BP's Looming Legal Battle
Lessons from the 21-year legal battle that followed the Exxon Valdez spill could help BP dodge charges—or show victims of this spill how to fight like an oil company.
With thousands of gallons of oil flooding the Gulf of Mexico, energy giant BP is accepting assistance from all quarters. The U.S. Coast Guard is on the scene, as is the Navy. All hands are on deck, trying to contain a slow-motion disaster.
One group in particular that BP is turning to for help is Exxon, and for good reason: Exxon has some experience in the spill department. Two decades ago, the oil tanker Exxon Valdez unleashed 250,000 barrels of crude oil into the waters of Prince William Sound, Alaska. Observers believe this spill will likely be even worse.
“For a 40-year-old lawyer to find himself 62-years-old and working on the same oil spill case is not a happy thing,” says one veteran of the Exxon Valdez case.
But while it consults with Exxon's engineering department, BP might also be wise to schedule a meeting with the energy behemoth’s legal team. Exxon spent $4.3 billion in clean-up expenses and resident compensation in the wake of the Valdez debacle. Court battles were waged for 21 years and reached all the way to the Supreme Court. Some lawyers spent a third of their lives litigating the case.
What kinds of lessons does the messy Exxon Valdez case hold for future action against BP? Veterans of that case shed some light on the legal gusher that the British-based future plaintiff is likely to face.
The Exxon Valdez’s principal legal legacy will likely be the clarity it adds to BP's legal fight. Because of Valdez, litigation against BP won't resemble the decades-long tussle with Exxon, says David Oesting, who represented 30,000 plaintiffs in the case. In 1990, a year after the Valdez spill, Congress passed the Oil Pollution Act, which created an oil industry-sponsored fund to help victims of oil spills— now totaling $1.6 billion. The act also straightened out a morass of legal requirements. To the frustration of lawyers and fishermen alike, the 1989 spill was argued under anachronistic maritime court law; the Oil Pollution Act was intended to bring those laws into the modern age.
• Bill McKibben: A Disaster’s Silver LiningWhat the act also did was make clearer who would be responsible in future spills. While BP worked with multiple other companies in the operation of this rig, it will ultimately be responsible for compensating residents and states for damages to the environment and business. “BP is on the hook unequivocally,” says Oesting.
But despite the changes made to the legal system after Valdez, veterans of that case say the spill in the Gulf has all the ingredients for an extremely expensive and lengthy court battle. Indeed, with the rig still spewing oil, legal action has already begun.
The first lawsuits were announced on Friday as shrimpers in Louisiana and Alabama entered class-action lawsuits for economic damages against BP, which leases the offshore well, and three other companies involved with upkeep of the rig. Attorney General Eric Holder has sent a cadre of government lawyers down to monitor the scene, promising the full pressure of the feds—“every resource at our disposal,” was how he put it—will be brought to bear.
Young lawyers building class-action suits in the BP case today may be approaching retirement by the time this case reaches its conclusion. Exxon Valdez lawyers reached by The Daily Beast on Friday sounded weary about the whole thing. Twenty-one years on, some are still working on the case.
“For a 40-year-old lawyer to find himself 62 years old and working on the same oil spill case is not a happy thing,” says Brian O’Neill, a partner at the Minneapolis firm Faegre & Benson.
And yet lawyers caution that filing lawsuits now, as some Gulf Coast shrimpers have already done, may be rash.
“There is really no need to rush the filing now because nobody is going to go anywhere. There is no statute of limitations,” says Philadelphia lawyer Laddie Montague, another Exxon Valdez veteran. Oesting called such early actions “grandstanding.”
Others point out that one of the biggest mistakes made by plaintiffs in the Exxon Valdez case was settling too soon. It took years for experts to sort out the extent of the damages to the environment and business. Oil is still being found in Prince William Sound to this day, and new science continues to emerge about the damage to local animal populations like the herring.
“It would be very, very premature to try to settle this thing,” says Robert Stoll, an Oregon attorney who represented Alaskan cities and towns in the Exxon Valdez case.
But with business for local fishermen and coastal industry perhaps irrevocably damaged, pressure from the plaintiffs for some compensation will increase as time goes on.
The first legal hurdle will likely be who is liable for the spill. At the same time BP faces states and local businessmen in court, the oil giant will likely be challenging its partners in this enterprise. A separate company called Transocean operated the rig on BP’s behalf. A third company, Cameron International, manufactured the device that should have prevented the rig’s explosion, which may have cost 11 workers their lives. And Halliburton, the energy company famous for once being run by former Vice President Dick Cheney, was also involved in the rig’s maintenance.
What lawyers did say was that based upon early reports, any negligence on BP’s part is likely to pale in comparison to the errors made by Exxon, which put a known drinker at the helm of its ship. Here, it seems mechanical or operational failure is to blame, not indifference to safety. Of course, only days out, it is too early to tell.
The legal spillage from the Exxon Valdez stretched all the way to 2008, when the case landed at the Supreme Court. The court ruled that the punitive damages assessed to the company—$2.5 billion—were too high and whittled them down to $500 million.
"So what can a corporation do to protect itself against punitive-damages awards such as this?" Chief Justice John Roberts asked an attorney for Alaskan fishermen, a question that, for many, crystallized the Court’s pro-business stance. That stance would likely be seen once again if any BP litigation comes before Roberts and his eight fellow justices.
David Lebedoff, a Minneapolis lawyer and author of Cleaning Up: The Story Behind the Biggest Legal Bonanza of Our Time, a chronicle of the Exxon Valdez case, said that the primary lesson from the previous court battle is “a fish cannot sue”—or in this case, he said, a shrimp. While the environmental costs may be great, the legal conflicts will likely center on the spill’s impact on business.
“It’s a huge industry, and the shrimp harvesters or canners and oystermen and other forms of sea business will say that their livelihood is impaired. People still think that Exxon Valdez was an environmental lawsuit. It was not. It was a tort action brought for loss of livelihood,” says Lebedoff.
Corporate culture matters too, and the attorneys who squared off against Exxon say that the oil juggernaut’s couldn’t have been worse.
“There is a question whether BP is going to act like a responsible citizen or act like Exxon Mobil Corp.,” says O’Neill. He adds, “Exxon Corporation decided it was going to teach people that if you sue Exxon Corporation, it’s going to take so long and so much money that at the end of it, you’re bleeding out the ears.”
Samuel P. Jacobs is a staff reporter at The Daily Beast. He has also written for The Boston Globe, The New York Observer, and The New Republic Online.