The Deepwater Horizon Oil Spill and its Effects on the Oyster Industry:

How Legal Recovery Can Operate for Restaurants, Oyster Farmers, and Oyster

Harvesters in Louisiana

Exam Numbers 999934 and 894576

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Introduction

The Deepwater Horizon oil spill has had profound effects for millions of people

along the Gulf Coast. While the government has made strong attempts at streamlining a

process for recovery for those harmed, questions still linger: How much can we

recover? Is there sufficient proof of the damage done? Which funds will provide the best

chance of success?

This paper addresses these concerns for two groups of injured parties:

restaurants adversely impacted by the spill, and oyster farmers and harvesters whose

crops have been severely diminished or completely destroyed. We will address the

harms to each industry as well as theories for recovery under both the Oil Pollution Act

of 1990 and through the BP Fund currently administered by Ken Feinberg. Our analysis

will sort through the various legal obstacles to recovery, and provide a basic framework

for those seeking compensation for damages stemming from the Deepwater Horizon oil

spill.

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Impacts on Restaurants

Gulf State restaurants represent a $77 billion industry and employ more than 2.2

million people.1 The industry relies on the oysters and other Gulf seafood for its

livelihood, and that very livelihood has been severely threatened by the oil spilling from

the damaged Macondo wellhead. One study estimates that over the next three years,

the five Gulf States will experience losses of about $22.7 billion.2

Although BP effectively capped the Macondo well approximately nine weeks ago

at the time of this writing, the spill’s long-term effects will undoubtedly the have a future

impact on local businesses, including declining seafood populations and continued loss

of tourism. As Ralph Brennan explained, “[t]he long-term consequences and impact on

tourism of a damaged brand are severe. Decreased visits lead to job loss, decreased

tax revenue, and more…For many on the coast, the economic impact is devastating,

but for others inland, it does not have to be.”3 These future ambiguities beg the

question: How can individuals or businesses within the restaurant industry recover

damages?

The Basis of Recovery: OPA 90

1 Carolyn Surh, Will the Oil Spill Affect Your Menu?, QSRMagazine.com (June 2010), http://www.qsrmagazine.com/articles/exclusives/0610/oil_spill-1.phtml. 2 Jill Schensul, Jill Schensul on the Gulf Oil Spill’s Damage to Tourism, NorthJersey.com (Aug. 8, 2010), http://www.northjersey.com/travel/100210189_Tourism_damages_are_wider_than_the_oil_spill.html. 3 The BP Oil Spill and Gulf Coast Tourism: Assessing the Impact: Hearing Before S.Comm. on Commerce, Trade and Consumer Prot. 111th Cong. 45 (2010) (statement of Ralph Brennan, President, Ralph Brennan Restaurant Group).

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Federal law provides an avenue for recovery under the Oil Pollution Act of 1990

(OPA 90).4 Congress passed the OPA 90 following the 1989 Exxon Valdez spill off the

coast of Alaska, a spill that resulted in the release of approximately 10 million gallons of

Trans-Alaska Pipeline North Slope crude oil into the Prince William Sound.5 Before the

OPA 90, the United States had several statutes designed to combat and clean up oil

pollution incidents.6 However, these acts are only applicable in limited situations and are

generally considered ineffective in controlling oil pollution and providing compensation

to those damaged by such incidents.7

Accordingly, the OPA 90 significantly altered the statutory regime governing oil

pollution, abrogating many traditional admiralty principles as a means to create

resources available to pay pollution claims.8 As Judge Clement for the District Court for

the Eastern District of Louisiana stated:

The Court finds that OPA establishes an entirely new, federal cause of action for oil spills….Although traditional maritime remedies for oil spills pre-date OPA, OPA creates a new, comprehensive federal scheme for the recovery of oil spill cleanup costs and the compensation of those injured by such oil spills. (Citation omitted). This new scheme includes new remedies, which, in many respects, preempt traditional maritime remedies.9

4 Oil Pollution Act of 1990, 33 U.S.C. §§ 2701-2762 (2006). 5 Bruce B. Weyhrauch, Oil Spill Litigation: Private Party Lawsuits and Limitations, 27 Land & Water L. Rev. 363, 366 (1992). The Exxon Valdez oil spill became the largest tanker oil spill in the United States waters at that time. The federal government filed criminal charges against the Exxon defendants. Additionally, thousands of plaintiffs filed hundreds of lawsuits against Exxon defendants seeking damages. Id. at 366-67. 6 These statutes included the Rivers and Harbors Act of 1899, the Oil Pollution Act of 1924, the Clean Waters Restoration Act of 1966, the Water Quality Improvement Act of 1970, and the Federal Water Pollution Control Act Amendments of 1972, later known as the Clean Water Act. Id. at 378-384. 7 Id. at 366. 8 Matthew P. Harrington, Necessary and Proper, but Still Unconstitutional: The Oil Pollution Act’s Delegation of Admiralty Power to the States, 48 Case W. Res. L. Rev. 1, 1 (1997). 9 Tanguis v. M/V Westchester, 153 F.Supp.2d 859, 867 (E.D. La. 2001).

