Why Victims of Mass Torts in the U.S. Are Never Fully Compensated for Their Damages
Virtually Every Multidistrict Litigation Is a RICO Enterprise
The British Petroleum (BP) oil well blowout in April 2010 is arguably the largest and most egregious mass tort in U.S. history. It has affected hundreds of thousands of individuals and businesses along the U.S. Gulf Coast and beyond. The full extent of damages may never be known.
On November 5, 2020, a civil RICO complaint was filed against the Honorable Carl J. Barbier, co-liaison counsel, and two fund administrators (hereinafter “Defendants”) as a result of their tortious conduct in the BP oil well blowout multidistrict litigation (MDL 2179).
Regrettably, virtually every MDL is a “RICO Enterprise.” MDL 2179 is instructive. MDL 2179 is considered to be the gold standard for MDL. The MDL 2179 fraudulent scheme proved to be so successful (for the MDL Court, the attorneys appointed to the Plaintiffs’ Steering Committee, the fund administrators, and BP) that, since 2010, it has served as a template for subsequent MDLs.
The following is the “Eight-Step” fraudulent scheme which was used by the defendants to maximize judicial efficiency and the compensation paid to the members of the Plaintiffs’ Steering Committee (PSC) in exchange for limiting the liability of BP.
Step No. 1: Capture Market Share
In MDL 2179, a victim of the BP oil well blowout is not a person. MDL 2179 plaintiffs are merely bargaining chips or commodities acquired by the defendants (MDL 2179 Co-Liaison Counsel and MDL 2179 PSC members) and later “sold” in bulk to BP.
The MDL 2179 plaintiffs serve as a bargaining chips in four ways: (a) an attorney with a sufficient number of bargaining chips has a better chance to be awarded with a lucrative appointment to the MDL 2179 PSC by Defendant Barbier; (b) after the attorney has been appointed to the PSC, he pools his bargaining chips with the bargaining chips of the other members of the PSC to exert leverage on BP while graciously offering BP and BP’s shareholders closure; (c) the settlement class action achieved by this leverage will hopefully result in significant judicial efficiency; and (d) this judicial efficiency, in turn, will result in Defendant Barbier ensuring that Defendants Herman, Roy, and the cooperative PSC attorneys are excessively compensated for closing the deal with BP in a timely manner. Justice for the BP oilwell blowout victims is never considered by the defendants.
Defendant Barbier praises the attorneys he appointed to the MDL 2179 PSC for their initiative, “Shortly after the events of April 20, 2010, various law firms who would eventually become Liaison Counsel, PSC members, Class Counsel, and other common benefit attorneys….started to coordinate with one another….Working together, the lawyers developed a formal limited joint-prosecution agreement to facilitate the coordination and sharing of information, research, and litigation strategy.” Defendants Herman, Roy, and each attorney appointed by Defendant Barbier to the MDL 2179 PSC directly represent tens of thousands of clients.
Step No. 2: The JPML Transfer Order
In the transfer order for MDL 2179, the JPML states, “Centralization may also facilitate closer coordination with Kenneth Feinberg’s administration of the BP compensation fund.”
Defendants did not have to rely solely on a settlement class action to limit BP’s liability. From the very beginning, Defendants also had a victims’ compensation fund, sanctioned by the JPML, to eliminate hundreds of thousands of MDL 2179 Plaintiff-Claimants.
Step No. 3: Establishment of Feinberg’s Victims’ Compensation Fund
Kenneth R. Feinberg, masquerading as a “Fund Administrator,” was employed by BP to limit BP’s liability.
In violation of the OPA, but with the approval of Defendants, Feinberg‘s approach to determining claimant eligibility was driven by two factors: (1) loss location; and (2) claimant business type.
Feinberg’s use of coercion and fraudulent inducement was also in clear violation of the OPA. Feinberg used the fear of costly and protracted litigation, during town hall meetings, on the Internet, and via email to coerce victims of the BP oil well blowout to accept grossly inadequate settlements.
