Burlington Northern Continues to PERColate

Posted on January 26, 2015 by Robert M Olian

The Fifth Circuit has just weighed in with a significant interpretation of the Supreme Court’s landmark decision in Burlington Northern & Santa Fe Railway Co. v. United States, 556 U.S. 599 (2009). In a case involving “arranger” liability under CERCLA (the Comprehensive Environmental Response, Compensation and Liability Act), the Fifth Circuit on January 14 overturned a district court judgment that had held BorgWarner liable for leaks of perchloroethylene (PERC) from equipment sold by an affiliate of BorgWarner’s corporate predecessor. Vine Street LLC v. Borg Warner Corp., No. 07-40440 (Jan. 14, 2015)

The Fifth Circuit held there was no “intent” to dispose of PERC even though the dry cleaning equipment was designed with the knowledge that some PERC would inevitably be mixed in with the water that the system was designed to discharge. Because PERC was a useful product and the intent was to reclaim it rather than dispose of it, the Fifth Circuit strictly applied Burlington Northern’s holding that arranger liability requires an intent to dispose and remanded the case to the district court with instructions to enter judgment in favor of BorgWarner.

Vine Street usurps the Fifth Circuit’s earlier “nexus” test (the test in effect when the District Court issued its ruling), which was based on a totality of the circumstances, and gives further ammunition to those defending against CERCLA liability for releases incidental to the sale of a useful product. 

BP Tightens its Grip on the Deepwater Horizon Checkbook

Posted on June 9, 2014 by Jarred Taylor

BP Exploration and Production, Inc. (“BP”) was recently dealt another blow in its fight to reinterpret its multibillion dollar settlement for economic and property losses arising from the 2010 Deepwater Horizon disaster when the Fifth Circuit refused to rehear BP’s appeal of a prior district court ruling on “causation nexus” requirements in the agreement.  In December 2013, U.S. District Court Judge Carl Barbier ruled that individuals and businesses do not have to prove that they were directly harmed by the oil spill in order to get paid under the terms of the settlement agreement.

In 2012, nearly two years after the spill, BP reached a settlement with the Plaintiffs’ Steering Committee (which acts on behalf of individual and business plaintiffs in the multi-district litigation proceedings) to resolve hundreds of thousands of private economic, property damage, and medical claims stemming from the Deepwater Horizon explosion and oil spill.  BP has disputed many of the economic and property damage claims brought pursuant to the settlement agreement.  BP argues that the claims administrator was incorrectly interpreting the meaning of the settlement agreement, particularly with respect to whether or not a claimant must submit evidence that its losses were directly caused by the spill.

Judge Barbier, who is presiding over the multidistrict litigation stemming from the Deepwater Horizon disaster, ruled that the settlement agreement did not contain a causation requirement beyond the revenue and related tests set out in the agreement, opening BP’s checkbook to economic loss claimants who may not be able to trace the cause of their damages back to the 2010 disaster.  BP already had revised its original $7.8 billion estimate of its potential costs under the settlement agreement up to about $9.2 billion.  Later, as it began challenging economic loss claims, BP proclaimed it could no longer provide a reliable estimate of the ultimate cost of the deal.   

BP appealed the district court’s ruling to the Fifth Circuit Court of Appeals, claiming in December that it had to pay hundreds of millions of dollars to businesses and individuals that exaggerated losses from the disaster.  The Fifth Circuit affirmed the district court’s ruling in March 2014, and on May 19, declined to rehear BP’s appeal. In a strongly worded dissent joined by two other justices, though, Judge Edith Clement argued that the district court’s rulings would “funnel BP’s cash into the pockets of undeserving non-victims” of the 2010 spill, adding that the appeals court had made itself “party to this fraud” by rejecting BP’s arguments. Judge Clement concluded that “another court surely must resolve this.” BP clearly agrees and has vowed to appeal its case to the U.S. Supreme Court, declaring that “no company would agree to pay for losses that it did not cause, and BP certainly did not when it entered into this settlement.” 

Ted Olsen, BP’s lead attorney, said in a 60 Minutes segment in May that the company would take its argument “as far as it is necessary to go to make sure that this settlement agreement is construed properly.” The New Orleans Times-Picayune reports that some experts following the case expect that the Supreme Court will not take up the case, but suspect that BP’s true motive may not be to win on appeal, but to simply prolong the litigation and delay paying claims. The Fifth Circuit lifted its stay on payout of settlement claims, and the Supreme Court just rejected BP’s request that the Supreme Court reimpose the stay pending filing and disposition of its petition for writ of certiorari. 

Meanwhile, in the midst of its attempt to walk back from the economic and property loss settlement it negotiated and—at the time—happily agreed to, BP rejected a $147 million claim from the National Oceanic and Atmospheric Administration (“NOAA”) demanding additional funds to conduct its ongoing Natural Resource Damage Assessment (“NRDA”) activities related to the Deepwater Horizon oil spill. NRDA is the process created by the Oil Pollution Act (“OPA”) and its implementing regulations that authorizes natural resources Trustees to assess injuries to natural resources caused by oil spills and spill response activities, and to restore the injured resources. OPA requires that the party or parties responsible for the oil spill pay for the reasonable costs incurred by the Trustees to carry out the NRDA and restoration. 

Last July, NOAA submitted a claim to BP for the estimated costs of NRDA activities that NOAA planned to implement in 2014. NOAA’s claim includes $2.2 million for research on the recovery of coastal wetlands, more than $10 million to remedy damage to dolphin and whale habitat, and $22 million for oyster habitat restoration. The Financial Times (free subscription required) reports that BP rejected the majority of NOAA’s requests, saying it was concerned by “the lack of visibility and accountability” in the process, and the unwillingness of the Deepwater Horizon NRDA Trustees (a handful of U.S. federal agencies and five Gulf Coast state governments) “to engage in technical discussions of the substantive issues.” The Financial Times reports that “BP said it had paid for work that was not done or done properly, been double-billed for the same study, and not been allowed to see research findings that it had been told would be shared”—evidence BP argues could be used at the trial over civil penalties to show that ecological damages from the spill are much less than once feared. 

According to an April 30 report on BP’s website, BP has already paid nearly $1.5 billion to federal and state government agencies for spill response, NRDA activities, and other claims related to the Deepwater Horizon spill, and over $11 billion to individuals and businesses. I need to disclose, too, that my firm is assisting several claimants to the BP settlement fund.