Ct Rejects Stigma Claims in BP Oil Spill Litigation

While the 2010 Deepwater Horizon oil spill fades from memory, the federal district court assigned to resolve the hundreds of cases arising from the explosion, fire, and sinking of the Deepwater Horizon  mobile offshore drilling unit (“MODU”) has been busy issuing orders. These opinions have addressed complex questions of law involving the interplay of the federal Oil Pollution Act (OPA), Clean Water Act (CWA), federal maritime law as well as state common law and statutory claims.

The general maritime law claims involve allegations of negligence, gross negligence, and strict liability for manufacturing and/or design defect. The state law claims involve allegations of nuisance, trespass, and fraudulent concealment, along with a claim for strict liability under the Florida Pollutant Discharge Prevention and Control Act. Additionally, Plaintiffs seek punitive damages under all claims. Defendants move to dismiss all of the general maritime law or state law.

To efficiently manage this complex case, the federal district court for the eastern district of Louisiana has organized the various types of claims into several “pleading bundles.” The “B1” pleading bundle includes all claims for private or “non-governmental economic loss and property damages.” Over 100,000 individual claims are encompassed within the B1 bundle.

The court has made the following rulings over the course of the past year:

  • The Deepwater Horizon was a mobile offshore drilling unit (MODU) that was a “vessel” as that term is defined under OPA and general maritime law. One defendant argued that the drilling platform was permanently or temporarily attached to the seabed of the Outer Continental Shelf and therefore should be considered a “fixed structure”. However, the court said the Deepwater Horizon had no legs or anchors connecting it to the seabed and that its only physical “attachment” to the wellhead was the 5,000 foot string of drill pipe. The court found the drill string were part of the vessel’s gear or appurtenances and that maritime law ordinarily treated an appurtenance attached to a vessel in navigable waters as part of the vessel itself;
  •  The court said the case invoked its admiralty and maritime law jurisdiction because the Deepwater Horizon and its appurtenances were operating on waters overlying the Outer Continental Shelf. The court said its admiralty and maritime jurisdiction extended to cases of injury or damage to persons or property caused by a vessel on navigable waters even though the injury or damage is done or consummated on land;
  • The court ruled that negligence claims under general maritime law were only available to persons who suffer physical damage and resulting economic loss resulting from an oil spill and not for claims do not involve physical damage to a proprietary interest;
  • Maritime law displaces state common law and statutory claims;.
  • The court ruled that OPA was intended to allow a broader class of claimants to recover for economic losses than allowed under general maritime law but did not displace all maritime law claims. Where claimants complied with the OPA presentment procedures (i.e., tendered their claims to the responsible parties), the court held the plaintiffs may not assert maritime causes of action against a Responsible Party.
  • The court held that maritime law claims that existed before OPA could be brought directly against non-Responsible parties. Again, plaintiffs could only maintain general maritime law claims if they allege physical damage to a proprietary interest;
  • Punitive damages are available under general maritime law claimants against Responsible Parties provided the claimants complied with the OPA presentment procedures;
  • The court ruled that BP and Anadarko, co-lessees of the area where the offshore facility was located, are responsible parties under OPA for discharges of oil that occurred beneath the surface of the water. However, Transocean as owner/operator of the MODU was not a responsible party under OPA for the discharge that occurred beneath the surface of the water;
  • The court held that BP and Anadarko were owners of the offshore facility and are liable for civil penalties under the Section 311(b)(7) of the Clean Water Act. Because there were disputed facts as to whether Transocean was an operator of the offshore facility, the court denied the government’s motion for summary judgment for civil penalties against Transocean under the CWA;
  • The court dismissed all general maritime negligence claims against Anadarko and MOEX because they were non-operating lessees of the Maconda well. Under the Joint Operating Agreement, BP was solely responsible for the drilling operations. In addition, the court said that exception for ultra-hazardous activity did not apply  because offshore drilling operations have been held not to be ultra-hazardous activity;
  • The Court granted preliminary approval to a proposed $7.8B settlement of certain private claims in May. A final fairness hearing is scheduled for November 8th.Several states and environmental organizations have objected to the proposed settlement.

While approval of the final settlement was pending, the Court heard motions involving three types of claims outside the proposed settlement: the “Pure Stigma,” “BP Dealer,” and “Recreation Claims.” The court rejected these claims in In re Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, 2012 U.S. Dist. LEXIS 141546 (E.D. La. 10/1/12).

 Pure Stigma Claims-

The “Pure Stigma Claims” involved allegations of real property devaluation caused by the oil spill or other contaminant even though (1) the property was not physically touched by oil and (2) the property was not sold. The “Pure Stigma Claims” did not include claims by persons such as real estate agents who earn a living selling real estate.

