Mississippi Litigation Review & Commentary : Mississippi Personal Injury Lawyer & Attorney : Phillip W. Thomas Law Firm : MS Litigation Review & Commentary

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The New York Times reports that the Department of Justice has charged eight people with filing fraudulent damages claims related to the BP Oil Spill. The article describes some of the indictments:

Among those charged were Cam T. Hang of Louisiana, who, according to the Justice Department, demanded $42,000 for business losses related to a restaurant that does not exist. A Michigan man, Kevin Hall, claimed he lost $9,000 at an ice cream stand in Pensacola, Fla., that, according to his indictment, is similarly mythical.

Good for DOJ. The fact that some people made false claims is perhaps the least surprising development of the entire saga. The same thing happened after Katrina.

Some of these claims sound like plot lines out of a Tim Dorsey novel. Doesn't Serge A. Storms have to be in the middle of the oil spill grift?  

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It's looking more and more like the big winners in the BP Oil Spill Litigation will be Ken Feinberg's law firm Feinberg Rozen and defense lawyers.

The WSJ Law Blog reported Monday that Plaintiff lawyers are heading for the exits:

 Plaintiffs’ attorneys who put money up front to hire experts are fretting about their investments, and some are trying to find a way to bow out of the litigation gracefully. Of course, there are plenty of complaints to be had about the pace of the Feinberg payouts so it’s too early to predict the success of the litigation.

I still think that there will be wars in court between resort properties and other businesses and their insurance companies and/or BP over lost revenue this past Summer. People didn't go to the beach due to the threat of oil. There was a definite loss of revenue even in places miles from the beach and where the oil never reached. Those victims are likely to sue.

The plaintiff lawyers who may be out of luck are the ones who went out and signed up fisherman, crabbers, shrimpers, etc. BP hired those guys to look for oil, birds with oil on them etc. Many made good money.

Meanwhile, Bloomberg reports that Ken Feinberg's firm has been paid $2.5 million so far and is getting paid $850,000 per month:

The London-based oil company agreed to pay Feinberg Rozen LLP in Washington a fee of $850,000 a month from mid-June, when Feinberg agreed to run the claims facility, through Oct. 1, according to a report today on the compensation by former U.S. Attorney General Michael Mukasey.

As for what this money covers, the article states:

The payments from BP help offset the “significant distortion” the project is causing to the Feinberg firm’s business, Mukasey said in the report today. Feinberg Rozen has turned away three mediation requests since June, according to the report.

Four attorneys spent 2,777 hours from June 16 to Oct. 4 working on the claims fund, according to the report. The firm hired two attorneys to help handle the work.

By my calculation that means Feinberg Rozen lawyers are averaging about $900.00 per hour for their work. I can't criticize Feinberg Rozen's pay for two reasons. First, I've heard that there are already lawyers in top law firms in New York, Washington and other East Coast cities who charge over $900 per hour. I suspect that BP has lawyers on its payroll who charge over $900 per hour.

Second, Feinberg Rozen has a specialty niche as resolution counsel that has no major competitor in the nation that I'm aware of. Ken Feinberg earned national fame running the settlement fund for 9/11 victims. His firm is hired by major corporations to settle mass tort and similar cases.

People might be surprised to know how many lawyers in Mississippi have dealt with Feinberg's partner Mike Rozen in negotiating settlements in large cases. I had never heard of them until Rozen showed up in a case that I worked on. I asked around and learned that many Mississippi lawyers have dealt with Rozen.

While Feinberg Rozen's compensation is large, my guess is that it is in line with what the firm charges other clients.  

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Want to be on an exclusive MDL plaintiffs' steering committee? Then you need to be an attorney in a large plaintiffs firm—the type that generally does not exist in Mississippi. That's my take away from reviewing the list of attorneys on the Plaintiffs' steering committee in the BP Oil Spill MDL.

Here is Judge Barbier's Order rendered Friday with the names of the fifteen lawyers on the plaintiffs' steering committee. Most of the lawyers appointed to the committee practice with large plaintiff firms. The even more exclusive executive committee is composed of four lawyers: James Roy, Russ Herman, Brian Barr and Scott Summy.

My interpretation of the Order is that the steering committee will run the entire litigation. Lawyers who represent victims—but who are not on the steering committee—appear to be getting squeezed out of the litigation.

The only Mississippi lawyer on the steering committee is former congressman and Secretary of Agriculture Mike Espy, who practices with national plaintiffs firm Morgan & Morgan. Here is Espy's application for the committee, which emphasizes his political background and firm size, as opposed to achievements as a trial attorney. Being African-American probably helped Espy make the cut. But being a former politician and a member of a large national firm could have been more important factors.

Numerous other Mississippi lawyers applied for a slot on the committee and were not appointed. I can't help but wonder if the small size of plaintiff firms in Mississippi was a hindrance in lawyers making the committee.

Most plaintiff operations in Mississippi are small as far as the number of lawyers. A large plaintiff firm in Mississippi is a firm with 4 or more lawyers. Many Mississippi plaintiff lawyers are solos, but still find a way to work mostly on big cases. It is common in Mississippi for plaintiff lawyers from different firms to team up for big litigation.

It is a model that I use in my practice all the time. But is it the best model for litigating big cases? Most of the MDL steering committee lawyers are in big plaintiff firms such as Baron and Budd and Beasley Allen.  

In the late 1990's regional defense firms formed and moved into Mississippi. But plaintiff firms remained small and localized. Perhaps more large plaintiff firms would have established a presence in Mississippi in the 2000's if not for tort reform and the era of the ultra-conservative Mississippi Supreme Court.

It will be interesting to see how plaintiff firms in Mississippi will look 10–15 years from now. My guess is that we are getting close to an era where plaintiff firms in Mississippi get larger. And while this would cause plaintiff lawyers to lose some of their autonomy, it would put them in a better position to compete for leadership slots in national litigation.    

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A Monday article in the Wall Street Journal takes a look at the MDL process. The article noted that in MDL actions, plaintiff lawyers have to compete for the work:

For plaintiffs' attorneys the streamlining can be brutal.

While hundreds of attorneys may be representing clients in the cases, judges typically pick only a handful to handle the day-to-day workload. The sidelined attorneys must pay the lead lawyers a fee and often say they feel shut out from key decisions.

