Lawsuits Over Oil Spill in Gulf Continue to Mount

As British Petroleum (BP) struggles to cap a gushing oil well a mile beneath the waters of the Gulf of Mexico, the geyser of oil spill lawsuits aimed at the companies responsible for the disaster are shaping up to be the largest environmental litigation in U.S. history. 

About 100 wrongful death, environmental tort and shareholder lawsuits have been filed against British Petroleum (BP), Transocean Ltd., Halliburton Energy Services, Inc. and Cameron International Corp. since the April 20 explosion and fire on the Deepwater Horizon sent the oil drilling rig to the bottom of the Gulf and unleashed an oil spill in the Gulf that some say could be the worst environmental disaster in history.

BP has failed numerous times to stop the underwater well from spewing oil into the gulf at a rate that could be as high as 5,000 barrels per day. President Barack Obama himself has said BP will be held responsible, and the company’s corporate partners, who all pointed fingers at each other in a recent congressional hearing, are now trying to shelter themselves from liability over the Gulf oil spill.

Last week, Transocean, which built and operated the oil rig itself, asked a U.S. judge to limit its liability to $26.7 million. The company made the request using the Limitation of Liability Act passed in 1851, meant to give U.S. shipping equal liability protection to that held by many foreign shipping companies. The $26.7 million is the value of the oil rig and its cargo, based off of accrued leasing fees since it sank. The rig was originally valued at $650 million, but the company says that it obviously is not worth that much in its present state as a burned-out hulk resting a mile deep on the ocean floor.

Analysts say the move is likely to fail, but Transocean and BP are calling for the growing number of lawsuits over the oil spill to be consolidated as part of an MDL, or multidistrict litigation, for pretrial proceedings in a Houston federal court, which is the corporate backyard for both companies. Plaintiff attorneys agree that the oil spill lawsuits should be consolidated, but argue that the cases should be centralized in New Orleans federal courts, because Louisiana has suffered the brunt of the damage, and numerous plaintiffs are based there.

No one disagrees that the pending litigation is going to be highly complex. Not only will it involve certain maritime laws that are hundreds of years old, and were never written to handle a disaster of this scale, but it will also be the first time that the Oil Pollution Act of 1990, which came out of the Exxon Valdez oil spill, will be put to the test. In addition, environmental laws touching on interstate commerce, such as the Migratory Bird Treaty Act of 1918 and the Rivers and Harbors Act of 1899 will also likely come into play.

On top of that, the types of litigation vary across three broad categories. There are wrongful death lawsuits over the Gulf oil spill, claiming that the defendants’ negligence lead to 11 deaths and dozens of other injuries for workers on board the oil rig at the time of the explosion; there are claims by fishermen, shrimpers, oyster farmers and property owners along the gulf, who allege that they have suffered business loss from the Gulf oil spill; and shareholders have begun filing lawsuits against the companies, saying that corporate incompetence caused the disaster and led to a mismanagement of the disaster response, which hurt their investments. Each of these categories involve different laws, burdens of proof, and evidence.

The U.S. Judicial Panel on Multidistrict Litigation is scheduled to look at the cases in July. They will decide whether the cases should be consolidated to prevent duplicative discovery and inconsistent rulings. The Panel will also determine where the oil spill lawsuits should be centralized if an MDL is formed.

In the meantime, the spill still has not been capped, and some say the flow of oil into the sensitive waters may not be stopped until construction of a relief well is finished some time in July. As the massive oil slick, which can be seen from space, spreads, it is likely to affect more coastal areas, raise the defendants’ liability, and bring more plaintiffs into the lawsuits.