Feeding Frenzy

In the months after the Deepwater Horizon oil rig exploded 300 miles off Florida's coast in April 2010, hotel and restaurant owners, fishermen and shopkeepers kept a grim vigil, waiting to see whether the millions of gallons of spilled oil would taint the state's beaches and harm its seafood.

From a distance, thousands of others watched too, the Canadian, European and American tourists and business travelers who had hoped to rent the Tampa Bay, Sarasota or Naples hotel rooms, dine at the restaurants, shop at the stores, and meet in the conference halls along the Gulf of Mexico. Instead, many traveled elsewhere.

Although no flocks of oil-soaked pelicans washed up on Florida's shores, and the 200 million spilled gallons did not blacken beaches as so many feared, the coastal communities and their businesses were nonetheless damaged by the BP oil spill, through economic losses — the visitors who never came. That is the contention of cities and counties, and thousands of business owners whose revenues fell in the months following the disaster.

A number of Florida resorts and other businesses that sought early compensation for their losses — the plunge in expected revenue — found their requests denied, although London-based BP had set up a $20 billion fund for victims. But the firms couldn't prove their revenue declines were related to the spill.

In December, U.S. District Judge Carl Barbier in New Orleans gave final approval to a $7.8 billion partial class-action settlement providing for economic and property damages from the spill, including those in Florida. BP separately agreed to pay $4.5 billion in penalties and pleaded guilty to felony misconduct in the disaster, which cost 11 lives. Barbier now is presiding over a trial to determine whether BP was grossly negligent, with another $17 billion in potential penalties at stake.

A new, streamlined process recognizes losses farther from the explosion site, and many Florida companies are receiving settlements that earlier were denied. With the new guidelines, thousands of firms may qualify if they fall within designated coastal zones and show a 2010 drop in revenue after the disaster, with a rebound in 2011. But the window to collect damages from the largest oil spill in U.S. history is closing — economic and property damage claims must be filed by April 2014.

With billions of dollars at stake, and the new, more generous settlement process opening the gates to countless additional claimants, Florida's west coast is swarming with attorneys, many from out of state. The lawyers are snapping up claimants, including entrepreneurs who previously had no idea they were eligible for settlements. Just a handful of industries are excluded, such as financial investors, property developers, insurance firms and those licensed to sell BP products. With their TV ad campaigns, mass mailings and boiler room phone tactics, attorneys from Texas and other states are rankling local law firms who are bound by Florida Bar Association restrictions on advertising and soliciting clients. The out-of-towners are poaching clients, the attorneys protest.

“I've never seen such a feeding frenzy on potential claimants like this in my life,” says Sarasota attorney William Robertson of the Kirk Pinkerton law firm. Lawyers, accountants and even claims-handlers with no legal or financial expertise are signing up clients, he says. “They're everywhere. This is one of the most competitive advertising campaigns I've ever seen. I've been practicing since 1983.” Some newcomers have seemingly limitless ad budgets, he says. “They've already picked off a lot of the top clients locally.”

Robertson echoes the frustration of many Florida colleagues. “I've talked to dozens and dozens of clients, people I've known for years, and they said, 'Gosh I've already hired a firm out of Houston.'” About 30% of the long-term clients he has spoken with recently have signed with out-of-state firms. Still, Robertson represents more than 150 oil spill clients in various stages of the claims process, who are seeking settlements of $25,000 to $5 million. He declines to say how many claims have been settled.

Although he estimates the total number of potential claimants at 100,000, others say the number could be many times that number. The settlement process does not require representation by an attorney. “Every Tom, Dick, and Harry” can file, Robertson says. “My wife was having her hair done in a salon off Siesta Key, and some guy in flip flops was walking around handing out flyers.”

Navigating the process
Some gulf companies formed because of the spill. Larry Golden, a former direct mail franchise owner and one of five partners in Tampa-based Gulf Recovery Solutions, says the firm helps business owners navigate the BP process. The owners include a videographer, franchise attorney, business consultant, and a former NFL football player.

The company consults on more than 100 BP cases, including a claim by a Land O' Lakes custom homebuilder who is the father of a partner. Twice rejected, the claim appears on track for a payment Golden describes as “substantial,” though less than $1 million. “He is still going back and forth with the claims administrator. Our number is within approximately 2% of what they've come back with,” says Golden, whose company gets a contingency fee.

His firm is involved with claims collectively valued at $10 million, he says. “We have a large pipeline that is pending,” but he says he has not yet received any client settlement payouts.

Danny Jackson, principal of Cherry Bekaert CPAs in Tampa, uses Gulf Coast Recovery Solutions to handle oil spill claims. “They put it into an online filing system, in which they can track it directly through BP,” he says. Jackson, who represented the TradeWinds Resort in St. Petersburg in an earlier round of claims, has 450 oil spill claimants, and is awaiting settlement decisions. TradeWinds already got the settlement it wanted, he says.

