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, home builders, subcontractors and
suppliers may be eligible to recoup revenue losses incurred in 2010.
The Settlement Program is receiving an average of 12,000
claims per month, with a total cost estimated by BP to be $7.8 billion.
It’s hard to imagine, due to the ever-increasing advertising about the Program,
but many business owners still don’t realize 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. Though the Settlement is currently estimated
to be $7.8 billion, it’s important to note that there is no cap on the amount
that may ultimately be paid to satisfy all valid claims.
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 early February, more than 125,000 claims had been
submitted, around 45,000 of which are from 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.
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.
