SALON

Thursday, Sep 9, 2010 6:57 PM UTC

Gulf businesses weigh whether to sue or settle

Local companies that accept a compensation check from BP forfeit their right to take the oil giant to court

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Topics: Gulf Oil Spill, Economics,

Alabama seafood market owner David Scott faces a difficult decision as he tries to rejuvenate his business after the Gulf oil spill: He can accept a piece of BP’s $20 billion claims fund — relatively fast, easy money — or sue the oil giant for a bigger payday, wait years and risk ending up with nothing.

Thousands of business owners, fishermen and others along the Gulf Coast are confronting a similar conundrum. Those who accept a check for their long-term losses from the victims’ compensation fund will have to give up their right to sue BP.

Scott, who runs Destin Connections Seafood Market in Montgomery, Ala., said business was off more than $49,000 in May and June compared with the year before. He said he is still weighing his options and waiting to see what BP is willing to offer.

“At this point, we’ve got to give BP a chance to do what they said they were going to do,” he said. “I can prove my loss. Sales were just way off, and I couldn’t get what I needed, and people weren’t coming in to buy either.”

Others fear that it could take years for the extent of the economic blow to be known, making it difficult to figure out whether a payout negotiated now will make them whole.

“Is the shrimp going to come back? Are the oysters going to survive? Are we going to have a market?” asked George Barisich, head of the United Commercial Fisherman’s Association in Louisiana. “One lump settlement — should I take it if it’s decent? Should I wait it out? It’s on the back of everyone’s minds right now. It’s another one of the unknowns that’s driving everyone sleepless right now.”

Right now, the BP compensation fund is paying businesses and individuals for their short-term losses, and those accepting such interim checks do not have to sign away their right to sue. But starting sometime after Nov. 23, and continuing for three years, the fund will compensate victims for long-term losses.

Attorney Kenneth Feinberg, who is running the fund under a deal between BP and the Obama administration, said in a recent interview that those who file a long-term claim will get a preview of their potential payout before they have to decide whether to accept it. If they don’t like it, they can sue.

“I think that my definition of eligibility will actually prove to be broader than if you litigate,” Feinberg said. “But I might be wrong, and if parties want to litigate, they can litigate.”

Feinberg has yet to set a deadline for applying for long-term compensation. Deadlines for filing lawsuits vary depending on the type of case and jurisdiction, but in general people would have between one and six years to file a negligence action against BP and other companies involved in the disaster.

How many are expected to file claims for long-term losses is anyone’s guess. As of Wednesday afternoon, more than 51,000 interim claims had been submitted, including more than 44,000 for lost earnings. Of the total, 10,252 claims had been paid, for a total of almost $80 million.

In addition, more than 300 lawsuits have been filed. But those plaintiffs can withdraw their lawsuits if they decide to accept a payout from the compensation fund.

The eligibility rules for the long-term settlements have not been set but are widely expected to be similar to those for the interim claims: The nearer you are geographically to the oil spill and the more closely you depend on the Gulf’s natural resources, the better chance you have of getting a share.

Feinberg said he may also bar recipients from suing not just BP but other companies, such as Transocean and Halliburton.

The Florida Restaurant and Lodging Association, which represents much of Florida’s $57 billion hospitality industry, is connecting its members to three law firms to help them choose between a claim or a lawsuit. The association’s president, Carol Dover, said dozens of interim claims have been rejected or reduced to “pennies on the dollar” because the businesses are far from the spill site.

Feinberg said his goal in administering the BP fund is to compensate victims for their losses, not punish BP. In contrast, suing holds the prospect of a big punitive damage verdict.

But punitive damage awards often take years to resolve and can be cut down on appeal. The 1989 Exxon Valdez oil spill in Alaska spawned a two-decade legal fight during which an initial $5 billion punitive damage award was whittled to about $500 million.

Gary Bauer, owner of crab processor Ponchartrain Blues in Slidell, La., said a fair claim settlement will be hard to turn down for many.

“If you go to litigation, oh God, your life is on hold, your income’s on hold. Everyone knows it is going to take six, eight years,” he said.

———-

Associated Press writer Cain Burdeau in Slidell, La., contributed to this story.

——

Online: Gulf Coast Claims Facility: http://www.gulfcoastclaimsfacility.com

More Curt Anderson.

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