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Congress designed the OPA 90 to prevent future spills and mitigate spill damage by

mandating that oil companies develop and maintain oil spill prevention plans and clean

up technology and equipment.10 The Act sought to balance the need to make industries

benefiting from the transport of oil internalize the costs of pollution, with the idea that

responsible vessel owners should not be driven from the industry with crippling damage

rewards.11 The OPA 90 also broadened the rights and remedies afforded to those

injured by pollution damage and streamlined the operation and construction

requirements applicable for vessels transporting oil in American waters.12

Moreover, the OPA 90 imposes strict liability on those responsible for oil spills.13

Under the OPA, a vessel or facility discharging14 oil onto navigable waters or adjoining

shorelines is strictly liable for damages, including economic losses,15 although the Act

caps the responsible party’s liability at $75 million.16 The OPA 90 specifically authorizes

a strict liability cause of action for public and private parties seeking to recover damages

related to a spill. Claims for recovery under the OPA 90 must first be presented to the

responsible party before a claimant can evoke the judicial process.17 Recovery can

include damage to natural resources; damages to real and personal property; damage

10 Harrington, supra note 8, at 1. 11 Id. 12 Id. 13 Id. 14 “Discharge” means any emission of oil and includes both intentional and unintentional oil spills. Weyhrauch, surpa note 5, at 382. 15 Harvey M. Sheldon, A Prospect for Claims Arising from the Gulf Coast Oil Spill, 2010 Aspatore Special Rep. 11 (2010). 16 33 U.S.C. § 2704(a)(3). 17 See id. § 2713(a). A claimant must wait ninety days during which the responsible party may deny liability or fail to settle the claim before bringing suit. A lawsuit can be dismissed if the claimant fails to comply with these mandates. See Boca Ciega Hotel Inc. v. Bouchard Transp. Co., 51 F.3d 235, 240 (11th Cir. 1995).

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on behalf of claimants that use such natural resources that have been injured,

destroyed or lost; lost taxes royalties, fees, rents, or profits; impairment of earning

capacity; and damage due to the increased cost of public services.18

The OPA 90 also established the Oil Spill Liability Fund (Fund) within the

Treasury of the United States designed to ensure adequate compensation for those

unable to recover the costs of cleanup or other damage from the responsible party.19

Any individual may file damage claims against the Fund,20 but preference is given to

private persons residing or doing business primarily in the area affected by the oil spill.21

However, the Fund is not a claimant’s primary source of recovery; all claims for

damages must first be presented to the responsible party before filing a claim with the

Fund.22 Only after a direct claim is denied or is not settled by the responsible party

within ninety days, can the claim then be made against the Fund.23

OPA 90, Deepwater Horizon Spill, and the BP Fund

In regard to the Deepwater Horizon spill, the U.S. Coast Guard has officially

designated BP Exploration & Production Inc. and Transocean Holding Inc. as

responsible parties.24 This means that BP is required to establish and administer a

claims process for affected individuals and businesses under the OPA 90. However, as

previously noted, BP’s liability is capped at $75 million. Fortunately, there are three

18 Id. See also Sekco Energy Inc. v. M/V Margaret Chouest, 820 F. Supp. 1008, 1014 (E.D. La. 1993). 19 See 26 U.S.C. § 9509 (2006). 20 Id. § 9509(e)(1). 21 33 U.S.C § 2712(k). 22 Stephen Gidiere, Mike Freeman & Mary Samuels, The Coming Wave of Gulf Coast Oil Spill Litigation, 71 Ala. Law. 374, 375 (2010). 23 33 U.S.C. § 2713(c). 24 Gidiere et al., supra note 22, at 376; see 33 U.S.C. § 2713(a).

