Trial Lawyers Scrape the Bottom of the Barrel

Jul 1, 2013

File this one under “no good deed goes unpunished.”

Regardless of what you may think of oil giant BP, you’d be hard pressed to argue it hasn’t bent over backward to make amends for the catastrophic Deepwater Horizon oil spill in 2010. The company has spent tens of billions of dollars on environmental cleanup and on compensation for businesses with real losses. It’s waived the $75 million liability cap under the law and promises to spend whatever it takes to make things right.

Enter a parade of trial lawyers, a who’s who of some of the nation’s wealthiest lawyers. They smell big bucks and want a piece of the action. They find a loophole to exploit—a misinterpretation by the claims administrator of the settlement agreement’s provisions for calculating a claimant’s lost profits. Instead of subtracting expenses from the revenues those expenses created—as is done under accepted accounting methods—the administrator is letting claimants match expenses and revenues by date, even if the expenses aren’t related to that revenue at all other than merely happening around
the same time.

So these lawyers start recruiting claimants and instructing them on how to game their numbers to show a “loss” of profit and therefore win compensation from BP. (One law firm’s ad reads, “If the numbers work, there is no need to provide proof that BP caused your loss!”) In reality, such “losses” often reflect nothing more than arbitrary or incorrect bookkeeping. Some state AGs are actively recruiting businesses to get a greater share of this fund for their states regardless of whether the claimants’ losses were due to the spill.

The result is that thousands of claimants that suffered no losses are coming forward, obtaining outrageous windfalls and making a mockery of what was intended to be a fair and honest settlement process.

What are the consequences if this settlement agreement—perhaps the largest ever—fails? It means that next time a business will choose to litigate, rather than settle, which will delay for years compensation to true victims while driving up legal costs and producing a major windfall for lawyers, not victims.

BP is shelling out billions of dollars to fix what went terribly wrong. We wish the tragedy had never happened, but it has brought out the best in many citizens and members of the business community. It’s sad and unacceptable that a few trial lawyers are exploiting the situation to line their own pockets. Their actions besmirch the dedicated efforts of Gulf residents who are helping the region come back strong.

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