Thursday, June 17, 2010

Does BP Get Due Process?

Does British Petroleum get due process?

Absolutely not

IS BP constitutionally entitled to due process?


Is President Obama acting outside the law?

Definitely yes.

Is President Obama denying BP due process of law?


Will BP receive due process?

Only if it litigates.

This is too good an opportunity for the President, the Green Movement, and the anti-oil Democrats.

BP is to be pilloried and skewered with cash being pumped out of the British company to distribute throughout the depressed Gulf region.

Don’t get me wrong. BP screwed up royally and should be liable for its negligence or gross negligence. The liability will be great, perhaps exceeding BP’s assets.

I have no sympathy for BP, but great respect for the Constitution and due process.
Ours is a nation of law, and not individuals or executive fiat. BP is
constitutionally entitled to due process before being liable.

We have three branches of government under our constitution: the Legislative, Executive, and Judicial.

The legislative enacts the laws which are administered and implemented by the executive, while the judiciary interprets the laws and adjudicates the rights and liabilities of parties in accordance with the law.

The executive branch, the President, can only act pursuant to powers delegated to it by the Constitution or Congress.

The President may have the Bully Pulpit, but he lacks legislative authority.

The President of the United States, a Constitutional Law Professor, is unilaterally imposing a compensation regime on BP, something for which he lacks legal authority.

In demanding reparations and the establishment of an escrow fund, President Obama is acting as judge, jury and executioner by executive fiat without any statutory authority to do so. As a constitutional Law Professor, he should know better.

President Truman during the Korean War claimed national security as the justification to seize the nation’s steel mills during a threatened strike. The United States Supreme Court held the President’s action unconstitutional in the famous 1952 Youngstown Sheet and Tube v. Sawyer case, a case which the Constitutional Law Professor is undoubtedly familiar with. The President lacked statutory authority to seize private property.

A President who is willing to trash the American debt holders of Chrysler and General Motors to advantage the United Auto Workers so as to save their medical plans, will have no qualms about any injuries done to British investors in BP, or even the American holders of 50% of BP’s stocks. British pensioners don’t vote in U.S. elections.

No legal authority exists, even in Tort law, for a defendant to be liable for remote economic losses, such as layoffs or reduced tax revenues. The farther out the chain of causation one goes, the more infinite the number of possible claimants, the more diffuse their claims, and the greater the opportunity for fraudulent claims.

The claims become infinite, but the defendant’s resources remain finite.

Congress or state legislatures can certainly enact statutes which provide for such a remedy, but for now BP’s legal liability under the Oil Pollution Control Act of 1991, enacted by a Democratic Congress, is limited to a paltry $75 million. BP has pledged to pay all “legitimate claims,’ whatever that means, but is not yet legally liable to do so.

We are witnessing another version of Chicago rules – legalized extortion. Congressman Joe Barton was right about this fund being extortion.

BP has little choice but to comply with the request for a $20 billion compensation fund. Hanging over BP are the public statements and threats by the President and Attorney General of criminal prosecutions of BP. The possible criminal penalties are in the billions, not to mention prison time. That is quite a sword of Damocles hanging over BP, or, if you will, the government's boot on BP's throat. BP dares not fight too hard on the civil for fear of the criminal.

BP and the rest of the oil and gas industry also face the threat that the President could extend and expand his current 6 month ban on new drilling. As illustrated by his Oval Office speech, he is in favor of shifting away from fossil fuels.

BP made a strategic, economic, and business decision to set up the escrow fund. The more claims it can resolve without going through litigation will save it money. The $20 billion will buy it some goodwill for awhile, but it is only a down payment.

The real interesting feature of the escrow plan is that BP has voluntarily contributed, without admitting liability, to a $100 million fund for the rig workers laid off by the President’s order.

The final cost to BP will far exceed $20 billion, all the current executives will be cashiered, and BP will lose its independence, probably becoming part of the China National Oil Company.

The British Government, of which the old Anglo-Iranian Oil Company was an integral of its foreign policy, will be unable to save England’s largest corporation.

The fund, to which BP will contribute $5 billion annually for 4 years, will be 40% financed by the elimination of the $2 billion annual dividend. The dividend was history once the magnitude of the disaster became clear.

BP may have earned $16.8 billion last year on revenues of $250 billion, truly impressive numbers, but except for the dividends the remaining income was reinvested in the company for exploration, drilling, and environmental and safety improvements at its facilities. The company claims to have spent over $1.6 billion to date in fighting the blowout and cleaning up.

The $1.6 billion and $20 billion are but down payments on an unknown liability.

The unanswered question about the fund is:

Where are the lawyers?

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