"Lawyers fight, hog work, are overloaded and squeeze out others," said Joseph F. Rice, a South Carolina plaintiffs' attorney who has been involved in cases filed by asbestos victims and families of victims of the terrorist attacks of Sept. 11, 2001.

Lawyers hogging work and squeezing out other lawyers is usually found on the defense side where lawyers are getting paid by the hour. Lawyers want to do some of the work, but other lawyers will not share. National counsel hogs work and squeezes out local counsel. The problem also happens within a firm if there is not enough work to go around. It was going on in Mississippi firms before the litigation boom in the late 90's and has probably resumed in some firms.

In contrast, on the plaintiff side it is sometimes hard to get co-counsel to do any work. Some plaintiff lawyers will sit back and wait for co-counsel to do the work. If two lawyers with that work ethic are co-counsel, the case can grind to a complete halt.

There are some defense lawyers who have the reputation that they will work up a case, but will not try it unless they believe that it is a slam-dunk.

There are some plaintiff lawyers who have the reputation that they will not work up a case. If the case ever gets to trial, they will usually lose due to the lack of preparation.

The best lawyers on both sides work very hard to prepare their cases and are not afraid to lose at trial. 

 But the MDL appears to turn the plaintiff lawyers into defense lawyers, where they have to compete for work. Pretty funny if you ask me.  

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The MDL Panel on Multidistrict Litigation ruled this week that the BP Oil Spill MDL is going to the Eastern District of Louisiana. Here is the Court's Order. The judge will be Judge Carl Barbier.

The MDL's decision is good for the plaintiffs and great for Louisiana oil spill lawyers, both plaintiff and defense. It's not bad for the Mississippi plaintiff lawyers who filed oil spill cases, since New Orleans is close in proximity.

The decision is bad for the oil companies and terrible for defense lawyers in most Gulf states, including Mississippi.

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Yesterday's Wall Street Journal ran this editorial tilted “Mississippi Justice on Email”. The article makes a poor attempt to connect the Scruggs State Farm litigation to Attorney General Jim Hood's request to Congress that it rewrite federal law to allow Mississippi to sue Gulf Oil Spill companies in state court. In attempting to make a connection that is not there, the editorial made several comments that are insulting and unfair to the Mississippi legal system.

To be clear, I'm not defending Hood's tactics with State Farm. I'm not a Hood apologist and I have criticized him several times on this blog. Suffice it to say that Hood probably could have handled the State Farm litigation better. But that does not mean that there is a connection between the State Farm litigation and the oil spill litigation.

Consider these statements in the editorial:

• It turns out that Mr. Hood was so tight with the Mississippi tort mob that he turned to them for help to refute our arguments that he was . . . in bed with the Mississippi tort mob.
• Mississippi is famed for its jackpot justice, and as the emails reveal, Mr. Hood and his cabal work together to squeeze settlements from their targets.
• As with the Katrina litigation, the Pascagoula lawsuit society is hoping for the mother of all jackpots against Big Oil. If the AG can keep this litigation at home, he can use the powers of his office to work with this crew to hit another gusher.
• BP and the other companies involved in the spill will be writing big checks no matter where the cases are adjudicated, and rightly so. But Mr. Hood offered no compelling reason in his Congressional testimony that the lawsuits against the oil giant belong outside of federal court. The only reason would be to allow Mr. Hood and his "friends" greater ability to stack the deck against industry and the rule of law.

First, reference to a “Mississippi tort mob” is a little much. Some lawyers—fewer than 10–-broke the law. They got caught. They were disbarred and went to jail. The characterization of a “tort mob” suggests a massive conspiracy and a legal system run amuck. That is not the case in Mississippi.   

Second, while Mississippi is known for jackpot justice, that's history. Germany is known for military aggression, but that doesn't mean that France and Poland should prepare for invasion. The combination of tort reform and, to a larger extent, the Mississippi Supreme Court changing the law on joinder and appellate bonds ended “jackpot justice.” There are even defense verdicts coming out of Jefferson County, once the epicenter of jackpot justice. It has literally been years since I have heard one person who actually practices in the system say that the Mississippi legal system is plaintiff biased. Maybe the Journal should devote its time to containing the spread of communism from the Soviet Union.

Third, what the heck is the Pascagoula lawsuit society? And is the fact that Mississippi plaintiff lawyers are pursuing oil spill litigation any different from other affected states? The Journal agrees that: “BP and the other companies involved in the spill will be writing big checks no matter where the cases are adjudicated, and rightly so.” So what's wrong with lawyers representing oil spill victims?

Fourth, there is nothing inherently wrong with Hood trying to get a home field advantage in oil spill litigation. The oil companies are also trying to get a home field advantage by having the cases heard in federal court in Houston. Mississippi's legal system is not crooked and locating the oil spill litigation in Mississippi would not “stack the deck” any more—or less—than locating it in Houston.

Mississippi's judicial system is an easy target for a New York based newspaper. But its continuing criticism of a legal system that is not broken is unfair.     

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The AP reports that while speaking in Pensacola this week, BP Oil Spill Fund Administrator Kenneth Feinberg urged people to find out what BP will pay them before filing a lawsuit:

Feinberg also said there's no reason for individuals affected by the massive Gulf of Mexico spill to file lawsuits - at least not yet.

Feinberg urged claimants to see how much he'd be able to pay them for before suing.

A separate article in the New York Times reports that Feinberg knows that he is facing skeptics:

Mr. Feinberg knew he was facing many skeptics — and cynics — who no doubt wondered if they could get more money from the oil company, not to mention satisfaction, in the courts. He acknowledged the doubters, noting that they were being asked to sign up for “a program that’s never been tried, never been tested and that they view with some skepticism.”

I'm a cynic myself, but at this time I agree with Feinberg. People who hire a lawyer on a contingency fee contract will have to collect much more in litigation just to break even with BP's non-lawsuit offer. 

My estimate is that you need to recover approximately 50% more in a lawsuit to match BP's original offer. This figure is derived by applying a 30–40% contingency fee and adding another 10–20% in case expenses that ultimately are subtracted from the client's recovery.

And people don't have to sign a contingency agreement with a lawyer to get legal advice. Most lawyers will work for an hourly rate. People could hire a couple of hours of a lawyer's time to review BP's offer and proposed settlement papers and discuss the issues involved in deciding whether the offer is fair. I realize that everyone can't afford even a few hundred dollars to pay a lawyer, but many people can.

