The US Court of Appeals for the Fifth Circuit [official website] on Wednesday reversed [opinion, PDF] a district court ruling that interpreted a settlement agreement [JURIST report] between BP and the class of parties injured in the Deepwater Horizon oil spill [JURIST news archive] in a way that permitted recovery for artificial and inflated claims. The appeals court applied fundamental accounting principles in its reasoning:
The difficulty is that subtracting temporally-related revenues and expenses recorded by cash-basis claimants would not result in numbers that could fairly be said to represent actual economic losses or lost "variable profits." It is difficult to understand why some claimants would be compensated for lost "variable profits," while others would be compensated for negative cash flows, based solely on how claimants maintained their financial records. Though in our view the agreement fails to provide absolutely clear direction on processing claims based on cash-basis records, we conclude that the district court's holding too quickly dismissed the concept of matching, and did not deal with the inconsistent results the court's interpretation gives to claims presented on an accrual-basis and those on a cash-basis.The court remanded the case and suggested that the US District Court for the Eastern District of Louisiana [official website] use a more consistent interpretation that fits both accrual- and cash-basis claims.
Wednesday's ruling is the most recent development in a long series of legal battles that have arisen from the Deepwater Horizon Crisis. In July the US Department of Justice (DOJ) [official website] announced that Halliburton Energy Services [corporate website; JURIST news archive] agreed to plead guilty to destroying evidence [press release] in connection with the spill. In January a judge for the US District Court for the Eastern District of Louisiana accepted a plea agreement [JURIST report] between BP and the DOJ for the company's criminal liability in the spill. Earlier in January Transocean Ltd. [corporate website] pleaded guilty [JURIST report] to "negligently discharging oil into the Gulf of Mexico," in violation of the Clean Water Act (CWA) [EPA summary] and agreed to pay $1 billion in civil penalties and $400 million in criminal penalties for its role in the Deepwater Horizon spill.