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Oil Spill Judge 'Deeply Disappointed' in BP
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Oil Spill Judge 'Deeply Disappointed' in BP

BP has really irritated Judge Carl Barbier this time. From his courtroom in New Orleans, Barbier presides over the multifaceted litigation concerning the 2010 Gulf of Mexico oil spill. He has sole discretion over a series of decisions determining whether BP 's liability bill from that disaster will total several additional billions of dollars or much, much more.

On Friday, Barbier issued an unusual opinion calling the actions of the oil company's enormous legal team "deeply disappointing." Like a parent who's run out of patience with an obstreperous child, the judge lectured BP's lawyers for changing their story and trying to "rewrite" the history of the landmark case.

Barbier's pronouncement came in response to an equally striking gesture by BP. On Thursday, the company filed what it called an "emergency motion" with the U.S. Court of Appeals for the Fifth Circuit in New Orleans. BP accused Barbier of defying the appellate court's directive to stop hundreds of millions of dollars in settlement payments that BP alleges are flowing to undeserving claimants in the Gulf region. The next day, Barbier issued an 11-page order that condemns the company for knowingly spurning a settlement its own lawyers helped craft.

The implication of the judge's statement was that BP has sought to undermine the pact-and his authority-simply because the settlement has turned out to be more expensive than the company anticipated. What made Barbier's assertion so startling was not just its content but that it put him in a position akin to that of a litigant, arguing against BP in his own defense before the Fifth Circuit.

Since the April 2010 blowout that resulted in the death of 11 rig workers and the release of millions of barrels of crude oil, BP has sold $40 billion of assets and paid out more than $25 billion in cleanup costs and damage claims. The financial question facing the company is how much more it will pay. The dispute with Barbier stems from one portion of that unknown liability: the amount BP owes under an open-ended settlement it signed agreeing to compensate private businesses harmed by the spill.

BP has accused the settlement administrator appointed and overseen by Barbier of handing out the company's money too generously. Multimillion-dollar payments are going to businesses far from the coastline that cannot prove any connection between their woes and the oil disaster, BP maintains. Barbier generally has endorsed the settlement administrator's liberal practices on the theory that the settlement's explicit terms allow certain businesses to receive compensation whether or not they have proof of such a causal connection.

Barbier said in his order on Friday that BP has changed its position now that it sees how expensive the settlement is turning out to be. The judge cited a Sept. 28, 2012, letter written by BP in-house lawyer Mark Holstein, in which Holstein conceded that "false positives"-claimants who don't actually have spill-related damage-would be an inevitable byproduct of the settlement. "If anyone is attempting to rewrite or disregard the unambiguous terms of the settlement agreement, it is counsel for BP," Barbier declared. "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."

The stakes in the immediate dispute are high, and the cost of Barbier's losing faith in BP's lawyers could be even higher for the company. Barbier is supervising not only the business-claims settlement but a trial in which the federal government seeks $17 billion of more from BP under the Clean Water Act. The judge's conclusion on the degree of BP's negligence-an assessment he will make without a jury-will determine the size of that verdict. His determination necessarily turns on whether he finds BP's counsel credible in how they present and interpret technical legal documents not unlike the settlement agreement he has accused them of blatantly misrepresenting.

The next move belongs to the Fifth Circuit, but Judge Barbier inevitably will have influence over BP's financial future. Right now he seems mightily displeased with the company.

Article by Paul M. Barrett, Bloomsberg Businessweek

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