November 12, 2013

Bayou Bonanza Bombshell: $540 Million In Spill Claims Went To Medical Clinics, Lawyers, A Psychiatric Hospital And Other Far-Flung Businesses

A lawyer who lost his license.  A wheat farmer who stopped growing wheat.  A hotel that closed for repairs after a fire.

What do these disparate businesses and people – some located hundreds of miles from the Gulf Coast – have in common?  They’re just a few of the more than 1,000 claimants getting payments from the Court Supervised Settlement Program in the Deepwater Horizon litigation, even though, as described in court papers filed by BP, their losses are either non-existent, exaggerated or have nothing to do with the Deepwater Horizon accident.

The new documents – filed by BP with the District Court on November 7 – demonstrate that the Program has handed out more than $540 million to more than 1,196 claimants located more than 100 miles from the Gulf, and who work in industries unlikely to have been impacted by the Spill, including agriculture, construction, legal services, and even nursing homes.  Another $76 million has been awarded to 64 claimants despite evidence either in their claims files or in publicly available documents, showing that the oil spill was not the cause of any losses.

As noted in BP’s filings, among those getting awards:

  • An Alabama medical clinic whose chief revenue generator was unable to practice medicine – and generate revenue – because his medical license had been revoked by the State of Alabama.  Its award: $662,586.
  • A psychiatric hospital – located more than 100 miles from the Gulf – that saw a pre-spill cut in rates paid to it by government programs and private insurers.  Its award: more than $2 million.
  • A nursing home in Central Louisiana that shut down almost a full year before the spill.  Its award: $662,834.
  • A dental service – located more than 200 miles from the Gulf – whose own sworn statement to its insurer says that water damage unrelated to the spill caused over $47,000 a month in lost income for three months in 2010.  Its award: $137,518.89.
  • A Floridian who claimed to be a builder of custom homes despite having no active contractor’s license in the state of Florida, and no payroll.  The claimant’s award: $274,944.98.
  • A wireless phone store in Louisiana that was closed for all of 2010 as a result of a fire predating the oil spill.  Its award: $135,258.94.
  • A Louisiana lawyer, located approximately 200 miles from the Gulf, who lost his license four months before the spill.  The claimant’s award $172,253.
  • A wheat farm located more than 200 miles from the Gulf that elected not to grow in 2010.  Its award: $266,730.

As part of its filings on November 7, BP asked the District Court to allow for an examination of the Claims Administrator's policies regarding these claims and stop payments to those who did not suffer a loss as a result of the Deepwater Horizon accident.  BP requested these amendments because the Fifth Circuit Court of Appeals expressly stated that the issue of claimants collecting funds for harms unrelated to the oil spill should be given "the attention it deserves" on remand, and because as the Claims Administrator admitted to the Fifth Circuit, the settlement program has paid claims "for losses that a reasonable observer might conclude were not in any way related to the Oil Spill."

The District Court, however, failed to follow the Fifth Circuit's clear directive to enter an injunction preventing payments to claimants who did not suffer harm traceable to the Deepwater Horizon accident.  The Court has also declined to properly enforce the settlement agreement's threshold requirement limiting class membership to those claimants whose injuries are traceable to the spill.  Continued violation of the settlement agreement's clear terms creates serious constitutional and other legal problems that would, unless corrected, invalidate the entire settlement.  BP has asked the Fifth Circuit to enforce the settlement agreement's threshold causal-nexus requirement for class membership and to enjoin any further payments to claimants whose losses are not traceable to the spill.  BP will continue to fight in court all interpretations of the settlement agreement that are inconsistent with the agreement's language, the intent of the parties, and the law.