A federal judge in Delaware has ordered a lawsuit by St. Joe Co. against Transocean over the Deepwater Horizon oil spill back to state court, raising the odds the drilling company will be dragged into litigation it was hoping to avoid.
The decision issued yesterday by U.S. District Judge Leonard P. Stark increases the risk Transocean will be held liable by a jury for some of the costs associated with the spill. If that happens, plaintiffs might assert that finding in the hundreds of cases now being consolidated in New Orleans.
“At that point the only discussion would be over damages,” said William Brewer of Bickel & Brewer, the Dallas law firm representing St. Joe in its unconventional strategy of concentrating on BP contractors instead of the British oil company itself. “This is a very significant development for St. Joe given the size of our claims.”
St. Joe is seeking more than $500 million for the diminished value of some 600,000 acres it is developing in Florida. The claim is based on the decline in St. Joe shares after the spill, which have since rebounded as 29% owner Fairholme Funds won a struggle for control of the firm. Its shares were unchanged midday Wednesday.
Here is the applicable verbiage from the court:
St. Joe Court Decision (click to open .pdf)
The Court agrees with St. Joe. In Askew v. American Waterways Operators, Inc., 411
u.s. 325,328 (1973), a pre-OPA opinion, the Supreme Court held that a Florida statutory scheme regarding oil spill damages was not preempted by federal law. The Court explained:One can read the history ofthe Admiralty Extension Act without finding any clear indication that Congress intended that sea-to-shore injuries be exclusively triable in the federal courts ….
[S]ea-to-shore pollution -historically within the reach ofthe police power ofthe States -is not silently taken away from the States by the Admiralty Extension Act, which does not purport to supply the exclusive remedy ….
. . .. But we decline to … oust state law from any situation involving shoreside injuries by ships on navigable waters. The Admiralty Extension Act does not pre-empt state law in those situations.
So, what does it mean? St. Joe’s lawsuit is likely headed for Florida State Court and a Florida jury, not to be lumped together in Louisiana with thousands of other suits. My bet would be it never sees a jury and Transocean will eventually enter into a closed settlement. Anything JOE gets from this will be a huge plus.
On the other hand, for those involved in the spill, this is very unwelcome news. Large class action are always better as they consolidate claims and decrease the eventual value of them all. If this begins to spill out into local state courts, things for all defendants will get very ugly rather quickly.