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exceptions to the liability cap. First, a responsible party cannot limit its liability under the

OPA 90 if the oil spill was proximately caused by gross negligence or willful misconduct

by the responsible party, its agent, employee, or person acting pursuant to a contract

with the responsible party.25 Second, if the spill was caused by one of those parties

violating a federal safety, construction, or operation regulation, the responsible party

cannot limit its liability.26 Finally, if the responsible party did not inform the president of

the Untied States of the discharge, and knew or should have known that such a

possibility existed its liability cannot be limited under the statute.27

Even if BP could successfully cap its liability at the $75 million maximum under

the OPA 90, fear that the company will skirt its full liability should be alleviated by the

creation of BP’s $20 billion compensation fund (BP Fund).28 On June 16, 2010, BP

announced the creation of its supplemental fund as a means “to provide a faster and

more fair way to pay damage claims for individuals and businesses harmed by the Gulf

Oil Spill.”29 The BP Fund “will not be controlled by either BP or by the government.”30

25 33 U.S.C. § 2704(c)(1)(A). The Federal government has launched a criminal investigation into the BP oil spill, making clear the fact that alleged gross negligence will be an issue in resulting BP litigation. Scott Summy, The Legal Challenges and Ramifications of the Gulf Oil Spill, 2010 Aspatore Special Rep. 11 (West 2010). 26 33 U.S.C. § 2704(c)(1)(A). 27 Id. § 2704(c)(1)(A). 28 BP has even agreed to add additionally money to the fund if compensation costs exceed $20 billion. Kristen Choo, The Price of Oil: Lawyers See Both Promise and Problems in the $20 Billion Gulf Coast Compensation Fund, A.B.A. J., Aug. 2010, at 36. 29 BP Claims: About the $20 Billion Claims Fund (Nov. 3, 2010), http://www.thebpclaimsfund.com/. 30 President Barack Obama, Statement After Meeting with BP Executives, (June 16, 2010), http://www.whitehouse.gov/the-press-office/statement-president-after-meeting-with-bp-executives.

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Instead, “It will be put in an escrow account administered by an impartial, independent

third party,”31 the appointed Kenneth Feinberg of Washington, D.C.32

Both BP and President Obama assigned Feinberg the task of handling every

claim made by individuals and businesses against the BP fund “as quickly, as fairly and

as transparently as possible.” As administrator of the BP Fund, Feinberg created the

Gulf Coast Claims Facility (GCCF), an independent claims facility, designed to process

all claims for damages as a result of the Deepwater Horizon oil spill, as well as all

claims previously filed directly with BP.33 “The goal of this program,” Fienberg explains,

“is to minimize the legal technicalities and maximize an efficient, swift payment.”34

To achieve this lofty goal, President Obama and BP empowered Feinberg to

decide what standards to apply in disbursing money to claimant. Feinberg states that he

will offer oil spill victims a sum equal to or better than the compensation a protracted

legal battle with BP would yield by relying on precedents set by state and federal law.35

However, various Gulf States interpret the doctrine of proximate cause differently, and,

as a result, the standards to determine which claims receive damages via the GCCF

rely on Feinberg’s interpretation of the legal doctrine of proximate cause.36

31 Id. 32 Choo, supra note 28, at 1. 33 The Gulf Coast Claims Facility, http://www.gulfcoastclaimsfacility.com (last visited Nov. 7, 2010). 34 Choo, supra note 28, at 40. 35 Andrew Restuccia, Feinberg Takes Control of Spill Compensation Fund, Dismisses Criticisms from McCollum, Fla. Indep. (Aug. 23, 2010), available at http://floridaindependent.com/6321/feinberg-takes-control-of-spill-compensation-fund-dismisses-criticisms-from-mccollum. 36 Id. The doctrine of proximate cause is not applied uniformly across various Gulf States. Id.

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Unfortunately, Feinberg has been vague with regards this issue. During a

conference call with reporters on August 22, 2010, Feinberg acknowledged that

determining how to take into account a claimant’s geographic proximity would pose a

significant challenge.37 He noted, however, that proximity is just one of three factors he

will consider when evaluating claims.38 In addition to geographic proximity, a claimant’s

dependence on the resources in the Gulf, and how hard hit the industry the claimant

works in, are also considered during the approval process.39

Recovery Under OPA 90 and the BP Fund

Thus the question remains, how can individuals or businesses within the

restaurant industry can even recover under the OPA 90 or the BP Fund? The OPA 90

does not provide much guidance if it is used as a precedent for determining legitimate

claims of indirect losses. The OPA 90 “doesn’t say ‘proximately caused by,” explains

Mark Davies, director of the Tulane Institute on Water Resources Law and Policy, “it

says ‘due to…and due is a slippery phrase.”40 As a result, the statute’s silence on the

issue of indirect losses leaves the question of how far the line will be drawn up to the

courts.41

Aggrieved parties do have a handle within the OPA if they can prove the incident

was caused by gross negligence, willful misconduct, or in violation of an applicable

federal safety, construction or operating regulation.42 The available evidence regarding

BP’s actions prior to the oil spill strongly suggest that, at minimum, gross negligence

