Gulf Oil Spill MDL Court Issues Trial CMO

The court managing the Gulf oil spill MDL recently entered an important case management order defining the structure and scope of the upcoming trial on the Deepwater Horizon oil spill.  That Trial of Liability, Limitation, Exoneration, and Fault Allocation is scheduled to commence, as previously ordered in CMO No. 1 and CMO No. 2, on February 27, 2012.  See In re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010, MDL No. 2179 (E.D. La., Order 9/14/11).

Readers know we have been keeping an eye on this signficant litigation since the MDL was created. CMO No. 3 notes that the trial will address all allocation of fault issues that are to be tried to the bench without a jury, including the negligence, gross negligence, or other bases of liability of, and the proportion of liability allocatable to, the various defendants, third parties, and non-parties with respect to the issues, including limitation of liability.

The trial will be conducted in three phases.

Phase One [the Incident Phase] of the trial will address issues arising out of the conduct of various parties, third parties, and non-parties allegedly relevant to the loss of well control at the Macondo Well, the ensuing fire and explosion on the Deepwater Horizon vessel, the sinking of the Deepwater Horizon on April 22, 2010, and the initiation of the release of oil from the Macondo Well or Deepwater Horizon.

Phase Two of the trial will address Source Control and Quantification of Discharge issues. Source Control issues consist of issues pertaining to the conduct of various parties, third parties, and non-parties regarding stopping the release of hydrocarbons stemming from the Incident from April 22, 2010 through approximately September 19, 2010. Quantification of Discharge issues refer to  issues pertaining to the amount of oil actually released into the Gulf of Mexico as a result of the Incident from the time when these releases began until the Macondo Well was capped on approximately July 15, 2010 and then permanently cemented shut on approximately September 19, 2010.

Phase Three [Containment Phase] of the trial will address issues pertaining to the efforts by various parties, third parties, and non-parties aimed at containing oil discharged as a result of the Incident by, for example, controlled burning, application of dispersants, use of booms, skimming, etc. Phase Three of the trial will also address issues pertaining to the migration paths and end locations of oil released as a result of the Incident as carried by wind, currents, and other natural forces.

CMO No. 3 also addresses the sequence of proof for Phase One: first plaintiffs, then Transocean, then the other defendants. At the end of each Phase of the trial and after consideration of the parties' submissions, the Court may decide to issue partial Findings of Fact and  conclusions of Law for that Phase if it deems the record adequately developed. The Court said it anticipates that discovery and other pretrial proceedings for Phase Two of the trial and possibly for Phase Three of the trial will likely need to be conducted concurrently with pretrial proceedings for and the conduct of Phase One of the trial.

 

 


 

Marital Privilege Over Emails Rejected in Oil Spill Litigation

The massive litigation over the Gulf oil spill has spawned a wide range of significant legal issues.  Here's an interesting little one. The magistrate judge in the MDL has held that a BP drilling engineer cannot assert marital privilege regarding e-mails to his spouse sought by the plaintiffs. In re Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico on April 20, 2010, MDL 2179 (E.D. La., 3/28/11).

Mr. Morel was employed by BP as a drilling engineer on the Macondo Well.  Plaintiffs and several defendants wanted to depose him.  The witness asserted the marital privilege as to certain email communications which were produced by BP to the Plaintiff Steering Committee. He contended that 93 documents containing email communications between himself and his wife should be returned to him or destroyed. His wife was a production engineer for BP, with no duties relating to the well. 

All of the email communications at issue were made through their BP email accounts. But the witness urged that: (1) BP permitted the personal use of company email; (2) it did not indiscriminately or randomly monitor its employees’ emails; (3) no third party other than BP had a right to access Mr. Morel’s email account.  The court framed the issue as whether BP’s notification
statements and email policies were sufficient to defeat Mr. Morel’s assertion of the marital privilege over the emails.

