Remember a few years back when the oil company BP was desperately trying to wriggle out of its own class action settlement with purported victims of the Deepwater Horizon oil spill? BP contended that settlement administrators had misconstrued the terms of the deal and were signing off on millions of dollars of unwarranted claims. The oil company brought in Gibson Dunn & Crutcher and conducted an ad blitz portraying itself as the victim of vulturous plaintiffs’ lawyers, but it was all for naught. The 5th U.S. Circuit Court of Appeals and then the U.S. Supreme Court refused to undo the settlement. The appeals court even refused (744 F.3d 370) in 2014 to revisit the trial court’s interpretation of the settlement, which, according to BP, made it all too easy for people to collect undeserved claims.
On Wednesday, however, the 5th Circuit said it had finally met a BP claim it could not abide.
The appeals court nixed a $1.5 million award to ex-NBA All Star David West, who was in the fourth year of a five-year, $45 million contract with the New Orleans Hornets when the Deepwater Horizon rig exploded in 2010. West was paid every penny of the $45 million he was owed under his contract, including the full amount he was due in the year after the spill. He nevertheless argued – and the settlement administrator agreed – that under the definitions and formulas in BP settlement, he qualified for a payout for economic losses because he earned less in 2010 than in 2009. The 5th Circuit shut that right down.
West earned less in the year after the spill, the appeals court said, because he had signed a front-loaded contract that paid him more in the early part of his deal than at the end. “West did not suffer actual and unexpected ‘losses’ or damages,” wrote Judge Andrew Oldham for a panel that also included Judge Edith Jones and Catharina Haynes. “In 2010, he earned exactly what he was entitled to receive under his contract. The fact that West received less money in 2010 than in 2009 does not mean he ‘lost’ anything or was ‘damaged’ in any way. It means only he agreed to a frontloaded contract. And he did so many years before the Deepwater Horizon catastrophe.”
Judge Haynes said West’s claim could most generously be described as “implausible,” in a concurrence in which she said West claims should be remanded to the trial court rather than rejected outright.
You’re probably wondering how West’s lawyers from Barrasso Usdin Kupperman Freeman & Sarver could possibly justify a $1.5 million demand from a multimillionaire who was paid all that he was due under his contract in the year after the Deepwater Horizon spill. The answer lies in the structure of the BP settlement. As West’s counsel explained in their brief to the 5th Circuit, employees of the Hornets (now renamed the Pelicans) were designated to be eligible for economic damages under the BP settlement because the team was considered a “tourism industry business” affected by the oil spill. West was indisputably a Hornets employee – and he indisputably earned less in the year after the storm, as he proved in documents submitted with his claim.
Ergo, according to his lawyers, he was entitled to payment from BP – which is why his claim was approved by the settlement administrator and left intact by U.S. District Judge Carl Barbier of New Orleans, who oversees the BP case. Any contrary arguments by the oil company, West contended, were simply another BP attempt to rewrite the settlement agreement.
That contention is pure chutzpah, according to BP, and from a guy so rich that in 2015 he forewent a $12.6 million option when he left the Indiana Pacers to play for the San Antonio Spurs. BP’s lead lawyer, Lisa Blatt of Williams & Connolly argued in the company’s appellate brief that the settlement agreement may not require oil spill victims to provide evidence linking their economic losses to the oil spill but it does demand that claimants attest they suffered economic harm as a result of the spill. West suffered no economic loss as a consequence of the spill, BP said, so the attestation he submitted with his claim was “patently false.”
“West does not dispute that he received exactly the post-spill earnings set forth in his lucrative pre-spill contract,” BP told the 5th Circuit. “The settlement agreement compensates individuals and businesses for actual losses. It was not designed to pay individuals for a dip in compensation dictated exclusively by a long-established contract.”
The appeals court did not go so far as to accuse West of filing a false declaration claiming economic losses, but the judges agreed that his theory – that he has a claim because he earned less after the spill than before it – “puts the cart before the horse.” To invoke the claim process, the 5th Circuit said, you have to have suffered a loss. West didn’t, so, according to the appeals court, he can’t recover from BP.
“West expected to earn in the absence of the spill precisely what he did earn after it,” the opinion said. “He therefore did not suffer unexpected damages.”
Amen to that.
I emailed West counsel Stephen Kupperman of the Barrasso firm but didn’t hear back. BP counsel Blatt had no comment.