37 Restuccia, supra note 35. 38 Id. 39 Id. 40 Choo, supra note 28, at 39. 41 Id. 42 See 33 U.S.C. § 2704(c)(1).

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was involved.43 The CEO of Anadarko Petroleum Corporation, a part owner of the

leaking well spoke to BP’s negligence saying, “[t]he mounting evidence clearly

demonstrates that this tragedy was preventable and the direct result of BP’s reckless

decisions and actions.”44 Accordingly, class actions within the restaurant industry are

asserting such evidence in their prayers for relief.45 Again, however, if the aggrieved

parties cannot prove BP’s gross negligence and the like, under the OPA 90 a party’s

removal cost damages46 are limited portion of the BP’s $75 million cap.47 Therefore, it is

important for a party to successfully argue one the OPA 90’s three liability cap

exceptions because the economic damages flowing from the Gulf Coast Oil Spill will

surely number in the billions and the OPA 90’s $75 million cap on damages will likely be

exhausted.

Due to difficulties and limitations associated with OPA 90 litigation, Louisiana

Restaurant Association (LRA) president Jim Funk encourages LRA members to seek

43 Attorney Scott Summy of Baron & Budd PC summarizes BP’s actions leading up to the spill as follows: “BP pressured the Transocean crew to work faster. When the well was to be plugged, BP wanted to drain the heaving drilling fluid from the well before the last concrete plug was in place, which risked pressure increases in the pipe for the sake of expediting operations and saving money. The BOP pressure test, which indicated the pressure was not too high, were unreliable because of the damage to the BOP, which allowed pressure to escape during the test…Although much remains to be discovered about the cause and the response to the blowout, fault seems to be in no short supply. Summy, supra note 25. 44 Gidiere et al., supra note 22, at 3. 45 See e.g., Complaint, Floyd v. British Petroleum, No. 2:10CV03116, 2010 WL 3973514 (E.D. La. Sept. 21, 2010). This restaurant class action suit asserts BP acts and/or admissions constitute gross negligence and the resulting oil spill and contamination of the Gulf seafood have caused and will continue to cause loss of livelihood and loss of income. 46 Removal costs are “the costs of removal that are incurred after a discharge of oil has occurred or, in any case in which there is a substantial threat of a discharge of oil, the costs to prevent, minimize, or mitigate oil pollution from such an incident.” 33 U.S.C. 2701(31). 47 33 U.S.C. § 2704(a)(3).

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remedies through the GCCF.48 “At this time we are not going the litigation route,” said

Funk.49 “We are encouraging our members to complete the claims process first and see

what they recover before considering a lawsuit where attorneys could get 30 to 40

percent of the award.”50 Furthermore, claims deemed ineligible pursuant to Feinberg’s

standards will probably fail in the judicial system. As Feinberg succinctly stated: “I take

the position, if I don't find you eligible, no court will find you eligible.”51 This means that

the restaurant industry’s individuals and businesses will likely have more success filing

damage claims to the GCCF.

However, damages claims related to the tourism industry will likely prove

problematic.52 Under the GCCF guidelines, restaurants “not directly on the water but

with oil on the beach,” and “restaurants located directly on the water but without oil

appearing on the beach,” must prove their right to use a specific natural resource, which

has been damaged by oil.53 Feinberg attempted to clarify a natural resource right

through a remote shrimp farmer hypothetical.54 He stated, “[i]f you’re a shrimp processor

100 miles from the Gulf and all you do is process Gulf shrimp and you can’t process

48 Gina Girardot Melton, Should You Sue BP?, Restaurant Hospitality (Sept. 10, 2010, 4:33 PM), http://restaurant-hospitality.com/news/bp-oilspill-0910. 49 Id. 50 Id. 51 Harry R. Weber, Chief of Gulf Oil Spill Damage Claims Says It was His Idea to Bar Recipients from Suing BP, Hous. Chron., August 22, 2010, at B1, available at 2010 WLNR 16814690. 52 Id. 53 Potential Claimant Recovery for Lost Profits and Economic Damages Resulting from the Gulf Oil Spill Matrix, MyFloridaCFO.com, http://www.myfloridacfo.com/OilSpill/docs/OilSpillMatrix091410.pdf (last visited Nov. 6, 2010). See Gulf Coast Claims Facility: Draft Protocol 1-2 (July 9, 2010), available at http://bpoilspill.us/wp-content/uploads/2010/06/Draft-Claims-Protocol-7-9-10.pdf. 54 Restuccia, supra note 35.