Don't get me wrong. I expect that many people will have to file lawsuits. But not everyone. If possible, people should at least attempt to resolve their own claims before signing away a big chunk of their recovery.  

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There is a dispute brewing among Louisiana plaintiff lawyers over who will get to argue at the MDL Panel hearing on July 29, 2010 that all oil spill cases should be transferred to Louisiana.

Some lawyers want New Orleans lawyer Russ Herman to argue for the Easter District of Louisiana at the hearing. That prompted this lengthy response email from Louisiana lawyer Dan Becnel:

With all due respect, please be advised that I was the original moving party in the MDL and filed the first lawsuit which asked for a MDL.  I have since filed complaints in numerous jurisdictions.  Complaints I filed deal with numerous issues other than simply economic loss.  They deal with Civil RICO, Environmental cases, and tax abatement cases, to name a few.  We also filed securities cases, as has Jim, in New York, Lafayette, and other locations.  While I have great respect for Calvin and Russ, I must advise that nobody to my knowledge that has filed a motion to speak before the MDL Panel has the credibility that I have before this Panel.  An example of that is that on Wednesday, I spent hours with Professor Francis McGovern at the request of the Chair of the Judicial Panel of Multidistrict Litigation, Judge Heyburn to discuss a study he has commissioned dealing with MDL’s, their procedures, its good points and recommendations for improvement.  There are very few lawyers from around the country who were asked to participate in this study.  As a matter of fact, Professor McGovern will be attending the MDL hearing at the request of Judge Heyburn, as he did at the last major MDL hearing that dealt with the Toyota case. 

 

I have been appearing before the MDL Panel on a regular basis since 1970.  Just over the last few years, almost every major MDL that has come to New Orleans, I not only argued the case but was the moving party.  An example of a few are the following:

 

1)      Propulsid, MDL No. 1355, assigned to Judge Fallon;

2)      Vioxx, MDL No. 1657, assigned to Judge Fallon;

3)      Ford Paint, MDL No. 1063, assigned to Judge Vance

4)      Shell Motiva, MDL No. 1632, assigned to Judge Lemelle; and

5)      Chinese Drywall, MDL No. 2047, assigned to Judge Fallon.

 

In addition, I have appeared on a regular basis before the Panel for over 35 years, sometimes having three or more cases to argue before the Panel.

 

It should be noted that Jerry Meunier and I were so upset about the entire MDL process allowing only a two or three minute argument per district, that he and I coordinated efforts to have the Panel grant extended arguments.  It was increased to an hour of argument, which we estimate at thirty minutes per side.  I had spoke to Professor Francis McGovern about this issue.  Jerry Meunier filed an excellent brief on this issue and the request we both made was granted.  Since most people on the ListServ did not attend the MDL hearing dealing with Toyota, the last major MDL that was argued before the Panel, each district was given two minutes, with 27 districts being allowed to argue.  Jerry had requested time for me to argue and I agreed. 

 

I do not have any objection to having someone else participate; however, the economic loss cases are one component of this MDL.  Environmental cases and Civil RICO cases are other components.  Tax Abatement is another.  In addition, at the Toyota MDL hearing, Judge Heyburn asked if more than one judge should be appointed.  I am sure he will request the same at this MDL hearing.  Certainly the Securities cases have a separate MDL number.   After speaking with people who have great insight into the process, I believe there will be two to three judges appointed.  In all probability, Judge Ellison will take the Transocean Limitation case.  It is my intention to strongly support New Orleans. If the Panel thinks judges in New Orleans have conflicts, I even want, at the request of Rob Gordon, to ask for a Judge to be imported into New Orleans to hear the case rather than requiring  the case and all the parties to go somewhere else.  Let there be no mistake, I want the Eastern District of Louisiana first, and alternatively, the Middle District and/or the Western District.  There is great speculation as to where this case will go.  From my experience in over 35 years practicing before the Panel, the one thing we do know is  “Nobody can predict what the Panel will do.”  A good example is the recent argument I made on Chinese Drywall, Arnold Levin, who has vast experience in the MDL , argued for Miami and Florida.  Almost 65% of all the cases in the MDL came from Florida but yet, the Panel accepted my argument requesting Judge Fallon in the Eastern District. 

 

With the above in mind, practicing before the MDL Court is not a popularity contest but one of credibility before the Panel.  Jerry Meunier and I discussed this very issue over the last few weeks.  Although he never made an appearance before the Panel in his career, I thought his brief was excellent and his insight to argue was even better.

 

I do not intend to defer my time to the Attorney General, much less the Justice Department.  In all probability, MMS maybe a party defendant.  While Steve and Jim have done an excellent job as Liaison Counsel, neither have experience before the MDL Panel.  Russ, to my knowledge, has only appeared once but has given great insight into many cases before the Panel where he and I have worked in concert but I am usually the person who makes the argument.  Russ has repeatedly complimented my argument which brought Chinese Drywall to New Orleans.

 

I hope you understand my position.  

 

One of my lawyers, Will Percy, will be assisting Professor Bea at a symposium today in reference to the Oil Spill and will accompany him to Grand Isle tomorrow to further assist him with filming a new segment for 60 Minutes on the Deepwater Horizon disaster.  As you know, Solly Granatstein is the producer who I assisted in the first 60 Minutes piece and I have been working with 60 Minutes since then on the second piece being produced.  Please keep this confidential.

 

DANIEL E. BECNEL, JR.

There will presumably be plaintiff's lawyers from other parts of the country arguing to have the case transferred to their backyards. Meanwhile, BP attorneys will argue for a transfer to the federal court in Houston. 

So where will the oil spill cases wind up? Who knows. As Becnel stated in his email:  Nobody can predict what the Panel will do.

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The Wall Street Journal ran this article on Thursday about plaintiffs' lawyers and the BP oil spill. The article states:

Plaintiffs' attorneys are scrambling to avoid being frozen out by a $20 billion fund aimed at compensating Gulf of Mexico oil-spill victims outside of court.

According to Louisiana attorney Daniel Becnel:

"People are firing their lawyers left and right," said Daniel Becnel, a Louisiana attorney who has filed numerous claims against BP on behalf of fishermen, shareholders and others.

This is a big change of tune for Becnel since early May, when he predicted that he would settle with BP within 90 days.  

