Keogh Cox Obtains Appellate Victory in Denial of Class Certification

On April 20, 2010, BP's Deepwater Horizon rig exploded at a cost of eleven lives. What followed was the largest accidental marine oil spill in history. In the aftermath, BP looked for a solution, ostensibly to cap its exposure and address a swirling PR disaster. BP began to actively negotiate a settlement.

On March 2, 2012, BP agreed to a detailed settlement which set forth specific criteria for recovery under the Fund created by the Agreement. In August of that year, BP asked U.S. District Judge Carl Barbier to approve the settlement. The Agreement was approved.

Despite championing the settlement, BP later filed a lawsuit seeking to set aside the settlement, unless it was interpreted as suggested by BP. BP's challenges were rejected by the Federal District Court. Thereafter, the New Orleans-based Fifth Circuit Court of Appeals affirmed that ruling in a 2-to-1 decision. BP then applied for a Petition of Writ for Certiorari with the United States Supreme Court in a final challenge to the settlement.

About BP's legal maneuvers, Samuel Issacharoff, a New York University Law Professor, said the following: "This case is about a contract that BP signed that it now wishes it hadn't."

One of BP's primary complaints was that, in effect, the settlement could be interpreted to provide recovery for individuals or businesses who could not show a direct link between a financial downturn and the spill. In response, it was stated that the settlement was crafted to use objective measures to gauge whether losses are recoverable.

On December 8, 2014, the U.S. Supreme Court rejected BP's Petition for Writ of Certiorari. As such, the settlement agreement first proposed by BP will remain in place. No higher court remains.

Under the Agreement, potential claimants have 6 months from the Supreme Court's Petition denial to file claims.

A Louisiana litigant has a right to appeal a judgment rendered against it at trial and has two options to appeal the judgment. The litigant can take a suspensive appeal, which suspends the execution of the judgment pending the outcome of the appeal, or it can take a devolutive appeal, which does not. La. C.C.P. art. 2124 provides that when the judgment if for a sum of money, a party seeking a suspensive appeal must post security, or a bond, “equal to the amount of the judgment,” including interest.

What happens when a monetary judgment is cast against an insurer (and its insureds) and the amount of the judgment exceeds the limits of the insurer’s policy? Can the insurer be required to post bond in excess of its policy limits to suspensively appeal the judgment? The Louisiana Supreme Court recently addressed this issue and ruled an insurer is required to post a security bond covering only its policy limits.

In Martinez v. Am. Transp. Grp. Risk Retention Grp., Inc., a jury cast judgment against a transportation group, its driver, and its insurer for damages the plaintiff sustained in a motor vehicle accident. The trial court rendered a judgment in the amount of $2,802,054.66, which was in excess of the $1,000,000 limits of the insurer’s policy. The insurer moved for a suspensive appeal and requested a reduced bond because its insured was no longer in existence and could not post a bond. Nevertheless, the trial court set the appeal bond at $2,802,054.66, plus interest. The insurer posted a bond in the amount of its policy limits plus interest and costs and sought appellate review of the trial court’s appeal bond order.

The Supreme Court observed that the contracts clauses of the federal and state constitutions prohibit the enactment of any law “impairing the obligation of contracts.” Therefore, the Court found that to require an insurer to post a bond for suspensive appeal in excess of its policy limits would render meaningless, and therefore impair, the terms of the insurance contract setting the policy’s limits. Thus, the Martinez court should have set security to allow the insurer to suspensively appeal the portion of the judgment up to its policy limit.

However, the Court refused to reduce the suspensive appeal bond for all the defendants cast in judgment. Instead, the Court ruled the insurer could suspensively appeal the judgment up to the amount of its policy limits, stay execution of that portion of the judgment, and devolutively appeal the remainder of the case for its insureds.

References:

Martinez v. Am. Transp. Grp. Risk Retention Grp., Inc., 2023-01716 (La. 10/25/24) 2024 WL 4579047.

In Madden v. Fairburn, the plaintiff amended her petition to assert a UM claim against an insurer based upon the alleged negligence of a new defendant not named in the original petition. The amended petition asserted a new theory of liability but sought the same recovery under the same UM policy.

The issue presented to the Louisiana Court of Appeal for the First Circuit was whether the original petition interrupted prescription for the claim brought against the UM insurer. Because the insurer did not receive notice in the original petition that it could be liable for damages based upon the new defendant’s fault, the court found prescription could not be interrupted.

Madden was a passenger in a vehicle driven by John Seibert that collided with Steven Ray Fairburn. Madden timely filed suit against Fairburn and Capitol Specialty Insurance Corporation (Capitol Specialty), claiming uninsured motorist (UM) coverage under its policy. The Trial Court later dismissed Madden’s claims against Fairburn. While the appeal of that ruling was pending, and over five years after the accident, Madden amended her petition to allege Seibert was at fault and sought the same UM coverage any damages he caused. Capitol Specialty argued the claim brought against it in the amended petition had prescribed.

At the time of the accident, claims for torts/delictual actions had a one-year prescriptive period that commenced from the date of the injury or damage sustained* Claims to recover damages under a UM policy are subject to a prescription period of two years.^ Madden argued her original claim against Capitol Specialty interrupted prescription because her amended claim arose from the same accident and sought to recover damages under the same UM policy.

La. C.C. art. 3462 states that prescription is interrupted when an obligee (Madden) commences an action against an obligor (Capitol Specialty) in a court of competent jurisdiction and venue. However, in Kling v. Hebert, the Louisiana Supreme Court has clarified that the “essence of interruption of prescription by suit is notice to the defendant of the legal proceedings based on the claim involved.” The Kling judges emphasized that prescription serves to protect defendants from unexpected liability years after an event, particularly when a new legal theory or a different alleged tortfeasor is introduced.

The court also considered Trahan v. Liberty Mutual Insurance Company, which held that a claim against an insurer based on one party’s negligence does not interrupt prescription for a later claim against the same insurer based on another party’s negligence. Because Madden’s original suit was based on Fairburn’s negligence, Capitol Specialty did not receive timely notice that she would later seek UM coverage based on Seibert’s alleged fault. Thus, the appellate court ruled in favor of the insurer, affirming the prescription of the plaintiff’s claims.

References:

Madden v. Fairburn, 2024-0513 (La. App. 1 Cir. 12/27/24), --- So.3d ---, 2024 WL 5232995.

Kling v. Hebert, 23- 00257, p. 4 (La. 1/ 26/24), 378 So. 3d 54.

Trahan v. Liberty Mutual Insurance Company, 314 So. 2d 350 (La. 1975).

*La. C.C. art. 3492. See As of July 1, 2024, delictual actions are subject to a two-year liberative prescriptive period, applying to delictual actions that arose or after the effective date.

^ La. R.S. 9:5629.