Billions At Stake as Latest Trial Over BP Oil Spill Begins
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UPDATED: Feb 26, 2013
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A federal judge in New Orleans heard opening statements yesterday in the trial to determine blame for the 2010 oil spill in the Gulf of Mexico caused by the explosion of BP’s Deepwater Horizon oil rig. The trial will appropriate blame between BP and its subcontractors, and issue financial judgments to the parties responsible based on the level of responsibility. At stake in this trial is a potentially record setting civil fine of up to $17.6 billion to be paid by BP and its subcontractors to states, businesses, and individuals who suffered from damage due to the spill.
Details of the Lawsuit
The current legal action is brought by a number of private businesses and individuals, the United States Government, and the States of Louisiana and Alabama. The US Government and two States in the litigation are pursuing a civil fine under the Clean Water Act and other appropriate State legislation which allow Federal and State governments to sue for a civil fines when a violation of the law occurs.
Arguing that BP “put profits over safety,” and operated under a “culture of corporate recklessness,” both the private plaintiffs and government entities allege that BP and its subcontractors were grossly negligent in their duty to operate safe oil rigs, and in their duty to mitigate the damage after Deepwater Horizon’s explosion. Gross negligence can be proven only if the plaintiffs demonstrate that BP and/or its subcontractors were seriously careless, and performed at a level so far below what they should have that additional fines are warranted. Gross negligence is reserved for the most blatant of offenses, and the penalties are often very steep.
Given BP’s past willingness to settle in both criminal and civil cases already closed, it is a little surprising that the company has allowed this litigation to proceed to trial. Although it is still possible the case will settle sometime in the future, BP seems intent on proving that it was not grossly negligent – a position the company has staunchly maintained since the disaster. With the company’s reputation taking a significant hit after the spill, it is possible BP wants the opportunity to show that the mistakes led to the spill were not the result of seriously careless behavior. Also, by appropriating blame to subcontractors, BP can further demonstrate it is not entirely at fault.
Defendants Turn on Each Other
In addition to accusations from the plaintiffs, each of the defendants will likely point to each other in an effort to reduce their slice of the blame pie. BP and its subcontractors will argue 1) that they were not grossly negligent because the mistakes made were not the result of extreme carelessness; and, 2) if there was extreme carelessness, the co-defendants were the guilty party. As the owner of the rig and manager of the subcontractors, it seems BP has the toughest fight, however, the company is prepared to offer evidence that its subcontractors made significant errors in judgment before and after the spill.
BP’s Other Settlements
BP has already paid out several billion dollars in other settlements, however, the current legal action will likely force the company to make its largest payout yet. Shortly after the incident, BP agreed to a settlement of over $4 billion to avoid criminal prosecution. BP also settled with plaintiffs not involved in the current litigation by paying $8.5 billion to close prior civil suits. When combined with money paid for relief efforts, BP has paid close to $37 billion so far to cover the cost of the accident.