It does appear that the claims fund will negate the need for a lot of litigation. Claims fund administrator Kenneth Feinberg is universally respected and has the trust of both BP and the government to be fair in administering claims. Feinberg is hopeful that claims will be paid within 60–90 days after being submitted. A claimant who decides to hire an attorney on a 40% contingency fee contract would need to collect 40% extra just to break even. So it makes sense for victims to try to resolve their claims on their own before hiring lawyers.

Obviously, plaintiffs' lawyers who hoped to generate revenue from oil spill litigation may end up disappointed. But they will not be the only ones. Defense firms who were gearing up for a decade of contentious litigation will be sick. BP hired $500 per hour lawyers who stand to make hundreds of millions from the litigation.  

When the dust settles, I bet that defense lawyers would earn more in fees from protracted litigation than plaintiffs' lawyers. And the defense lawyers shoulder none of the risks. Unlike plaintiffs lawyers, defense lawyers are not responsible for payment of litigation expenses and bill their clients either monthly or quarterly. This means that they typically do not run the risk of having to pay for office overhead for an extended period of time with no revenue coming in. Further, the longer and more contentious the litigation, the more money defense lawyers make.

Plaintiffs lawyers, on the other hand, can put so much time and money into a case that it winds up working out badly for the lawyers. 

On the whole, defense lawyers make more money than plaintiff lawyers and they do it within a less risky business model. This fact is conveniently omitted from the WSJ article and virtually every article that mentions plaintiff attorneys' fees. 

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The Sun-Herald reports that BP didn't consider hurricanes in its oil spill response plan:

Rep. Edward Markey says BP's disaster response plan for an oil spill doesn't mention hurricanes or tropical storms.

Markey says the omission is yet another example of what the oil giant was not prepared to handle.

The Massachusetts Democrat's comments came during a congressional hearing on a law to improve technology intended to prevent disasters like the Deepwater Horizon oil spill.

Officials responding to the oil spill in the Gulf Coast are scrambling to prepare for Hurricane Alex, which is expected to touch the lower half of the Rio Grande Valley tonight. The center of the storm is expected to hit 100 miles south of the U.S. border.

In related news, investigators are trying to identify these two individuals, who are believed to have been in charge of certain aspects of BP's response plan:

 These two individuals have a known history of not preparing for hurricanes. Anyone with information on the identity of these individuals should contact authorities.

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Today's Wall Street Journal contained an article on plans that states have to recover oil spill related losses from BP. Mississippi Attorney General Jim Hood seems to have a handle on the scope of the possible litigation:

Mississippi Attorney General Jim Hood has sought advice from state university researchers, economists and lawyers to assess the environmental and economic damage the spill has caused to the state.

Mr. Hood said the process could take three or more years before he could present BP with the final bill because the issues aren't straightforward. For instance, hotel capacity along the coast may be similar to last year's but rooms now are occupied by clean-up workers instead of money-spending tourists.

Mississippi has already received $25 million from BP to pay for costs from the spill and another $25 million for its local governments that are grappling with an array of economic issues brought on by the slick that has washed ashore.

"We're first going to ask BP to pay what we can come up with and hopefully we can negotiate with them," Mr. Hood said. "But I'm losing faith quickly."

His advance planning includes strategies for a lawsuit against BP in state court. "I certainly don't want to be thrown into the mix with thousands of other claims" in federal courts, Mr. Hood said.

General Hood: (1) is consulting experts to assist in quantifying damages; (2) has a realistic estimate on the length of the impact (3 or more years); (3) is trying to first resolve the issue through negotiation; and (4) is planning litigation strategy in the event that negotiations with BP fail.

Hood's handling of the situation looks very good. And much better that Governor Barbour's, whose failure to publicly recognize the scope of the disaster is facing growing criticism. 

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As Louisiana companies ask a federal judge to lift the ban on deepwater drilling, the issue of whether to continue drilling in the Gulf following the BP Horizon disaster is a big topic of conversation. On Sunday the Clarion-Ledger ran competing opinion articles on whether offshore drilling should be banned.

Louis Miller of the Sierra Club advocated banning offshore drilling and instead developing alternative energy sources.

State Senator Merle Flowers disagreed, arguing that offshore drilling is needed for energy supplies and the jobs that it creates.  

So who is right? They both are.

Senator Flowers is right that advocating a complete ban on offshore drilling is “naive.” Mr. Miller is right that we should develop renewable energy. But until we have developed enough renewable energy sources to replace oil, we don't have much option to offshore drilling. We may not like that fact, but it is a fact.

 The United States is in desperate need of a comprehensive energy plan designed at sharply reducing or eliminating our dependence on oil. The era of cheap and easily accessible oil is ending. Major energy companies are not replacing their oil reserves through new discoveries as fast as they are being depleted. That is why we are having to drill in 5,000 feet of water in  the Gulf and are looking at the Artic for possible future drilling. If Peak Oil is not already here, then it will be soon. We should plan for dwindling supplies now—not when there is a supply crunch that drives gas to $10 per gallon.

One idea is Boone Pickens' plan. The pillars of the plan are:

• Create millions of new jobs by building out the capacity to generate up to 22 percent of our electricity from wind. And adding to that with additional solar generation capacity;
• Building a 21st century backbone electrical transmission grid;
• Providing incentives for homeowners and the owners of commercial buildings to upgrade their insulation and other energy saving options; and
• Using America's natural gas to replace imported oil as a transportation fuel in addition to its other uses in power generation, chemicals, etc.

People may disagree with some of Pickens' ideas or have their own ideas. But it is better than what we have now: nothing. Congress needs to enact energy legislation now, since it will take years to implement. Failure to do so is a failure in leadership by the executive and legislative branches.

What about deepwater drilling? Should we ban that? Again, I say no. My reasoning is that it is now pretty clear that BP was grossly negligent in its operation of the Horizon. That suggests that deepwater drilling can be done safely. BP just wasn't doing it. But the government needs to make an example of BP and the Justice Department should criminally prosecute the people responsible for running that rig. Their actions caused the deaths of eleven people and an evironmental disaster.

We need oil like a heroin addict needs his next hit. We've got to have it. I'm all for working to end the addiction. But until we do, we have to have oil. And deepwater is one of the only places that we have to get it.  

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I previously posted about Attorney General Jim Hood's State lawsuit against Microsoft and the $8.3 million attorneys fee paid to a group of lawyers that included Jackson lawyer Brent Hazzard, Susman Godfrey of Houston and David Boies' firm. The prior posts are here, here, and here. It looks like Jake and Elwood are putting the band back together to make a run at BP and the other usual suspects in the Gulf Oil Spill Litigation.

