A recent Law.com story by Amanda Bronstad, “Fla. Lawyer Says Lead Plaintiffs Attorney Drafted BP Oil Spill Settlement to Get $3B in Fees,” reports that a Florida attorney has alleged that a lead plaintiffs lawyer in the Deepwater Horizon oil spill litigation colluded with BP in drafting a class action settlement that gave more than $3 billion in legal fees. Attorney Brian Donovan, of The Donovan Law Group in Tampa, filed the suit Feb. 12 in Florida’s 13th Judicial District in Hillsborough County against Steve Herman, co-lead counsel for the multidistrict litigation against BP over the 2010 spill. Donovan claims that Herman, of New Orleans-based Herman Herman & Katz, was negligent and breached his duties to class members through an “eight-step plan to maximize his compensation” while reducing BP’s liability over oil spill claims.
Herman, in an email to Law.com, stood by his handling of the Deepwater Horizon case, noting that he had addressed many of Donovan’s concerns about the settlement in emails and in court during the original litigation. But Donovan called the multidistrict litigation “an example of Louisiana judicial homecookin’ at its very worst” in which both sides put the interests of the blowout’s victims on the back burner.
“Justice for the BP oil well blowout victims was never considered by defendant Herman,” wrote Donovan in a 130-page complaint. Donovan claimed in the lawsuit that the 19 lawyers on the plaintiffs’ steering committee, including Herman, stood to earn more than $3 billion in fees, including both the common benefit fund and separate contingency fees they had with their clients. “It is beyond cavil that a reasonable, objective observer would not conclude that this amount is out of proportion to the value of the professional services rendered,” he wrote in the complaint.
Herman questioned the validity of Donovan’s numbers, and said he was apprised of his clients’ full range of options. In one 2012 email that was referenced in Donovan’s complaint, Herman advised him on available procedures for his clients who opted out of the settlement. Herman took note of that conversation in an emailed statement to Law.com. “Seems like that was pretty good advice,” Herman wrote. “No idea the extent to which he or his clients may or may not have followed it.”
As to the allegations about fees, Herman wrote, “The common benefit fees are a matter of record. Neither Donovan, nor any of his clients (assuming he has any), nor anyone else objected to them. Nor did Donovan, nor any of his clients (assuming he has any), nor anyone who settled in the GCCF or the class settlement program ever pay one cent to the PSC or any other common benefit attorneys any common benefit fees.”
The suit is the latest skirmish over fees between leadership attorneys in multidistrict litigation and lawyers representing individual clients. In November, Philadelphia’s Kline & Specter alleged that lawyers leading lawsuits over pelvic mesh devices had settled cases on the cheap, despite much larger jury verdicts. A federal judge in West Virginia rejected those allegations and approved $500 million in common benefit fees Jan. 30.
BP initially set up a claims process for individuals and businesses along the Gulf of Mexico who had lost money due to the 2010 spill and were entitled to compensation under the Oil Pollution Act of 1990. Attorney Kenneth Feinberg initially doled out claims, under the Gulf Coast Claims Facility, but plaintiffs lawyers criticized the process for lengthy delays and inconsistencies. In 2012, BP agreed to settle the class action, estimated to cost $7.8 billion, while a new administrator continued to process claims.
Over the years, BP revised its settlement cost estimate several times and even attacked portions of the deal for contributing to what it called a flood of fraudulent claims. Last month, BP, which also paid $20 billion to the U.S. Justice Department in 2015, raised its total projected oil spill costs to $65 billion, in large part due to outstanding claims in the class action settlement.
Donovan’s suit alleged that Herman’s “eight steps” involved limiting BP’s liability in the class action settlement by restricting claims based on geography and other factors and, before that, encouraging claimants to drop their lawsuits in favor of quick cash under Feinberg’s Gulf Cost Claims Facility. Donovan called the leadership lawyers “cooperative dealmakers,” not adversaries to BP, who shut out 220,000 claimants in favor of their own clients. “This deal was consummated behind closed doors,” he wrote. “In sum, plaintiff, plaintiff’s clients, and all others similarly situated are being indefinitely held hostage by defendant Herman. Escape is impossible.”
Herman, in his email, defended his advocacy efforts, noting that he challenged the fairness of Feinberg’s claims process in 2011. Feinberg, of The Law Offices of Kenneth R. Feinberg in Washington, D.C., defended his Gulf Coast Claims Facility as a “great success.” “The idea that I coerced anybody is preposterous,” he said, noting that in 16 months, he distributed $6.5 billion to about 220,000 individuals and businesses in the Gulf of Mexico. “Now, years later, a very creative, determined, unenlightened plaintiffs lawyer decides to throw allegations around that are simply rejected by the facts.”
Donovan’s suit estimated that lead lawyers would get $3.035 billion in fees. In the complaint, he based that figure on an estimated $2.4 billion in contingency fees, $600 million in common benefit fees, and co-counsel and holdback fees assessed on claims prior to the settlement. He said more than $321 million went to members of the common benefit cost and fee committee and $277 million to other members of the plaintiffs’ steering committee. “I don’t have any idea what any firm earned in individual client contingency fees,” Herman wrote in his email.
In 2012, U.S. District Judge Carl Barbier of the Eastern District of Louisiana capped contingency fees at 25 percent. Four years later, the judge appointed special master John Perry of Perry, Balhoff, Mengis & Burns of Baton Rouge, Louisiana, to review the allocation of $600 million in common benefit fees, paid for by BP.
In 2017, the common benefit cost and fee committee submitted a proposed allocation plan for 122 law firms. Herman and Jim Roy, a partner at Domengeaux Wright Roy & Edwards in Lafayette, Louisiana, who both were co-lead counsel in the multidistrict litigation and co-chairmen of that fee committee, recommended that each of their firms receive more than $87 million. In 2017, Perry recommended approving the fee request, which grew to $700 million when including settlements with Halliburton and Transocean. Barbier adopted the special master’s recommendation. Soon afterward, Donovan filed a motion on behalf of three clients. The motion sought a public record of all compensation paid to the plaintiffs’ steering committee, legal experts, special masters and the settlement claims administrator.