BP Found Grossly Negligent for Deepwater Horizon Oil Spill

Types : Alerts

Judge Carl Barbier issued his much-anticipated decision yesterday (September 4, 2014), assessing liability for the Deepwater Horizon catastrophe. In lengthy Findings of Fact and Conclusions of Law (153 pp.) for the so called “Phase One” non-jury trial that was conducted in 2013, Judge Barbier held that BP Exploration & Production, Inc.’s (“BP”) reckless actions, gross negligence, and willful misconduct were a proximate cause of the spill and imposed liability against BP under both the Clean Water Act (33 USC 1321(b)(7)(D)) and general maritime law.

The judge went on to find that the conduct of Transocean Holdings LLC and Halliburton Energy Service, Inc. were negligent and also proximate causes of the casualty, but not grossly negligent.

Applying general maritime law, Judge Barbier then apportioned fault as follows: BP – 67 percent, Transocean – 30 percent, and Halliburton – 3 percent. However, the judge ruled that indemnities and releases contained in Transocean and Halliburton’s contracts with BP were valid and enforceable because they were not grossly negligent.

Although the judge stated that BP’s conduct warranted the imposition of punitive damages under general maritime law, he concluded that Fifth Circuit precedent prevented him from awarding such damages. Even so, he noted that other circuits such as the First and Ninth circuits would allow punitive damages on the facts of this case, and to the extent that those standards might apply, BP would be liable for punitive damages.

As a consequence of this decision, BP would not be entitled to a complete defense or limited liability under the Oil Pollution Act of 1990’s sections 2703 and 2704.  The findings of gross negligence and willful misconduct open BP up to enhanced penalties under the Clean Water Act that potentially will run into billions of dollars. Judge Barbier did not make a finding as to how much oil was spilled, which is an important factor in assessing fines and penalties.  The amount of oil spilled will be determined in the next phase of the case, scheduled to be tried in January 2015.

We presume that BP, as well as the other parties affected by this decision, will appeal.

While the finding of gross negligence may have profound financial consequences for BP, the precedential effect should be more limited because gross negligence is a factual matter to be determined on the record of each case.  Nonetheless, Judge Barbier’s definition of “gross negligence” and his construction of the record in reaching his conclusion that BP was grossly negligent can also be expected to have influence beyond the OPA 90 context because the phrase has a long history in U.S. law and was not the subject of a definition in the statute itself.