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Supreme Court rejects BP’s appeal of oil spill settlement

The Supreme Court refused to review BP Plc’s $9.7 billion settlement over the 2010 Gulf of Mexico oil spill, turning away the company’s argument that hundreds of millions of dollars are going to businesses that weren’t harmed.

The rebuff, which came without comment, lets spill victims continue to collect billions of dollars still owed by the oil company under the settlement.

The offshore spill, the largest in U.S. history, has cost London-based BP more than $28 billion in cleanup costs and damages, and the company is still fighting battles on multiple fronts. BP faces fines of up to $18 billion for violations of the U.S. Clean Water Act in a case set for trial in January.

BP originally estimated the class action settlement would cost $7.8 billion and now says it will be “significantly higher” than $9.7 billion. The settlement ultimately may cost the company $20 billion, according to an estimate by Bloomberg Intelligence analyst Brandon Barnes. The company has taken a pretax charge to earnings of $43 billion to cover all anticipated spill costs.

BP is “concerned that the program has made awards to claimants that suffered no injury from the spill — and that the lawyers for these claimants have unjustly profited as a result,” Geoff Morrell, a company spokesman, said in an email.

Stephen J. Herman and James P. Roy, the lead lawyers for the group pressing claims against the oil company, said the high court rebuff “should finally put to rest BP’s two-year attack on its own settlement.”

BP argued that the 2012 settlement is being implemented in a way that violates the Constitution and the federal rules governing class action lawsuits.

The company said money is going to entities whose losses were unrelated to the spill, including lawyers who lost their licenses and warehouses that burned down before the incident.

“Large numbers of claimants have received awards totaling more than half a billion dollars despite the evident absence of any injury caused by BP,” the company argued. The accord is being overseen by a federal judge in New Orleans.

The fight over the payments may have backfired on BP, boosting the ultimate cost of the settlement, said Joe Rice, one of the victims’ lawyers who negotiated the agreement.

“BP spurred interest by a lot of businesses that wouldn’t have filed claims,” he said.

BP’s initial estimates were too low, Rice added. “I always felt it was going to be somewhere in the $12-14 billion range,” he said. “It may go up.”

The Supreme Court’s rejection “starts the clock ticking on filing claims,” Rice said. Plaintiffs have six months to file economic-loss claims over the spill.

The suing businesses urged the high court to reject the appeal, saying BP is trying to renege on an agreement because it is proving more costly than anticipated.

“BP has developed buyer’s remorse and wants out of the agreement it entered into,” lawyers for the businesses argued.

Business economic losses

The Supreme Court dispute centered on the most expensive category of claims under the settlement, those for business economic losses. The accord awards damages to businesses meeting certain loss-calculation formulas that vary by industry and distance from the spill.

The high court in June refused to halt the payments while the justices weighed whether to take up the case.

Earlier this month, a federal judge rejected BP’s bid to remove Patrick Juneau, the claims administrator overseeing payouts. The company said he had a conflict of interest because he briefly represented Louisiana in the early days of the spill.

BP is separately asking a federal appeals court to undo payments to some victims, arguing that Juneau misunderstood the deal.

The April 2010 explosion at BP’s Deepwater Horizon rig killed 11 people and sent more than 4 million barrels of oil spewing into the Gulf of Mexico.

BP’s American depositary receipts fell Monday by $1.11, or 2.8 percent, to close at $38.87. Earlier, they dropped as low as $38.77.

The case is BP Exploration v. Lake Eugenie Land, 14-123.

With assistance from Margaret Cronin Fisk in Detroit and Laurel Calkins in Houston. 

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