By Amanda Bronstad, The National Law Journal

The U.S. Court of Appeals for the Fifth Circuit has refused to invalidate a nearly $2.7 million settlement that BP PLC reached with a member of a boat crew who went to court to enforce the award after he never got paid.

However, in its ruling on Friday, the panel determined that claimant Elton Johnson will need to provide evidence to a lower court that he didn’t exaggerate injuries sustained in the 2010 blast that caused the Deepwater Horizon oil spill.

The case presents a rare window into the process BP set up to compensate dozens of workers who were injured and the families of the 11 who were killed from the blowout. Most of those workers and their relatives have settled their claims confidentially out of court.

It also is the latest circumstance in which BP has insisted that fraud has tainted the spill’s claims process. BP has spent several years challenging its own $9.2 billion settlement for economic damages on grounds that fraudulent claims allowed businesses to receive inflated awards.

“The issue of how to deal with claimant fraud remains a recurring and highly significant one in Deepwater Horizon litigation,” wrote BP attorney Richard Godfrey, a partner at Chicago’s Kirkland & Ellis, in a July 11 appeals brief in Johnson’s case.

In that case, BP has asserted that Johnson didn’t sign a release waiving his right to sue and that his employer, Tidewater Marine LLC, part of New Orleans-based Tidewater Inc., had provided evidence that he exaggerated the extent of his injuries.

U.S. District Judge Carl Barbier.

Last year, U.S. District Judge Carl Barbier (left) in New Orleans upheld the settlement, which came out to more than $3.6 million with interest. The Fifth Circuit on May 15 affirmed Barbier’s decision but remanded the case so that he could “determine whether Johnson fraudulently induced BP into” agreeing to the settlement.

“We are pleased with the Fifth Circuit’s decision vacating the judgment awarding Mr. Johnson more than $3 million in damages,” wrote BP spokesman Geoff Morrell.

Johnson’s lawyer, Kurt Arnold of Arnold & Itkin in Houston, disputed any allegations of potential fraud.

“They can throw around words like ‘fraud’ really easy in a legal pleading, but the reality is they know this isn’t a fraud case,” Arnold said. “They just dispute the extent of his injuries and the amount they’re paying for it.”

The case shows the back-and-forth communications involving Johnson, his employer and the Gulf Coast Claims Facility, set up by BP and administered by Kenneth Feinberg to compensate for monetary damages, including for physical injuries, arising from the Deepwater Horizon disaster.

Johnson was aboard a vessel that was roped to the Deepwater Horizon rig for offloading drilling mud. He claimed the explosion threw him against a bulkhead, causing injuries to his back and shoulder, a herniated disc and post-traumatic stress disorder.

The Gulf Coast Claims Facility sent Johnson a letter in 2011 stating he was entitled to nearly $2.7 million, which included loss of income and medical expenses.

Soon afterward, Tidewater wrote a letter to the Gulf Coast Claims Facility stating that the award was “excessive and unreasonable,” according to the Fifth Circuit opinion. Tidewater later sent statements of other crew members indicating that Johnson might have exaggerated his injuries.

Upon further investigation, the Gulf Coast Claims Facility denied Johnson’s claim in 2012.

On appeal, BP argued there was no agreement because Johnson hadn’t signed a release. Johnson countered that BP never sent him the release. He also disputed potential fraud in a claim based on numerous medical records.

“The only reason it’s gotten to this point is Tidewater would have had to pay for it under indemnity obligations,” Arnold said. “This is just an attempt of having to get out of paying the settlement they reached.”

The Fifth Circuit agreed that there was a settlement agreement but ordered that Barbier conduct an evidentiary hearing on the fraud allegations. “Because BP’s evidence suggests that Johnson may have submitted a wholly fabricated claim to the GCCF, BP may raise fraudulent inducement as a defense to enforcement of the settlement,” the panel wrote.

In a dissent, Circuit Judge Priscilla Owen concluded that there never had been a settlement because Johnson could have chosen not to sign the release had it been sent.

IMAGE: FILE – In an April 21, 2010 file aerial photo taken in the Gulf of Mexico more than 50 miles southeast of Venice, La., the Deepwater Horizon oil rig is seen burning.

Photo: Gerald Herbert/AP

For more on this story go to: http://www.nationallawjournal.com/id=1202726817994/BP-Injury-Settlement-Upheld-But-Worker-Must-Answer-Fraud-Claims#ixzz3aaz60ouc