Social and Legal Issues Related to the Problem of the BP Oil Fiasco Creating Involuntary Creditors
Earth Day. A day to consider some of the consequences of the BP oil rig fiasco in the larger context of mass torts. One problem arising from mass torts is that the world’s legal systems are doing a lousy job of dealing with the persons and entities suffering loss caused by the tort. Among other problems, the injured parties are rendered involuntary and unsecured creditors of the person or entity causing the tort. In that context, one might also think of Mother Nature, the Gulf waters and its creatures as members of the vast group of international, involuntary creditors. All of the victims/creditors face new challenges because BP has now filed suit , blaming the fiasco on the owner of the rig (Transocean) and the maker of the blowout preventer (Cameron International). Accordingly, at least in theory, BP also could be an involuntary creditor of the real problems.
A business professor recently wrote touched on the social and legal problem of torts creating involuntary creditors through an article focused on the BP oil fiasco. Dr. Jean Helwege’s online article unfortunately is locked away behind the digital barrier the American Bar Association shortsightedly imposes for articles published in its magazines. The article is titled: The Gulf Oil Spill: Social Versus Legal Obligations Facing BP, and appears in the Winter 2011 issue of the SciTech Lawyer, at 6-7.
Dr. Helwege’s article is notable for at least three reasons. First, she raises the prospect of raising the creditor status for involuntary tort creditors, or "going back to a Superfund structure where we tax likely polluters in advance of their expected crimes. Conversely, if we do not push at all, these "accidents" will occur too often from lack of care. The situation is reminiscent of drunk driving in America before the creation of Mothers Against Drunk Driving (MADD). Back then drunks, would get behind the wheels of their cars and kill people, and we used to call them accidents. MADD convinced us that these incidents were not entirely unpreventable." Dr. Helwege’s well-stated argument obviously could (and should) also be applied to protect the interests of personal injury creditors, and not simply environmental creditors.
Dr. Helwege’s article also is valuable for making that point that the uncertainty of future toxic tort injuries creates leverage that is in fact used in bankruptcy court to allow shareholders to create bargaining power over the sometimes likely but not well organized groups of likely future victims. In making this point, Dr. Helwege correctly points to asbestos bankruptcies as a prime example of tortfeasors using bankruptcy to evade paying full value for losses caused, and identifies Manville as one of the entities that paid too little.
And, finally, the article is notable for coming close to calling a spade a spade with respect to tobacco industry asset movement games in which the non-tobacco assets have been separated from the tobacco assets so that less money is available to pay future injured smokers. Thus, she notes: "By separating the pieces of the negligent company and calling into question the which parts of the legal entity have obligations to pay, BP can reduce the pool of assets available for negotiation in bankruptcy. This line of thinking undoubtedly spurred the boards of Phillip Morris and RJR Nabisco to shed their food businesses as they faced increasingly unfavorable tobacco litigation outcomes."
Conclusion? Involuntary tort victims deserve better than law gives them today. New solutions are needed, including small-scale answers such as described in this post on the corporate bonding suggestion of Professor Rhee as a means for dealing with small-scale tort victims of insolvent corporate entities. A recent article on a young and tragically injured drunk driving victim made me think that Professor Rhee’s proposal could be slightly modified to create a fund to provide better care for persons paralyzed by under-insured drunk drivers. Professor Helwege further drives the point home with her pointed observations about MADD having changed the legal and social landscape. The law needs to do better for tort victims/involuntary creditors, including even Amoco if in fact the fault lies with the rig owner and the manufacturer of the blowout preventer.