JPML Orders Gulf Oil Spill MDL to Eastern District of Louisiana

The Judicial Panel on Multidistrict Litigation yesterday selected New Orleans as the site of the oil spill litigation MDL. The Panel ordered coordination, and transferred 77 lawsuits to the Eastern District of Louisiana before U.S. Judge Carl J. Barbier (and referred to more than 200 potential tag along actions). In Re: Oil Spill by the Oil Rig "Deepwater Horizon" in The Gulf of Mexico, MDL No. 2179 (Aug. 10, 2010). 

In its order, the Panel found that the cases indisputably share factual issues concerning the cause (or causes) of the Deepwater Horizon explosion/fire and the role, if any, that each defendant played in it. Centralization under Section 1407 would eliminate duplicative discovery, prevent inconsistent pretrial rulings, including rulings on class certification and other issues, and conserve the resources of the parties, their counsel, and the judiciary. Interestingly, the Panel noted that centralization may also facilitate closer coordination with Kenneth Feinberg’s administration of the BP compensation fund.

Over some objections, the Panel also concluded that it made sense to include the personal injury/wrongful death actions in the MDL. While these actions will require some amount of individualized discovery, in other respects they overlap with those that pursue only economic damage claims, found the Panel. The Order notes that the transferee judge has broad discretion to employ any number of pretrial techniques – such as establishing separate discovery and/or motion tracks – to address any differences among the cases and efficiently manage the various aspects of this litigation. See, e.g., In re Lehman Brothers Holdings, Inc., Securities & Employee Retirement Income Security Act (ERISA) Litigation, 598 F.Supp.2d 1362, 1364 (J.P.M.L. 2009). 

In terms of where the cases should be coordinated, the Panel noted that the parties advanced sound reasons for a large number of possible transferee districts and judges. They settled upon the Eastern District of Louisiana as the most appropriate district for this litigation. Without discounting the spill’s effects on other states, the Panel concluded that "if there is a geographic and psychological center of gravity in this docket, then the Eastern District of Louisiana is closest to it."

In selecting Judge Barbier, the Panel expressly declined the suggestion made at oral argument that, given the litigation’s scope and complexity, it should assign the docket to multiple transferee judges. "Experience teaches," said the Panel, that most, if not all, multidistrict proceedings do not require the oversight of more than one judge, provided that he or she has the time and resources to handle the assignment. Moreover, Judge Barbier has at his disposal all the many assets of the Eastern District of Louisiana which is accustomed to handling large MDLs. Judge Barbier may also, found the Panel, choose to employ special masters and other case administration tools to facilitate certain aspects of the litigation. See Manual for Complex Litigation, Fourth §§ 11.52, 11.53 (2004).


 

Gulf Oil Spill Litigation

More than 100 federal and state court actions have been filed against BP PLC, Transocean Ltd., and other companies in connection with the Deepwater Horizon drilling rig accident in the Gulf of Mexico.  (The API has a Q&A on the accident, and the Unified Command on the incident offers updates.)  Like many mass accident scenarios, the spill has generated a variety of kinds of actions. The claims so far fall into several main categories, including personal injury/wrongful death, maritime torts, property damage/lost profits, shareholder claims, and environmental law actions.

The wrongful death actions arise from the 11 workers missing and presumed dead in the accident.  These cases were filed in federal and state courts in Louisiana and Texas.  Gulf-front property owners, fishermen, shrimpers, harvesters, seafood processors, and restaurants in Louisiana, Alabama, Mississippi and Florida are among the entities suing over alleged harm to their businesses and their economic livelihoods. Many of these suits are class actions with overlapping class definitions.  The plaintiffs typically allege that defendants knew of the dangers associated with deepwater drilling and failed to take appropriate safety measures to prevent damage to marine or coastal environments, where they work and earn their income.

These claims potentially implicate caps on damages under the Limitation of Liability Act, and the Oil Pollution Act, which currently caps certain oil spill liability at approximately $75 million.  Plaintiffs have asserted that there are various exemptions from this reach of the Oil Pollution Act, for gross negligence and certain cleanup costs.  Also, the Obama administration and Democrats in Congress have advocated raising the caps retroactively. Bills S. 3305  (the so-called Big Oil Bailout Prevention Liability Act of 2010) and H.R. 5214 would raise the liability for economic damages to $10 billion per spill from the current $75 million. In a Senate hearing, Interior Secretary Ken Salazar warned that raising the trust fund's liability cap to $10 billion would prevent smaller and mid-sized energy companies from operating offshore. Perhaps most importantly, there is some case law suggesting that the Oil Pollution Act will not preempt state common law tort liability.

The administration is also proposing a tax increase, to support the Oil Spill Liability Trust Fund, of a further 1 cent per barrel on petroleum. It is interesting that the administration has been criticized for the slowness of some of its responses to the spill, but is very quick to propose tax hikes, without an opportunity for all stakeholders to be heard and without careful consideration of the availability of the fund for future incidents. A White House summary of its proposals for legislation on oil spill response is available.

Some plaintiffs have proposed that the federal cases be coordinated in an MDL proceeding in the Eastern District of Louisiana.  In Re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, MDL No. 2179 (filed 4/30/10). Certain defendants have suggested instead that the Southern District of Texas host the MDL. A large group of plaintiffs' attorneys had met in New Orleans early in the month to plot out litigation strategy.  Interestingly, the Mississippi Bar issued a statement advising potentially affected parties of the risk of improper solicitation by plaintiff attorneys.It will be fascinating to see if the defendants can remain similarly coordinated and avoid unnecessary finger-pointing.  The testimony of various executives for BP Plc, Transocean Ltd., and Halliburton in front of the Senate Energy and Natural Resources Committee and the Senate Environment and Public Works Committee that pointed out the responsibilities of the other companies, raises this issue. 

Another type of pending action is by various shareholders alleging securities fraud in a class action that asserts that defendants made false and misleading statements about their safety procedures. Allegedly as a result of the statements and the company's supposed failure to disclose prior safety issues, the stock prices had been inflated, tumbling after the accident.  Several shareholder derivative lawsuits were also filed against certain officers and directors of the defendants, claiming that they breached their fiduciary duties by supposedly ignoring critical safety issues. The suits also allege that defendants lobbied governmental authorities to reduce the extent of safety  regulation of the companies' gulf operations. (one would think that was protected speech)

Some litigation has named Interior Secretary Salazar and the U.S. Department of the Interior for their oversight of off-shore drilling operations. These case point to the rules regulating the oil companies' blowout and worst-case oil spill preparations.  Some have gone so far as to seek a halt to BP's operations at other oil drilling platforms.  Still others have focused on the oil companies' environmental impact statement posture as in violation of  the National Environmental Policy Act, and their seismic surveys and drilling operations as in violation of the Marine Mammal Protection Act and the Endangered Species Act.

Democratic Senators are pressuring the Justice Department to to open a criminal probe into the accident, and BP's statements to the federal government regarding its ability to respond to oil spills. Earlier this month, Florida Gov. Crist appointed two former Florida state attorneys general to head a newly formed legal team that will represent the state on issues related to the spill.