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Gulf shrimp, you clearly have a claim.”55

But what about restaurants that simply rely on steady supplies of Gulf seafood for

their livelihood? The Gulf Region accounts for approximately one-fifth of the total U.S.

commercial seafood production, supplying sixty-nine percent of shrimp, seventy percent

of oysters, and ninety percent of crawfish produced in the country.56 The Louisiana

shrimp industry alone is worth more that $100 million a year.57 “There will certainly be

cases, it seems to me, where the Feinberg claims process will not pay,” Ed Sherman of

Tulane University Law School posited. “A seafood restaurant in Idaho that didn’t get

Gulf oysters for a period of time faces an uphill battle. I’m sure we’ll see lots of litigation

from groups like that.”58

55 Id. 56 Surh, supra note 1. 57 Shaila Dewan, Questions Linger as Shrimp Season Open in Gulf, N.Y. Times, Aug. 16, 2010, http://www.nytimes.com/2010/08/17/us/17gulf.html. 58 Restuccia, supra note 35.

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History, Levees, and Diversions: An Introduction

Before humans intervened with the natural flow of the Mississippi, the river

flowed through Louisiana carrying valuable nutrients, sediments, and freshwater that

dissipated throughout the State’s marshlands.59 Nutrients helped support the varied

plant life throughout the marshes. Sediments were gradually deposited over time,

creating more and more landmass in the wetlands every year.60 Finally, the freshwater

mixed with saltwater to create the rare salinity level of 5-15 parts per million, a perfect

breeding ground to support the life and reproductive cycle for Louisiana’s now famous

oysters.61

As humans began to interact closely with the Mississippi, all of this changed.

Heavy amounts of nutrients drained off of Midwestern farms using fertilizers, and these

nutrients, as they entered wetlands, allowed plant life to form much more shallow roots

with which to find the nutrients necessary for survival.62 With shallower roots, the plants

stood no chance of surviving the hurricanes and storms that hit the area each year, and

landmass began to disappear.63 Sediment deposits changed, too. For several reasons,

the river began carrying less sediment, thus offering less support to the growth of

59 Avenal v. State, 886 So.2d 1085, 1088 (La. 2004). 60 Id. 61 Id. 62 Mark Schleifstein, Dead Zone as Big as Massachusetts Along Coast of Louisiana and Texas, Scientists Say, Times-Picayune, Aug. 5 2010, available at http://blog.nola.com/2010_gulf_oil_spill/print.html?entry=/2010/08/dead_zone_as_big_as_massachuse.html. 63 Nick C. Howes et al., Hurricane-Induced Failure of Low Salinity Wetlands 1 (David H. Thomas ed., 2010), available at http://www.pnas.org/content/107/32/14014.full.pdf+html.

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landmass.64 To further (and more substantially) aggravate this problem, levees began to

be built along the Mississippi after the flood of 1927.65 These levees prevented the river

from spreading out through the marshlands, cutting of not just sediment, but also the

nutrients once provided by the river. Finally, these levees had the effect of increasing

the salinity of much of the wetlands, because the river could no longer provide the

freshwater required, and consequently, oyster production changed.66

In some areas, less freshwater meant that the right salinity level was achieved,

so that areas previously unable to produce oysters now could.67 In other areas,

however, where oysters had reproduced for generations, the animals died off.68 This

was about to be reversed, however, as planning for freshwater diversions began.

Because of land loss and changes in oyster and wildlife populations, planning for the

Caernarvon freshwater diversion began in the 1980s, and in 1991 work on the project

was complete.69 The diversion pushed freshwater from the river into the wetlands

surrounding the levees, and re-altered the balance of salinities and shifted, again,

where oysters could survive.

How Oyster Farming and Oyster Harvesting Work

The State of Louisiana owns all water bottoms “bordering on or connecting with

the Gulf of Mexico within the territory or jurisdiction of the State,” and the State may not

64 Mississippi River Anatomy, America’s Wetlands Resource Center, http://www.americaswetlandresources.com/background_facts/detailedstory/MississippiRiverAnatomy.html (last visited Nov. 9, 2010). 65 Avenal v. State, 886 So.2d 1085, 1088 (La. 2004). 66 Id. 67 Id. at 1090. 68 Id. 69 Id. at 1090-91.

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alienate these water bottoms.70 Furthermore, the state owns “all oysters and other

shellfish and parts thereof grown [on the State's water bottoms], either naturally or

cultivated, and all oysters in the shells after they are caught and taken

therefrom...except as provided in R.S. 56.4.”71 To farm oysters, a lease must be

purchased from the State,72 and a lessee pays the state two dollars per acre for plots up

to 2500 acres.73 All leases begin on the date signed and last for fifteen years.74 Finally,

La. R.S. 56:423 delineates the scope of the property rights for oyster lessees:

A. A lessee shall enjoy the exclusive use of the water bottoms leased and of all oysters and cultch grown or placed thereon, subject to the restrictions and regulations of this subpart. B. (1) A lessee of oyster beds or grounds who has obtained, recorded and marked his lease in compliance with the law shall have the right to maintain an action for damages against any person, partnership, corporation or other entity causing wrongful or negligent injury or damage to the beds or grounds under lease to such lessee.