BP computer screens included the statement that “[w]ithin the bounds of law, electronic transmissions through internal and external networks may be monitored to ensure compliance with internal policies and legitimate business purposes."  BP’s Code of Conduct Policy provided that: Personal data, information or electronic communications created or stored on company computers or other electronic media such as hand-held devices are not private.

Mr. Morel, however, argued that the determination of privilege should not be made on the basis of the written BP policies but on how those policies were implemented.

There are a number of cases finding that when an employer has a rule prohibiting personal computer use, an employee cannot reasonably expect privacy in their prohibited communications.   Miller v. Blattner, 676 F.Supp.2d 485 (E.D.La. 2009); Thygeson v. U.S. Bankcorp, 2004 WL 2066764 (D. Or.); Kelleher v. City of Reading, 2002 WL 1067442, *8 (E.D. Pa.).

BP had no such prohibition, but BP notified its employees that electronic communications could
be monitored and accessed by BP. There are a few cases indicating that policies short of a prohibition of personal use can defeat an expectation of privacy. Muick v. Glenayre Electronics, 280 F.3d 741 (7th Cir. 2002); United States v. Etkin, 2008 WL 482281 (S.D.N.Y); Sims v. Lakeside School, 2007 WL 2745367, *1 (W.D. Wash.).

Based on these cases, this court found that it was not objectively reasonable for an employee to have an expectation of privacy where the employers’ policies clearly demonstrate that the employee’s electronic communications may be monitored and accessed by the employer; and thus they were subject to production by a subpoena.
 

Update on Gulf Oil Spill Litigation

Couple of interesting issue being debated in the Gulf Oil Spill Litigation.  In re: Oil Spill by the Oil Rig "Deepwater Horizon" in the Gulf of Mexico on April 20, 2010, MDL-2179 (E.D. La.).

The first concerns control over the testing of key components of the rig, once they are recovered.  Readers know how important such testing can be in supporting or refuting causation theories. But the very act of testing, even if not destructive, potentially alters the condition of the product.  Who goes first; what tests get run in what order; who does the testing; how tests are done... all of these can be vitally important issues in accident investigation and product liability litigation.

Defendant Transocean Ltd. unit has asked the judge in the MDL to grant a motion for a protective order that would block the government's apparent plan to unilaterally control testing of the oil rig's blowout preventer. Press reports suggest the blowout preventer could be recovered from the Gulf floor in the near future. Transocean Offshore Deepwater Drilling Inc. and several other defendants thus filed a motion last week in the U.S. District Court for the Eastern District of Louisiana for an expedited hearing on the protective order covering the blowout preventer.

The federal government has indicated that it wants to take exclusive control of the blowout preventer, transport it to a government site, and then contract for forensic testing and analysis. The motion argues that while the government has solicited input from other parties on testing protocol, it never said it would pay attention to any of those suggestions.

The second issue is a battle between Transocean and co-defendant BP over document discovery. Transocean attorneys are claiming that BP has been withholding documents and limiting Transocean's access to sensitive information connected to the accident, including records of tests on the blowout preventer, lab reports on components of the rig such as the well cement mix, and data on equipment used to keep well pipes in place during cementing.  BP, for its part, calls the claim a "publicity stunt” designed to divert attention from Transocean's alleged role in the accident.  BP claims it has already turned over thousands of pages of documents, including materials on the initial exploration plan, lab tests and daily drilling reports, and mud log reports.

Third, the American Petroleum Institute and other parties who are defendant-intervenors have asked the MDL judge to remand one of the many coordinated cases.  Gulf Restoration Network et al. v. Salazar et al.  This one is the suit brought by environmental groups against the federal government, and the argument is that it is fundamentally different from the other cases because it focuses on administrative law issues regarding the government’s approval of offshore drilling plans.

The Gulf Restoration Network, along with the Sierra Club, accused the U.S. Department of the Interior of ignoring environmental regulations when it allegedly waived safety regulations to allow BP and Transocean to conduct offshore drilling exploration in the Gulf of Mexico.

