Issacharoff and Rave: BP Settlement a win-win

Samuel Issacharoff and Theodore Rave have posted an excellent analysis of the BP settlement.  Comparing the court-supervised Deepwater Horizon Settlement to the (now expired) Gulf Coast Claims Facility, they declare it a win-win.  Plaintiffs in the aggregate got more from the class action settlement than was available under the individualized claims process of BP's Gulf Coast Claims Facility.  The GCCF was a mechanism BP chose to meet the requirements of the Oil Pollution Act  to pay interim claims without prejudice to the ability to later file a lawsuit.  

Issacharoff and Rave, The BP Oil Spill Settlement and the Paradox of Public Litigation, 74 La. L. Rev. 397 (2014) full text at SSRN

Abstract:

The streamlined administrative program that BP set up to pay claims arising out of the Deepwater Horizon Oil spill — the Gulf Coast Claims Facility (GCCF) — promised a significant transaction-cost savings over litigation in the public court system. At least in theory, that savings should have worked to the benefit of BP and claimants alike, freeing up money that would otherwise have gone to lawyers and other litigation costs to fund claimants’ recoveries. But a comparison of the GCCF to the class action settlement that replaced it reveals that the class settlement will result in greater payments to claimants. Paradoxically, the dispute resolution system with the higher built-in transaction costs appears superior. We offer some hypotheses for why this might be the case. Our central claim is that claimants did better under the higher-cost class action settlement because it allowed them to offer the defendant something it valued — a greater degree of finality than the GCCF could ever provide — in exchange for a “peace premium.” And we analyze some of the features of the public system of class action litigation that enable parties to obtain a greater degree of closure than a purely private dispute resolution system like the GCCF, while at the same time providing guarantees of transparency, consistency, and equitable treatment of absentees.