Small Biz to BP: Your Move

It's been a month since Bob Taylor filed his compensation claim to BP (BP) and the Mississippi restaurateur is still waiting for his check.

Taylor, who runs three seafood eateries in Gulfport and D'Iberville, as well as a large food service business serving institutions on the coast, has already seen a 10% drop in restaurant sales and a progressive surge in the cost of oysters on his menu.

So far, he's resisted boosting prices but has held off hiring additional staff for the summer season and has already begun sourcing shrimp - a point of local pride in the Gulf - from Indonesia. A month ago he began the process of filing a claim with BP to recover the difference in seafood costs, pouring over historical invoices to document prices before and after the Deepwater Horizon spill.

"All I'm trying to do is get back the change in prices of seafood I'm experiencing," said Taylor, who added that BP contacted his lawyer a couple weeks after he filed his initial claim to request further documentation. The delay has him doubting his chances for long-term compensation. "I think a lawsuit is inevitable."

Taylor's business is one of a multitude of independent concerns - restaurants, hotels, tourist attractions and the like - that pepper the Gulf of Mexico. Unlike fishermen, these businesses are not physically marred by the environmental impact of the BP spill. But they are still suffering significant losses amid rising costs and a falloff in the local economy.

BACK OF THE LINE

Long after BP caps the Deepwater Horizon well, ancillary area businesses are going to be angling for damages. History is not on their side, according to those with experience defending the little guys in big spills like the Exxon Valdez disaster of 1989.

"Fishermen in a spill case are easy to get certified as part of a class; supporting area businesses are very hard, and that's a big issue," said Brian B. O'Neill, a trial lawyer and partner with the Minneapolis-based law firm Faegre & Benson. O'Neill is best known for his role as lead counsel in the $5.3 billion jury verdict against Exxon in 1994.

He fought for more than two decades on behalf of 32,000 claimants - mostly fishermen - ultimately trying four cases and winning $1.4 billion in damages, an amount he said translated to about one fourth of the economic losses filed by each claimant.

U.S. law tends to limit the scope of damages in these cases as narrowly as possible, O'Neill said, pointing to a seminal 1927 U.S. Supreme Court case known as Robins Dry Dock & Repair C. v. Flint. Robins established the precedent that claims for pure economic loss are not recoverable under civil law, a precedent that has largely been upheld for more than 80 years.

"That will be one of the big BP defenses, where to draw the line," he said, adding that the burden of proof for small businesses "that are hurt but don't have oil on their beach" will be far harder. "It's easy this year for everybody to say they ought to be paid and for the administration to make broad statements that they ought to be paid. Once this is off the front page of the newspapers, those people are going to find themselves in litigation for years."

SPILLOVER COSTS

For its part, BP said small businesses removed from the spill's direct impact are eligible to make claims. Mark Proegler, a BP spokesman, said they must provide three years of income tax data to help demonstrate the impact.

This week, BP said in a prepared statement that it had issued about 25,000 total claims checks amounting to roughly $63 million. The company also said it was instituting measures to accelerate claims of large commercial losses from businesses, and expected the total payout amount to reach $85 million by week's end, inclusive of large loss payments. Improvements to the claims process, BP said, will implement an advance estimating process, rather than a month "look back."

In addition BP has agreed to set up a $20 billion claims fund, following the first meeting between the company's top executives and President Barack Obama at the White House since the start of the two-month-old oil spill.

R.J. Kopchak, a longtime Alaska fisherman who helped coordinate a response to the Exxon Valdez disaster, said he is doubtful about small businesses' chances of recovering the full extent of their damages in the long term.

"BP has been very, very careful in its selection of words; it continues to say they're going to pay every legitimate claim," said Kopchak, who last week testified before the Senate Committee on Environment and Public Works. "They will look for loopholes and fight any claim outside the narrowly defined legally recoverable losses."

Kopchak, who now serves as president of the Prince William Sound Science Center, said a major difference between the Exxon spill and that in the Gulf is that the number of people and businesses affected in the Gulf is far greater.

"There's an entirely different demographic at play, you have a huge series of communities dependent on shore-based and water-based enterprise, tourism in addition to fishermen," he said, noting that should help push the issue of future claims to the forefront.

"It's one thing to get an early check for a couple thousand dollars or ten grand even," he said. "The real question is: what does it look like in six months or in eight months?"