In MDL 2179, Feinberg used a “Delay, Deny, Defend” tactic against legitimate BP oil well blowout victims. This tactic, commonly used by unscrupulous insurance companies, is as follows: “Delay payment, starve claimant, and then offer the economically and emotionally-stressed claimant a miniscule percent of all damages, including future damages, to which the claimant is entitled. If the financially ruined claimant rejects the settlement offer, he or she may sue.”
This “Delay, Deny, Defend” tactic, although unconscionable, proved to be very effective for the defendants and BP. Defendants fully sanctioned and facilitated Feinberg’s “Release and Covenant Not to Sue.”
The ultimate objective of Feinberg’s “Delay, Deny, Defend” tactic was to limit BP’s liability by obtaining a signed “Release and Covenant Not to Sue” from as many BP oil well blowout victims as possible. Feinberg’s “Release and Covenant Not to Sue” requirement violates OPA, State contract law, and is contrary to public policy.
Releases, compromises and settlement agreements are contracts and the rules of construction applicable to all contracts are used in the interpretation of such agreements. Whether a compromise, settlement, or release is a valid contract between the parties is determined by reference to State substantive law governing contracts generally. Whether a contract or a contractual provision is unconscionable or unenforceable on grounds of illegality or public policy is a question of law. In examining whether a contract is unconscionable, the court must determine whether one party lacked a meaningful choice and the contract terms were unreasonably favorable to the other party.
Kenneth R. Feinberg’s “Release and Covenant Not to Sue” violates State contract law and is contrary to public policy because it: (a) was obtained through the use of economic duress; (b) was obtained without free consent (Claimants did not consent to the release by choice, because the only option for receiving payment required Claimants to sign a release, the terms of which they had no opportunity to negotiate.); (c) was obtained through fraud; (d) requires Claimants to discharge, waive and release future claims (including those resulting from gross negligence) for costs and damages (including punitive damages) that are unknown and have not yet arisen. As Defendant Barbier clearly states in his Order of August 26, 2011, “The long term effects [of the BP oil well blowout] on the environment and fisheries may not be known for many years;” (e) was obtained in exchange for inadequate consideration; and (f) has as its objective the circumvention of the OPA.
Accordingly, Defendants’ sanctioned “Release and Covenant Not to Sue” is void ab initio.
Incredibly, Defendant Barbier still held: (a) “While OPA does not specifically address the use of waivers and releases by Responsible Parties, the statute also does not clearly prohibit it;” and (b) “In fact, as the Court has recognized in this Order, one of the goals of OPA was to allow for speedy and efficient recovery by victims of an oil spill.”
The OPA requires more than merely “speedy and efficient.” The OPA requires that all BP oil well blowout victims are fully compensated. Furthermore, the purpose of the Federal Rules of Civil Procedure is “to secure the just, speedy, and inexpensive determination of every action and proceeding (Emphasis added).” Victims of the BP oil well blowout turned to the court in search of justice, not merely a “speedy” determination of their cases.
Efficiency is not the only touchstone of justice. A substantial body of opinion and a respect for jurisdictional principles suggest that a plaintiff ordinarily has a right to a trial in the forum of his or her choosing. Aggregation of cases for the purpose of facilitating settlement is a byproduct of §1407, but is not its central statutory purpose. Judicial economy is undoubtedly well-served by MDL consolidation when scores of similar cases are pending in the courts. Nevertheless, the excessive delay and marginalization of juror fact finding (i.e., dearth of jury trials) associated with traditional MDL practice, such as MDL 2179, are developments that cannot be defended.
The appropriate focus for Defendants’ sanctioned Feinberg-administered victims’ compensation fund resolution of mass claims should be justice for the claimants, not merely judicial economy and closure for BP.
Defendant Feinberg denied payment to approximately 61.46% of the claimants who filed claims.
