Lake Eugenie Land & Development, Inc. v. BP Exploration & Production, Inc.

744 F.3d 370

• Court: Court of Appeals for the Fifth Circuit
• Decided: March 3, 2014
• Docket: Nos. 13-30315, 13-30329, 13-31220, 13-31316
• Status: Published

Opinions

LESLIE H. SOUTHWICK, Circuit Judge:

This appeal concerns issues arising under a Settlement Agreement approved by the district court in December 2012. Relevant to us today is that the settlement provided a mechanism for presenting and processing claims for business losses caused by the April 2010 Deepwater Horizon disaster in the Gulf of Mexico. The district court made two rulings as directed by our October 2013 remand. One concerned an accounting question, which was resolved in a sufficiently satisfactory manner as not to be appealed by any party. The other ruling was that the Settlement Agreement did not require those submitting claims for certain business losses to provide evidence of causation. BP Exploration and Production, Inc. appeals that ruling and also argues that an injunction is required to stop payments on such claims. We AFFIRM.

FACTUAL AND PROCEDURAL BACKGROUND

This appeal was originally briefed in May and June of 2013 and orally argued in July. BP’s argument at that time concerned contract interpretation. Its appeal was from an order of the district court entered on March 5, 2013. That order affirmed a Policy Statement issued by the claims administrator on January 15, 2013. BP asserted that the district court and claims administrator’s interpretations of Exhibit 4C of the Settlement Agreement were erroneous because they did not require matching of revenues and expenses in claims processing. On October 2, 2013, this panel, writing three separate opinions, remanded with guidance to the district court for reconsidering the necessity of matching revenues and expenses when processing Business and Economic Loss (“BEL”) claims. See In re Deepwater Horizon, 732 F.3d 326, 332-39 (5th Cir.2013) (“Deepwater Horizon I ”).

Additionally, in a part of the opinion for the court that no other panel member joined, Judge Clement wrote on a separate but related issue. She determined that if the Settlement Agreement’s causation evi-dentiary framework was interpreted not to require proof of a nexus between the Deepwater Horizon disaster and a claimant’s damages, the Settlement Agreement would violate Article III, Federal Rule of Civil Procedure 23, and the Rules Enabling Act. Id. at 342-43. Because that issue had not been briefed or argued, Judge Southwick wrote that it was inappropriate to resolve it. Id. at 346 (South-wick, J. concurring). Nonetheless, he called the analysis “logical” and joined in requiring the district court to consider, on remand, the relevance of causation to the extent the parties argued the point. Id.

On remand, the district court, in three different orders spread over several weeks, indicated that it did not believe this court had required an evaluation of the causation issue. On December 2, 2013, we clarified that Judges Clement and South-wick had agreed in their separate October opinions that, if raised, the district court must consider the Article III and other causation arguments on remand. We acknowledged that our issuance of multiple “opinions may have created interpretive difficulties on the remand, but the district court erred by not considering the arguments on causation.” Yet again today, we each express ourselves individually. Two of us do at least say in tandem, clearly we trust, “affirm.”

On December 24, the district court held that the Settlement Agreement requires matching of revenues and expenses. The court directed the claims administrator to implement that interpretation. As of that ruling, the entirety of BP’s initial argument, namely, that the initial interpretations of Exhibit 4C were incorrect, was successful. Also at that point, though, the district court rejected BP’s arguments with respect to the new issue of whether Article III, Rule 23, and the Rules Enabling Act permitted the parties to agree to a settlement that dealt with causation in this manner. To answer that second question, the district court analyzed the terms of the Settlement Agreement and an October 10, 2012, Policy Statement by the claims administrator to which BP had not objected. The district court concluded that the language of the Settlement Agreement did not require extrinsic inquiry into causation and that the Settlement Agreement had not violated Article III, Rule 23, or the Rules Enabling Act by eschewing the need for evidence of causation.

BP renewed its emergency motion for an injunction with this court on December 30, challenging only the district court’s rejection of its causation arguments. No party appealed the district court’s instruction to the claims administrator to implement the district court’s interpretation of the Settlement Agreement with respect to matching.

