The Wall Street Journal is defending BP's decision to fight its legal responsibilities in the wake of the 2010 Deepwater Horizon oil spill by criticizing both class-action lawsuits and the settlement agreement that BP itself agreed to.
The Journal is vocally opposed to class action lawsuits and has previously criticized them as frivolous, abusive, and beneficial only to trial attorneys. Yet the editorial board apparently isn't fond of companies that take responsibility for their harmful actions and settle, either -- even though these settlements can be a less costly alternative to class action lawsuits.
In a recent editorial, the Journal was supportive of BP's latest efforts to avoid having to pay claims related to the oil spill that it caused and that has still not fully been cleaned out of the Gulf of Mexico. Even though BP helped craft and agreed to a billion-dollar settlement deal in order to avoid a trial result that could have been even more damaging, the company is now questioning the terms of the agreement. The Journal is fully onboard with BP's tactics, despite the fact that BP has repeatedly lost its varied attempts to disregard the settlement. The Journal wrote that the ensuing payments to claimants represent “an all-you-can-eat buffet” that is “the best thing ever to happen to the trial lawyers who continue to exploit the accident for fun and profit.”
The editorial went on to call on the Supreme Court “to impose discipline on the class-action lawsuit industry” by voiding the settlement under a far-fetched legal theory that could foreclose the ability of anyone to agree to a settlement:
The fund has become an all-you-can-eat buffet and everybody is invited, regardless of the cause of the damages they may or may not have suffered. As long as claimants can show a material loss within certain geographical regions, they qualify.
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BP sued to break this wave of abuse but lost in front of [federal district court Judge Carl] Barbier and then mostly again amid a tangle of opinions at the Fifth Circuit Court of Appeals. But the major question for the High Court to resolve isn't a narrow dispute about whether [claims administrator for the settlement fund Patrick] Juneau's or BP's interpretation of the terms is right. Rather, it's whether the courts can certify a class in which thousands of people cannot prove they suffered injuries that the defendant caused and could never succeed in an individual lawsuit, as even Mr. Juneau has conceded.
A class settlement is not a mere understanding among private parties but carries a judicial imprimatur -- or at least is supposed to outside of the Bayou. The legal system is not allowed to convert non-claims into legitimate claims under either Federal Rule of Civil Procedure No. 23 or especially Article III of the U.S. Constitution.
The main reason is that aggregating real and false torts exceeds the constitutional bounds that limits judicial power to “cases and controversies.” If BP wants to run a pot-of-gold fund, that's its business, but the courts can't play the administrator.
The Journal mirrors the position of BP, but doesn't mention it has been specifically rejected by the 5th U.S. Circuit Court of Appeals. The editorial's argument that “the legal system is not allowed to convert non-claims into legitimate claims” is borrowed directly from conservative 5th Circuit Judge Edith Clement. According to Reuters legal analyst Alison Frankel, Clement “has been nothing but consistent in her conviction that the BP settlement, as it has been interpreted and implemented by Judge Barbier, violates the U.S. Constitution.” Clement also is the minority. As Frankel explained, one of the majority opinions in the BP proceedings specifically addressed Clement's conclusion, which would illogically force class action plaintiffs to prove their case before defendants are allowed to settle (emphasis added):
BP's arguments that Barbier's post-approval interpretation of the deal rendered class certification unconstitutional were beside the point, according to the majority. The 5th Circuit's review, the opinion said, was based on the evidence before Judge Barbier in December 2012. If BP had wanted a deeper review of individual claims, according to the opinion, then it should not have settled through a class action.
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Indeed, the majority said, BP knew (or should have known) that it was asking for something impossible. “In particular, BP's arguments fail to explain how this court or the district court should identify or even discern the existence of 'claimants that have suffered no cognizable injury' for purposes of the standing inquiry during class certification and settlement approval,” the opinion said. "It would make no practical sense for a court to require evidence of a party's claims when the parties themselves seek settlement. ... Logically, requiring absent class members to prove their claims prior to settlement ... would eliminate class settlement because there would be no need to settle a claim that was already proven.
The majority opinion went on to explain that "[s]uch a rule would thwart the 'overriding public interest in favor of settlement' that we have recognized '[p]articularly in class action suits.' "
Forcing plaintiffs to litigate their case not only before trial but before settlement is a rather radical position -- but the Journal endorses it anyway. In this case, it was agreed that both the specific class (certified by the court) and settlement (agreed to by BP) comprised those who had been harmed by the devastation of Deepwater. The Clement dissent and the Journal are asking for the sort of evidentiary finding on the merits that is done at trial. The 5th Circuit explained in its rejection of this proposal to turn class action procedure upside down: “courts are not authorized to apply such a standard for this purpose at the Rule 23 stage. Under [Supreme Court precedent], of course, this is precisely what the district judge must do at summary judgment and what the finder of fact must do at trial.”
The Journal editorial board doesn't want plaintiffs to recover from corporate wrongdoing, even when the companies want to compensate their victims. Although the Supreme Court has whittled away plaintiffs' rights and made it more difficult for plaintiffs to join as a class, the position that the Journal is asking the court to adopt is even worse -- leaving injured consumers, employees who have been discriminated against, and victims of corporate fraud with less of a remedy. Even the conservative justices of the Supreme Court haven't gone that far, yet.