The BP/Feinberg victims who executed a “Release and Covenant Not to Sue” (approximately 220,000 in number) were subsequently excluded by Defendants Barbier, Herman, and Roy from the settlement class action.
Step. No. 4: Appointment of “Cooperative” Attorneys to the PSC
It is important to understand that Defendant Herman, in a 2018 Loyola Law Review article which he authored, openly admits that judicial efficiency replaces justice and his primary fiduciary duty is to Defendant Barbier in MDL 2179.
MDL 2179 is not a litigation. Attorneys appointed to the MDL 2179 PSC are not appointed by Defendant Barbier to be litigators. These attorneys are not selected for the purpose of zealously advocating on behalf of their clients. Defendants Herman, Roy, and the attorneys appointed to the MDL 2179 PSC are cooperative dealmakers.
In sum, the main criteria for membership in the MDL 2179 PSC is very simple: (a) The attorney must be “cooperative;” (b) The attorney should be a “repeat player;” and (c) The attorney must have signed-up a large stable of clients which he or she is already directly representing.
It is helpful to remember the three Cs of any successful PSC: cooperation, control, and compensation. Greater cooperation (between the dealmakers) and control (in terms of a significant market share of plaintiffs) results in closing the deal faster with the defendant and clearing the docket faster which results in greater compensation. A happy transferee judge is a generous transferee judge. A happy Plaintiffs’ Co-Liaison Counsel is a generous Plaintiffs’ Co-Liaison Counsel. In MDL 2179, the comatose, hapless plaintiffs received little or no compensation while the compensation paid to Defendants (Herman, Roy, and the members of MDL 2179 PSC) is estimated to be $3.035 billion.
Step No. 5: Circumvention of OPA, a Strict Liability Statute
“OPA applies of its own force, because that act governs, inter alia, private claims for property damage and economic loss resulting from a discharge of oil in navigable waters. See 33 U.S.C. § 2702(a), (b)(2)(B), (b)(2)(C), (b)(2)(E).” The Honorable Carl J. Barbier, In re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010 (Rec. Doc. 3830 at 11, August 26, 2011).
The OPA is a strict liability statute. In order to recover damages under the OPA, a claimant merely needs to show that his or her damages “resulted from” the oil spill or oil well blowout.
BP, the majority owner and operator of the Macondo Well, is a “responsible party” for the BP oil well blowout of April 20, 2010 under the OPA, 33 U.S.C. §2702(a).
Although liability under the OPA is subject to a monetary cap of $75,000,000 for each incident by each responsible party, there is no limit to liability if the damage was proximately caused by “gross negligence or willful misconduct.” It is important to note that BP, the responsible party, waived the monetary cap of $75,000,000 for the BP oil well blowout incident in the Gulf of Mexico on April 20, 2010 and the MDL 2179 Court concluded that the discharge of oil was the result of BP’s “gross negligence” and “willful misconduct” under the Clean Water Act (“CWA”). Accordingly, in theory, there is no limit to BP’s liability. Defendants’ greed-induced reality is so very different.
Allegedly, in order to efficiently manage MDL 2179, the Court consolidated and organized the various types of claims into several “pleading bundles” for the purpose of the filing of complaints, answers, and any Rule 12 motions.
The “B1” pleading bundle includes all claims for private or “non-governmental” economic loss and property damages.
On January 12, 2011, the MDL 2179 Court issued PTO No. 25, in order to clarify “the scope and effect” of the “B1” Master Complaint. The Court held that any individual plaintiff who is a named plaintiff in a case that falls within pleading bundle “B1” is deemed to be a plaintiff in the “B1” Master Complaint. Also, “the allegations, claims, theories of recovery and/or prayers for relief contained within the pre-existing petition or complaint are deemed to be amended, restated, and superseded by the allegations, claims, theories of recovery, and/or prayers for relief in the respective “B1” Master Complaint(s) in which the defendant is named.”
