BP Oil Spill Lawsuits and Legal Issues

The BP oil spill has affected thousands of people and businesses in the Gulf region. What are their legal options?

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The BP oil spill and its impact will be felt in the Gulf of Mexico region for years, if not decades. In the months after the Deepwater Horizon drilling rig exploded off the coast of Louisiana in April 2010, it's estimated that almost five million barrels of oil gushed from the seabed and into the Gulf, making it the worst oil spill in history. Now that the flow of oil has stopped, the scope of the catastrophe is coming into focus, and attention is turning to how things will play out in the court system.

This article looks at some of the legal issues raised by the BP oil spill, including legal options for businesses and individuals looking to get back on their financial feet after the oil spill. (For in-depth information on filing a claim with BP's $20 billion compensation fund, see Nolo's article BP Oil Spill: Filing a Claim With BP's Compensation Fund.)

The BP Oil Spill: Types of Lawsuits

The BP oil spill has already prompted the filing of thousands of lawsuits. Businesses and workers have seen their livelihoods suffer or even disappear in Louisiana, Mississippi, Alabama, Florida, and Texas. Families and individuals in the Gulf region worry about the health hazards posed by the chemicals used to disperse and clean up the oil. And, with its dubious distinction as the largest environmental disaster in U.S. history, the BP oil spill has inflicted immeasurable devastation on the Gulf's coastline, wetlands, wildlife, and ecosystems.

Here's a look at the different kinds of lawsuits being filed over the BP oil spill (with links to more information from Nolo where relevant).

  • Lost business profits and individual income losses. Thousands of businesses and workers in the Gulf region have filed lawsuits against BP, seeking repayment for profits and income that were lost because of the oil spill. These plaintiffs include companies and employees in the commercial fishing, shrimp, and oyster industry; and charter boat operators, hotels, tourist attractions, rental property owners, and other businesses in popular resort areas. These businesses and individuals may also be eligible to file a claim with BP under a fund that's been set up to help those whose financial livelihood has suffered because of the spill. (See "BP Compensation Fund: Filing a Claim," below.)
  • Environmental damage. A number of lawsuits have been filed over the environmental damage inflicted by the spill -- including damage to coastline, wetlands, wildlife, and other harm to the ecosystem in the Gulf region (and related fines and cleanup orders from the federal government). The Justice Department is currently weighing its options for filing civil and criminal lawsuits against BP and other companies responsible for the spill, including actions for violations of the Oil Pollution Act of 1990, the Clean Water Act, and the Endangered Species Act of 1973.
  • Property damage. The BP oil spill has damaged commercial, residential, and undeveloped property along the Gulf coastline, as well as a number of small islands offshore. Some property damage suits involve the use of dispersants to aid in the cleanup of the spill. Property damage cases may be handled by filing a claim through the $20 billion compensation fund set up by BP. (See "BP Compensation Fund: Filing a Claim," below.)
  • Health problems and health risks from oil and chemical dispersants. Residents in the Gulf region have filed lawsuits over the health problems and health risks caused by the presence of oil on or near coastal property and the dangers posed by the potentially toxic chemicals that have been used to disperse the spilled oil. (Learn more about these kinds of toxic chemical cases in Nolo's Toxic Torts FAQ.)
  • Injuries and health risks from cleanup. A number of people who went to work cleaning up and burning off oil in the Gulf in the months after the spill have filed claims for health problems allegedly linked to the cleanup (including headaches, nausea, and throat irritation).
  • Wrongful death and injury claims by rig workers and their families. Some families of the 11 workers killed in the explosion of the Deepwater Horizon have filed wrongful death lawsuits against BP and Transocean. (Learn more about wrongful death lawsuits in Nolo's article Wrongful Death Claims: Overview). Those companies have also been sued for negligence by the surviving drill rig workers who suffered injury that day.
  • BP shareholder lawsuits. Dozens of investors and pension funds have filed suit against BP, accusing the company of misleading shareholders and causing BP share values to plummet. The U.S. Securities and Exchange Commission (SEC) is also investigating whether BP insiders profited from trading based on nonpublic information in the weeks and months after the spill.
  • Lawsuits by state governments. At least one state (Alabama) is considering filing a lawsuit against BP to recoup tax revenue from business income that was lost because of the spill, and to recover state money that was spent cleaning up the spill.

