UPDATE 1-U.S. Gulf Coast oil spillers about to face day in court

Feb 21 (Reuters) - Nearly three years after a deepwater well

rupture killed 11 men, sank a rig and spewed 4 million barrels

of oil into the Gulf of Mexico, BP and the other companies

involved are scheduled to face their judge in court.

The trial over the worst U.S. offshore oil spill is set to

start Monday in New Orleans before a federal judge and without a

jury. Few expect the case, seen lasting several months, will be

decided by the judge.

An eleventh-hour settlement this weekend is a possibility,

but legal experts expect a resolution, at least with the U.S.

Department of Justice, in the coming months. Early testimony is

likely to set the tone for any settlement talks, depending on

how damaging the evidence is, they said.

"This is a game of corporate chicken," said John Zavitsanos,

a Houston civil litigator. "We have tangled with BP often, and

they blink."

Joining well owner BP Plc in Judge Carl Barbier's

courtroom will be rig owner Transocean Ltd and well

cement services provider Halliburton Co.

Lined up against them will be the Justice Department,

several Gulf Coast states and other plaintiffs.

BP and Transocean declined to comment on the specifics of

the upcoming trial. Halliburton was not immediately available

for comment.

BP has a history of settling civil cases before or during

trial. Four trials began over the 2005 explosion at its Texas

City refinery that killed 15 people. All were settled. Payouts

totalled $3.1 billion. BP has since sold the refinery.

The stakes are higher this time, though. The Macondo well

explosion and spill on April 20, 2010 affected five state

coastlines, prompted a six-month ban on oil and gas drilling in

the Gulf and disrupted the livelihoods of fishermen, hoteliers

and others. And once a trial gets under way, a new dynamic can

take hold.

"If the first couple of days are good for the plaintiffs or

good for the defendants, that could shift. Once the first pitch

is thrown, those odds could change," said Anthony Sabino, a

business law professor at St. John's University School of Law.

Just ahead of the trial, BP won agreement from the Justice

Department to exclude 810,000 barrels from the total spilt

barrels estimate, but BP says the estimate is still too high. It

also wants "efforts to do the right thing" afterwards taken into

account and has earmarked only $3.5 billion for Clean Water Act

payments, compared with its potential maximum liability of $17.5

billion.

A BP settlement with the Justice Department over such a

large liability could lead to another delay of a trial that has

already been postponed.

"With the federal government out of it, he (Barbier) might

well postpone ... particularly if the states indicated to him

that they were continuing to talk," said Ed Sherman of Tulane

University Law School in New Orleans.

"REASONABLE TERMS"

BP has committed to pay $8.5 billion to plaintiffs in a

separate settlement, having already paid out $9 billion in other

claims. Last year it also settled 14 criminal charges with a

guilty plea and a record $4 billion in fines and penalties.

The civil claims to be covered next week could surpass

these, and the trial's significance to BP was evident at a Feb.

5 news conference in London. When Chief Executive Bob Dudley

said the company would vigorously defend itself, he repeatedly

looked toward his top in-house lawyer, Rupert Bondy, for moral

support.

BP has repeatedly said it will settle on "reasonable terms,"

but Bondy drew a line in the sand this week, saying the British

company now goes to trial "faced with demands that are excessive

and not based on reality."

Its spill bill is already impressive: Accounting provisions

total $42 billion - about 30 percent of its stock market value.

It has sold assets worth $38 billion to finance compensation,

clean-ups and fines. It has paid, or committed to pay, $37

billion of this. The actions have sliced $5 billion a year, or

14 percent, off its cash flow - a basic money-making measure.

And there is more to come. That is why, even on forward

measures of earning power, a shrunken BP still lags its peers.

If BP is found "grossly negligent" - a key question for the

trial - its fine under the U.S. Clean Water Act could be as high

as $17.5 billion based on a total of 4.1 million barrels spilled

and a maximum fine of $4,300 a barrel.

It could also be much lower, at a maximum $1,100 per barrel,

or $4.5 billion, if BP's claim that it was "no more than

negligent" is proved.

Aside from the Clean Water Act, two other claim groups come

under the jurisdiction of Barbier, a federal judge for the

Eastern District of Louisiana. Both are harder to quantify.

Economic damage claims totalling $34 billion have been made

by Gulf Coast states including Louisiana and Alabama. BP has

said these are excessive, and that its clean-up spending had a

positive economic impact.

A third set of claims, for natural resources damage, has not

even been quantified yet.

PROVING GROSS NEGLIGENCE

From Monday, phase one of the trial will focus on the level

of negligence and on apportioning blame among the defendants.

Phase two will focus on the number of barrels spilled from

the blown-out well.

Together, they could drag into next year, and neither phase

will consider the size of any fine. But a gross negligence

finding could open the way for extra costs in the form of

punitive damages.

Lawyers point out that strong evidence of a reckless and

willful disregard for employee safety and environmental health

would be required to prove gross negligence.

"It is very difficult to prove, and that is something that

these defendants are counting on," Sabino said.

Zavitsanos cited the 1970 Ford Pinto Memo as one of the few

cases where the evidence was strong enough to prove gross

negligence. In this case, Ford Motor Co was shown to have

been aware of a design flaw and that a crash could puncture the

gasoline tank and cause a fire. It was also shown to have

decided to risk death and injury lawsuits rather than fix the

design.

Steve Herman, one of the lead lawyers for the plaintiffs,

said they contend there is "overwhelming evidence" that BP,

Transocean and Halliburton "were all grossly negligent, and we

look forward to laying bare that evidence for all to see."

Alabama Attorney General Luther Strange, who will speak for

the states in the trial, agreed that the evidence would show

BP's conduct reaches the level of gross negligence and said

expert testimony would prove "very, very damaging to BP."

Strange said he plans to present BP with declarations that

the spill was both predictable and preventable, and that the

company fosters a "culture of callousness."

"It's a focus of profits over safety," he said in an

interview on Thursday.

The companies have consistently held that whatever mistakes

were made, they don't rise to the level of gross negligence.

But on Thursday, Barbier rejected BP's request that the

plaintiffs not be allowed to present evidence regarding its

suspension from obtaining new federal contracts following the

spill, imposed last year by the U.S. Environmental Protection

Agency. The plaintiffs said that evidence may be pertinent after

the first phase, so Barbier said BP could try again to block it

if the issue arises once the case starts.

The case is In re: Oil Spill by the Oil Rig "Deepwater

Horizon" in the Gulf of Mexico, on April 20, 2010, No.

10-md-02179, in the U.S. District Court, Eastern District of

Louisiana.

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