(This blog post originally appeared on the On the Case blog on
Thomson Reuters News & Insight http://newsandinsight.com.)
By Andrew Longstreth
NEW YORK, May 21 (Reuters) – BP Plc appears to be
well on its way to concluding an estimated $7.8 billion
settlement to resolve most of its civil liability from the Gulf
of Mexico oil spill. But a potential landmine lurks in the
settlement documents: under certain circumstances, the company
can invoke a little-noticed provision that allows it to walk
away from the deal.
The potential landmine is opt-outs. In a settlement of a
class action, class members can reject the deal and decide to go
it alone. Defendants have to be prepared for the possibility
that a high volume of opt-out litigation will undermine the goal
of global resolution. BP certainly is prepared: Its settlement
agreement with plaintiffs claiming economic and property damages
includes a provision that gives BP the right to terminate the
deal if the total of opt-outs “exceeds a number agreed to by the
parties.”
So what’s the number? That’s the $7.8 billion question. The
settlement agreement doesn’t say. In fact, the document states
that the opt-out number that could trigger a blowup is to be
submitted to the court “in a sealed envelope.”
It’s not clear why BP is keeping the number secret. A
spokesman for BP said that it was “part of the settlement
negotiation process.”
Others said they suspect there’s more to it. Plaintiffs’
lawyer Tony Buzbee of the Buzbee Law Firm, who is weighing
whether to recommend the settlement to his clients, said BP may
want the number kept under seal so that lawyers with lots of
clients do not team up and threaten to opt out in an effort to
extract a favorable deal. “They don’t want a coalition of
attorneys getting together saying we’re not going to participate
unless you treat us differently,” said Buzbee, who added that
he’s never before encountered an opt-out provision with a secret
trigger.
Edward Sherman, a professor at Tulane University Law School,
said that by keeping the trigger number private BP was also
giving itself the option of accepting the deal even if the
opt-outs exceed its threshold. “They can go ahead and accept it,
and they’re not committed to a public number,” Sherman said.
Earlier this month, U.S. District Judge Carl Barbier in New
Orleans granted preliminary approval to the pact between BP and
thousands of private plaintiffs affected by the spill. Barbier
set a fairness hearing date for Nov. 8, when he will consider
granting final approval. In the meantime, plaintiffs who are
part of the class have until Aug. 31 to file objections to the
settlement. Those plaintiffs also face a deadline of Oct. 1 to
opt out of the settlement.
(Reporting by Andrew Longstreth; Editing by Eddie Evans)