Rather than allege claims under OPA and the Outer Continental Shelf Lands Act (“OCSLA”) (which governs the MDL 2179 personal injury and wrongful death actions and borrows the law of the adjacent state as surrogate federal law), the “cooperative” Defendants Herman and Roy made the unfathomable decision to allege claims under a hodgepodge of statutes. In the “B1” Master Complaint, Defendant Herman states, “The claims presented herein are admiralty or maritime claims within the meaning of Rule 9(h) of the Federal Rules of Civil Procedure. Plaintiffs hereby designate this case as an admiralty or maritime case, and request a non-jury trial, pursuant to Rule 9(h).”
Defendants Herman and Roy were concerned that a jury may not be “cooperative.”
Defendant Herman’s reasoning and Defendant Barbier’s orders and reasoning are contrary to U.S. Congressional intent, the OCSLA, the OPA and U.S. Supreme Court decisions. The only logical conclusion is that they are the product of Defendants acting individually and/or in collusion with each other in order to knowingly limit BP’s liability and thereby maximize judicial efficiency and/or their compensation.
Filing of the “B1” Master Complaint as an admiralty or maritime case artfully circumvented the OPA. By doing so, Defendant Herman assisted Defendant Barbier in expeditiously being able to erroneously and incomprehensibly find, “….that nothing prohibits Defendants from settling claims for economic loss. While OPA does not specifically address the use of waivers and releases by Responsible Parties, the statute also does not clearly prohibit it. In fact, as the Court has recognized in this Order, one of the goals of OPA was to allow for speedy and efficient recovery by victims of an oil spill.”
As a result of this finding by Defendant Barbier, approximately 220,000 Kenneth R. Feinberg victims who or that executed a “Release and Covenant Not to Sue” in exchange for a one-time final payment ($5,000 for individuals and $25,000 for businesses) were excluded from the settlement class action. There is no evidence that these amounts even remotely represent adequate consideration to compensate claimants for the damages that claimants did or will suffer as a result of the BP oil well blowout.
Moreover, the maritime rule in the Fifth Circuit is that operational recklessness or willful disregard is generally insufficient to visit punitive damages upon the employer. Rather, the conduct must emanate from corporate policy or that a corporate official with policy-making authority participated in, approved of, or subsequently ratified the egregious conduct.
Accordingly, Defendant Barbier concluded that BP cannot be held liable for punitive damages under general maritime law. Defendant Barbier further noted that, even if BP were liable for punitive damages, only commercial fishermen or those who could satisfy the “physical injury” threshold of the Robins Dry Dock rule would be entitled to such an award.
Circumventing the OPA also allowed the settlement to limit a claimant’s recovery of damages by geographic bounds, pertain solely to certain business activities, and require a heightened and vague proof of causation between his or her damages and the BP oil well blowout incident.
Step No. 6: Approval of the Settlement Class Action
In February 2011, only 4 months after Defendant Barbier appointed Defendants Herman, Roy, and the other cooperative attorneys, settlement negotiations began “in earnest.” Defendants Herman, Roy, and BP negotiated a total amount which BP was willing to pay in order to settle the BP oil well blowout case.
Carefully implementing the above-described Steps No. 1 through No. 5, Defendants Herman, Roy, and BP worked backwards from that agreed upon total amount to draft the terms and conditions of the settlement.
Just prior to the final fairness hearing in November 2012, Defendants Herman, Roy, the members of the MDL 2179 PSC, Defendant Juneau, and BP, with the approval of Defendant Barbier, intentionally processed a substantial number of high value claims in an attempt to demonstrate that the settlement program was working as promised. Here, the objective was to keep as many of the remaining claimants/plaintiffs in the settlement class action as possible. Opt-outs were seriously frowned upon. The settlement class action was the only game in town. Take it or leave it!
At the fairness hearing, Defendant Barbier limited oral presentations by individual objectors (or their counsel, as applicable) to not more than 3 minutes each.