* * * (3) Any action for damages under this Section shall be brought within one year of the occurrence of the wrongful or negligent act, or within one year of the date of discovery of such act, whichever last occurs.75

All leases now existing contain two very important “hold harmless” clauses, which

serve to indemnify the State against lawsuits from oyster farmers damaged by influxes

of freshwater from diversions. The Coastal Wetlands Restoration Advisory Clause

states:

70 La. Rev. Stat. Ann § 56:3 (2010); LA. Const. art. VII, § 14, art. IX, § 3 (2004). 71 Id. § 56:3. 72 Id. § 41:1225. 73 Id. §§ 56:423(A), 56:432. 74 Id. § 56: 428. 75 Avenal v. State, 886 So.2d 1085, 1096 (La. 2004) (citing La. Rev. Stat. Ann. § 56:423).

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[T]he State as Lessor hereby conveys to Lessee a limited interest in the water bottom which is described in this lease, subject to the conditions that: . . . (3) the State is only issuing this lease based upon the mutual understanding of both the State and Lessee that Lessee's property interest conveyed by this lease shall not include any right whatsoever to make claims against the State as a result of freshwater diversion or any other coastal restoration projects provided that, the State and the United States shall remain responsible for their own (1) acts or omissions which are not reasonably related to the legitimate governmental objective for which the policy-making or discretionary power of the State and/or the United States exists; or (2) acts or omissions which constitute criminal, fraudulent, malicious, outrageous, reckless, or flagrant misconduct.76

The Indemnity Clause in the lease states:

Lessee further acknowledges that Lessee has no intent to pursue any claims for damages against the State of Louisiana and/or the Wildlife and Fisheries Commission and/or the State's departments and agencies. . . Further, in consideration of the issuance of this lease, Lessee shall assume all liability and risk of loss, and agrees that this lease is subservient to all past, present or future coastal restoration projects as described above. Damages include, but are not limited to, oyster mortality, oyster disease, damaged oyster beds or decreased oyster production, loss of revenue and/or loss of income due to siltation, changes in salinity, pollution or other causes.77

Finally, these clauses are in line with legislation enacted to the same effect, stating that

the State shall be held harmless in damages caused by freshwater diversions for the

purpose of restoring the coastline.78

Oyster farmers invest significant resources in their farmable tracts. Not only do

they invest time and money in the growth and development of oysters from larvae to full

size (which can take 12 months to a year, depending on whether they are grown on the

76 Avenal, 886 So.2d at 1098. 77 Id. 78 Id.

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bottom or slightly raised),79 the farmers also take the time to develop a hard water

bottom on their tracts, which produces the correct environment for oyster reproduction.80

These hard bottoms are developed over several years by dumping tons of rocks and

shells onto the water bottom, and are unmovable and tied to specific geographic

locations.81 In addition to oyster farming on leased tracts, oysters are also harvested

seasonally on public lands and seeding grounds, thousands of acres of oyster reefs that

anyone can harvest, as long as they have a commercial fishing license.82

The Gulf Oil Spill: Effects on the Oyster Harvest and The Use of Diversions

On April 20, 2010, methane gas shot out of the drill pipe at the site of the

Macondo wellhead operated by Transocean and British Petroleum; explosions

occurred, and the Deepwater Horizon sank to the ocean floor.83 The result was an

uncapped and unmanaged wellhead that spewed crude oil into the Gulf for nearly three

months. As oil from the wellhead moved closer and closer to the shoreline, officials

feared that it would enter the complicated, mazy web of wetlands, and once there, it

would be too difficult to remove.84 As early as April 25,85 officials decided to open

79 Suzanne Tansey, Oyster Farming in Louisiana, Louisiana Sea Grant College Program, available at http://www.lamer.lsu.edu/classroom/edonahalfshell/pdf/cycle_info.pdf. 80 Chris Kirkham, Louisiana Oyster Industry Struggles to Cope with Oil Spill, Coastal Restoration Efforts, Times-Picayune, Oct. 31. 2010, available at http://www.nola.com/news/gulf-oil-spill/index.ssf/2010/10/louisiana_oyster_industry_stru.html. 81 Id. 82 Commercial Oystering, La. Dep’t of Wildlife and Fisheries, http://www.wlf.louisiana.gov/fishing/commercial-oystering (last visited Nov. 13, 2010). 83 Noah Brenner et al., Coast Guard Confirms Horizon Sinks, Upstream Online (Apr. 22, 2010), http://www.upstreamonline.com/live/article212769.ece. 84 Louisiana Using Mississippi River Diversions in Gulf Oil Spill Battle, Times-Picayune, May, 13, 2010, available at

