I must admit that I'm new to the world of legal ethics. I don't practice law in the traditional sense. I don't have clients. It never seemed to be the most exciting or important area of law to study. I was wrong.
Late Wednesday, in a strong rebuke to BP and the legal ethics of its embattled hired gun, Ken Feinberg, a federal judge ruled that it was misleading for Feinberg to call himself "neutral" or "independent" of BP in administering BP's $20 billion oil spill victim compensation fund. The judge ordered Feinberg and all of his representatives to clearly disclose his role as "acting for and on behalf of BP in fulfilling its statutory obligations... under the Oil Pollution Act of 1990."
Moreover, said the judge, he must "[a]dvise claimants that the 'pro bono' attorneys and 'community representatives' retained to assist GCCF claimants are being compensated directly or indirectly by BP." And he has ordered further briefing on another key issue, that is, the liability release. Feinberg is requiring that families sign away all legal rights not only for themselves, but for their spouse, their children, their parents and all of their heirs even though no one knows today what losses they may suffer in the future due to the BP disaster. This sweeping release, which assigns victims' claims to BP, benefits only one actor: BP -- the company that pays Mr. Feinberg's salary.
People aren't dumb. The families and businesses in the Gulf have been screaming about Feinberg for months, with week after week of angry meetings and public petitions to remove him. These efforts grew even more intense since it was disclosed that BP was paying Feinberg's firm, Feinberg Rozen, $850,000 per month, that he has duties of confidentiality and loyalty to BP, that he is required to turn over all claims information to BP, and that BP has a central role in hiring and firing everyone Feinberg brings on to help.
This is not an academic discussion. The impact on victims has been very real. Last week it was revealed that Feinberg has issued a final settlement payment to just one of the thousands of people and businesses waiting for checks -- a $10 million check to a BP business partner. Meanwhile, some claimants who submitted hundreds of pages of documentation in support of their claims were told that they didn't submit enough proof and were refused even emergency funds. Others sent in identical claims but only one person received a payment and the other was denied.
What's more, Feinberg has taken a decidedly biased view of the science to BP's benefit, hiding behind "studies" that others believe are flatly untrue and could significantly impact how he views victims' losses. Claimants have been warned by Mr. Feinberg not to seek lawyers, to settle now before they have any idea what they may need to survive, and to not join important, ongoing litigation. (The judge has now ordered a stop to this behavior by Feinberg.) Because of the type of misconduct by the companies that caused the spill (there are several companies besides BP that are responsible), there is a strong possibility that the litigation (filed in federal court in New Orleans) might find them liable for far more than $20 billion. This means far more compensation could be available to families and business through this litigation than through the claims process, tremendously benefiting Gulf Coast residents. (Claimants can sign up for this lawsuit here.)
You don't have to be an expert in legal ethics to know that something was very wrong here. In fact, the Center for Justice Democracy tried to point this out many times. (See here, here, here.) Yet last December, Feinberg hired NYU law professor Stephen Gillers -- paid $950 an hour by BP -- to issue a ethical opinion clearing Feinberg's relationship with BP. In a December 28, 2010, letter, Gillers declared that Mr. Feinberg is neutral, independent and not subject to BP's direction or control. This was clearly inaccurate. The tens of thousands of suffering residents in the Gulf deserved better than this, as repeatedly pointed out by legal ethics pioneer Monroe Freedman. (See here, here, here.)
Clearly, Feinberg and BP have attempted to skirt very real ethical and conflict of interest concerns about this process. Rather than taking the extra step of alleviating these concerns or fixing the problems directly, Mr. Feinberg has simply dismissed them, hiding behind the incorrect written views of a paid expert, and fighting victims at every turn.
Finally, the residents and businesses in the Gulf may now have caught a break. Hopefully, things are about to change for the better for them, at last.