Here is the Class Action Complaint that the group filed in Houston, Texas on behalf of an Alabama resident. The complaint's class definition is:

All Gulf of Mexico residents who claim injury and/or damages as a result of the April 20, 2010 fire and explosion which occurred aboard the Deepwater Horizon drilling rig  and the resulting oil spill.

  I'm not sure what to make of a class of “Gulf of Mexico residents.”

Joking aside, I don't know anything about Susman Godfrey. But I'm impressed by this statement from their firm website:

In handling complex litigation, our firm is guided by two principles, both of which reduce expense without sacrificing chances for success. First, less is best. Excess discovery is not just nonproductive, it often is counterproductive. Excess discovery removes the element of surprise at trial, forces the opposition lawyers and witnesses to get prepared earlier than they otherwise would, and often takes the eyes of the lawyers who engage in it off the ball. The best lawyers are best able to handle (and create) surprise at trial. We believe in retaining our natural advantage.

I'm not sure I've ever seen a statement like this in print—but I completely agree. That's a truly outstanding observation. I've tried to explain this concept to other lawyers and have had trouble articulating it. Many young defense lawyers are trained to conduct excess discovery, but they don't know why. Sometimes the reason is that it creates more billable hours, but more often it's inertia in a system where that's how it has always been done.

David Boies (pictured) is a legal heavyweight who has been the subject of at least two books. Just yesterday I blogged about his penchant for wearing the same cheap suit to trial every day. If he truly engages in the oil spill litigation, then this group is more likely to end up in a leadership role in the litigation.

Brent Hazzard is also somewhat of a mystery to me. I recently met him and he seemed like a good guy. But we didn't get into his background and experience.

So far this is one of many complaints filed by many groups of lawyers. But it is one to keep an eye on.

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I think of the comic strip Dilbert when I think of BP's gaffes related to the Gulf oil spill. But this video captures my perception of BP (and most other large corporations): 

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According to this AP article, less than half the federal judges in Florida, Alabama, Mississippi, Louisiana and Texas are eligible to preside over oil spill cases due to connections with the oil industry. The article relies on 2008 disclosure forms.

The article states:

Thirty-seven of the 64 active or senior judges in key Gulf Coast districts in Louisiana, Texas, Alabama, Mississippi and Florida have links to oil, gas and related energy industries, including some who own stocks or bonds in BP PLC, Halliburton or Transocean — and others who regularly list receiving royalties from oil and gas production wells, according to the reports judges must file each year. The AP reviewed 2008 disclosure forms, the most recent available.

Of course, smart judges who owned stock in BP, Haliburton or Transocean at the time of the spill sold their stock soon after the spill.

  The story states:

The AP review of disclosure statements shows the oil and gas industry's roots run as deep in the Gulf Coast's judiciary as they do in the region's economy.

This may be painting with too broad of a brush. I suspect that many judges in other parts of the country also own or owned stock in these companies. They are all leading companies in their industry and are common investments in the energy sector. There is a good chance that anyone who holds individual stocks in their brokerage or retirement accounts owned stock in at least one of these companies. 

 Similar conflicts recently caused the Fifth Circuit Court of Appeals to dismiss an appeal, as discussed in this post. So this issue will be in play at both the trial and appellate court levels.

Some attorneys (presumably plaintiff's attorneys) want to bring a New York Judge to Louisiana to preside over the case:

Some attorneys have come up with an unusual assertion: import a New York federal judge with a strong background in environmental lawsuits to Louisiana to preside over the cases.

They are recommending that the U.S. Judicial Panel on Multidistrict Litigation appoint U.S. District Judge Shira Scheindlin. Scheindlin presided over settlement of some 200 lawsuits brought against BP and other oil companies over a toxic additive called MTBE that contaminated drinking supplies nationally — and she has no oil and gas investments, according to her financial disclosure forms.

Sounds like the makings of My Cousin Vinnie 2. It's twenty years later and Vinnie is now a federal judge who returns to the Deep South to preside over the cases involving the biggest environmental disaster in U.S. history.

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 With Governor Haley Barbour downplaying the signficance of the oil spill, MLR located this rare video footage of Barbour from his college days (play video):

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On Friday the Fifth Circuit Court of Appeals did about the most bizarre thing that I can recall an appellate court ever doing in the Comer v. Murphy Oil case: dismissed an appeal without deciding it because it did not have a quorum to decide the case. Needless to say, it's caused a huge stir that you can read about at NMC, Anderson Blogs, and Consumer Class Action and Mass Torts, among other places.

The case at issue was the novel case where plaintiffs sued oil companies for causing climate change that makes hurricanes—specifically, Katrina—worse. We can debate the plaintiff's causation theory another day. The important point is that the Fifth Circuit couldn't get a quorum to decide the case, presumably because the justices owned stock in the defendant companies, which included BP and other major oil companies. So the Court punted the case without deciding the appeal even though the issues were ripe for determination. I honestly did not know that was an option.

Oops. Looks like President Obama should have been in a bigger hurry in getting Justice Graves confirmed to fill Judge Barksdale's seat on the Fifth.

It is almost guaranteed that the Gulf Oil Spill litigation will involve multiple appeals from the district courts to the court of appeals. But for the cases in the Fifth Circuit, there is an apparent likelihood that the appeals court will be unwilling unable to hear the appeal. This litigation is going to need an appellate court that has the guts “quorum” to decide the issues. In short, the litigation needs to be somewhere where the appellate court can hear the case. That's somewhere other than the Fifth Circuit.

This means that the MDL should not be located in the states that comprise the Fifth Circuit: Texas, Louisiana and Mississippi. How big of an advantage would it be for the oil companies to get the MDL in front of a hand-picked judge in Houston with no appellate court in play? Too big.

The MDL panel needs to think about this and locate the MDL in another circuit. For instance, in the Eleventh Circuit, which includes Alabama and Florida. Or even in a court located on the other side of the county where there is a district judge and appellate court that can hear the case.  

Incidentally, while I do not always agree with every decision by the Mississippi Supreme Court, I cannot imagine our justices doing what the Fifth Circuit did in Comer v. Murphy Oil.

