The Gulf Coast Claims Facility and the Deepwater Horizon Litigation: Judicial Regulation of Private Compensation Schemes

By McDonell, Colin | Stanford Law Review, March 2012 | Go to article overview

The Gulf Coast Claims Facility and the Deepwater Horizon Litigation: Judicial Regulation of Private Compensation Schemes


McDonell, Colin, Stanford Law Review


INTRODUCTION

I.  THE GULF COAST CLAIMS FACILITY AND THE DEEPWATER HORIZON
    LITIGATION
    A. The Oil Pollution Act of 1990
    B. The Gulf Coast Claims Facility
    C. The Multidistrict Litigation
       1. The parties interested in judicial regulation
       2. Supervision of communications
       3. Nullification of releases and intervention into the
          claims process

II. JUDICIAL REGULATION OF THE GULF COAST CLAIMS FACILITY
    A. The Dual Requirements of Standing and Adequacy
    B. Possible Claims and Potential Conflicts
       1. Nullification or modification of releases
       2. Supervision of communications
       3. Intervention into the GCCF claims process

CONCLUSION

INTRODUCTION

The explosion of the oil rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010 resulted in millions of barrels of oil pouring into the Gulf, making it the largest disaster of its kind to date. (1) On June 16, 2010, President Obama announced that Kenneth Feinberg, who had previously administered a fund to compensate victims of 9/11, would oversee a $20 billion fund to compensate victims of the Deepwater Horizon oil spill. (2) This fund, the Gulf Coast Claims Facility (GCCF), opened on August 23, 2010, and has since paid out billions of dollars to hundreds of thousands of claimants. (3)

But the GCCF is not the only route to compensation for Deepwater Horizon victims. Hundreds of actions filed in federal court, many of them class actions, have been consolidated in New Orleans. Of the thousands of briefs, motions, and orders filed in the court, several dozen of them have concerned efforts to regulate the administration of the GCCF. The Plaintiffs' Steering Committee (PSC), and the attorneys general of states bordering the Gulf, have urged the court to invalidate or modify releases of liability, monitor communications between the GCCF and potential claimants, and even take over the private compensation process itself. These efforts have met resistance not only from BP, which operated the rig, but also from other plaintiffs' lawyers. They raise questions about what jurisdiction a court has to intervene in a private compensation scheme at the request of litigants who choose to seek compensation through the courts.

The focus of this Comment is on these efforts to control the GCCF through the court system. The Comment discusses several barriers that might deprive the court of jurisdiction to consider the PSC requests to regulate the GCCF, namely that (1) there may not exist a proper cause of action that would allow the court to grant the requested relief, (2) even when such a cause of action exists, the putative class may not contain plaintiffs with standing to bring the claim before the court, and (3) if the class is broad enough to include plaintiffs with standing to raise the request, then there might be too much intraclass disagreement about the propriety of judicial regulation for the class to be certifiable under Federal Rule of Civil Procedure 23(a)'s adequacy requirement. This Comment argues that the court ought to resolve these standing and adequacy issues in a way that will preserve the ability of the class to gain certification and bring other claims: by dismissing any claims for supervision that create substantial disagreement among class members on the grounds that an adequate representative of the class could not have standing with respect to that issue.

Part I gives an overview of the Oil Pollution Act of 1990 (OPA), (4) which provides the statutory framework for both the GCCF and the litigation, as well as a summary of the creation and mechanics of the GCCF. It then discusses the portion of the litigation dealing with requests for judicial regulation of the GCCF, explaining the progression of the litigation, the major points of dispute, and which parties were on which sides of the issues. Part II examines the legal basis for the requests for regulation, examining possible causes of action and whether the court has jurisdiction to hear them. …

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