Oil Spill Lawsuits: Who Is Being Sued?

When it comes to lawsuits over the 2010 Gulf of Mexico oil spill, BP is front and center because of its high-profile role in the disaster -- not to mention its deep pockets and its reputation as a global business power. Current estimates have BP setting aside about $32 billion to cover cleanup, legal claims, fines, and other costs related to the spill. So, clearly BP is planning on taking the brunt of the legal blame -- and the biggest financial hit -- for contributing to the worst oil spill in the nation's history.

But there are other parties that might be on the legal hook and are already targeted in lawsuits over the spill. These include:

  • Transocean, which owned the Deepwater Horizon drilling rig
  • Halliburton, the well contractor, and
  • Cameron International, the company that manufactured the underwater well's blowout preventer, which apparently failed to function as planned and didn't do anything to prevent or lessen the oil spill.

Consolidated Lawsuits: MDL and Class Actions

Because of the sheer volume of lawsuits and the variety of business and individuals affected by the BP oil spill, many lawsuits will be grouped together under a process known as multidistrict litigation and through class actions.

Multidistrict litigation (MDL). In August 2010, a federal judicial panel decided that most of the hundreds of federal lawsuits stemming from the BP oil spill will be consolidated in federal court in New Orleans, under a process known as multidistrict litigation (MDL). Specifically, the BP oil spill MDL will be handled by Judge Carl Barbier in the U.S. District Court for the Eastern District of Louisiana (located in New Orleans). Check out the official website for the BP oil spill MDL at www.laed.uscourts.gov/OilSpill/OilSpill.htm. (To learn more about MDL and what happens when cases like these are consolidated, read Nolo's article Multidistrict Litigation (MDL) for Drug Lawsuits and Other Cases.)

Class actions. It's still early in the litigation game, but a number of BP oil spill lawsuits have already been filed as class actions -- including negligence claims against BP and shareholder suits filed on behalf of BP investors. And more class actions are likely on the way, provided there is enough similarity among the plaintiffs and the damages they suffered.

BP Compensation Fund: Filing a Claim with the Gulf Coast Claims Facility

A few months after the Deepwater Horizon explosion, BP announced that it had set up a $20 billion escrow fund that's primarily meant to compensate businesses and workers in Louisiana, Mississippi, Alabama, Florida, and Texas whose financial livelihood has suffered as a result of the BP oil spill disaster. Claims can also be filed for injuries and health problems linked to the spill, though the process for those kinds of claims may take longer (and claims for mental health problems caused by the spill likely won't be covered by the fund at all). For in-depth information on filing a claim with the Gulf Coast Claims Facility (the independent administrator running the claims process), see Nolo's article BP Oil Spill: Filing a Claim With BP's Compensation Fund.

If you've lost business or personal income due to the oil spill, keep in mind that while filing a claim with the Gulf Coast Claims Facility may be a quick way to get money that can help keep your business's doors open or your bills paid on time, it may not be the best route in every case. Claims for a few thousand dollars may move through the process quickly, but BP considers any claim over $5,000 to be a "large loss" claim, and those claims are subject to a longer review process. Also, as a condition of receiving a lump-sum payment under the fund, you'll probably be asked to waive your right to file a lawsuit against BP and others (the waiver probably won't be a condition tied to the receipt of monthly "emergency" payments). It could be risky to accept a one-time payment now and waive your right to file a lawsuit when the scope of your financial losses may not be fully defined. And, finally, as more and more claimants get in line, there's no guarantee that the $20 billion fund will be enough to compensate everyone. Before filing a claim with the fund, consider talking to an attorney about all of your legal options.

Getting Help

For individuals and businesses that have suffered damages tied to the BP oil spill, it can be tough to know where to start. Should you file a claim under BP's $20 billion fund? Would a lawsuit be more effective? Is there an existing class action you could join? These are complex questions, and the legal landscape surrounding the BP oil spill can be tough to navigate on your own. You may want to talk with an experienced attorney about your case -- especially an attorney who has experience in cases involving damages caused by environmental disasters or familiarity with the BP claims process. You can use Nolo's trusted Lawyer Directory to locate and talk to an attorney in your area.

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