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As expected, Southern District Judge Sul Ozerden has begun staying the Gulf Oil Spill cases pending a decision on whether an MDL will be created in the litigation. Here is one of Judge Ozerden's orders. 

I am not aware of any of the defendants filing a substantive response to the complaints before entry of the stay orders. Therefore, it will be a while before the emergence of the defendants' strategy for blaming the oil spill on other defendants through cross-claims.  

Judge Ozerden is the judge in most—but not all—of the cases filed in Mississippi. But all the cases are likely to be stayed regardless of the judge.

Everyone agrees that there will be an MDL action. Speculation continues to center on where the MDL will be located. I am not sure when the MDL panel meets next. I have heard July, but I have not verified that report.

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The Wall Street Journal has been publishing fantastic articles on the events leading to the Horizon Rig explosion.

This article yesterday focuses on faulty BP decision making that led to the explosion.

An article today focuses on the chaos on the rig that was partially caused by chain of command problems.

Here is the link to many WSJ articles. It is a great source of information about the disaster.

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As frustration mounts on the Gulf Coast, and at the White House, here is a suggestion for BP: (play video)

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There have not been any major developments in oil spill litigation in Mississippi in the last few weeks. More cases have been filed, but that is expected and more will be filed going forward.

I am not aware of a defendant filing an answer to the complaints yet. BP has been filing motions to stay the cases pending transfer to an MDL. Transocean is seeking to limit its liability in a Houston court and is filing documents related to that case in Mississippi cases.

Transocean seeks to limit its liability from the spill to less than $27 million. If Transocean is successful, there could be a huge political and public backlash that results in the strategy backfiring. Of course, Transocean has probably considered this and decided to go for the limitation anyway.

 Transocean's stock price has been in a free fall since the explosion along with BP's. 

 

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A 60 Minutes story paints a scathing picture of operations on the Deepwater Horizon in the days and hours leading up to the fatal explosion and resulting oil spill. The main source of the report was Mike Williams, Transocean's chief electronics technician on the rig.

Significant points from the story include:

• With the schedule slipping, Williams says a BP manager ordered a faster pace.
• We were informed of this during one of the safety meetings, that somewhere in the neighborhood of $25 million was lost in bottom hole assembly and 'mud.' And you always kind of knew that in the back of your mind when they start throwing these big numbers around that there was gonna be a push coming, you know? A push to pick up production and pick up the pace," Williams said.
• But the trouble was just beginning: when drilling resumed, Williams says there was an accident on the rig that has not been reported before. He says, four weeks before the explosion, the rig's most vital piece of safety equipment was damaged.
• Williams says, during a test, they closed the gasket. But while it was shut tight, a crewman on deck accidentally nudged a joystick, applying hundreds of thousands of pounds of force, and moving 15 feet of drill pipe through the closed blowout preventer. Later, a man monitoring drilling fluid rising to the top made a troubling find.
  
  "He discovered chunks of rubber in the drilling fluid. He thought it was important enough to gather this double handful of chunks of rubber and bring them into the driller shack. I recall asking the supervisor if this was out of the ordinary. And he says, 'Oh, it's no big deal.' And I thought, 'How can it be not a big deal? There's chunks of our seal is now missing,'" Williams told Pelley.
• In the hours before the disaster, Deepwater Horizon's work was nearly done. All that was left was to seal the well closed. The oil would be pumped out by another rig later. Williams says, that during a safety meeting, the manager for the rig owner, Transocean, was explaining how they were going to close the well when the manager from BP interrupted.
  
  "I had the BP company man sitting directly beside me. And he literally perked up and said 'Well my process is different. And I think we're gonna do it this way.' And they kind of lined out how he thought it should go that day. So there was short of a chest-bumping kind of deal. The communication seemed to break down as to who was ultimately in charge," Williams said.
• What strikes Bea is Williams' description of the blowout preventer. Williams says in a drilling accident four weeks before the explosion, the critical rubber gasket, called an "annular," was damaged and pieces of it started coming out of the well.
• In finishing the well, the plan was to have a subcontractor, Halliburton, place three concrete plugs, like corks, in the column. The Transocean manager wanted to do this with the column full of heavy drilling fluid - what drillers call "mud" - to keep the pressure down below contained. But the BP manager wanted to begin to remove the "mud" before the last plug was set. That would reduce the pressure controlling the well before the plugs were finished.
  
  Asked why BP would do that, Bea told Pelley, "It expedites the subsequent steps."
•  To do it BP's way, they had to be absolutely certain that the first two plugs were keeping the pressure down. That life or death test was done using the blowout preventer which Mike Williams says had a damaged gasket.
• They didn't stop. As the drilling fluid was removed, downward pressure was relieved; the bottom plug failed. The blowout preventer didn't work. And 11 men were incinerated; 115 crewmembers survived.
  

The law does not allow a company to sacrifice safety for profits. But that looks like exactly what BP did.

The more dangerous an activity is, the more careful the company or person performing the activity must be. A drilling operation in deep water must be much more careful than a drilling operation on land, since if anything goes wrong in the deep water, the problem will be much harder to fix. BP and Transocean know this principle, but they ignored it. For money.

In addition to civil liability, authorities need to consider filing criminal charges against BP and key personnel involved in operating the rig. Given the blatant and intentional disregard of safety on the rig and resulting deaths, the matter should at least be presented to a grand jury to determine if criminal charges should be filed.   

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The Wall Street Journal reports on the high stakes oil spill blame game being played between BP, Transocean and Halliburton. So who is to blame?

BP?

Couldn’t be. BP blames Transocean’s blow-out preventer:

BP, the well owner, blames the failure of a big set of valves on the sea floor, known as the blowout preventer, to halt the blowout once it started.

That seems reasonable. There was a blow-out and the blow-out preventer didn’t work. So it must be Transocean’s fault?

Transocean?

Couldn’t be. Transocean says its not to blame:

Transocean Chief Executive Steven Newman is expected to tell the Senate the explosion occurred "after the well construction process was essentially finished." His prepared testimony then blames the blowout on a failure of the well's lining, saying the blowout had to be caused by "a sudden, catastrophic failure of the cement, the casing or both."

Transocean also claims that it makes no sense to blame the blow-out on the blow-out preventer. Actually, it makes a lot of sense. I’m not saying Transocean is wrong because I don’t know. But it does make sense to at least point the finger at the blow-out preventer for not doing its job.