In sum, the purpose of the fairness hearing was to allow the cooperative dealmakers to argue in favor of approval of the Economic and Property Damages Settlement. Claims Administrator Patrick Juneau and Michael Juneau also presented on the glorious status of the settlement and the virtually non-existent settlement opt-outs.
The BP oil well blowout of April 2010 resulted in the largest environmental disaster in the history of the United States. An estimated 5.0 million barrels of crude oil gushed into the Gulf of Mexico.
Defendant Barbier clearly states, “The long-term effects [of the BP oil well blowout] on the environment and fisheries may not be known for many years.” Nevertheless, in order to limit BP’s liability, one tactic employed by the defendants was to limit the compensation period to 2010.
Incredibly, Defendant Barbier found, and Defendants Herman and Roy agreed, that limiting the compensation period to 2010 is reasonable. Defendant Barbier explains, “Certain objectors complain that the Economic Damage Claim Frameworks are unfair because they do not compensate persons who did not begin suffering losses until 2011. Yet this provision is reasonable for three reasons: (i) the Macondo well ceased flowing in July 2010; (ii) there is evidence that by late 2010, Gulf Coast tourism had returned to or surpassed 2009 levels; and (iii) as to claims by individuals and businesses in charter fishing, seafood processing, or other businesses relying on access to Gulf waters, nearly all federal and state waters were reopened for commercial fishing by November 2010. Thus, extending compensation to 2011 would cover losses not likely caused by the spill.”
Defendants’ settlement causation requirements take obfuscation to a new level.
The BP oil well blowout settlement contains various causation requirements for Business Economic Loss (“BEL”) claims. Two of the causation tests, the Modified V-test and the Decline-Only test, require a revenue calculation based on benchmark periods and, in addition, a decline in the share of total revenue generated by non-local customers or customers in Zones A to C as reflected in specified documentation.
In discussing the causation requirements for BEL claims, Defendant Barbier explains, “Certain objectors contend that to invoke the Modified V-Test or the Decline-Only Test, they are required to satisfy the Customer Mix Test, which requires these businesses to establish where their customers are located. The objective evidence shows that the causation tests available under the Settlement Agreement are both economically reasonable and highly favorable to claimants, which is why they were negotiated by experienced counsel in consultation with their clients and experts….Other objectors complain that before they can invoke the V-Shaped Revenue Pattern test, they must demonstrate a 5% revenue recovery during the correlating months of 2011 as compared to the 2010 baseline period. This provision is reasonable, as losses that continued after the spill are likely to be due to factors other than the spill.”
Defendants fraudulently, recklessly, negligently and knowingly breached their fiduciary and ethical duties to Plaintiffs by reassuring BP oil well blowout Plaintiffs that the settlement claims program’s Risk Transfer Premium (“RTP”) enhances the compensation amount for, among other things, certain claimants whose damages could be recurring, to account for that risk of future damages.
Defendants further fraudulently, recklessly, negligently and knowingly breached their fiduciary and ethical duties to Plaintiffs by supporting the Court’s finding that, “RTP payments are meant to compensate class members for pre-judgment interest, the risk of oil returning, consequential damages, inconvenience, aggravation, the risk of future loss, the lost value of money, compensation for emotional distress, liquidation of legal disputes about punitive damages, and other factors.”
According to Defendants Barbier and Herman, RTP payments are simply magical.
Defendants Herman, Roy, and the members of the MDL 2179 PSC, tendered either jointly or on their own behalf four “experts” in the law of class actions: Professors Coffee, Issacharoff, Klonoff, and Miller. Indeed, Defendant Barbier cites to, or in some instances quotes from, the opinions of these “Thought Leaders” at various points in its analysis of class certification issues.
The following are a few examples of the quotes of these “Thought Leaders” and Claims Administrator.
(a) The class definition is geographically circumscribed to Louisiana, Alabama, Mississippi, and certain specified counties in Florida and Texas along the Gulf Coast, as well as Specified Gulf Waters [in violation of the OPA].
