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June 21, 2010 12:38 PM

Feinberg Talks of Criteria for Gulf Oil Claims, Says Lawyers Not Needed

Posted by Brian Baxter

UPDATE 1: June 21, 3:15 p.m. Ken Feinberg said on CNN this morning that $20 billion might not be enough to satisfy damage claims related to the gulf oil spill, Bloomberg reports.

UPDATE 2: June 23, 8:15 p.m. Feinberg will step down from his position as pay czar for the Treasury Department as a result of his new oil spill-related duties, reports The New York Times.

Former Kaye Scholer partner Kenneth Feinberg, who has played key roles in overseeing both the $7 billion government fund for families of 9/11 victims and the federal Troubled Asset Relief Program--spoke out this weekend on his plans for the Obama administration's independent claims facility for victims of the Gulf of Mexico oil spill. The 64-year-old litigator is the chief government-appointed administrator of the fund, to which BP has agreed to contribute at least $20 billion.

Feinberg, now a founder and name partner of Washington, D.C.'s Feinberg Rozen, has said publicly he won't be beholden to either BP or the Obama administration as he balances his duties as the special master in charge of TARP executive compensation with his new assignment helping gulf victims. (Click here for a story from The Washington Post on how Feinberg came to be hired; while Feinberg's 9/11 work was pro bono, BP will be paying him and his Feinberg Rozen team for oil spill compensation efforts.)

Feinberg told Matt Lauer on NBC's Today Show Monday that he'll be "in the gulf with local people processing these claims, so that eligible claimants get paid quicker in a comprehensive way, with some certainty that they don't have now."

BP began flooding the airwaves a few days ago with a commercial featuring Darryl Willis, a vice president of resources for BP America and the head of the London-based oil giant's claims team, encouraging victims to call a hotline to submit their claims. When Lauer asked Feinberg how quickly those claims could be processed, Feinberg, ever the mediator, made sure to note BP's efforts so far.

"Give BP some credit," he said. "They've already set up a program in the gulf that's paid out over $100 million in emergency payments....Anybody who is on the brink of financial ruin should have filed a claim last week with BP, in an effort to get some emergency money to hold them over until we immediately set up this new program."

Feinberg told Lauer that the victims wouldn't need lawyers to help them navigate a complicated claims process.

"You don't need an attorney--you can certainly have one if you want--but this will be a very transparent process where you will walk into one of numerous local offices strewn throughout the gulf, file a claim, even electronically online if you want, and we will immediately be able to process that claim," Feinberg said. "We're setting this up now, and BP already has something in place, which we'll build upon. But there's no reason that a local fisherman, businessman, or individual can't file a claim properly."

As for the criteria for filing claims, Feinberg admitted to Lauer that the claims facility had yet to evaluate every variation--or "collateral causation"--that would enable individuals to be compensated from the fund. Nonetheless, Feinberg cited his previous experience administering the 9/11 Victims Fund, asking all potential victims to file their claims anyway.

"One thing we learned from the 9/11 fund, you'll recall, Congress passed that law and said that when it comes to whether or not a financial injury was caused by the terrorist attack, look to the local law of the state where you live," he told Lauer. "So if a Boston restaurant says, 'We're losing business in our restaurant because we can't get shrimp from the gulf,' let's take a look at Massachusetts law. Would Massachusetts law recognize that claim? If it would, I will. If it wouldn't, I won't. That's what Congress suggested, and that might work here."

Lauer then asked Feinberg how he will take emotion out of each claims situation and deal with it on a dollars-and-cents level. (After his 9/11 work, Feinberg wrote a book about the experience called What Is Life Worth?)

"It's very emotional," said Feinberg, recalling how families victimized by the 9/11 attacks were forced to calculate the value of their loved ones. "Here in the gulf do not underestimate--I was down there this week and I'll be there tomorrow--the emotionalism and the frustration and anger of people in the gulf uncertain of their financial future....It's different from 9/11, but the emotion, anger, and frustration is very pronounced. I witnessed it firsthand last week."

As questions continue over how BP has handled the crisis, the company announced on Monday that it has already spent about $2 billion trying to contain the oil spill in the Gulf of Mexico, monies that are separate from the $20 billion it has placed in escrow to compensate victims. BP also said that payments had been made on 32,000 claims so far--out of 65,000 submitted--worth a total of roughly $105 million.

And while Feinberg might think lawyers aren't necessary for processing oil spill claims, it's clear that litigators will still have an important role as the crisis unfolds. Former deputy attorney general Mark Filip, now a litigation partner with Kirkland & Ellis in Chicago and Washington, D.C., is taking the lead advising BP in a criminal probe being conducted by the Justice Department.

The Wall Street Journal reports that Filip will work closely with Wilmer Cutler Pickering Hale and Dorr public policy and strategy chair Jamie Gorelick, who has been handling BP's negotiations with the White House, and Sutherland Asbill & Brennan's Rachel Clingman, now acting general counsel for Swiss-based offshore drilling contractor Transocean.

Litigation is now even touching those who thought their links to BP were in the past. Erroll Davis, Jr., chancellor of the University System of Georgia and former BP director until he retired on April 15 (five days before the Deepwater Horizon oil rig exploded and sank), has been named in at least four shareholder suits filed against BP in Louisiana and Alaska.

The Atlanta Business Chronicle reports that Davis has retained Sullivan & Cromwell.

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