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several diversions at high flow rates, in an attempt to push back the oncoming oil and

prevent its encroachment into the marshlands.86 As these massive flows of freshwater

made their way through the marshlands and the millions of acres of oyster beds, the

salinity levels of these fragile environments were significantly altered, killing off massive

quantities of oysters.87

The true success of the diversion openings as a way to stem oil intrusion into

delicate marshlands is unknown, but oyster farmers were damaged by more than just

freshwater. First, a moratorium on oyster harvesting was put in place during the spill,

preventing both farmers and those harvesting on public grounds from operating during

that period, and as the spill continued throughout the summer, more and more oyster

beds were closed.88 Oil effected and was ingested by an unknown number of oysters,

and more research is still needed to determine how many oysters came into contact

with the oil and died from it, as well as how many oysters contain traces of oil, and

whether those traces make them unsafe for human consumption.89 Finally, in many of

the public lands used for harvesting, death of oysters may not be fully realized until two

http://www.nola.com/news/gulf-oil-spill/index.ssf/2010/05/louisiana_using_mississippi_ri.html. 85 Widespread Oyster Deaths Found on Louisiana Reefs, Associated Press, July 17, 2010, available at http://www.nola.com/news/gulf-oil-spill/index.ssf/2010/07/widespread_oyster_deaths_found.html. 86 Id. 87 Susan Buchanan, Oyster Growers Weigh Options in Claims Process, La. Wkly., Aug. 10, 2010, available at http://www.louisianaweekly.com/news.php?viewStory=3145. 88 Geoff Mohan, Gulf Oil Spill: Oyster Beds, Shrimp Areas Closed, Los Angeles Times, May 9, 2010, http://latimesblogs.latimes.com/greenspace/2010/05/gulf-oil-spill-more-oyster-beds-closed-.html. 89 William Graham, Scientists Find ‘Shadow’ of Deepwater Horizon Oil in Gulf Food, Dauphin Island Sea Lab (Nov. 8, 2010), http://press.disl.org/11_8_10graham.htm.

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to four years from now, when larvae killed from oil or freshwater are supposed to grow

to full size.90

These three harms inflicted on the oyster farmers and harvesters: oyster death

from freshwater diversions, business interruptions from bed closures, and oyster harm

from oil ingestion, present the three prongs of most likely lawsuits and claims from

oyster farmers and harvesters. While much of the damage is still speculative, there are

several avenues for lawsuits available to the oyster farmers and harvesters.

Potential Routes to Recovery of Damages for Harvesters and Farmers:

To begin with, both farmers and harvesters may file claims with the $20 billion BP

fund currently administered by Ken Feinberg. Now that the oil has stopped flowing,

claimants will be offered a lump sum of damages by the BP fund, in exchange for

signing an agreement to not sue BP in the future for oil spill damages.91 If these claims

are rejected, claimants may next turn to the Oil Spill Liability Trust Fund, a fund capped

at $2.7 Billion and funded by a five-percent-per-barrel tax on the oil industry.92 This fund

exists for claimants when the party responsible for the oil spill is unwilling or unable to

make payments,93 and may offer some further compensation to farmers and harvesters.

While many farmers and harvesters may need to make claims through these funds

because their entire livelihoods have been threatened or shut down by the spill,

claimants run a large risk in being undercompensated because there is little evidence of

the continuing toll that the spill will have on oyster production in the future. If farmers

90 Widespread Oyster Deaths Found on Louisiana Reefs, supra note 26. 91 Choo, supra note 28. 92 Id. 93 Id.

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and harvesters are able to survive without a quick lump sum from either fund, they

should avoid a claim and pursue other legal avenues.

This poses a serious problem for harvesters on public grounds in particular. Their

claim will consist of two theories of recovery, the first being damages stemming from the

closure of oyster beds and the resulting interruption of business, which should be fairly

easy to calculate. The problem here, however, is that it is essentially a suit for pure

economic loss: because the harvesters have no ownership interest in the oysters or in

the oyster breeding grounds, none of their property was destroyed. The applicable rule

here is that from the Supreme Court case of Robbins Dry Dock v. Flint, in which the

court held that claims for pure economic loss are not recoverable in tort.94 However, this

suit would likely be within the scope of OPA 90 and therefore the Robbins Dry Dock rule

would not apply. Now, the problem arises here that only $75 million is available for

claimants under OPA 90 unless the responsible party is found to be grossly negligent.95

Ideally for the harvesters, BP will be found grossly negligent, and the funds available

under OPA 90 will be unlimited. In that case claims for interruption of business will be

fairly successful, but not much more fruitful than those filed as claims through the BP

fund directly. However, filing a claim for interruption from April through August will result

in being unable to later sue for coming business interruptions in the following seasons,

and it seems unlikely that Feinberg would grant a claim for speculative damage to

oyster yields in coming seasons. For these reasons, a suit under OPA 90 remains a

more effective solution.