While this panel has been addressing questions arising out of the claims administrator’s interpretation of the Settlement Agreement, another panel considered the chronologically earlier question of the validity of the certification of the class by the district court on December 21, 2012, and the approval of the Settlement Agreement. In a January 10, 2014, decision, what we will refer to as the “certification panel” determined the class certification and settlement approval did not contravene Article III, Rule 23, or the Rules Enabling Act. See In re Deepwater Horizon, 739 F.3d 790, 795 (5th Cir.2014) (Deepwater Horizon II).

The certification panel declined to analyze issues arising from the interpretation and implementation of the settlement after its approval by the district court, but the panel held that all Article III, Rule 23, and Rules Enabling Act concerns were resolved at the class certification and settlement approval stage. Id. at 804. We directed letter briefing on the impact of that decision on the remaining issues before this panel for resolution. We now consider the issues that we conclude remain before us.

DISCUSSION

Contract interpretation is a question of law we review de novo. Waterfowl L.L.C. v. United States, 473 F.3d 135, 141 (5th Cir.2006). BP argues that the district court erred in concluding that the Settlement Agreement’s causation framework did not violate Article III, Federal Rule of Civil Procedure 23, and the Rules Enabling Act. Only part of this issue was resolved on January 10 by the certification panel when it concluded that the certification of a class and the approval of the Settlement Agreement were proper. What this panel now must decide is whether the implementation of the Settlement Agreement is defective.

BP contends that Section 1.3.1.2 of the class definition and footnote 1 of Exhibit 4B establish a requirement that claimants prove with evidence that they are proper class members. Section 1.3.1.2 states: “Economic Damage Category. Loss of income, earnings or profits suffered by Natural Persons or Entities as a result of the DEEPWATER HORIZON INCIDENT.” Footnote 1 of Exhibit 4B states: “This Causation Requirements for Business Economic Loss Claims does not apply to ... Entities, Individuals, or Claims not included within the Economic Class definition.” We will discuss the referenced footnote later.

The class definition was relied upon by the certification panel when it concluded that the Settlement Agreement complied with Article III:

Under the plain terms of the Class Definition, a “person or entity” is included “in the Economic Class only if their Claims meet the descriptions of one or more of the Damage Categories described” in Section 1.3.1 of the Class Definition. Of these “Damage Categories,” the only category that BP has identified as giving rise to Article III difficulties is the “Economic Damage Category” under Section 1.3.1.2. This section of the Settlement Agreement, however, explicitly limits claims to those based on “[l]oss of income, earnings or profits suffered by Natural Persons or Entities as a result of the DEEPWA-TER HORIZON INCIDENT,” subject to exclusions for participants in certain industries. As contemplated by the Class Definition, therefore, the class contains only persons and entities that possess Article III standing.

Deepwater Horizon II, 739 F.3d at 803 (footnotes omitted). The panel also determined that the class definition and the amended complaint satisfied the requirements of Rule 23 and the Rules Enabling Act. Id. at 804 & n. 53.

The Settlement Agreement was approved in the same December 2012 district court order that certified the class. The certification panel’s opinion notes that the terms of this settlement substitute for at least some of the contested factual development that occurs in cases that do not have simultaneous certification and settlement. Id. at 806-08. Despite the settlement, the individual claims still had to be processed. Thus, we now examine the methodology for presenting and processing those claims, as written in the Settlement Agreement and as interpreted by the claims administrator in the October 10, 2012, Policy Statement.

Causation for BEL claims is primarily addressed in Exhibit 4B to the Settlement Agreement. It provides for the use of proof of loss as a substitute for proof of causation. Exhibit 4B exempts claimants located within certain geographic regions and in certain industries from presenting any evidence of causation. That exemption appears in a section under the heading “Business Claimants for Which There is No Causation Requirement.” It continues: “If you are a business in [geographic] Zone A, you are not required to provide any evidence of causation unless you fall into one of the exceptions agreed to by the parties, and listed in footnote (1).” Claimants not within the exempt criteria must only meet one of a set of quantitative tests based on their revenue patterns during the pre- and post- Deepwater Horizon disaster periods.

