BP PLC is embarking on a two-pronged legal strategy as it struggles to deal with the biggest environmental mess in U.S. history: Share the wealth and spread the blame.
With oil continuing to spew into the Gulf of Mexico, the energy giant has both bowed to U.S. demands that it put up $20-billion (U.S.) in a fund to meet claims, while also taking pains to point out it isn't alone. Like a well-planned, if delayed, series of chess moves, this strategy could be critical to BP's chances of avoiding a rising tide of costs that some analysts have suggested could push the company into a Chapter 11 bankruptcy filing in the United States.
BP had little choice on the escrow fund, as surety bond provisions in Gulf of Mexico lease agreements give the U.S. government broad powers to force companies such as BP to put up additional money. The provisions are meant to assure the payment of royalties to government but also include leeway for special payments as deemed necessary.
But the company is well-served by not fighting such demands, and also by quickly paying out millions of dollars for claims made against it by businesses and people on the Gulf, said Richard Alderman, associate dean of the law centre at the University of Houston.
"The legal strategy is to reduce liability as much as possible and take care of the liabilities as they arrive, so it doesn't reach the level of lawsuits, so people don't accuse BP of shirking their responsibility," Mr. Alderman said.
The second, and equally important, prong in BP's defence will be to share the blame, say lawyers involved in and observing the case.
The broader group of companies include rig owner Transocean Halliburton which was cementing the well; Anadarko and Japan's Mitsui & Co. which have minority stakes in the oil lease; and Cameron the company that made the blowout preventer.
"I can assure you everyone's going to be pointing to the man behind the tree," said lawyer Daniel Becnel of Becnel Law Firm LLC in Reserve, La., which has already filed several suits against BP, which include allegations by BP's own shareholders that the company misled investors about the risks of drilling in the Gulf.
BP will spend a lot of time fighting the other companies involved over contracts that are written to outline individual roles and responsibilities in the collective effort of drilling deepwater wells, meant to protect the parties from potential losses, said law professor Zygmunt Plater of Boston College.
"There's going to be a lot of arguing over the indemnification clauses, whether gross negligence, or willful misconduct overrides it," Prof. Plater said.
BP has hired Kirkland & Ellis LLP of Chicago, one of the world's largest law firms and a top-ranked litigator. BP spokesman Jon Pack has said BP will pay all legitimate claims but would not provide additional detail about its legal strategy.
Two decades ago, Prof. Plater was chairman of a legal task force for the state of Alaska to improve laws after the Exxon Valdez spill. But the two situations are not comparable, he said.
"In Alaska, you go a mile back from the coast and there's nobody," Prof. Plater noted. "The economy is so much bigger in the Gulf. If I was on the BP board, and someone came in and said, 'We could give you immunity for $25-billion,' I'd fall across the table writing that cheque."
Exxon paid about $2-billion to clean the Valdez spill and another $1-billion to settle criminal and civil charges. Estimate of total costs in the Gulf vary; one analyst at Credit Suisse last week estimated a cost of as much as $6-billion to clean the Gulf oil and an additional $14-billion in damages to claimants.
BP has said it has already paid out $1.6-billion for the Gulf blowout.
Given the legal tangle, allegiances will ebb and flow, said lawyer Matthew Cairns of Gallagher Callahan & Gartrell in Concord, N.H., and president-elect of DRI, a legal group specializing in civil litigation.
"The plaintiffs' lawyers and BP will be aligned to some extent to identify others to blame," Mr. Cairns said. "It's the nature of the beast in this kind of litigation. There'll be shifting alliances and this is going to keep lawyers and judges busy for years and years."
BP PLC (BP)
Close: $31.85 (U.S.), up 45¢Report Typo/Error