94 Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303 (1927). 95 33 U.S.C. § 2704(c)(1)(A).

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The second theory of recovery for harvesters will be for a loss in revenue

stemming from reduced oyster harvest in years to come. There problem here is that

most of what killed the oysters was the influx of freshwater into the beds, so an issue of

proximate cause will arise, and it seems straightforward: BP caused an oil spill, and the

necessary response was a release of freshwater, which caused the complained of harm

of oyster deaths. While BP could make challenges to the State’s decision to release

freshwater, and harvesters may even attempt to sue the State over their actions, these

actions will likely fail, as the State, through its statutory scheme discussed above, has

broad powers in protecting its coastline. Assuming the oyster deaths can be linked

through proximate cause to the oil spill, harvesters must then calculate losses. If

reasonable calculations can be made as to the population losses, then a court would be

more willing to grant such claims under OPA 90, but the key will be to avoid overly

speculative claims. Without more information on these losses at the current time, the

best this author can suggest for harvesters is to wait for concrete research before

making an OPA 90 claim.

For farmers, claims will also be complicated. Again, considering how the current

research has yet to provide concrete results on the deaths of oysters and the long-term

prospects of recovery, this analysis can only go so far. First, the simple claims. Farmers

who have evidence of oyster deaths directly from oil impacts will have an easy time

suing under OPA 90 or making claims with the BP fund, but again such claims with the

Feinberg-administered fund are not suggested. Success with claims under OPA again

hinges on proving gross negligence, but again there is strong evidence that gross

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negligence will be shown, and therefore farmers’ recovery will succeed for direct oil

damage under OPA 90, and the farmers’ leases with the State allow such claims.96

Next, claims for losses related to freshwater diversions should be made by

farmers. Claims against the state for their decision to release the freshwater will not be

possible given the “hold harmless” clauses in the leases discussed above, but suits

against BP will be possible. These suits, also covered by OPA 90, will be not only for

losses in business profits, but also for loss of property. Oyster farmers can sue for the

value of the hard bottoms they toiled to create over the course of several years, as well

as the value of oyster larvae and growing oysters killed by the freshwater incursions.

The statutory scheme in place to indemnify the state against claims from oyster

farmers and harvesters should have little to no effect on the chances for recovery from

BP under OPA 90. Sadly, many of those in the oyster industry will be forced to make

premature settlements with BP for less than they deserve, simply because they need

the money in order to stay afloat and provide for their families. For those that can avoid

the early claims with BP, much rests on specific findings of not only current but also

future damages to oyster crops for years to come. One can only hope that such

research projects are undertaken with intensity and vigor, so that those who built their

lives around the oyster industry are fairly compensated.

Conclusion

For restaurants adversely impacted by the Deepwater Horizon oil spill, the recovery

process should begin with filing a claim with the Feinberg-administered BP Fund.

96 A lessee of oyster beds or grounds . . . shall have the right to maintain an action for damages against any person, partnership, corporation or other entity causing wrongful or negligent injury or damage to the beds or grounds under lease to such lessee. La. Rev. Stat. Ann. § 56:423 (B)(1).

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Analogies should be made between Feinberg’s example of the deserving shrimp

processor 100 miles from the Gulf and the restaurant seeking compensation: it will likely

be that the closer the restaurant to the Gulf, and the more reliant on seafood the

establishment is, the greater the award will be. If the BP Fund either refuses to award a

claim or the claim is too small, the restaurant should proceed in court under OPA 90.

While many restaurants may be unable to refuse an immediate claim because a fast

award is needed, those who can wait for legal judgment will be hopefully be rewarded

with increased damage awards.

For oyster farmers and harvesters, claims with the BP Fund are problematic

because of the speculative nature of injuries thus far. Until further research reveals the

true impact to the oyster beds several years from now, a claim made with the BP Fund

would either be overly speculative and thus completely denied, or else the award would

be too small to cover the full damage incurred. The damages caused by freshwater

diversions will likely last for years, and if oyster farmers and harvesters can avoid the

need for fast cash from the BP Fund, further research will hopefully provide them with

evidence required to succeed in larger damage claims in court under OPA 90.