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BP won a significant victory yesterday in its ongoing litigation arising from the tragic April 20, 2010 explosion of the DeepWater Horizon and resulting oil spill that affected the Gulf of Mexico. While it has attempted to wrap up its liability for the Spill through a variety of different settlements, a lingering liability for BP was “moratoria losses.” “Moratoria plaintiffs” are generally described in the litigation as “deepwater drilling rig workers, rig support personnel, transport personnel and others” who suffered losses and damages as the result of the six-month deepwater drilling moratorium issued by the United States Department of Interior after the BP oil spill. Examples of those type of businesses are marine salvage companies, rig suppliers, commercial divers, and equipment inspection companies, and other exploration and production companies in the oil and gas in the Gulf of Mexico.

Those plaintiffs argued that they suffered damages because of their inability to do business in the Gulf of Mexico because the federal government issued a moratoria through a series of orders limiting drilling operations in the Gulf of Mexico. They argued that the moratorium was a “direct, proximate and forseeable result” of the Spill and BP should thus be responsible for the economic losses flowing from that moratoria.

The legal question was whether BP was responsible for the losses or whether the losses were caused by the moratoria. BP argued that the moratorium was not an “unavoidable mandatory response” to the oil spill but a government crafted measure aimed at avoiding future spills. It also argued that the Oil Pollution Act (OPA, the statute on which the plaintiffs relied) only required it to compensate losses that were “proximately caused” by the oil spill. The plaintiffs argued that OPA did not impose a “proximate cause” requirement and that even if it did, the government imposed moratoria was foreseeable and certain should an oil spill occur.

It is important to note that the oil and gas industry challenged the moratoria when it was issued.  Another federal judge stated that he was “unable to divine or fathom a relationship between the “[Secretary of Interior’s] findings [justifying the moratoria] and the immense scope of the moratoria.

Judge Barbier’s decision turned on his interpretation of the relevant portions of OPA. Analyzing those parts, Judge Barbier ruled that the plaintiffs had to establish that their economic losses were “due to” the injury, destruction, or loss of property or natural resources that “resulted from” the discharge or threatened discharge of oil from the Deepwater Horizon well. Judge Barbier ruled that the moratorium addressed the risk of possible future blowouts and oil spills from other wells. The judge ruled that the plaintiffs losses “did not result from the discharge or substantial threat of discharge of oil from the Macondo well; they resulted from the perceived threat (whether substantial or not) of discharge from other wells.”

The judge also stated that “while OPA’s legislative history makes clear that Congress intended the Act to loosen or remove some of the restrictions on recovery that existed under maritime law, there is nothing to suggest that Congress intended OPA to go so far as to hold a discharger liable for the financial consequences of subsequent government actions aimed at preventing similar tragedies in the future and which broadly affect an entire industry.”

The last sentence of the judge’s ruling is important to note in regard to the remanning litigation.  Judge Barbier stated that he “need not and does not decide” whether the applicable portions of OPA incorporate a proximate causation standard.  That is an important issue for the litigants who have opted out or been excluded from the class action settlements.  Certainly this decision was an important victory for BP and will likely be an important decision going forward about the liability under OPA for future litigants.

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