David R. Kotok
Chairman and Chief Investment Officer
May 27, 2010
“Any and all injury, loss, destruction and damage arising out of or related to the above described casualty event was not caused or contributed to by any fault, negligence or lack of due care on the part of Petitioners…”
This was excerpted from the May 13, 2010 motion filed by Transocean in the Federal District Court of Texas, in which they are trying to limit their liability in claims against them to $27mm (to be exact, the number is $26,764,083.00), by invoking an 1851 maritime law. We have the full document posted on our website. See: http://www.cumber.com/content/Special/Triton051310.pdf .
This is chutzpah.
Chutzpah is a term that is often used in parts of the United States and originates in European Yiddish. It means brazenness, temerity in a pejorative way, engaging in an effrontery.
Here’s an example of chutzpah: a 15-year-old kid murders his mother and father and then asks the court for mercy because he is an orphan. That‘s chutzpah.
Here’s another example: Lehman Brothers’ lawyer takes a cab to the bankruptcy court. The cabbie says the fare is $27. The lawyer says, “Come inside and join the unsecured creditors.” That’s also chutzpah. You get my drift.
Legal process requires that Transocean’s lawyers admit no wrongdoing. We shall find out more about that when the allegations of negligence get the clarity of trials, depositions, interrogatories, witnesses, etc. So let’s just look at some facts.
Transocean is trying to avoid payment of claims by arguing they are under the rules of admiralty (law applied to the sea) and they are invoking the “Shipowner’s Limitation of Liability Act of 1851.” That’s right, 1851. The same Transocean that has collected over $400 million from its insurers is trying to avoid paying the claims of the injured and dead that resulted from the blowout of their drilling rig. This is also the same Transocean that valued the rig at $650 million before the blowout but now is using the $27 million figure because it is the remaining salvage value of this “vessel.”
By getting the case into admiralty court, Transocean may be able to delay the proceedings and may have the ability to limit exposure to a jury trial. They may be able to combine all the claims. They will claim that all they owe the injured and the families of the dead is $27mm. That, too, is chutzpah.
We are just starting to enter the legal proceeding stage of the BP-Transocean saga. This is where the figure will reach into the tens of billions if the Top Kill attempt to seal the well is successful and permanent. Tens of billions in claims are coming. More billions in clean up costs lie ahead. Over 130 lawsuits are already filed. Thousands will be involved before this is over.
New estimates are that the oil spewing rate is somewhere around 20,000 barrels a day; that’s nearly 1 million gallons a day. This is now deemed to be the largest and most serious oil catastrophe in US history. And the same politicians who didn’t impose strict rules and didn’t supervise and didn’t do what they were supposed to do, from either the White House or the Congress, are now claiming they have been busily concerning themselves with this event every day. That, too, is chutzpah.
By the way, Transocean says they filed the maritime limiting motion “at the instruction of our insurers” and in order to preserve coverage. Again, pure chutzpah.
The fight now is who pays whom and how much and when. The battles will be between lawyers. Stay tuned as we observe what is about to be one of the biggest legal battles in history. We continue to suggest that these liabilities are going to be huge and cannot be presently estimated. We would avoid these stocks. Some are recommending them over other energy companies. That, too, may come to be seen as chutzpah.
David R. Kotok, Chairman & Chief Investment Officer, Cumberland Advisors, www.cumber.com