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Engulfed in damages

Get ready for years of ugly litigation once the BP oil spill disaster hits the courts

By Alex Beam
Globe Columnist / June 15, 2010

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We are now watching Act One of the Gulf oil spill drama. It is a tragic farce. British Petroleum pretends to be contrite. The Obama administration pretends to be in charge. The economic and environmental depredations are of course very real. Everyone hopes the catastrophic, ocean-floor gusher can be stanched by early fall.

I am waiting for Act Two. That is when the PR flacks go home and the lawyers take over. Lawyers are an unsentimental lot. It’s all very sad about the pelicans and the groupers, but as several attorneys explained to me: Fish can’t sue. Only people can. And once the oil spill hits the courts, the public is in for a rude awakening.

The obvious legal precedent for any litigation is Baker v. Exxon, the 1989 Exxon Valdez oil spill case in Alaska. More than 32,000 fishermen, food processors, and Native Americans banded together to recover damages from the multinational oil giant, and the results were not pretty. Exxon drew the case out for 19 years before it finally reached the Supreme Court. By the time of the final ruling, more than 7,000 of the plaintiffs had died.

What happened? In Alaska, the lawyers won $500 million in damages and $5 billion in punitive damages. After five years of trial and 14 years of putzing around in appeals court, the case finally arrived before John Roberts’s Supreme Court in 2008, with the punitive damages already reduced to $2.5 billion. “Roberts’s first question from the bench was, ‘Isn’t the question here how a company can protect itself from unlimited damages?’ ’’ says David Lebedoff, who was present at the arguments. A lawyer and author of “Cleaning Up,’’ a book about the Exxon Valdez litigation, Lebedoff notes that “If Bush v. Gore had been decided differently, you might have had a chief justice who asked instead, ‘How can a fisherman protect himself from an oil spill?’ ’’

By a 5-to-3 vote, the Roberts court slashed the punitive damages fivefold, from $2.5 billion to $500 million. My hero David Souter opined for the majority that Exxon’s actions were negligent but not malicious, which could be a reasonable finding in the BP case. Everyone agrees that Souter conjured the one-to-one actual-to-punitive damages ratio out of thin air. “It was judicial activism at its most raw,’’ says Gerry Nolting of Minneapolis-based Faegre & Benson, who was on the plaintiffs’ trial team.

Nolting points out that the actual awards ranged from a few thousand dollars to about a million. Was justice served? “Those numbers don’t tell us that justice was served,’’ says Boston University law professor Keith Hylton. “But to get more, you have to prove more. It’s harsh, but that is the way the tort system works.’’

So what will happen in the Gulf? Like Exxon, BP will pay all cleanup costs, which could total hundreds of millions of dollars. Various government agencies will probably levy huge fines for BP’s conduct before, during, and after the spill, but the real money action will come during the tort claims. “The regulatory penalties will be dwarfed by the tort damages that will be brought forward in this case,’’ says Hylton. “It’s pretty simple. If the lawyers can prove that BP’s behavior was grossly, wantonly, or maliciously negligent, that will open the door to punitive damages.’’

Nolting’s firm, steeled by 19 years of oil spill litigation, is sniffing around the Gulf for business but hasn’t filed any lawsuits yet. “An oil spill is a dynamic event; it’s not like an airplane crash, which is instantaneous and then it’s over,’’ he explains. “Here the damages continue to occur. It’s like six-dimensional chess. If you want to represent your clients aggressively, it is a huge financial, emotional, and psychological undertaking.’’

As Nolting was laying out the Baker v. Exxon timeline for me, he casually mentioned, “Oh, we’re still in Alaska court.’’ What? That’s right. Twenty-one years after the Prince William Sound spill, the lawyers are still working on distributing claims.

As for State of Louisiana v. British Petroleum — come back in 2031.

Alex Beam is a Globe columnist. His e-dress is beam@globe.com.