As of Feb. 10, in the third phase of payouts, the Deepwater Horizon Claims Center had issued 26,608 eligibility notices with payment offers totaling more than $2 billion throughout the gulf states. The center had also completed more than $1.43 billion in payments on 19,530 claims. Among the third-party claims paid out, according to charts from the Deepwater Horizon claims center, the biggest payout category has been legal fees, by a wide margin.

For BP, caught in a web of suits and settlements, the disaster's price is high. Through 2012, BP's cumulative net charge for the Deepwater Horizon incident was $42 billion, according to a February company report.

A big bonus
The claims attract lawyers because BP has already agreed to pay qualifying claims, and attorney fees can amount to 25% of settlements. Also, in this third wave of claims, eligibility is based on geographic and financial requirements, rather than the arduous legal process of proving damage causation.

“From a lawyer's standpoint, this is a crazy situation, because business owners don't have to show any relation between their losses and the spill,” says Tampa attorney Kevin McLean. “They can now recover if they have the appropriate losses, and it doesn't matter if it's related to the spill or not.”

A business needs to fall within certain geographic zones and show that revenues dropped by a certain percentage between May and December 2010 from previous years, then rose by a certain percentage in 2011, says McLean. “Based on revenues alone, if they can do that, BP's going to write them a check,” he says. “When I first heard that, my jaw dropped. I said, 'Wow.' It took me several days of research before I realized that that was in fact true.”

Establishing damage causation is mainly an accounting exercise, agrees St. Petersburg attorney Vincent LoBue. It requires analyzing profit-and-loss statements. The claims process is “very fair,” he says.

What sweetens the pot for attorneys and clients alike is an enhancement or multiplier of at least 25% for those who qualify, says McLean. “Let's say you had $100,000 in losses, the check you'd get from BP would be $125,000.” And that's not all. Tourism-related companies are treated even more generously, depending on their zone. A hotel, restaurant or souvenir shop reporting a $100,000 loss in a prime beach location could potentially receive a BP check for $225,000, based on the multiplier, says McLean.

Inland companies aren't excluded from the settlements. McNeal signed up his own officemate, workers compensation attorney George Cappy, whose clients have included hotel maids and other hospitality employees. His income fell during the requisite period, and his revenues make him eligible, Cappy was surprised to learn from McLean.

An attorney for 41 years and former prosecutor for the state attorney's office in Tampa, Cappy has been on his own since 1982. He declined to say the potential settlement amount. “Whatever the figures they come out with, I'm happy with,” he says.

Settlement could come with a hidden cost
A number of Gulf Coast cities and counties have filed claims against BP, asking the oil company to reimburse them for economic damages—lost tax revenue from tourism, conferences, sales and other sources. On Jan. 18, the city of Tampa filed a claim for nearly $60 million, and is now in a 90-day waiting period in which BP can review the claim.

“Our goal is that we would be able to reach a settlement with them without having to file a lawsuit,” says City Attorney James Shimberg. Settlement could come with a hidden cost, however, says Shimberg. “They want local governments to give up any future claims. So, for example, if oil is still out in the gulf, and it ends up resurfacing and causing additional economic damage to this area, they want you to agree to not bring any additional claims.”

Tampa did a lot of due diligence before filing the claim, notes Mayor Bob Buckhorn. “We think we can back up the damages. Our legal team has put a fairly exhaustive study in play that talks about sales tax revenue and reduced bed tax revenue. There's a whole menu of revenues that we feel were impacted by the break.”

Steve Yerrid, the attorney hired to represent the city of Tampa, says businesses and residents should not have to absorb indirect losses from the spill. “We're seeking to shift the burden from the taxpayers,” he says. “We've clearly lost revenue, we've clearly lost taxes. To replace that money, we're looking to BP.”

Yerrid represented the state of Florida on a pro bono basis against BP during former Gov. Charlie Crist's term. He is working for Tampa on a contingency basis, with a 25% cap on the contingent fee, he says.

The spill occurred in April 2010, nearly two years ago. But it took time for BP to establish the claims process, says Yerrid. “We had to calculate with forensic preciseness the amount of damages that were incurred and that likely would be incurred in the very short term future.” Precise estimates deter charges of overreaching or cost inflation, he says.

But there remain many unknowns with regard to damage. Besides the incurred economic damage, communities could face latent environmental damage, says Yerrid. “Not only was a pollutant emitted into the Gulf of Mexico, there was also a lot of dispersant used in the cleanup effort. Much of that, we have good reason to believe, remains in the Gulf of Mexico.”

The University of Florida and other institutions are studying possible consequences for marine life and potentially, human health.