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Transocean Agrees with DOJ on Scope of Liability Act

Source: Dow Jones

Posted on 14 Jun 2010

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Transocean Ltd. said it agrees with the U.S. government that an effort to limit its liability in the Gulf of Mexico oil spill shields it against practically none of the many lawsuits filed against it under the nation's environmental laws.

A filing by the Deepwater Horizon owner in Houston federal court Friday brings to an end a dispute between Transocean and the Department of Justice over the scope of the Limitation of Liability Act of 1851, which Transocean invoked about three weeks after the burning and sinking of the rig. Transocean sought to limit its liability for the late April accident that killed 11 men and triggered the Gulf of Mexico oil spill to around $27 million. While maritime lawyers say the Act, in practice, rarely helps vessel owners trim their financial liability for an accident, it can give them some legal breathing room by centralizing all lawsuits in federal court under a single judge. BP PLC has taken responsibility for the oil spill and recovery efforts.

Transocean came under sharp criticism by some lawmakers and Gulf Coast residents for invoking the same 159-year-old law that allowed the owners of the RMS Titanic to limit their liability following that ship's famous 1912 sinking. A May 24 letter to Transocean's lead attorney from the Justice Department called the company's efforts to limit liability in the Gulf spill "simply unconscionable."

After Switzerland-based Transocean filed its petition on May 13, all lawsuits naming the company as a defendant were consolidated in U.S. district court in Houston. This prompted the Justice Department to ask the court to clarify that lawsuits filed by the federal government and states under a wide array of environmental laws, including the Oil Pollution Act of 1990--the nation's primary law governing oil spills--were exempt from the action to limit liability.

On Tuesday, Transocean said in a filing to the court that it agreed the Limitation of Liability Act doesn't preclude lawsuits filed by the federal government and states under the Clean Water Act, Clean Air Act and a raft of other laws. The company's lawyers stopped short, however, of saying it was open to all claims against it made under the Oil Pollution Act of 1990, or OPA. The Oil Pollution Act was enacted in response to the Exxon Valdez spill in 1989. In a letter to District Judge Keith Ellison filed Friday, the lead attorney working for Transocean, Frank A. Piccolo, wrote that the company's lawyers and the Justice Department had agreed to a proposed order clarifying that no claims filed under the Oil Protection Act, with one exception, would be stayed by the liability-limitation action. Only if a lawsuit is filed under the Oil Protection Act by another party held responsible for the accident, namely BP, would it be included in the limitation action.

"The Department of Justice has indicated to the company that it has no opposition to the proposed order," a spokesman for Transocean said in an email. The Department of Justice couldn't be reached immediately for comment.

Judge Ellison will now have to sign the proposed order.

Now, the only suits still contained within the Limitation of Liability action are personal-injury and wrongful-death claims. Plaintiffs lawyers have asked Judge Ellison to move the venue of the proceeding from Houston to the U.S. District of Eastern Louisiana, to make it easier for the victims' families to participate. The Deepwater Horizon went down about 50 miles off the shore of Louisiana.

U.S.-listed shares of Transocean, which have lost nearly half their value since the accident, closed 5.8% higher at $46.85 apiece on the New York Stock Exchange on Friday.