By: Henry “Hank” Didier, Jr.
The BP oil spill on April 20, 2010 was nothing short of disastrous. Long-term and permanent damage to the environment remains hotly debated. Economically speaking, the financial impact still resonates across many industries in Florida and beyond, but now, with the Deepwater Horizon Settlement Program in place, businesses in counties along the Gulf Coast are finding the help they need for recovery.
The Settlement Program is receiving an average of 12,000 claims per month. It’s hard to imagine, due to the ever-increasing advertising about the Program, but there are still some business owners and professionals that simply do not know that they are specifically included within the terms of the new settlement agreement, and that they may well have valid claims.
A Look At What Led to the New Settlement Program
BP could see its legal future with crystal ball clarity in the aftermath of the spill. All it had to do was look at the Exxon Valdez spill, and how Exxon was mired in lawsuits for 20 years, to know it had to take a proactive approach. Thus, under the current plan, the vast majority of BP’s criminal, civil and legal matters will be wrapped up and done within four years of the spill. For that reason, BP is one of the biggest proponents of this Settlement Program. It represents the best way to satisfy the hundreds of thousands of claims that potentially exist. For BP, to be able to move beyond the disaster relatively quickly will go far to minimize shareholder discontent and desertion.
BP’s first attempt at a Settlement Program led to the Gulf Coast Claims Facility, or GCCF. The independent program held companies to subjective claim measurements, causing claims to be unfairly valued or outright denied. While issues with the program have led some to re-file under the current program, the GCCF paid out $6.2 billion to more than 220,000 claimants before BP and the District Court of Louisiana approved the Settlement Program for remaining private plaintiffs.
In August 2010, all of the lawsuits against BP and the other defendants concerning the Deepwater Horizon Incident were consolidated before one Court as MDL 2179, and moving toward a February 27, 2013 trial date. However, settlement negotiations were successful, and the Plaintiffs’ Steering Committee and BP reached agreement on the Economic and Property Damages Settlement.
Through the Deepwater Horizon Court-supervised Settlement Program, BP acknowledged that virtually every type of business was either directly or indirectly harmed, making nearly all types of businesses eligible for the settlement. The Program, outlined in a 1,000+ page court document, lays out specific and complex formulas by which companies will be evaluated and compensated. The total settlement package is currently estimated to be $7.8 billion; however there is no cap on the amount that may be paid under the settlement to all businesses who qualify.
While the revenue loss does not have to be directly related to the oil spill, claimants must meet causation requirements based on geographic location and type of business. The Program was granted preliminary approval on June 4, 2012 and final approval on December 21, 2012. An appeal is pending.
A Broad-Reaching Program
Businesses were no doubt caught in the trickle-down effect of the aftermath. Tourism dropped significantly as people feared oil on the beaches as far south as Naples and the Keys. Locally, job losses and economic uncertainty led to constricted consumer spending, especially on items such as eating out, taking vacations, and purchasing new cars. Businesses of all types – from construction companies and restaurant owners, to lawyers, dentists and architects – began to feel the impact.
As of the end of January, more than 118,000 claims had been submitted, nearly 40,000 of which were in Florida. More than half of all claims involve a business or individual economic loss. The problem arises, however, when you consider that, currently, 65% of all economic loss claims evaluated to date have been deemed incomplete. Filing can be complicated and cumbersome without legal counsel, but an evaluation can be done fairly simply by firms handling these claims.
Financially-speaking, many impact scenarios exist under which claimants may qualify, including trends referred to as V-shaped, modified V-shaped or decline only revenue patterns. The V-shaped pattern, for instance, is identified when an analysis of individual business financial statements identifies a drop in gross revenues in 2010 and some recovery in 2011. If this economic trend is identified, BP has agreed that it is indicative of an oil spill economic impact beyond normal market factors, and it will compensate those fairly for their losses between May and December of 2010.
Settlement funds are providing an array of relief for those affected. Companies found to be eligible are recouping business losses incurred, investing in marketing to stimulate growth and moving forward towards recovery.
For more information about the new BP Settlement Program, visit: www.DeepwaterHorizonSettlements.com
Henry “Hank” Didier, Jr. is Founding Partner of Economic Recovery Group, LLC, a statewide law firm dedicated to helping clients navigate the BP Settlement Program.