The discovery for negligence claims at the core of the MDL, these moving parties assert, will not materially assist or advance a case that stems from the legal issue whether the federal government took proper steps in granting the companies the offshore drilling exploration permits.  In fact, the argument goes, keeping Gulf Restoration in the MDL would unreasonably delay what would normally be a quick resolution to an administrative law action.

 


 

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).


 

JPML Hears Oral Argument In Gulf Oil Spill MDL

The U.S. Judicial Panel on Multidistrict Litigation heard oral argument last week on the issue of consolidating the hundreds of cases arising from the Gulf oil spill. In re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico,  MDL No. 2179.

The MDL panel met this time in Boise, Idaho, and suspended the usual rule limiting oral
argument to 20 minutes.  Multiple attorneys representing the various parties in the pending cases addressed the panel.  Most defendants urged the cases be coordinated in the Southern District of Texas, while most plaintiffs, including some of the restaurant owners and fishermen affected by the spill, argued for the Eastern District of Louisiana, asserting that much of the injury/damages is centered there. A  few other plaintiffs pushed for the cases to be coordinated in Mississippi, Alabama, or Florida courts.

BP argued that the Texas forum was appropriate because this defendant's headquarters, documents, and key fact witnesses are all located there. The government wants the cases consolidated in New Orleans. But one issue is that 8 federal judges, including several in Louisiana, have recused themselves from the spill cases.  This led to discussion whether potential judicial conflicts should compel the panel to bring in a judge from outside the Gulf states. In New Orleans, the Eastern District of Louisiana has consolidated its 50+ oil spill cases before Judge Carl J. Barbier, who has issued interim case management orders and appointed interim liaison counsel for plaintiffs and defendants.  Some have argued this has effectively created an administrative framework that could be utilized were the Panel to send the MDL to New Orleans.

At last look, federal cases were spread around the country, including in New York and California and Illinois.  However, the busiest oil spill dockets are in the Eastern District of Louisiana, Southern District of Texas, Southern District of Alabama, and the three Florida district courts, each with more than 10 cases. 

As noted here, the litigation involves a wide variety of claims, from personal injury, to property or environmental damages, lost profits, and securities-based economic injury.  The panel asked whether the cases, even if consolidated, should be put in separate groupings.  Some plaintiffs' attorneys  argued it was particularly important to set up a separate track for personal-injury claims.  

 

"SPILL" Act Passes House

Readers may recall that last month we posted about H.R. 5503, the “Securing Protections for the Injured from Limitations on Liability Act” (SPILL Act). This is one of many pending and promised bills addressing legal liability issues arising from the Gulf Coast oil spill, including amendments to the Death on the High Seas Act.

Specifically, H.R. 5503 would:

  • Amend the Death on the High Seas Act to permit recovery of non-pecuniary damages (e.g., pain and suffering and loss of care, comfort, and companionship) by the decedent’s family, as well as standardizing the geographic threshold for its application, and permitting surviving family members to bring suit directly rather than through a personal representative.
  • Amend the Jones Act to permit recovery of non-pecuniary damages by the families of seamen who are killed.
  • Repeal the Limitation on Liability Act to the extent it limits the liability of vessel owners to the value of the vessel and its cargo.
  • Amend bankruptcy rules to prevent corporations allegedly responsible for damages under the Oil Pollution Act from certain moves seeking to sever their assets from the legal liabilities.

The bill was supposed to be in response to the Gulf Oil Spill. However, we cautioned that some of  its provisions were not limited to the subject matter of oil spills. For example, Section 5 of the bill as introduced, proposed to amend the Class Action Fairness Act to exclude from its reach any action brought by a State or subdivision of a State on behalf of its citizens. Such a provision could have significant effect on CAFA, far beyond the oil spill litigation. For example, it might impact cases like State ex rel. McGraw v. Comcast Corp., 2010 WL 1257639 (E.D. Pa. Mar. 31, 2010).

