Upcoming Ruling Could Freeze BP Oil Spill Payouts

Last week, BP suffered a defeat when the 5th U.S. Circuit Court of Appeals in New Orleans refused to reconsider a previous ruling stating that businesses were not required to prove that they were harmed by the 2010 Gulf of Mexico oil spill in order to collect money. When BP approached the federal appeals court asking them to rehear the case, the court voted 8-5 against it—which ultimately preserved the originally ruling.

The Issue: Establishing Causation

Currently, the criteria for the business claims, per the 2012 policy statements, does not require businesses to provide direct evidence of the harm caused by the oil spill; instead, the policy statement has identified four geographic zones and types of businesses, as well as a formula for presenting economic losses.

According to Judge Leslie Southwick, all parties involved in the case agreed to these terms when drafting the original 2012 settlement; however, BP is arguing that their statement has been misinterpreted by the claims administrator. As Judge Edith Brown Clement said, "Our courts' decisions would allow payments to 'victims' such as a wireless phone company store that burned down and a RV park owner that was foreclosed on before the spill. Left intact, our holdings funnel BP's cash into the pockets of undeserving non-victims."

Taking the Case to the Supreme Court

Following the federal appeals court's denial, BP stated that they were considering all options, with many legal experts stating that their only true recourse would be taking the fight all the way to the Supreme Court. This was only made truer when this Wednesday a federal judge lifted the hold on the oil spill payments, which opened the company up to hundreds of millions of dollars in liabilities from what they allege are fabricated claims. In their motion, BP stated "absent recall and state of the mandate, BP will suffer irreparable injury."

BP is currently fighting to have the injunction kept in place so that hundreds of millions of dollars are not "irretrievably scattered to claimants that suffered no injury traceable to BP's conduct," as stated in court documents. The matter is now up to Supreme Court Justice Antonin Scalia who must look into all relevant factors in the case. Should Scalia decide that BP's claim holds weight, he may move quickly to re-instate the hold, which could give a six month breathing period for BP as it would temporarily freeze oil spill payouts.

During that time, the Supreme Court would be able to decide whether or not it wants to take up the case; as one University of Richmond law professor stated, the Supreme Court would ultimately want to review the entire civil trial instead of just parts of it. If, however, Scalia decides that the case is nothing more than a simple contractual dispute, he could side with the 5th Circuit and dismiss BP's petition altogether.

While the settlement does not have a cap, BP originally estimated that it would take nearly $8 million to resolve all of the claims, which has since been boosted to an estimate of more than $9 billion. This is in addition to the $14 billion the company has already spent to assist with the oil spill cleanup efforts.