficiently alleged
presentment of their claims under OPA 90 and may seek punitive
damages under general maritime law.
On 9 December 2011, the district court in MDL 2179 granted in part BP’s
motion to dismiss a master complaint brought on behalf of local
government entities. The court’s order dismissed the plaintiffs’ state law
claims and limited the types of maritime law claims the plaintiffs may
pursue, but also held that the plaintiffs have sufficiently alleged
presentment of their claims under OPA 90 and that certain local
government entity claimants may seek punitive damages under general
maritime law. The court did not, however, lift an earlier stay on the
Additional disclosures
BP Annual Report and Form 20-F 2013 261