Tuesday, September 21, 2010

trial lawyers and the BP post-spill payments

From the editorialists of the WSJ...

When is $20 billion in ready cash not enough? Answer: When state Attorneys General and the plaintiffs bar are vying for a bigger chunk of the BP compensation fund that is supposed to go to victims of the Gulf of Mexico oil spill.

That's the real story behind the headlines about unhappiness over Kenneth Feinberg's terms for payments under the Gulf Coast Claims Facility. As administrator, er, King Solomon of this exercise, Mr. Feinberg has to make difficult judgments as he attempts to compensate genuine victims while not rewarding freeloaders. Plaintiffs attorneys and their AG pals seem to be afraid that they'll be cut out of the action....

What are Mr. Feinberg's supposedly onerous terms? Well, claimants can file through November 23 and receive an immediate cash payment for up to six months of emergency relief without forfeiting any legal right to sue BP. They can take that money and hire a lawyer if they'd like. The same claimants then have three years to apply for a final loss settlement, and only if they accept that Feinberg offer would they have to give up their right to sue.

So let's see. A Gulf Coast shrimper can get immediate emergency cash, plus a larger final settlement from Mr. Feinberg in relatively short order. The money is taxable as income, but otherwise the shrimper can keep it all.

Or, instead of accepting a final settlement offer, that shrimper can hire one of Mr. Hood's plaintiffs bar friends, wait years to see how the litigation plays out, and then pay 40% of his share of any settlement to the lawyer as a contingency fee. Which process sounds fairer to the victims?...

Mr. Feinberg is also criticized for demanding documentation such as income tax returns or other proof of loss, especially since much of the Gulf economy seems to run on a cash (not to say, tax-avoiding) basis....

We would have preferred that the Gulf claims follow the regular laws of liability, but President Obama insisted on the $20 billion fund and BP agreed to an offer it couldn't refuse. The best path now is to let Mr. Feinberg get on with judging claims and getting cash to the victims as soon as possible so they can get back to making a living and the Gulf economy can revive.


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