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Who Should the People of the Gulf Coast Trust for Payback?
August 28th, 2010 The Federal Government or the State Court System?
Legal Analysis
by Glynn Wilson
David Underhill of the Mobile Alabama Sierra Club, who recently protested a public forum sponsored by the U.S. Department of the Interior by wearing duct tape over his mouth since citizens were not allowed to speak like they should have been in a real democratic town hall public hearing, was also party to a stakeholders meeting August 17 with officials from national and local government agencies and environmental groups as well as the British Petroleum corporation.
There were already so many public complaints about the lethargic nature of BP’s response to paying claims to individuals and businesses along the Gulf Coast that the Obama administration stepped in June 15 and seized $20 billion of the oil company’s money, to make sure people receive compensation for losses suffered due to the largest and worst environmental disaster in American history.
By June 16, less than two months after the Deepwater Horizon oil rig blew up in the Gulf of Mexico April 20, killing 11 workers and spreading it’s crude all over the Gulf from the Louisiana marshes to the beaches of Mississippi, Alabama and Florida, President Barack Obama appointed Washington attorney Kenneth Feinberg to act as the arbitrator to lead an independent team to oversee paying out claims from the new $20 billion escrow fund.
But the question on Underhill’s mind at the August 17 meeting was whether Feinberg could truly be independent and fair if he is being paid by BP. So he tried to get an answer from one of the BP representatives at the meeting, Gary Willis. Clearly there is not much trust of BP on the Gulf Coast, since the company has lied time and time again about the amount of oil leaking into the Gulf, about the use of chemical dispersants, even about who has the power to control access to oiled beaches.
The answer Underhill got from the BP official was “fuzzy,” he said, so he and Casi Callaway of the Mobile Baykeeper did a followup interview with BP public relations representative Sam J. Sacco.
In an e-mail exchange obtained exclusively by The Locust Fork News-Journal, Sacco said: “A question was asked by one of your members at the Aug. 17 COAST meeting as to whether BP was paying the appointed claims administrator, Mr. Feinberg,” Sacco said. “The answer to that question is yes.”
He then provided an official explanation of the new Gulf Coast Claims Facility, an independent claims center set up to receive and resolve claims of individuals and businesses “for costs and damages incurred as a result of the oil discharges due to the Deepwater Horizon incident.”
At the insistence of the president and his cabinet, BP fully agreed to contribute funds to an escrow account to be used to pay claims submitted to the center, which will be administered by Feinberg as the Claims Administrator, “a neutral fund administrator responsible for all decisions relating to the administration and processing of claims,” Sacco said.
The next question was, if the Claims Administrator is being paid by BP, “can I trust him to be fair?”
Answer: “The Claims Administrator is an independent, neutral fund administrator. BP provides the funding for the GCCF, including the Claims Administrator’s fees and expenses. The Claims Administrator does not report to BP and BP does not control his decisions in any way.”
The next question: “Will BP decide my claim?”
Answer: “No. The GCCF, an independent, neutral administrator, will decide your claim. BP will have no input on the decision.”
Question: “I already submitted a claim through BP. What should I do?”
Answer: “If you have previously filed a claim with BP your information will be transferred to the GCCF. You must complete a (new) Claim Form if you intend to apply to receive Emergency Advance Payments or a Final Payment for your damages or losses. You will be assigned a new Claimant Identification Number.”
The final question: “Can I still file a claim with BP?”
Answer: “No. As of August 23, 2010, all claims must be filed with the GCCF. (It) has replaced the BP claims process. Individuals and businesses should no longer present claims to BP.”
Alabama’s outgoing attorney general Troy King has made public statements questioning the impartiality of Feinberg, as has liberal trial lawyer Jere Beasley, whose firm stands to make millions of dollars in fees by bringing separate lawsuits on behalf of local fishermen who have lost income due to the oil spill.
A recent lawsuit filed on behalf of the state of Alabama is an entirely separate matter. All the claims by governments which lost tax revenue from the collapse of the tourism economy on the Gulf Coast will be handled in a separate federal case consolidated in Houston, Texas.
Individuals and businesses, on the other hand, must either file their claims with Feinberg and the government fund and hope to get paid soon, or opt out and go with a private lawyer and sue in a state district court, potentially waiting many years to receive any compensation. It took 20 years for the people of Alaska to get paid a fraction of their losses in the case against Exxon for the Valdez spill in Prince William Sound.
In a recent statement sent out far and wide by e-mail, but reported on by no news organization that I know of, Beasley said he wrote Feinberg a letter and asked a number of questions concerning his role in the oil spill disaster claims process.
Not waiting for an answer, Beasley said, “It appears that Mr. Feinberg favors BP and other potential defendants in the protocol he has developed. I question who he is really working for?”
“The folks on the coast are hurting, and they deserve fair treatment, which they certainly haven’t gotten so far from BP,” Beasley said. “Now Mr. Feinberg says he’s going to do the right thing, but at the same time he’s advising people to settle with BP and lose any future rights to seek relief from BP and the other companies that have liabilities to claimants. The victims desperately need help now, but they also must be fully protected in the future.”
