BP victim of 'irreparable injustices' in oil spill settlement, court hears

BP is suffering financial harm because of the way a court-appointed administrator is making payments from a settlement of claims from the 2010 oil spill in the Gulf of Mexico, a U.S. federal appeals court reviewing BP's challenge of billions of dollars in payouts heard Monday.

Oil company wants judges to overturn billions of dollars in claims

Protesters outside of a U.S. federal building in New Orleans on the first day of the trial over the 2010 BP oil spill in February 2013. The judge in the civil trial upheld a court-appointed administrator's interpretation of settlement claims from businesses that say they suffered millions of dollars in damages as a result of the massive spill. BP is appealing the ruling, saying many of the claims are inflated or fictitious. (Jonathan Bachman/Reuters)

BP PLC is suffering financial harm because of the way a court-appointed administrator is making payments from a settlement of claims from the 2010 oil spill in the Gulf of Mexico, an attorney for the oil giant said Monday.

Ted Olson made the arguments in a packed courtroom before a three-judge panel of the Fifth U.S. Circuit Court of Appeals. A lower court already refused to block payments to businesses that claim the spill cost them money.

At stake are billions of dollars in settlement payments stemming from the blowout of BP's Macondo well in the Gulf of Mexico in April 2010. The blowout killed 11 people and spilled four million barrels of oil into the Gulf.

'Irreparable injustices'

Samuel Issacharoff, an attorney for Gulf Coast businesses and residents, argued the oil company was aware of the settlement terms and the administrator's methods. He questioned whether the appeals court has authority to change that agreement.

Oil spill settlement payouts causing ‘irreparable injustices,’ BP tells court

But Olson, who served as solicitor general under President George W. Bush, attacked the payout process.

"Irreparable injustices are taking place and money is being dispensed to parties from whom it may not be recoverable," he told the judges.

The panel opened Monday's hearing by asking Olson whether the court has jurisdiction in a case involving a settlement already approved by the parties in the case and a U.S. District Court judge.

Judge James Dennis seemed skeptical at times, asking at one point, "How can we go beyond the four corners of the agreement?"

BP has asserted that the judge who approved the deal and a court-appointed claims administrator have misinterpreted the settlement, allowing thousands of businesses to secure hundreds of millions of dollars in payments for inflated and fictitious losses.

Plaintiffs' attorneys who brokered the deal last year counter that BP undervalued the settlement and underestimated how many claimants would qualify for payments under the terms they negotiated.

BP's appeal doesn't apply to payouts to individuals.

$20B compensation fund

The April 2010 blowout of BP's well off the Louisiana coast triggered an explosion that killed 11 workers on the Deepwater Horizon drilling rig and led to millions of gallons of oil spilling into the Gulf. Shortly after the disaster, BP agreed to create a $20 billion US compensation fund that was administered at first by the Gulf Coast Claims Facility, led by attorney Kenneth Feinberg.

After the settlement was announced last year, Barbier appointed attorney Patrick Juneau to take over the process of evaluating and paying claims.

The settlement doesn't have a cap, but BP initially estimated that it would pay $7.8 billion to resolve claims by tens of thousands of Gulf Coast residents and businesses. Now, the company says it no longer can give a reliable estimate for how much the deal will cost.

Awards to businesses are based on a comparison of their revenues and expenses before and after the spill. BP says a "policy decision" that Juneau announced in January 2013 allows businesses to manipulate those figures in a way that leads to errors in calculating their actual lost profits.

Plaintiffs' attorneys say BP has never offered an alternative methodology for evaluating these claims — and had agreed from the outset of the settlement agreement that the claims administrator should interpret the compensation frameworks to provide the greatest payouts to claimants, the plaintiffs' lawyers said.

Juneau's office has offered more than $2.2 billion in settlement payments to more than 8,600 businesses as of June 23.