The Corner

Can Someone ‘Win’ a Lawsuit without Suffering Injury?

From the “Nice Work If You Can Get It” Department: Being paid $100,000-plus for damages from an accident, even if neither you nor anything you own was actually damaged.

Such absurdities will be at issue soon at the Supreme Court, which as early as this coming Monday (November 17) is expected to decide whether to grant certiorari in a tremendously important challenge to one of the class-action awards involving the 2010 BP oil spill. The high court ought to take the case. 

To say that the Court should indeed grant cert is not to say the Court should rule in any one direction. Both supporters and opponents of the challenge should want the issue settled definitively, to avoid continuing confusion about the rules governing class actions.

BP’s challenge to this particular class action is being carried by a legal team headed by conservative superstar lawyers Ted Olson and Miguel Estrada. The nub of their complaint is this: Dozens upon dozens of the beneficiaries approved, by a special claims administrator, to share in BP’s payments suffered absolutely no damage — either directly from or with a discernible nexus to — the Deepwater Horizon disaster. For example, there is the phone retailer whose facility was shut down by fire in 2009, long before the drilling accident of April 2010, and remained shut down throughout the whole year of 2010. Yet even though its loss of business manifestly owed nothing to the BP disaster, the administrator awarded it $135,258.94 from the settlement fund.

Then there was the attorney living 200 miles from the Gulf who had his business license revoked in 2009 (and not reinstated), but who nonetheless was awarded more than $172,000 from the BP fund. And the dentist also 200 miles from the Gulf who lost business because his building suffered water damage nearly half a year after the oil spill, having nothing to do with the spill — but who was awarded  $137,518.89.

And so mind-numbingly on.

An impressive list of legal luminaries, including former White House Counsel Boyden Gray, have weighed in on the side of BP. But, in what seemed like a bitterly divided U.S. Fifth Circuit Court of Appeals, the appellate majority ruled that “causation” of damage by the spill did not need to be proved, but only asserted, in order for a claimant to be included in the pay-out largesse. 

The Fifth Circuit majority noted that BP had signed a “Settlement Agreement” containing this key provision:

“If you are a business in [geographic] Zone A, you are not required to provide any 

evidence of causation unless you fall into one of the exceptions agreed to by the 

parties, and listed in footnote (1).” Claimants not within the exempt criteria 

must only meet one of a set of quantitative tests based on their revenue 

patterns during the pre- and post- Deepwater Horizon disaster periods. 

In short, the judges ruled that BP agreed in advance that in certain geographic zones, proof of loss of income, not proof that BP caused the loss of income, would be sufficient to share in the booty. The judges, in effect, said they were upholding the terms of a contract (as one outside observer described it, “the basic norms of contract law”) and upholding the lower court’s power to certify the scope of the class of claimants.

BP argues that the interplay of the Constitution with Rule 23 of the Federal Rules of Civil Procedure do not allow such a certification of a class of claimants unless the injuries allegedly suffered were caused by the event or entity at issue.

If the law were merely a matter of applying common sense — which it isn’t — BP would win this case in a flash, no matter how negligent its behavior before the spill. (It should be noted that BP already has doled out $27 billion to atone for the disaster.) And if long-established legal principles hold sway (to wit, colloquially: One can’t collect damages from somebody who didn’t damage you), BP will win.

On the other hand, once a court has approved a settlement agreement, can one of the parties to that agreement re-open it, as some say BP is trying to do, in order to change its terms (or the lower court’s interpretation thereof)?

Different federal courts of appeals have ruled somewhat differently on this issue. With a circuit split effectively at hand, and with rules governing class-action lawsuits being so important in managing overburdened court systems nationwide, the Supreme Court really ought to step in. Granting cert is clearly the right thing to do.

(NOTE: For what little it’s worth, I write this as a resident of the Gulf Coast whose two home states were greatly damaged by BP, and thus who has little sympathy for BP in general. The question, though, isn’t whether BP should pay, but to whom. On the merits, it seems to me that BP’s challenge, based on the latter question, deserves Supreme Court review.)

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