Document Type

Article

Publication Title

Louisiana Law Review

Abstract

The streamlined administrative program that BP set up to pay claims arising out of the Deepwater Horizon oil spill—the Gulf Coast Claims Facility (GCCF)—promised a significant transaction cost savings over litigation in the public court system. At least in theory, that savings should have worked to the benefit of BP and claimants alike, freeing up money to fund claimants’ recoveries that otherwise would have gone to lawyers and other litigation costs. But a comparison of the GCCF to the class action settlement that replaced it reveals that the class settlement will result in greater payments to claimants. Paradoxically, the dispute resolution system with the higher built-in transaction costs appears to offer the parties a superior result. This Article offers some hypotheses for why this might be the case. The central claim is that claimants did better under the higher-cost class action settlement because it allowed them to offer the defendant something it valued—a greater degree of finality than the GCCF could ever provide—in exchange for a “peace premium.” And this Article analyzes some of the features of the public system of class action litigation that enable parties to obtain a greater degree of closure than a purely private dispute resolution system like the GCCF, while at the same time providing guarantees of transparency, consistency, and equitable treatment of absentees.

First Page

397

Volume

74

Publication Date

2014

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