The Coming Wave of Gulf Coast Oil Spill Litigation
| Publication year | 2010 |
| Pages | 0374 |
| Citation | Vol. 71 No. 5 Pg. 0374 |
When the Deepwater Horizon oil rig exploded and sank in the Gulf of Mexico April 22, 2010, few imagined the environmental disaster that was brewing below the surface. To be sure, early reports of missing and presumed dead oil rig workers saddened us. And images of fire, thick black billowing smoke and a sinking rig captured our attention. But those in charge assured us that no oil was leaking, and we went on about our lives. Not until days and weeks later did the truth begin seeping out. We now know that hundreds of millions of gallons of oil have been released into the Gulf, easily eclipsing the 1989 Exxon Valdez spill in Alaska.
The on-the-ground response to the spill by the responsible parties, chief among them BP, was chaotic at best. The proposed "fixes" to stop the leaking oil proved unsuccessful and sometimes comical-like the "top kill" that involved shooting golf balls into the well. As we write this article, the leaking well still spews oil into the Gulf-closing fisheries, killing marine life and destroying the livelihoods of those who rely on a healthy Gulf of Mexico.
The legal landscape surrounding the oil spill, like the response, can also be described as confused and uncertain. Many individuals and businesses are unclear where to turn for legal relief. Scores of class-action lawsuits have been filed on behalf of various interested parties, including commercial fishermen, hotel owners, charter boat captains and marinas. BP set up and administered a claims process, as required by the federal Oil Pollution Act, paying millions of dollars to claimants. Later, the Obama Administration forced BP to cough up $20 billion to fund an "independent" claims process administrated by former federal pay czar and 9/11 fund administrator Ken Feinberg. The federal government and Gulf Coast states are conducting their own investigations into the incident and will pursue their own legal claims, which could include criminal charges.
With all of these moving parts, it is difficult to predict how this disaster will play out from a legal perspective. Hundreds of millions of dollars have already been spent in clean-up costs and interim claims payments. Undoubtedly, billions of additional dollars will trade hands but how will this process proceed? Will Feinberg take over the BP claims process? What types of claims will he pay and what criteria will he use? What documentation will be required? This last question is particularly important to the tourist-related businesses along the Gulf, many of which are cash-, not record-, driven. While claims have been paid to many for lost past wages and income (there are issues as to amount), for how long will these payments continue? Will there be a "final" claim submittal process? Will acceptance of the offered amount preclude the claimant from later pursuing judicial relief?
And those are some of the easier questions. What about damages for lost rental income? Payments have reportedly been made where claimants can show reservations and cancellations due to the spill. But what about all those reservations that were never made as potential tourists watched images of oil-soaked pelicans and oil-soiled beaches and decided this was the year for Six Flags, a Braves game and the Coca-Cola museum? What about all the Gulf Coast businesses (restaurants, theme parks, fishing stores, charter boat captains, etc.) whose businesses have been damaged or destroyed? Are they going to be able to collect future lost profits? That brings us to the thousands of property owners up and down the Gulf Coast and along its bays and estuaries. These individuals and businesses face their own unique legal and economic issues. While many of these owners rent their property for profit, others do not. But all of them have one thing in common-they have lost the use and enjoyment of their property for at least one season and have seen the value of their rental, retirement, investment and vacation properties decline precipitously. In fact, some Florida tax officials have already suggested assessing property owners based on new lower property values caused by the diminution in value from the spill.
"But that is not all. Oh, no. That is not all," to quote Dr. Suess's Cat in the Hat. The overarching question is where and who will decide all these questions, issues and disputes. Will it be BP through its claims process, or the Coast Guard as administrator of the Oil Spill Liability Trust Fund? Could it be Obama's "independent" pay czar Ken Feinberg? Our bet is that for many, the ultimate answer will be none of the above. While some claims will be submitted to and paid by BP and Feinberg, many more will be resolved by and through the judicial system, at least in the end. While the process will be suitable for handling claims for cleanup costs, lost past wages and rents, and some well-documented business interruption losses, it will not provide a meaningful avenue for full recovery to all those who have seen and will continue to see their property generate less in income and decline in value.
One thing is for certain-lawyers and judges will be wrestling for years with a complex web of federal and state statutory and common law, all in...
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