But Transocean says the blow-out preventer was not responsible for stopping the blow-out in the location where it occured. So it must be Haliburton’s fault?

Halliburton?

Couldn’t be. Halliburton blames Transocean and BP:

Halliburton says it was following Transocean's orders and is "contractually bound to comply with the well owner's instructions on all matters relating to the performance of all work‐related activities."

Before such a plug is placed, the job of keeping underground gas from coming up the pipe is done by heavy drilling fluid inside the well, commonly known as "mud." The plug is normally put in before the mud is removed, but according to the account of Halliburton, Transocean and the two workers, in this case, that wasn't done—drilling mud was removed before a final cement plug was placed in the well.

It is not clear why such a decision would have been made. Rig owner Transocean says that BP, as owner of the well that was just being completed, made key decisions on how to proceed. BP declined to comment on this account of the drilling procedures.

So whose fault is it? Who knows. Maybe we’ll find out one day. Maybe not.

Barring a settlement agreement among the oil companies, they will spend hundreds of millions of dollars in legal fees trying to prove that the other companies were responsible for the blow-out and resulting spill. I am not aware of any cross-claims being filed yet by the oil companies, but they are probably coming.

It will also be interesting to see if any of the oil companies take the initiative and file suit against the other companies in a chosen venue. After all, the MDL proceeding could go anywhere.

If I were advising the oil companies, I would recommend that they consider filing suit against one or more of the other companies in a hand-picked venue. Strategically, that move would make a lot of sense.   

Finally, and this is a big point that we need to remember: It's still leaking. Maybe they should bring in those guys who got Apollo 13 back to Earth.

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As expected, BP is moving to stay federal court lawsuits pending a transfer to the Multi-district Litigation (MDL).Here is a motion filed Friday in Parker v. Transocean et al. 

Technically, an MDL has not yet been established. But that is a mere formality. Here is BP’s motion  seeking to transfer 70 cases to an MDL proceeding. This is much greater than the “we’re gonna win in 90 days” group proposed by a few plaintiff lawyers on April 30.

Here is the list of actions that BP wants to include in the MDL. Once the MDL is established federal courts will routinely transfer new filings to the MDL.

The real news in the filings is that BP seeks to have the MDL action in Houston, Texas, which is in the Southern District of Texas. The main reasons supporting this location is that it is the headquarters of all the defendants and is where key witnesses and documents are located.

The defendants are obviously looking for a home field advantage in Houston. In addition, the spill is not moving in that direction. The defendants would obviously like to avoid having the case pending in a court located in an area where the spill makes land fall.

It seems to me that the MDL should be located in the Southern Division of the Southern District of Mississippi. That means Gulfport. The courthouse is located a block from the Gulf and the federal judges can watch the oil make land fall from their office windows. If the spill gets really bad, defendants’ lawyers will be able to smell the oil as they walk into the courthouse. You can't get more convenient than that.

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In response to unprecedented amounts of lawyers “running cases”, the Mississippi Bar issued a press release today concerning solicitation of cases by lawyers. Here is the statement.

The term "running a case" refers to a lawyer obtaining a case by solicitation. Advertising is not considered running a case. Paying an investigator to direct potential plaintiffs to a certain lawyer is considered running a case.

 Key points in the Bar's statement address the practice of law in Mississippi by out-of-state lawyers and improper case solicitation by lawyers.

In other oil spill litigation news, there are reports that the federal court system has already been asked to combine all the oil spill cases in a multi-district litigation proceeding. A federal MDL proceeding is a foregone conclusion. The only interesting questions are where the MDL will be located and who will be the presiding judge.

In addition, New Orleans lawyer Dan Becnel emerged from a meeting yesterday among plaintiff lawyers and predicted that the litigation will be over soon:

 We’re not going to have a long march to trial,” Becnel said yesterday in an interview before the meeting. “This could all be over in 90 days.”

I find that prediction extremely optimistic even though the Oil Pollution Act imposes strict liability on BP. People said the same thing about the length of the Civil War and World War I, and look how those predictions turned out.  

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There is some good analysis of the oil spill in legal blogs. Tennessee lawyer John Day has this post about the impact of the damage cap under the Oil Pollution Act (OPA) on his Day on Torts blog. Day points out that the cap under the OPA for this type of spill is $75 million:

You haven't seen much about it in the press yet,  but BP has the benefit of a cap that will probably limit its liability for the oil spill in the Gulf.  Section 1004 of the Oil Pollution Act (OPA), passed into law in August 1990 after the Exxon Valdez incident, limits the liability of holders of leases or permits for offshore facilities to $75 million per spill, plus removal costs.

In addition, Day points out that if the bulk of the clean up and damages are covered from the Oil Spill Liability Trust Fund, then consumers will be the ones actually paying the bill:

Thus, if the oil damages the coastline, the damages will be hundreds and hundreds of millions, the vast majority of it paid for by consumers who paid the tax on oil, and not the company that negligently created the harm.  That is a crying shame.  

Maybe this tragedy will cause people to re-examine the appropriateness of damage caps in general.   Whether they concern property damage, personal injury or wrongful death, damage caps are nothing but a bailout to those who cause harm. 

Philadelphia, Pa. lawyer and Ocean Springs native Max Kennerly has this post on his Litigation and Trial Blog commenting on the oil spill litigation and, among other things, criticizes some plaintiff lawyers’ first to file mentality:     

Some lawyers read language like the above and, as a matter of habit, throw together a slapdash complaint the moment they see bad news in the papers.

This strategy used to work, and there are indeed old cases in which the class counsel was chosen almost entirely on the basis of the first-to-file.

But those days are behind us, and the first-to-file rule has little influence in the selection of class counsel these days. As the Third Circuit's Task Force Report on the Selection of Class Counsel quoted from a Delaware securities fraud case,

Although it might be thought, based on myths, fables, or mere urban legends, that the first to file a lawsuit in this Court wins some advantage in the race to represent the shareholder class, that assumption, in my opinion, has neither empirical nor logical support.

Too often judges of this Court face complaints filed hastily, minutes or hours after a transaction is announced, based on snippets from the print or electronic media. Such pleadings are remarkable, but only because of the speed with which they are filed in reaction to an announced transaction. It is not the race to the courthouse door, however, that impresses the members of this Court when it comes to deciding who should control and coordinate litigation on behalf of the shareholder class.      

 Both posts are worth reading in their entirety.