The version passed by the House apparently does not contain this provision.  It was passed on motion to suspend the rules and pass the bill, as amended, and agreed to by voice vote.  Republicans and industry groups had expressed some concerns, and since many of the provision purport to be retroactive, wondered what the rush was.  Supporters argued that some of the prevailing laws were written in the mid-19th century to protect American merchant ship owners, and that the liability system needs to be updated.

As amended, Section 2 amends the Death on the High Seas Act (chapter 303 of title 46, United States Code), Section 3 alters recoveries under the Jones Act; Section 4 would repeal the Limitation of  Liability Act and the Oil Pollution Act; and Section 5 would provide new bankruptcy protection for tort claims arising from oil incidents.

Beware of Legislative Moves Over The Gulf Oil Spill

Last week,  U.S. House Judiciary Committee Chairman John Conyers, Jr. (D-Mich.) and Congressman Charlie Melancon (D-LA) introduced H.R. 5503, the “Securing Protections for the Injured from Limitations on Liability Act” (SPILL Act).  This is one of many pending and promised bills addressing legal liability issues arising from the Gulf Coast oil spill, including amendments to the Death on the High Seas Act.

Specifically, H.R. 5503 would:

• Amend the Death on the High Seas Act to permit recovery of non-pecuniary damages (e.g., pain and suffering and loss of care, comfort, and companionship) by the decedent’s family, as well as standardizing the geographic threshold for its application, and permitting surviving family members to bring suit directly rather than through a personal representative.

• Amend the Jones Act to permit recovery of non-pecuniary damages by the families of seamen who are killed.

• Repeal the Limitation on Liability Act to the extent it limits the liability of vessel owners to the value of the vessel and its cargo.

• Amend bankruptcy rules to prevent corporations allegedly responsible for damages under the Oil Pollution Act from certain moves seeking to sever their assets from the legal liabilities.

The bill is supposed to be in response to the Gulf Oil Spill. However, many of its provisions are not limited to the subject matter of oil spills.  For example, Section 5 proposes to amend the Class Action Fairness Act  to exclude from its reach any action brought by a State or subdivision of a State on behalf of its citizens.  Such a provision could have significant effect on CAFA, far beyond the oil spill litigation. For example, it might impact cases like State ex rel. McGraw v. Comcast Corp., 2010 WL 1257639 (E.D. Pa. Mar. 31, 2010). In that case, the state of West Virginia, in its capacity as parens patriae, filed an action in state court alleging that a cable company's requirements concerning cable boxes constituted impermissible tying behavior, in violation of state antitrust and consumer protection laws. On removal, the federal court held that the action was a “class action” under the Class Action Fairness Act, under which the definition of a class action must be “interpreted liberally.”

The bill has been referred to the following committees: House Judiciary, Subcommittee on House Transportation and Infrastructure, Subcommittee on House Transportation and Infrastructure, Subcommittee on Coast Guard and Maritime Transportation.

Earlier this month, the House Subcommittee on Oversight and Investigations held a field hearing In Louisiana on the local impact of the Gulf oil spill.The House Subcommittee heard testimony from experts on the environment and wildlife, some of whom who warned that the full effects of the spill will not be known until the flow of oil is stopped.  But the most emotional testimony came from two widows, whose husbands died when the Deepwater Horizon Rig exploded in April. The widows urged Congress to reform the Death on the High Seas Act, but also noted that they fully support offshore drilling as essential to our nation's economy.

 

UPDATE: the House Judiciary Committee approved H.R. 5503, Securing Protections for the Injured from Limitations on Liability Act (SPILL Act), by a roll call vote of 16-11, with two Republicans, Reps. Lungren (R-Calif.) and Rooney (R-Fla.), joining the rest of the Democratic committee members in voting in favor.

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.