(b) According to Professor Coffee, such careful negotiation of the release was “an example of reasoned statesmanship [in violation of the OPA].”
(c) “Because a class action is the vastly superior method by which to resolve the impact of this mass disaster on the Gulf Coast Region, it would be a social tragedy if class certification were denied.”
(d) “I’ve never been involved in a project that has gotten up this quick, had the involvement with the volume we had to deal with, and to either have started it earlier or gotten it paid this quickly. It’s been a remarkable experience for me.”
(e) “The pace of payment determinations and payments is very high in comparison to other claims matters and is especially reasonable considering the other substantial responsibilities of the Settlement Program during this same period of time.”
Defendants fraudulently, recklessly, negligently and knowingly breached their fiduciary and ethical duties to Plaintiffs by retaining, and highly compensating, four law professors/thought leaders to give their “unbiased” opinions in order to induce the plaintiffs into believing that the proposed settlement is “fair, reasonable, and adequate.”
Notwithstanding the opinions of the four law professors, Plaintiff it is obvious to any reasonable person that the settlement class action violates the OPA statute by defining class members by geographic bounds and certain business activities while requiring proof of a heightened, vague standard of causation.
The MDL 2179 class settlement agreement is a business deal entered into between Defendants Barbier, Herman, Roy, the members of the MDL 2179 PSC, and BP for their own personal benefit. This deal was consummated behind closed doors. Although there is no stated limit on the amount that BP is willing to pay, there is an absolute limit that BP is willing to pay ($20 billion). Otherwise, BP would not have agreed to the settlement terms and conditions. More importantly, Defendants conveniently fail to mention that although there is no stated ceiling, there is also no stated floor. BP is not obligated to pay any amount. Moreover, BP and Defendants are able to argue that certain claims are not legitimate and Defendants may clawback “fraudulent” payments previously paid to BP oil well blowout victims.
After eliminating the class members who opted-out and the illegally excluded BP oil well blowout victims, the vast majority of remaining Plaintiffs are either comatose or are directly represented by Defendants Herman, Roy, and members of the PSC. Plaintiffs directly represented by Defendants Herman, Roy, and members of the PSC know they shall be well-compensated because each client must pay a contingent fee to his or her “cooperative” dealmaker attorney.
Step No. 7: The Post-Settlement Mop-Up Procedures
Transferee judges tend to issue Lone Pine orders after most plaintiffs’ cases are resolved through a comprehensive settlement. Lone Pine orders are usually issued with little advanced notice. Although plaintiffs may be relying on common evidence produced by the PSC, when they refuse to settle, Lone Pine orders might require a plaintiff to retain an individual expert and produce her opinion within a couple of weeks. In sum, Lone Pine orders require non-settling plaintiffs to provide some evidentiary support for their claims to avoid dismissal.
Defendants Herman, Roy, and MDL 2179 PSC members routinely argue that a Lone Pine order is appropriate as “a post-settlement mop-up procedure utilized to address those cases which either were not eligible for compensation through the MDL 2179 settlement program or which had opted-out of participation in the MDL 2179 settlement program.” In reality, the purpose of a Lone Pine order is to eliminate those few remaining non-cooperating plaintiffs who have the audacity to demand justice.
Step No. 8: Clawback
Carefully implementing the above-described Steps No. 1 through No. 7, Defendants eliminated, excluded or dismissed virtually all remaining claims against BP.
One purpose of the MDL 2179 “clawback” order was allegedly to refund to BP the amount paid to claimants who had submitted fraudulent claims. However, Defendants’ primary purpose was to burnish BP’s tarnished image. Although only an infinitesimal percentage of submitted claims were found to be fraudulent, these claims were highly publicized and reported on the Internet and in the media. Any casual observer could easily conclude that BP was the only true victim of the oil well blowout disaster. Indeed, were there ever any real victims with legitimate claims?