BP's failed U.S. Supreme Court appeal sends clear signal

Legal experts say the U.S. Supreme Court’s decision not to hear BP’s challenge to its multibillion-dollar oil spill settlement was a predictable end to one of the more contentious chapters of the ongoing disaster litigation. But the setback may not keep BP from appealing to the nation’s highest court on future oil spill disputes.

The Monday (Dec. 8) decision upholds lower court rulings that, under the settlement terms, businesses claiming damages from the 2010 Gulf of Mexico oil disaster need not prove direct harm.

BP spent nearly two years challenging that interpretation of the settlement. It argued that the agreement was being misread to allow millions of dollars to go to underserving business.

BP originally estimated the settlement would cost it $7.8 billion total. It now estimates it could spend as much as $9.7 billion.

David Logan, a law professor at Roger Williams University in Rhode Island, said BP’s appeal to the Supreme Court was a long shot, even with the nation’s top attorneys behind the effort.

Logan noted there was no split on the issue in the lower courts. The U.S. District Court and the 5th Circuit Court of Appeals, both in New Orleans, have upheld the settlement.

He added BP’s argument that this case could discourage companies from making large settlements in the future didn’t appear to be compelling enough.

“The basis for the position they’ve taken for a couple of years now is no longer a valid position legally,” Logan said. “It’s time for them to move on.”

It’s not yet clear whether BP will stage another big appeal of the settlement.

Logan expects Monday’s ruling is likely the end of BP’s major challenges, though “fringe” matters such as accounting guidelines for the program could still land in court.

He noted the decision reinforces the binding language of the settlement.

Logan said BP is now forced to ask itself whether its lawyers were incompetent in waiving the company’s right to demand proof of direct harm in the settlement.

Carl Tobias, a law professor at the University of Richmond and expert in constitutional law, was hesitant to predict an end to BP’s challenges to the settlement deal.

Tobias said the Supreme Court appeal focused on a narrow dispute – whether businesses should be forced to prove their losses were directly caused by the spill.

There may be other settlement matters BP is considering challenging, he said.

“I never want to underestimate the ability of BP to make arguments, for better or for worse,” Tobias said. “I would never say never, but I think the Supreme Court has clearly signaled what it thinks here.”

Tobias said it’s possible BP will redirect its energy to matters outside of the settlement.

The third and final phase of the civil trial against BP and its drilling partners in the blown-out Macondo well will be in January.

The first phase in early 2013 sought to apportion blame for the 2010 disaster. The second phase later that year focused on the amount of oil spilled into the Gulf. The third phase will determine fines for BP and its partners.

U.S. District Judge Carl Barbier ruled in September that BP was “grossly negligent” in its actions and bore most of the blame for the 2010 oil disaster. As a result, BP faces as much as $18 billion in fines. BP has said it plans to appeal Barbier’s ruling.

Tobias said BP could take its appeal of the gross negligence rulings and others stemming from the civil trial, including fines under the federal Clean Water Act, to the Supreme Court.

“That’s where I think it will be interesting to see what the court does,” Tobias said.

Logan said BP’s approach to future litigation could be steered by its bottom line.

BP has been actively downsizing in the wake of the 2010 oil spill, which it now estimates will cost it $43 billion not including unpaid business claims payments. Ahead of Monday’s ruling, the company said it would accelerate layoffs worldwide amid falling oil prices.

BP reported $3 billion in underlying cost profit - which removes the impact of oil prices - for the third quarter, down from $3.7 billion last year.

“If they’re concerned with their bottom line then throwing more money into litigation may not be the best business decision,” Logan said. “The reality is the Supreme Court is not going to take the vast majority of disputes even with the best lawyers teeing them up.”

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