DOJ objects to 6% attorney reserve in BP litigation

Steve Korris Jan. 17, 2012, 3:32am


NEW ORLEANS – The Department of Justice burst an $840 million bubble for the Plaintiff Steering Committee in Deepwater Horizon litigation, wrecking their plan to reserve 6 percent of settlements at BP's Gulf Coast Claims Facility.

Alabama Attorney General Luther Strange waved a surrender flag on Jan. 13, a day after the DOJ objected to any charge on the GCCF.

Strange asked U. S. District Judge Carl Barbier, who is presiding over the multi district litigation for BP suits, to reconsider an order he signed on Dec. 28, and rule that settlements with the facility are not subject to the charge.

The GCCF started with $20 billion, and has paid out about $6 billion.

The charge continues to apply to settlements in Barbier's court, at 4 percent for states and 6 percent for private parties and local governments.

Surrender spells trouble for PSC lawyers as they prepare for a fault allocation trial that Barbier plans to start on Feb. 27.

Strange, as the committee's sole representative for state and local governments, has cooperated more closely with the committee than with states and locals.

Barbier, who picked the committee, followed its members out on a weak limb.

He had exercised jurisdiction over the facility only once before, to adopt a script for claims administrator Kenneth Feinberg to follow in communicating with claimants.

Last November, the committee asked him to establish a reserve account that would hold back 4 or 6 percent of settlements.

The proposal upset plaintiff lawyers who don't belong to the steering committee.

They expressed satisfaction with Feinberg, and argued they derived no benefit from the committee's work.

Defendants protested that the proposal would force them to finance their opposition.

Committee lawyers retreated, writing that they wouldn't compel defendants to hold back a reserve fund over and above a plaintiff's recovery.

They wrote that the order would afford parties flexibility to negotiate a resolution.

They wrote that defendants could fund the reserve over and above a settlement amount or hold the reserve out of the settlement amount.

"Nothing in the order, as proposed, would require a defendant to pay attorneys' fees," the committee attorneys wrote.

Louisiana Attorney General Buddy Caldwell, who had once favored the plan, turned against it.

He wrote that the order did not contemplate a deduction from state recoveries.

Louisiana Gov. Bobby Jindal decided to isolate Caldwell by endorsing the proposal, after persuading the committee to exempt certain settlements from the tax.

In the clash between Caldwell and Jindal, Barbier found fault with Caldwell.

"The court has on multiple occasions encouraged the state of Louisiana to cooperate with the PSC (Plaintiff Steering Committee) and the state of Alabama insofar as their interests are aligned versus the defendants in this complex MDL," he wrote.

"Rather than cooperate or attempt to work collaboratively, the state of Louisiana, through its retained private counsel, has instead often obstructed and frustrated the progress of the litigation," Barbier wrote.

Barbier gave the committee much of the credit for the facility's accomplishments.

"The PSC has strongly advocated on behalf of persons submitting claims to the GCCF, continuing to apply public and private pressure to improve the GCCF claims handling operations," he wrote.

Barbier wrote that the committee made translators available to Vietnamese claimants.

He wrote that they advocated a full audit of the facility now in progress and for a more liberal causation standard.

"Considering the unique circumstances of this case, it would be unfair to allow parties to benefit from these activities of the PSC, but avoid contributing to the common benefit fund simply because they are able to settle directly with the GCCF and avoid filing a claim in the MDL," he wrote.

Barbier awarded no fees, writing that he simply established a fund from which common benefit fees might later be disbursed.

He made the reserve retroactive to Nov. 7, the date of the committee's proposal.

BP moved for reconsideration, and Feinberg suspended all claim payments pending a review of actions the order would require.

Caldwell petitioned to overturn the order on Jan. 6, branding it disappointing, false, purely personal, wholly inappropriate and not relevant.

He wrote that Barbier violated Louisiana's sovereignty, constitution and laws.

Caldwell wrote that the committee would effectively control Louisiana's case at trial.

On Jan. 11 and 12, Florida Attorney General Pamela Jo Bondi, five plaintiff lawyers and the Department of Justice attacked the order.

Bondi wrote that attorney generals and the DOJ were responsible for improvements to the claims facility process.

She wrote that the committee directed its energies toward diverting claimants from the facility to Barbier's court.

"It is particularly troubling that GCCF claimants who chose to stay out of court would have their payments withheld due to the claimed expense of a lengthy trial that will not even remotely benefit them," she wrote.

She wrote that the order penalized claimants who resolve claims without counsel.

"One of the criteria for the selection of PSC members was the financial wherewithal to fund and prosecute this litigation," Bondi wrote.

Attorney Anthony Buzbee of Houston wrote on behalf of Luxury Resorts and Hotels that the order would reduce his fee by more than half.

Daniel Becnel of Reserve, La., wrote that the committee hasn't shared any work product that would help his firm in negotiations with the facility.

He wrote that committee liaison Steve Herman sent a letter informing him that his firm would receive no common benefit work from the committee.

Camilo Salas of New Orleans wrote that he has not used any work product of the committee and his clients haven't benefited from any work the committee performed.

Robert McKee of Fort Lauderdale, Fla., wrote that he agreed to a greatly reduced fee in reliance on how the facility process would work.

"There is nothing to suggest that the PSC's efforts had any impact on the claims evaluation formula," he wrote.

J. R. Whaley of Alexandria, La., wrote that no opportunity was given for a hearing to controvert the committee's claims.

For the Department of Justice, Michael Underhill of San Francisco wrote that the Oil Pollution Act establishes a process different from the usual tort law process.

"Withholding a portion of the settlement funds provided to a claimant who affirmatively declines to come before this court by initiating or joining litigation, with the funds to be deposited in a litigation related fund, is a significant alteration of the policies reflected in the Oil Pollution Act," Underhill wrote.

"By reaching into the claims process and explicitly diminishing the amount possible to be realized by claimants, the withholding vitiates a significant benefit of avoiding litigation."

The committee composed a reply to Buzbee and fired a shot at Becnel, writing that this wasn't the appropriate time to comment on the nature or quality of his activities.

To the DOJ, the committee could reply only with a white flag.

BP's motion for reconsideration remains pending, with no hearing set.

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