“How can BP — or Mr. Feinberg — ask them to release BP, Transocean, Halliburton, Cameron and any other entity at fault from all future responsibilities? Many claimants will have tremendous future losses and will be damaged for years,” Beasley continued. “I am also calling for transparency from Mr. Feinberg. How is he being paid to handle claims for BP? How much has he been paid so far? What is his compensation agreement?”
“So far, BP hasn’t shown any evidence that it’s shooting straight with the individuals, businesses and governmental entities that are suffering as a result of the gross wrongdoing by these powerful corporations,” Beasley said. “Why should victims believe Mr. Feinberg has their best interests at heart if he is cutting off their rights to a full recovery, which will include tremendous future losses? Mr. Feinberg owes the public more than just talk!”
Another trial lawyer in Alabama, who has worked directly with Mr. Feinberg on other cases, indicated if there is anyone in the country who can do a fair job of getting the people of the Gulf Coast paid, it is Feinberg.
“I think Ken is as fair and independent as they come,” the attorney said. “It’s a good thing BP has to pay him — otherwise the government would. It is too big a job to do for free. If he says he’ll be liberal (in paying claims), I assume he will and that if BP doesn’t like it, they can try to fire him and see where that gets them.”
Feinberg may in fact be uniquely qualified among American lawyers to handle this job, according to Web research and interviews with other attorneys.
He is perhaps most famous for stepping in and acting as “special master” for the federal September 11th Victim Compensation Fund, which distributed nearly $7 billion to more than 5,000 victims and families of victims of 9/11 in New York.
He also acted as executive-pay czar in the big bank and automobile company bailout, negotiating a 50 percent reduction in salaries for the 25 highest-paid executives at the companies that received the most federal bailout money: Citigroup, Bank of America, AIG, General Motors and Chrysler.
Feinberg has also acted as mediator to resolve a series of high-profile legal cases, including some of biggest asbestos lawsuits in the country. He obtained a $2.5 billion settlement for women suing over a defective contraceptive device. He administered the Hokie Spirit Memorial Fund, set up for the benefit of victims’ families in the 2007 Virginia Tech shootings.
Then, after 8 years of litigation in which victims died and families suffered immeasurably, Feinberg finally helped settle a class action lawsuit by 250,000 Vietnam veterans against the manufacturers of Agent Orange, a deadly defoliant used in the Vietnam war. In just six week’s time, Feinberg obtained a $180 million settlement, receiving a fee of less than $1 million for his services.
“His natural talent is cutting a deal that everybody can live with,” John C. Coffee Jr., a law professor at Columbia University, told Time magazine.
Another independent Alabama trial lawyer, who was recently elected to the board of the Alabama Association for Justice (formerly the Alabama Trial Lawyer’s Association) indicated that he too was concerned about folks on the Gulf Coast getting paid fast, although in some cases they must sign waivers giving up “all future claims,” even though it is still way too early in most cases for anyone to know exactly what their losses will be, “how exactly to quantify and compute them.”
But when I asked Underhill if it he didn’t think it was better for the money to come from BP, the multinational corporation that caused the Gulf oil spill disaster, rather than the people of this country, he said, “I would rather have the taxpayers pay than have one of the parties to the dispute pay.”
From everything I can ascertain after researching this story for the past few days, in cases where individuals or businesses can compute an accurate estimate of what their total loses will be, they would be far better off filing their claims with Feinberg. They will suffer far less grief and be paid faster by a long shot from the government fund than waiting for any private lawsuit to work its way through the courts.
In some cases, where individuals or businesses actually have the savings or capital to wait it out, it is possible they could receive a higher amount by opting out of the $20 billion fund and going after the responsible corporations in private lawsuits.
There is only one major problem with that scenario, especially in Alabama.
The state Supreme Court is dominated by eight conservative Republican justices, elected largely with the help of former President George W. Bush’s political adviser Karl Rove and the conservative Business Council of Alabama. The high court has demonstrated in case after case that it has no regard for the rights of juries to decide actual and punitive damages in civil lawsuits in which individuals have been wronged by the malfeasance and negligence of greedy corporations.
One only needs to look at the case against ExxonMobile, where it was proved in court that the oil giant cheated the taxpayers of Alabama out of millions in oil and gas royalties. A jury found them liable of cheating the state out of $63.8 million and ordered them to pay an additional $3.5 billion in punitive damages. The conservative Supreme Court reduced the breach of contract award from $63.8 million to $51.9 million, and wiped out the $3.5 billion punitive damage award in its entirety.
Even if Beasley or another liberal trial lawyer were to make a compelling case and obtain a favorable jury verdict and a major financial award in court, the state’s high court would just toss the case out or reduce the verdict to virtually nothing.
Even if the cases were brought in federal court, the Eleventh U.S. Circuit of Appeals is also very conservative and dominated by Republican appointees, as is the United States Supreme Court now.
Until the legal community in Alabama and other states and the citizens get together and launch a major effort for court reform, “not tort reform,” and elect some Democrats to balance the state Supreme Court, it seems to me the citizens along the Gulf Coast would be better off trusting Feinberg and the Obama administration than greedy trial lawyers and a c
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