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Federal appeals court hears BP deal dispute

Company faults judge’s OK of payout terms

Oil coated the surface of the Gulf of Mexico waters near the site of the May 18, 2010, spill.

Hans Deryk/Reuters/File

Oil coated the surface of the Gulf of Mexico waters near the site of the May 18, 2010, spill.

NEW ORLEANS — A federal appeals court heard dueling arguments Monday on whether a judge should have approved BP’s multibillion-dollar settlement for compensating victims of its 2010 oil spill in the Gulf of Mexico.

Theodore Olson, a lawyer for BP, said the class-action deal it reached last year with a team of private plaintiffs’ attorneys ‘‘became something else’’ after US District Judge Carl Barbier upheld a court-appointed claims administrator’s interpretation of terms governing payouts to businesses.

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‘‘I don’t understand how you can now disagree with what’s in there,’’ Judge Eugene Davis of the US Court of Appeals for the Fifth Circuit told Olson.

‘‘Black became white,’’ Olson told Davis, one of three judges on the panel that heard the case. The judges didn’t indicate how soon they would rule.

The plaintiffs’ lawyers who brokered the agreement on behalf of tens of thousands of Gulf Coast residents and businesses urged the panel to uphold Barbier’s approval of the settlement.

BP, however, argues Barbier’s approval shouldn’t stand unless the company ultimately prevails in its ongoing dispute over payments to businesses.

‘‘BP supports the settlement as properly construed and implemented to compensate claims for actual losses caused by the Deepwater Horizon oil spill,’’ Olson said.

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The company asserts that Barbier and claims administrator Patrick Juneau interpreted the settlement in way that would force it to pay for billions of dollars in inflated or bogus claims by businesses. Plaintiffs’ lawyers counter that BP simply undervalued the settlement and underestimated how many claimants would be eligible for payments.

‘‘They’ve all lost their livelihood or their business revenue as a result of the economic calamity’’ caused by the spill, said Samuel Issacharoff, who argued the case for the plaintiffs’ attorneys.

In October, a different Fifth Circuit panel threw out Barbier’s rulings on that dispute and ordered him to change the calculation of some damages. Olson, who served as a US solicitor general under President George W. Bush, told Monday’s panel of judges that they may need to wait until that process is finished before issuing their own ruling.

Issacharoff, a professor at New York University School of Law, said BP acknowledged in a court filing last year that the settlement intended to exclude certain claims that the company doesn’t believe are eligible for compensation.

As of Friday, payments have been made to more than 38,000 people and businesses for an estimated $3.7 billion. Tens of thousands more could file claims in the coming months.

The settlement doesn’t have a cap, but BP initially estimated that it would pay roughly $7.8 billion to resolve the claims. Later, as it started to challenge the business payouts, the company said it no longer could give a reliable estimate for how much the deal will cost.

The dispute centers on money for businesses, not individuals. Awards are based on a comparison of revenues and expenses before and after the spill. BP says a ‘‘policy decision’’ that Juneau announced in January has allowed businesses to manipulate those figures in a way that leads to errors in calculating actual lost profits.

Monday’s panel also heard objections from several lawyers who weren’t involved in settlement negotiations, but say the deal shouldn’t have been approved in its current form.

Echoing BP’s complaints, some of their objections center on the argument that the settlement impermissibly allows payments to go to claimants who didn’t sustain damages from the nation’s worst offshore oil spill.

Brent Coon, a Beaumont, Texas-based attorney whose firm represents thousands of spill claimants, said the settlement has been good for some of his clients. ‘‘It’s very bad for others,’’ he said. ‘‘And it has to be fair to everyone.’’

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