The court provided the following example of a typical stigma claim: “[plaintiff] owns a condominium at the Phoenix VIII located . . . in Orange Beach, Alabama (residential). Plaintiff has experienced a diminution on the value of her property because of the oil spill. No known physical damage at this time”

The plaintiffs argued that the Pure Stigma Claims were recoverable under subsections (B) and (E) of OPA’s damages provisions located at 33 U.S.C. § 2702(b)(2). They also asserted these claims were cognizable under general maritime law and Louisiana law.

The court referred to its earlier ruling that maritime law bars unintentional tort claims for economic losses when there is no physical injury to the plaintiff’s proprietary interest. The court then concluded that the plaintiffs had not alleged facts that would lead to the reasonable inference that the Defendants intended either the oil spill or the purported diminution in property value. Because the “Pure Stigma Claims” involved property that was not physically touched by oil, the court dismissed the maritime law claims.

Turning to Subsection (B) covering damage to real or personal property, the court said these claims require physical injury or destruction of a claimant’s property. Because the “Pure Stigma Claims” do not involve situations where oil contacted property, the claims did not involve “destruction of” property. Accordingly, the court dismissed the OPA Subsection “B” claims.

The court began its analysis of OPA damage Subsection “E” covering lost profits and earning capacity by recognizing that Congress intended OPA to allow a broader class of claimants to recover economic losses than allowed under general maritime law. The court said that Subsection (E) allows recovery for “loss of profits” or “impairment of earning capacity. However, the court said, the “Pure Stigma Claims” were for claims for unrealized diminution of real property value. The court characterized these claims as neither a “loss of profits” nor “impairment of earning capacity because there must be a sale of a property for the owner to suffer a “loss of profits”. The court said that until a property was sold, and a loss realized, damages are speculative. Indeed, the court suggested that it was possible that the value of real property eventually may meet or exceed its pre-spill amount. Likewise, the court held that unrealized diminution of property value is usually not an “impairment earning capacity.

Accordingly, the court dismissed the Subsection B and E claims. However, the court emphasized that its order did not affect claims relating to property that was sold or property that was oiled, or any other claims that are outside the scope of “Pure Stigma Claims.

BP Dealer Claims

This category of claims applied to plaintiffs whose allege economic loss based solely on consumers’ decisions not to purchase fuel or goods from BP fuel stations and convenience stores following the explosion and oil spill. In other words, claims solely based on consumer animosity toward BP. These claims do not involve dealers located in the Gulf Coast or located along a highway frequently traveled by tourist heading to the Gulf Coast alleging lost profits due to an area-wide decline in tourism resulting form the oil spill.

An example of a dealer claim falling within this category was the claim filed by a BP franchisee in Massachusetts who claimed a loss of revenue because “As a protest against BP and all things associated with BP thousands of drivers chose not to fill their vehicles at BP or BP associated fuel/service stations. As a result, my business saw a dramatic decline in profits from which it has yet to recover.”

The plaintiff asserted claims under OPA Subsection B, general maritime law and state law. The court dismissed the maritime and state law claims for the reasons previously cited. Turning to the OPA Subsection (B) claims, the court said the BP Dealers were asserting that the “injured property” for purposes of Subsection (B) was the “BP brand” leased by the BP Dealers. The quickly dispensed with the OPA claim, ruling that because the “BP brand” is intangible property, it is not susceptible to physical injury. Therefore, the court held, the BP Dealer Claims were not compensable under OPA Subsection (B).

Recreational Claims-

These claims involve recreational fishermen, recreational divers, beachgoers, recreational boaters, etc., who allege they have suffered damages that include loss of enjoyment of life from the inability to use portions of the Gulf of Mexico for recreation and amusement purposes.

The court gave the following example of such a claim: “[Claimant] owns a 2009 19- foot Tahoe QSI recreational boat stored . . . in Fort Morgan, Alabama . . . . Due to the presence of oil in the Gulf of Mexico and Mobile Bay, boat traffic was restricted and waters were closed. Ms. Wisniewski was denied use of her boat for seven weeks (June 7, 2010 to July 26, 2010) due to the oil spill. During this period, she paid for the upkeep and maintenance of the boat”

The court ruled that “Loss of Enjoyment” claims do not involve “loss of profits” or “impairment of earning capacity,” and, thus, were not recoverable under Subsection (E). Because these claims did not arise from a physical injury or destruction to property, plaintiffs could not recover under Subsection (B). To the extent a “Loss of Enjoyment” claim actually involved physical injury or destruction to one’s property (e.g., where a pleasure boat was oiled), the court held that Subsection (B) did not provide compensation for this type of emotional, non-pecuniary damage.

Under the “Loss of Deposit” claims, plaintiffs allege they expended money preparing recreational activities and, the court said these claims were not available under Subsection E for the same reasons. Regarding the Subsection B claims, the court said that while a monetary payment may qualify as “property” in some legal contexts, it does not qualify as property under Subsection (B) since the money payment was not capable of being “injured” or “destroyed” by oil pollution.

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