The estimated $7.8 billion deal struck by BP Plc with businesses and individuals suing over the massive 2010 Gulf of Mexico oil spill could speed up payments to thousands of claimants and offers lawyers a potential windfall in legal fees.
London-based BP announced the deal on Friday with the Plaintiffs' Steering Committee, or PSC, which represents condominium owners, fishermen, hoteliers, restaurateurs and others who say their livelihoods were damaged by the April 20, 2010, explosion of the Deepwater Horizon drilling rig and subsequent oil spill.
The settlement, which delayed a giant trial that had been set to get under way in a New Orleans federal court on Monday is a step by BP toward resolving its liability in the case, which could stretch into the tens of billions of dollars. But the deal does nothing to settle charges brought by BP's biggest opponent in the trial: the U.S. government.
Eleven people died and 4.9 million barrels of oil spewed from the mile-deep (1.6 km-deep) Macondo oil well in by far the worst offshore U.S. oil spill.
In addition to the Justice Department, BP still faces lawsuits from five U.S. states whose coastlines were oiled, as well as its partners in the ill-fated Macondo well.
U.S. District Judge Carl Barbier in an order late on Friday delayed the trial, saying the settlement would likely result in a realignment of the parties in this litigation and require substantial changes to the trial plan.
Barbier, who will preside over the three-part trial that could stretch through 2012, set no definite date for the trial to resume. Barbier would also have to approve the settlement.
BP has already paid out about $6.1 billion to compensate about 220,000 plaintiffs from the Gulf Coast Claims Facility, or GCCF, a trust fund administered by Kenneth Feinberg. The latest settlement will be in addition to that.
Lawyers for the PSC, Stephen Herman and James Roy, said the settlement would speed up compensation for thousands of victims, who would be divided into two categories: economic loss claims and medical claims.
This settlement will provide a full measure of compensation to hundreds of thousands - in a transparent and expeditious manner under rigorous judicial oversight, they said in a statement. It does the greatest amount of good for the greatest number of people.
In a statement, Feinberg said the settlement avoids a lengthy complex trial and uncertain appeals.
The proposed settlement could also be good news for attorneys, who could stand to charge big fees for negotiating claims.
They're attempting to negotiate their fees, said Daniel Becnel, a Louisiana tort attorney who represents clients who have filed claims with Feinberg. Alhough courts have limited legal fees to 6 percent so far, they (lawyers) want an open-ended claim fund.
Becnel predicted many potential claimants would opt out of the settlement. I'm going to recommend to my clients, 'Let's opt out and go try our individual cases,' he said.
Following pressure from the White House, BP created a $20 billion fund in 2010 to compensate victims of the spill that froze out trial lawyers.
The settlement sets new criteria for calculating compensation, and transfers claims processing from Feinberg's fund to a new court-supervised fund based in New Orleans. During the transition, which could take several months, claimants could be offered an unspecified percentage from the GCCF, with the rest paid by the new fund, the PSC said in a statement.
Those claiming medical benefits, including workers who helped clean up the spill, would be eligible for care for 21 years, the PSC said.
BP said the proposed settlement was not an admission of liability and that BP would assign to the plaintiffs some of its claims against Transocean and Halliburton.
Apart from BP, which owned 65 percent of Macondo, the main corporate defendants are Switzerland-based Transocean Ltd, which owned the Deepwater Horizon, and Houston-based Halliburton Co, which provided cementing services for the well. The settlement does not address legal damages that plaintiffs might seek from BP's well partners, which are also suing each other.
BP still faces claims by the U.S. government, which is pursuing violations of the Clean Water Act and other laws. BP has said it expects government fines to total $3.5 billion, but the maximum under law is in excess of $20 billion if gross negligence can be proven.