BP seeks to override the explicit language disclaiming the need for evidence of causation by focusing on this footnote that appears in Exhibit 4B: “This Causation Requirements for Business Economic Loss Claims does not apply to ... Entities, Individuals, or Claims not included within the Economic Class definition.” Wielding this footnote, BP seeks to dismantle the complex framework of exemptions, presumptions, and formulas that allow business claimants to submit evidence of their income and expenses before and after the BP-caused disaster. BP, in essence, is arguing that only if a claimant can prove its injuries are traceable to BP’s conduct will Exhibit 4B’s forswearing of the need for proof of traceability to BP’s conduct apply. There likely is a more nuanced manner in which BP would characterize its argument, but this fairly captures its essence. We reject the argument, of course.

We acknowledge, though, that BP is pointing out a possible inconsistency between what the certification panel says it found to satisfy Article III — namely, a requirement that class members be able to trace their claims to the defendant’s conduct — and the way the Settlement Agreement is written and has been implemented. In effect, BP argues that Exhibit 4B cannot be interpreted to exclude a requirement of causation because the certification panel held that requirement to be a feature of the class definition. BP argues, then, that even if the class were properly certified under Article III based upon this definition, a settlement that abandons such a requirement, or at least a settlement later interpreted and implemented as not including such a requirement, was simultaneously approved. This, according to BP, reanimates Article III, Rule 23, and Rules Enabling Act issues put to rest by the certification panel. We disagree with the premise of abandonment and therefore we never reach the applicability of these fundamental issues to the questions that remain before us.¹ Neither the Settlement Agreement’s terms nor its implementation ignore causation. Instead, the parties explicitly contracted that traceability between the defendant’s conduct and a claimant’s injury would be satisfied at the proof stage, that is, in the submission of a claim, by a certification on the document that the claimant was injured by the Deepwater Horizon disaster. We explain.

The parties agreed to a form that BEL claimants would submit to make a claim. The introductory section of the form states: “The Business Economic Loss Claim is for businesses ... that assert economic loss due to the spill.” (Italics added). The end of the form requires the claimant “certify and declare under penalty of perjury” that all of the information in the claim form is “true and accurate to the best of my knowledge.” The claimant further attests “I understand that false statements or claims made in connection with this Claim Form may result in fines, imprisonment, and/or any other remedy available by law ... and that suspicious claims will be forwarded ... for possible investigation and prosecution.” Every claim BP argues suffers from some causal-nexus infirmity should have with it an attestation from the claimant or an attorney that the economic loss was caused by the spill.

In light of our reading of the Settlement Agreement, claim form, letter briefing, and the voluminous record in this appeal, we conclude the Settlement Agreement does not require a claimant to submit evidence that the claim arose as a result of the oil spill. Each claimant does attest, though, under penalty of perjury, that the claim in fact was due to the Deepwater Horizon disaster. The attestation, of course, applies to all assertions on the claims form, including the financial figures and other details. Suspicious forms would be subject to investigation. These requirements are not as protective of BP’s present concerns as might have been achievable, but they are the protections that were accepted by the parties and approved by the district court. It was a contractual concession by BP to limit the issue of factual causation in the processing of claims. Causation, or in Rule 23 terms, traceability, was not abandoned but it was certainly subordinated.

