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* 5th Circuit directs new look at payout formula
* BP claimed people who weren't harmed got payments
By Jonathan Stempel
Oct 2(Reuters) - BP Plc won a legal reprieve in itseffort to force the administrator of a settlement related to the2010 Gulf of Mexico oil spill to tighten standards in assessingclaims, potentially sparing the oil company billions of dollarsof extra costs.
A divided 5th U.S. Circuit Court of Appeals in New Orleanson Wednesday directed U.S. District Judge Carl Barbier, who inMarch had approved administrator Patrick Juneau's evaluationmethods, to take a fresh look at which claims are legitimate.
The 5th Circuit also directed Barbier to halt payments onthose claims that don't meet stricter standards.
BP had agreed in 2012 to make payments to cover economiclosses arising from the spill.
But it complained that Juneau's payout formula has been toogenerous, and compensates people and businesses that were notharmed.
That argument drew sympathy from Circuit Judge Edith BrownClement, part of a 2-1 panel majority that sent the case back toBarbier, who also sits in New Orleans.
"There is no need to secure peace with those with whom oneis not at war," Clement wrote.
"The district court had no authority to approve thesettlement of a class that included members that had notsustained losses at all, or had sustained losses unrelated tothe oil spill, as BP alleges," she added. "If the administratoris interpreting the settlement to include such claimants, thesettlement is unlawful."
BP originally projected that the settlement would cost $7.8billion, but in July boosted its estimate to $9.6 billion.
As of Wednesday, about $3.69 billion has been paid out,according to Juneau's claims website. ()
The 5th Circuit said Barbier should issue a narrowerinjunction to allow recoveries by claimants with "actual injury"from the spill, and not punish BP and its shareholders byallowing potentially "hundreds of millions of dollars ofunrecoverable awards."
Stephen Herman, a lawyer for some claimants, said in anemail after Wednesday's decision: "We're pleased that the vastmajority of class members will continue to be paid in a timelyand expeditious manner. We look forward to working with theclaims administrator and the court to determine the best way toget the affected claims processed and paid as soon as possible."
BP spokesman Geoff Morrell said the ruling affirms what BPhas been saying since the beginning: claimants should not bepaid for fictitious or wholly non-existent losses.
"BP is extremely pleased with today's ruling... settingaside the claims administrator's interpretation of the businesseconomic loss framework in the settlement agreement BP reachedwith the Plaintiffs' Steering Committee last year," Morrellsaid.
The settlement was designed to compensate victims of theApril 20, 2010 explosion of the Deepwater Horizon drilling rigand rupture of BP's Macondo oil well. The disaster killed 11people and triggered the largest U.S. offshore oil spill.
BP, which is based in London, has already incurred more than$42 billion of charges for clean-up costs, fines andcompensation related to the spill.
The 5th Circuit on Wednesday also upheld Barbier's dismissalof a BP lawsuit against Juneau.
Meanwhile, the second phase of a trial before Barbier overthe spill began on Sept. 30. It focuses on how much oil wasspilled and BP's effort to control the flow.
The case is BP Exploration & Production Inc v. DeepwaterHorizon Court-Supervised Settlement Program et al, 5th U.S.Circuit Court of Appeals, No. 13-30315.
