The BP Settlements: Class actions v. institutional claims processing

Law profs Sam Issacharoff and D. Theodore Rave "The BP Oil Spill Settlement and the Paradox of Public Litigation." Here is the abstract:

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
that would otherwise have gone to lawyers and other litigation costs to
fund claimants’ recoveries. 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 superior. We offer some hypotheses for why this might be the
case. Our 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 we
analyze 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.

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