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Ever since the Deepwater Horizon oil spill, BP has tried to push off part of the blame for this tragedy on Transocean, the company that operated the rig.  However, earlier today Transocean wasabsolved from having to pay actual damages for the spill.

A U.S. federal judge on Thursday said BP must uphold a clause in its contract with Transocean Ltd that would shield the Swiss-based driller from compensatory damage claims related to the 2010 disaster.

That means London-based BP may have to shoulder alone compensation claims brought by the likes of fishermen and hoteliers whose livelihoods were affected by largest offshore oil spill in U.S. history.

Transocean isn't quite out of the woods yet.  The judge ruled that Transocean is potentially still on the hook for punitive damages and/or civil penalties.  Still, this ruling means BP could potentially have to shoulder the entire cleanup bill even if Transocean is found to have acted with gross negligence--which at present is at over $42 billion.

Apparently the market thinks that this decision is a win for Transocean, if it can be called that.  Analysts for UBS say the ruling significantly diminishes Transocean's liability.  Transocean stock rose in the wake of the ruling, while BP's stock fell.

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Comment Preferences

  •  If the truth is that three LLC entities (1+ / 0-)
    Recommended by:

    BP, Transocean, and Halliburton were all knowing parties in a conspiracy to conceal negligence, then what?

    Does it all fall in one place? If so, which place? The party that was guilty of the cement fail?

    •  My opinion is that if LLCs want to form (2+ / 0-)
      Recommended by:
      Sychotic1, codairem

      a joint partnership that they should be jointly and severally liable if it fails catastrophically.

      When corporations, recognized as persons, are allowed to own and collaborate with other corporations, recognized in whole or in part, who have done torts without upward guilt, we are getting to the point that artificial slaves can take the blame without penalty to the collective deliberate owners.

      Conspiracy is a dangerous tool.

      •  Where's the partnership? (0+ / 0-)

        There were three companies actually in a partnership here, and they weren't those three.

        Lease holders:

        Mitsui & Co (USA)

        ...the other two partners settled with BP for their stake in liability, with BP agreeing to assume it in exchange for fix payments from them.

        Halliburton and Transocean are just contractors that BP hired.

  •  Here's the Opinion and Order (0+ / 0-)

    Link. Conclusion:

    In summary, the Court finds as follows:

    1.Subject to the provisions below, BP is required to indemnify Transocean for compensatory damages asserted by third parties against Transocean related topollution that did not originate on or above the surface of the water, even if the claimis the result of Transocean’s strict liability (including OPA and unseaworthiness), negligence, or gross negligence. The Court does not express an opinion as to whether Transocean will be held strictly liable, negligent, or grossly negligent.

    2.BP does not owe Transocean indemnity to the extent Transocean is held liable for punitive damages. The Court does not express an opinion as to whether Transocean will be liable for punitive damages.

    3.BP does not owe Transocean indemnity to the extent Transocean is held liable for civil penalties under Section 311(b)(7) of the CWA, 33 U.S.C. § 1321(b)(7). The Court does not express an opinion as to whether Transocean will be liable for such penalties.

    4.The Court defers ruling on BP’s arguments that Transocean breached the Drilling Contract or committed an act that materially increased BP’s risk or prejudiced its rights.

    5.BP’s duty to defend does not include the expenses Transocean has incurred or will incur in proving its right to indemnity.

    6.BP is not obligated to fund Transocean’s defense against third party claims at this time.

    A thought: can it really be said that the ruling affected stock prices?  Wouldn't savvy traders have talked to lawyers, predicted this outcome based on the contract, and baked this ruling into the value of the companies?
  •  Seems to me BP got outsmarted (0+ / 0-)

    that sounds like a nice little clause that the attorneys for Transocean inserted into their contracts..

    I think in terms of smarts it goes:

    1. Transocean
    2. Haliburton
    3. BP

    yep...a poker game amongst these three is not where BP wants to be.

    •  It's not nearly that simple (1+ / 0-)
      Recommended by:

      From p 15 (I'm skimming):

      As to the argument that contractual indemnity for gross negligence contravenes public policy, it is significant that the Drilling Contract allocated risk to both Transocean and BP, not just BP. For example, Transocean admits that it bears liability for the deaths and injuries to its crew members and the loss of its equipment (namely, the DEEPWATER HORIZON) under Articles 21.1and 22.2. (Transocean’s Reply Br. to BP p.7, Rec. Doc. 4867 at 8). With regards to pollution, Transocean assumed responsibility for pollution originating at or above the water’s surface in Article 24.1. Given these risk allocations, a grossly negligent act by Transocean could result in liability to Transocean as easily as it could have resulted in liability to BP. In other words, the reciprocal nature of these indemnity clauses arguably created an incentive for Transocean to avoid grossly negligent conduct, or at least did not encourage Transocean to act in a grossly negligent manner.

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