While I'd love to say a lot has happened since my article on BP Hollow Legal 'Victory', but quite frankly it is just official confirmation on what should have already been known and understood. As I stated in my most recent BP (NYSE:BP) article, BP had been prematurely popping the champagne when it had a huge party at its headquarters.
The media was going nuts, claiming it will save BP billions of dollars and portraying some huge win for BP as if the settlement was getting thrown out. I characterized this as ludicrous. Even some attorneys fell for the hype.
On Friday November 22, the hangover hit. In an 11-page ruling, Judge Carl Barbier systematically tore BP apart. He concluded in part, "In any event, the undersigned is certain that causation is not an issue before this Court, and will not consider any pleadings requesting that it be made a subject of re-evaluation."
For those new to the story, BP co-wrote a settlement for business economic losses regarding its 2010 oil spill. The purpose is to compensate businesses in the Gulf coast region that suffered economic losses. The settlement is starting to cost more than BP wants to or expected to pay, and it has been fighting against its own settlement ever since. It won a minor ruling about an accounting rule that may not even have a material effect on its payout bill, but other than that BP has been continually beaten up in court.
The terms of the settlement require claimants to use a mathematical formula to qualify. This formula acts as a substitute for presenting evidence and holding a trial and allows the settlement to compensate tens or hundreds of thousands of claimants at once. BP has done a 180 and was asking for proof be required by businesses in order to make a claim. This, of course, is ridiculous and defeats the whole purpose of a settlement. This attempt was denied, and Judge Carl Barbier had quite a few harsh words for BP's attorneys.
Some items of note from the ruling:
1. BP's hypocrisy
BP's new position, however, is at odds with the Settlement Agreement's language and BP's prior statements and submissions regarding the proper interpretation and implementation of Exhibit 4B. Moreover, BP's accusations against Mr. Juneau and the Settlement Program are unwarranted.
2. BP busted by its own email:
BP has been all over the media citing examples of what it called ridiculous claims from businesses whose losses clearly had nothing to do with the oil spill. In response, Judge Barbier produced emails where he himself questioned BP with hypothetical scenarios. He gave one where a partner in a CPA firm was out on medical leave, and the only reason the firm suffered losses was due to the absence of that partner which was clearly not from the spill itself. A lawyer for BP emailed back:
...extraneous non-financial data indicates that the decline was attributable to a factor wholly unrelated to the Oil Spill. Such "false positives" are an inevitable concomitant of an objective quantitative, data-based test.
3. BP's own expert testified:
...all revenue and variable profit declines during the claimant selected compensation period are presumed to be caused by the spill, with no analysis required to determine whether the declines might have been due, at least in part, to other causes.
4. The judge's final beat down on BP in his conclusion:
BP accuses the Claims Administrator of "rewriting" and systematically disregarding" the Settlement Agreement. To the contrary, when it talks about causation, if anyone is attempting to rewrite or disregard the unambiguous terms of the Settlement Agreement, it is counsel for BP.
Frankly, it is surprising that the same counsel who represented BP during the settlement negotiations, participated in drafting the final Settlement Agreement, and then strenuously advocated for approval of the settlement before this Court, now come to this Court and the Fifth Circuit and contradict everything they have previously done or said on this issue. Such actions are deeply disappointing, especially considering that the Court has previously appreciated and complimented the excellent cooperation and professionalism exhibited by all counsel in this extremely complex and difficult litigation. In any event, the undersigned is certain that causation is not an issue before this Court, and will not consider any pleadings requesting that it be made a subject of re-evaluation.
On top of all this, what BP and the media aren't telling you is that even if BP somehow did miraculously get its own settlement terminated, there's a clause that states any claim already filed would be automatically grandfathered in. See page 92:
If this Agreement for any reason terminates and becomes null and void, the Claims Administrator will continue to process Claims that have been submitted but as to which the Claimant has not executed an Individual Release.
With an original settlement deadline of April 22, 2014 it's running out of time to stop new claims even if it did win. In an even bigger fit of irony, the longer BP fights the further that deadline is extended. The settlement calls for the deadline to be extended if there's anything going on with appeals in the court system so as to allow claimants a full six months to know officially the final rules are before choosing to participate or not. Since six months from now is already passed the original April 22, 2014 deadline, every single day passes with BP still fighting it out means another day the settlement deadline is extended. BP is rapidly racking up its own legal bills, unnecessarily, at the expense of shareholders.
To quote Judge Barbier, "BP has made another document dump into the record of this case, without leave of court and apparently without consulting with opposing counsel." BP litigation department appears to be almost as sloppy as its deep water well drilling department.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.