There is nothing fundamentally unreasonable about what BP accepted but now wishes it had not.² One event during negotiations in the fall of 2012 suggests reasons for just requiring a certification. The claims administrator, in working through how the proposed claims processing would apply in specific situations, submitted a hypothetical to BP and others. It posited three accountants being partners in a small firm located in a relevant geographic region. One of the three partners takes medical leave in the period immediately following the disaster, thus reducing profits in that period because that partner is not performing services for the firm. At least some of the firm’s loss, then, would have resulted from the absence of the partner during his medical leave. BP responded that such a claim should be paid. We raise this not for the purpose of analyzing an issue we conclude is not relevant to our decision, namely, whether BP is estopped from its current arguments. Instead, we mention it in order to identify the practical problem mass processing of claims such as these presents, a problem that supports the logic of the terms of the Settlement Agreement. These are business loss claims. Why businesses fail or, why one year is less or more profitable than another, are questions often rigorously analyzed by highly-paid consultants, who may still reach mistaken conclusions. There may be multiple causes for a loss. As with the hypothetical accountants, all of the loss may be attributable to the missing partner, or some of the loss may be traceable to the Deepwater Horizon disaster. The difficulties of a claimant’s providing evidentiary support and the claims administrator’s investigating the existence and degree of nexus between the loss and the disaster in the Gulf could be overwhelming. The inherent limitations in mass claims processing may have suggested substituting certification for evidence, just as proof of loss substituted for proof of causation. Because the Settlement Agreement at least requires a formal assertion of the causal nexus, we conclude that what the certification panel relied upon in approving the class definition and Settlement Agreement remained in place during the processing of claims.

The dissent concludes we require too little as to causation. We see the extent of our colleague’s disagreement to be as follows. All of us accept that the class definition and Settlement Agreement require that membership in the class be based on harm from BP’s conduct, as the Certification Panel previously held. We also agree that the provision in Exhibit 4B that disclaims the need for evidence of causation is at least generally applicable. We part analytical ways when identifying the role of the claims administrator regarding suspicious or implausible claims. The dissent would require the claims administrator to “ensure that claims are not paid that are not plausibly traceable to the spill,” thus placing the onus on the claims administrator to ensure that implausible claims are adequately scrutinized such that those lacking a causal nexus are rejected.

We do not agree that we should order the claims administrator to perform that gatekeeping function. There is no language in the Settlement Agreement nor in BP’s briefing, supplemental submissions, or emergency motions, about a procedure to be followed when an attestation of a nexus seems at odds with the specifics of the claim. Far from proposing a specific procedure or even guidelines for crafting one, the entirety of BP’s requested relief, exemplified in its Renewed Motion for Injunction, is “a permanent injunction barring the [claims administrator] from issuing or paying awards to claimants whose alleged injuries are not traceable to the spill.” BP identifies its desired relief but does not identify a part of the Settlement Agreement that in any way suggests that each submitted claim would be examined as to whether it satisfies a traceability requirement.

Relevant to this concern is that BP did not object in this appeal to a decision made in October 2012 that the claims administrator was not to look at potential alternative causes for claimants’ losses. Though we are reluctant to say that all claims must be accepted no matter how clear the absence of the required nexus may be, no one has concerned itself in this appeal with the when, by whom, and how of analyzing such suspicious claims after they are submitted. It seems to us that absent any specific provision in the Settlement Agreement, and no one suggests there is one, such concerns are to be addressed in the usual course of processing individual claims. The Settlement Agreement contained many compromises. One of them was to provide in only a limited way for connecting the claim to the cause. The claims administrator, parties, and district court can resolve real examples of implausible claims as they resolve other questions that arise in the handling of specific claims.

We affirm the district court’s December 24, 2013, order interpreting the Settlement Agreement. An injunction has been in place preventing payment of BEL claims pending the resolution of all of these issues. Between the certification panel’s decision of January 10 and ours today, all issues presented to this panel have been resolved. On the other hand, petitions for rehearing en banc of the certification panel’s decision on which we have relied have been filed. We can anticipate that our decision might not persuade all parties either. We conclude that the injunction should be dissolved, but the injunction remains in place until the mandate of the court is issued.

The December 24, 2013, ruling of the district court is AFFIRMED. The injunction prohibiting payment of the relevant claims is VACATED.

1 . We observe that the difficulties that BP points out as to causation are outgrowths of the definition of the class and the terms of the Settlement Agreement that were sustained by the Certification panel. We do not perceive any basis for saying Article III, Rule 23, and the Rules Enabling Act are violated at the claims processing stage that has not already been addressed by the prior panel.

2 . Though the approach may have been reasonable, that fact does not make it legally valid. As we have already held, though, the Certification panel precedentially resolved validity.