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Case of the Week: The ‘Deepwater Horizon’ Oil Spill

Nearly 4 ½ years after the oil well beneath the "Deepwater Horizon” rig blew out and spilled millions of barrels of oil into the Gulf of Mexico, legal news surrounding the disaster again made headlines last week. On Tuesday, Sept. 2, Halliburton Energy Services, Inc. announced an agreement to pay over $1,000,000,000.00 to settle punitive claims arising from its role in the oil spill. Then on Thursday, U.S. District Judge Carl J. Barbier ruled that BP Exploration & Production, Inc. had acted “recklessly” and with gross negligence. According to a Law360 article, this ruling alone places a potential $18,000,000,000.00 bull’s-eye on BP. (Law360 subscribers can view the full article here.)

In the wake of the disaster, a large number of legal claims were filed. The bulk of the litigation focused on BP, which leased the well, Transocean Deepwater Drilling Inc., which owned the Deepwater Horizon oil rig, and Halliburton Energy Services, Inc., which contracted to perform the cement work connecting the rig to the well. The actions were consolidated into MDL 2179 in the U.S. District Court for the Eastern District of Louisiana. Since that time, a number of different plaintiff and defendants reached settlements of their claim. So far, the largest settlement was announced by BP in March of 2012.  At that time, BP had proposed to pay $7,800,000,000.00 to resolve a substantial majority of the economic loss and medical claims stemming from the Deepwater Horizon accident and oil spill. 2012 Jury Verdicts LEXIS 2567.

With last Tuesday’s settlement, Halliburton put to rest a number of maritime claims and claims filed by the Deepwater Horizon Economic and Property Damages (DHEPDS) Class. The class included property owners whose real or personal property was touched by oil or other substances from the well any time between April 20, 2010 through April 18, 2012. The class also included all commercial fishers or charterboat operators in the affected Gulf Coast areas. Under the settlement, Halliburton would pay $1,028,000,000.00 to resolve the punitive damages claims of the class in three installments. Halliburton also agreed not to contest any request by class counsel for an award of up to $99,950,000.00 in attorney fees and costs. 2014 Jury Verdicts LEXIS 7534.

Then on Thursday, Judge Barbier lowered the boom on BP, ruling that the company was subject to enhanced civil penalties under the Clean Water Act. 2014 Jury Verdicts LEXIS 7588.
The decision followed Phase I of a trial proceeding that focused on two cases within MDL 2179: In re Triton Asset Leasing GmbH, et al. (No. 10-2771) and United States v. BP Exploration & Production Inc., et al. (No. 10-4536). Because the proceedings were in Admiralty, the case was tried without a jury. The Phase I Trial began on Feb. 5, 2013 and ended on April 17, 2013. In the Triton Asset case, Judge Barbier considered petitions for limitations of liability filed by various Transocean entities under the Shipowner's Limitation of Liability Act. In the BP case, he considered the United States' claims for civil penalties under Section 311(b) of the Clean Water Act, 33 USCS § 1321(b), and for a declaratory judgment of liability under the Oil Pollution Act of 1990, 33 USCS § 2701, et seq.

In addition to finding that BP was subject to enhanced civil penalties under the Clean Water Act, Judge Barbier found that that BP and its co-defendants, Halliburton and Transocean, were liable under general maritime law for the blowout, explosion, and oil spill. The ruling apportioned 67 percent liability to BP, 30 percent to Transocean, and 3 percent to Halliburton. Judge Barbier wrote that BP's conduct was "reckless" and that Transocean and Halliburton were negligent. Although BP's conduct under general maritime law warranted the imposition of punitive damages, Judge Barbier noted that the company could not be held liable under Fifth Circuit precedent. In addition, he concluded that Transocean was an operator of an Outer Continental Shelf facility under the Oil Pollution Act of 1990 and was liable to the federal government for removal costs.  

Judge Barbier has not yet issued his decision in the second phase of the civil trial. That ruling will consider BP's efforts to control the spill, and it will also decide the total amount of oil that spilled into the Gulf. According to Law360, the first two phases will play a huge role in the third and final phase of the trial set to begin in January, where Judge Barbier is set to determine damages. In addition, the article notes that BP intends to immediately appeal the ruling to the Fifth Circuit, saying its actions didn’t meet the standard of gross negligence. 

For other cases stemming from the Deepwater Horizon Oil Spill, see also:  2012 Jury Verdicts LEXIS 7039 (Louisiana federal jury finds actor Kevin Costner did not mislead or deceive actor Stephen Baldwin and others regarding company marketing oil reclamation technology); 2012 Jury Verdicts LEXIS 4899 (Clean-up workers settle wage and hour claims against BP and subcontractor); 2012 Jury Verdicts LEXIS 21863 (Clean-up breach of contract claim).

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