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Gulf Disaster
Law360, May 19, 2010

Suits Still Pouring In Over Deepwater Horizon Accident
By Jesse Greenspan

Law360, New York (May 19, 2010) -- About 115 federal lawsuits and additional state court actions have been lodged against BP PLC, Transocean Ltd. and other companies potentially responsible for April's Deepwater Horizon accident in the Gulf of Mexico, and experts anticipate that many more are on the way.

Here is a rundown of the types of cases out there thus far, including wrongful death, maritime tort, shareholder and statutory environmental:

Wrongful Death Actions

Plaintiffs lawyers didn't wait long on this front, filing the first wrongful death suit just one day after the April 20 accident left 11 people missing and presumed dead.

That suit was lodged in the U.S. District Court for the Eastern District of Louisiana on behalf of Shane Roshto, an oil rig worker who was thrown overboard by the force of the explosion, and his wife, Natalie.

The suit accused Transocean, which owned the sunken Deepwater Horizon rig, and BP, which leased the rig, of failing to provide a competent crew, failing to properly train or supervise their employees, and failing to ensure that the crew worked in a safe and prudent manner, among other things.

A day later, another similar suit was launched in Texas state court, and more suits have come in since then.

Meanwhile, there have been separate cases brought by those workers seriously injured in the Deepwater Horizon accident.

Maritime and Common Law Tort Actions

Property owners, fishermen, shrimpers, seafood processors and restaurants in Louisiana, Alabama, Mississippi and Florida are also suing over the growing oil slick in the gulf, saying their economic livelihoods are at stake.

BP is asking that those suits, most of which are class actions, be consolidated in the U.S. District Court for the Southern District of Texas, whereas the plaintiffs have requested the Eastern District of Louisiana.

Meanwhile, Transocean has claimed that its damages should be capped at roughly $27 million under the Limitation of Liability Act of 1851. Another law that will likely come into play is the Oil Pollution Act, which currently caps oil spill liability at approximately $75 million.

But there are exemptions to the Oil Pollution Act for such things as negligence and willful misconduct, and cleanup costs are not included, according to experts. There have also been efforts in Congress to raise the cap.

Moreover, the Oil Pollution Act and other statutes should not preempt common law tort and maritime liability, opined Zygmunt Plater, a professor at the Boston College Law School who chaired the Alaska Oil Spill Commission's legal research task force following the Exxon Valdez spill.

“You're looking at probably the largest environmental disaster that we've ever had in the legal system,” Plater said.

Thus far, BP has been reluctant to talk about the $75 million cap, according to Brendan Cummings, senior counsel at the Center for Biological Diversity.

“Politically, they're smart enough not to waive that cap in front of them as a shield,” Cummings said. “Only [Sens.] Lisa Murkowski and [James] Inhofe seem to be saying to the American public that oil companies should be shielded from liability.”

Because fisheries in the Gulf of Mexico have closed, the fishermen probably have the strongest case for damages, whereas BP may argue that claims from property owners and other parties are more tenuous, he added.

“If BP were required to pay the true economic and ecologic cost that this spill is likely to cause, there would be no more British Petroleum,” Cummings said.

A spokesman for BP declined to comment on pending litigation.

Shareholder Actions

Various shareholders are also getting into the act. For example, on May 13, a putative securities fraud class action was filed in the U.S. District Court for the Eastern District of Louisiana alleging that Transocean issued false and misleading statements about its safety protocols.

As a result of the false and misleading statements and the company's failure to disclose repeated safety failures, Transocean's shares traded as high as $94.88, the investors claim. But since the Deepwater Horizon accident, the stock has fallen to $66.34 per share, they say.

Earlier in May, at least two shareholder derivative lawsuits were filed against certain officers and directors of BP and other defendants, claiming that they breached their fiduciary duties by ignoring critical safety issues even after earlier explosions.

“Despite repeated incidents serving as 'red flags' of the possibility of a major explosion and oil spill in the Gulf of Mexico, the BP defendants elected to cut costs, including safety and maintenance expenditures, in pursuit of profitable results to report to Wall Street,” one of those suits said.

“These defendants also lobbied the federal and state governmental authorities to remove or decrease the extent of safety and maintenance regulation of the company’s gulf operations, claiming, against all evidence, that 'voluntary compliance' would suffice to address safety and environmental concerns,” it added.

BP is famous for complacency, collusion, neglect and risky cost cutting, all of which will be looked at by shareholders, according to Plater.

“If I had BP stock right now I would get out of it,” he said.

Statutory Environmental Actions

Rather than taking aim at BP or Transocean, other suits go after Interior Secretary Ken Salazar and the U.S. Department of the Interior for their allegedly lax oversight.

On Tuesday, for example, the Gulf Restoration Network and the Sierra Club sued the Minerals Management Service, an agency within the DOI, for exempting oil companies drilling in the Gulf of Mexico from disclosing blowout and worst-case oil spill scenarios.

A day earlier, consumer advocacy group Food & Water Watch asked the U.S. District Court for the Southern District of Texas to halt operations at BP's Atlantis oil drilling platform — which is located near the site of the Deepwater Horizon accident — until certain final engineering drawings are produced.

Also on Monday, the Center for Biological Diversity launched a suit against Salazar, saying his “categorical exclusion” exemption policy — which allowed many oil companies, including BP, to drill without an environmental impact statement — violated the National Environmental Policy Act.

“That policy was ... unlawful on its face, but certainly post-Deepwater Horizon oil spill, it is a completely untenable policy and needs to be revoked,” Cummings said.

A similar NEPA suit was filed that same day by Defenders of Wildlife and the Southern Environmental Law Center.

And on Friday, the Center for Biological Diversity issued a 60-day notice of intent to sue, saying that since Salazar took office, the Interior Department had approved three lease sales, more than 100 seismic surveys and more than 300 drilling operations without permits required by the Marine Mammal Protection Act and the Endangered Species Act.

Though those cases are brought under different statutes, they are conceptually linked, according to Cummings.

“They all point to the unmistakable conclusion that Secretary Salazar was asleep at the wheel and didn't bring any of the reforms to MMS that he had promised,” he said.

Future Actions

State and federal agencies have yet to take legal action over the Deepwater Horizon accident, but it is likely they will, experts said.

In fact, Democratic senators on Tuesday pressured Attorney General Eric Holder to open a possible criminal probe into whether BP PLC “made false and misleading statements to the federal government regarding its ability to respond to oil spills.”

And on May 10, Florida Gov. Charlie Crist appointed two former attorneys general of that state to head a newly formed legal team that will represent the state on issues related to the spill. However, the governor also said he was not currently planning a lawsuit against BP.

Lastly, much litigation could erupt over the complex web of insurance policies held by the various parties affiliated with the rig.

--Additional reporting by Eric Hornbeck

Photo © Paul S. Hamilton