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This one goes into the WTF category. The Sun Herald reports:

Texas Gov. Rick Perry says it's not wise to speculate about what caused an explosion and massive oil spill in the Gulf of Mexico. And he's defending his use of the term "act of God" to describe the disaster.

Perry said Tuesday the phrase is a legal definition and that his point is "nobody knows what happened" at the oil rig off the Louisiana coast. The undersea well has been spewing 200,000 gallons of oil a day.

Perry is right about one thing. An act of god is a legal definition. Under the Oil Pollution Act (OPA), an act of god is one of only three defenses to liability for an oil spill. If BP, Transocean, et al. can convince a court that the spill was an act of god, then they owe nothing for the clean up and damages caused.

But don’t worry. Perry is dead wrong. According to the Environmental Law Handbook (20th ed), courts have interpreted the OPA act of god defense to be very narrow—more narrow than the common law act of god defense. The statutory language of OPA has three elements: the natural phenomenon must be:  (1) exceptional; (2) inevitable; and (3) irresistible.

Like maybe a big hurricane blowing a rig over and causing a spill. Here, there was no “natural phenomenon.” There was an explosion. An Explosion is not a natural phenomenon. Or an act of god.

Governor Perry, just because something was an accident doesn’t mean it was an act of god. Come on Governor, you can’t really think that. 

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WSJ is reporting on two Senators introducing legislation to raise BP’s liability exposure for the Gulf Oil Spill under the Oil Pollution Act (OPA):

On Monday, two Democratic senators introduced legislation to raise the $75 million cap to $10 billion. The bill also proposes that claimants would be able to collect damages from future revenues for the fund, with interest, if damages exceed the $1.6 billion held by the trust fund.

A $75 million cap is ridiculously low for a spill that will affect the entire Gulf Coast and that is predicted to reach the Florida Keys and Atlantic Coast.

The article also explains that oil spill victims may be better off making claims under the OPA than filing lawsuits:

Lawsuits, however, aren’t the only way to go for an alleged victim. A piece of federal legislation passed in the wake of the 1989 Exxon Valdez spill allows injured individuals to make use of a claims process in which the federal government makes payments from a fund collected through a tax imposed on the oil industry.

The benefit of the claims process: those harmed may recover funds without going to state or federal court, which can take years.

Meanwhile, a separate WSJ article explains that the oil spill litigation is headed for an MDL:

Lawyers expect the private litigation to unfold in the same way as the lawsuits against Toyota Motor Corp. over problems tied to unintended acceleration.

The cases will get consolidated and sent to one judge, who will then pick a steering committee made up of a group of plaintiffs' lawyers to direct the litigation.

Early predictions from Mississippi lawyers is that the MDL will not be in Mississippi.

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Since my last post I identified three more Gulf Oil Spill lawsuits filed in federal court in Mississippi. The three are:

1. Nguyen v. Transocean et al.—a class action filed Monday on behalf of shrimpers, fishermen, etc. Plaintiff lawyers are Patrick Sheehan and Hayes Johnson of Biloxi and Robert Gambrell of Oxford.
2. Cajun Maide v. BP, et al.—a class action filed Friday with a class as wide as the Gulf. This case has a big and interesting group of Plaintiff lawyers. The group includes the Barrett firm out of Lexington, a bunch of lawyers from all over the country and the Daniel Coker law firm from Mississippi. Daniel Coker is traditionally an insurance defense firm and I was surprised to see them show up on the plaintiff side of this case. But down the road in the oil spill litigation I expect to see insurance companies suing the oil companies to recoup money paid in claims. So Daniel Coker’s traditional client base will probably be adverse to the oil companies.
3. Trieu v. BP et al.— a class action filed Friday with the class consisting of people and companies in the fishing industry. Plaintiff’s counsel is Robert Wiygul of Ocean Springs.

Some plaintiff lawyers believe that all of the filed suits are premature and that people must first give notice to the responsible party under the Oil Pollution Act. Most people interpret that to mean BP because it is their oil. But I have read quotes where BP is blaming Transocean or other contractors who operated the rig. BP may have a point as to fault, but BP is likely responsible under the Oil Pollution Act.

Plaintiffs in the lawsuits are suing BP and the contractors such as Transocean. Transocean is a deep water driller whose stock (symbol RIG) has gone in the tank since the explosion. Plaintiff’s lawyers will love the fact that the defendants are pointing the finger at each other, since it will make it easier to prove their cases where defendants are blaming each other.

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The Sun Herald is running this article regarding out-of-state lawyers soliciting clients for lawsuits over the Gulf Oil Spill. The leader of the Mississippi Association for Justice is asking Attorney General Jim Hood to investigate:

 We have heard numerous stories of businesses along the Mississippi Gulf Coast that are getting as many as half a dozen phone calls per hour from out-of-state law firms,” the organization’s president, Steve Mullins, said in a letter to Hood. Mullins said trial lawyers’ associations in Alabama, Louisiana and Texas support the call for an investigation.

“We’ve all collectively had enough of this,” Mullins said in an interview with the Sun Herald. “You can’t just come into this state and just represent people willy-nilly. It’s illegal. It’s unethical.”

Mullins told the Sun Herald the problem of illegal solicitations has grown since Katrina, when unethical attorneys stationed private investigators and other runners on the Coast to solicit clients.

“This is widespread,” he said. Under professional rules of conduct, attorneys are not supposed to solicit cases. Also, it is a misdemeanor violation of state statute to practice law in Mississippi without a state license. 

Out-of-state lawyers running cases in Mississippi is nothing new. I remember a conversation that I had over ten years ago with former Mississippi Bar President David Smith (deceased in 1998) in which he lamented the practice and talked about how bad it was for Mississippians. It’s probably gotten worse since then. 

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Five years after Katrina the Gulf Coast is getting its teeth kicked in—again. But the Gulf Oil Spill could be even bigger than Katrina in terms of the economic impact and the area affected by the disaster. 

How Bad Will it Get? 

That’s the big question right now. Straight-shooting Congressman Gene Taylor viewed the spill Saturday and said that it’s not Armageddon. But the question remains: how bad will it be by the time they get the leaking well capped?

Clarion-Ledger writer Bobby Cleveland called the leak a “volcano” of oil:

Think about it: 200,000 gallons a day. That's 139 gallons a minute, 8,333 gallons an hour, 1.4 million gallons a week and 6 million gallons a month.