Oil Spill Attorneys Dispute $75 Million Cap on Oil Spill Lawsuits
5-4-2010 – The New York Times yesterday reported that a federal law (the Oil Pollution Act of 1990, or “OPA”) established a $1.6 billion reserve to pay for damages from oil spills, and that “Up to $1 billion of the $1.6 billion reserve could be used to compensate for losses….” But what really started people talking was the blockbuster contained in the Times article’s next sentence: “Under the law that established the reserve, called the Oil Spill Liability Trust Fund, the operators of the offshore rig face no more than $75 million in liability for the damages that might be claimed by individuals, companies or the government. (emphasis added).
By dinnertime, thousands of articles had been posted on news sites and blogs discussing the possibility that BP would get away with paying only $75 million in damages, and Democratic Senators Bill Nelson of Florida and Robert Menendez and Frank Lautenberg of New Jersey had introduced legislation to raise that cap to $10 billion. The name of the new bill? The Big Oil Bailout Prevention Act.
But what of the Times’s assertion that BP faces “no more than $75 million in liability for the damages that might be claimed by individuals, companies or the government?” It turns out that it’s not nearly as black-and-white as the Times article implies. We can thank Politico for adding some perspective.
Politico quotes Office of Management and Budget spokesman Ken Baer, who said, “If BP is found to be grossly negligent or to have engaged in willful misconduct or conduct in violation of federal regulations, then there is no cap under the Oil Pollution Act for damages. In addition, BP could be liable for damages under additional applicable federal and state laws. You can be sure that BP will be held accountable to the full extent of the law.” Politico also found someone with expertise in the matter, Houston lawyer Hutson Smelley Smelley actually wrote a law review article about the federal law. According to Smelley, “The legislation allows the states to impose additional penalties and to continue to enforce their own laws.”
Also weighing in on the issue was David Pettit, Director of the Southern California Air Program. Pettit wrote, “The OPA expressly does not preempt claims under state law or common law. A potential problem for plaintiffs in those non-federal claims is that they may need to prove negligence, but the flip side is that there is, in general, no cap on damages.”
It appears from this corner that the Times may have jumped the gun when it created the impression that BP’s liability to Gulf Coast residents will be limited to $75 million. The Associated Press quotes an Oppenheimer & Co. analyst who estimates that BP may be required to pay $5 billion to $15 billion for the cleanup, damage claims and lawsuits. AP notes that BP has already lost $32 billion in stock market valuation due to concerns over its oil spill liabilities. AP also quotes a New Orleans lawyer who represents oil and gas companies: ”The worst-case scenario is enormous. There are already a number of wrongful-death and personal injury cases out there. There will be no doubt more.”
About 30 class action lawsuits have already been filed by oil spill attorneys representing Gulf Coast residents. (See Oil Spill Lawsuits Flood Courthouses in the Central Florida Law Journal). BP earned profits of $14 billion in 2009, and over $6 billion in the first quarter of 2010. These oil spill attorneys do not believe BP’s damages will be capped at $75 million. BP can afford, and should be required, to pay all damages caused by its massive oil spill.
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