UPDATE: Following a meeting with administration officials this morning, BP announced that it would accept the $20 billion escrow. According to the New York Times, the “preliminary terms would give BP several years to deposit the full amount into the fund so it could better manage cash flow, maintain its financial viability and not scare off investors.”
President Obama got tough on the British oil giant turned Gulf spill villain BP last night in a nationally televised primetime speech detailing the administration’s plan to contain the spill and prevent similar disasters in the future. Behind the scenes, the Obama administration has been making legal postures, which some say overstep its authority. But BP is already facing a set of tough legal challenges, federal and otherwise, and might not have the political strength to take the administration to court.
On Monday, the president backed a letter co-signed by 54 Senators asking BP to “establish a special account of $20 billion, administered by an independent trustee, to be used for payment of economic damages and clean-up costs.” In addition to helping victims of the spill, the letter said that it would be a first step for BP to show that it’s serious about taking responsibility for the spill.
The Obama administration has taken this request even further, saying it will legally demand that BP set up the $20 billion escrow account. “We want to make sure that money is escrowed for the legitimate claims that are going to be made and are being made by businesses down in the Gulf, people who have been damaged by this,” said Obama advisor David Axelrod on Meet the Press. “We believe that BP has the resources to meet the claims. And we’re going to make sure that they do.”
Legal experts, including University of Pennsylvania law professor David Zaring, who writes for The Conglomerate blog, have said that the Obama administration does not have the legal authority to force BP to establish the escrow account. After all, federal law has set a liability cap for the company at $75 million (not including non-government lawsuits). But White House Deputy Press Secretary Bill Burton has brushed these concerns aside. “We’re confident that we have the legal authority to compel BP to make sure that the folks that they have affected here are made whole,” he said. “The signs from BP aren’t that there is going to be a protracted legal battle over this or anything like that.”
He’s right. BP will mostly likely appease the administration and set aside the $20 billion. But that’s not necessarily because they are legally bound to do so. To this point, the Obama administration has been generally supportive of BP, at least on a policy level. So BP would be foolish to risk turning the US government into an enemy and appearing even more villainous to the public by refusing to help oil spill victims. Then again, anything can happen, and foolish hasn’t stopped BP before.
Photo credit: USCGD8
Andy Gillin received his Bachelor’s Degree from the University of California at Berkeley and his law degree from the University of Chicago. He is the managing partner of GJEL Accident Attorneys and has written and lectured in the field of plaintiffs’ personal injury law for numerous organizations. Andy is a highly recognized wrongful death lawyer in California.