BP is not a single entity. Determining which part or parts of the BP empire had to join would largely be a function of those entities that were participating in the Deep Horizon litigation. It need not be ugly or wrong. Agreements, such as the settlement, would likely remain in place. What is an agreement and what isn't would likely involve a great deal of time to determine.
It also isn't as impossible as you might think it would be. BP faces claims from its own shareholders, from states, from many individuals, banks, corporations and the like.
BP, the applicable parts, are probably worth $250 billion dollars on a good day, the stock valuation. It has a net income of 20 plus billion dollars a year, its production capacity and its reserves even in the United States. There would be numerous buyers.
While a chapter 7 (liquidation) might be possible, it is hardly likely given the value and income of the companies involved. That means it would likely be a chapter 11 reorganization type filing. Assuredly the many creditors and creditor groups would need to be represented by counsel. In this case applications for representation would be required and court approval from a new federal judge would be involved, a federal bankruptcy judge.
Likewise, claims would be filed just as they've been filed in the Class action and those same forms would likely be the source of those claims. This would be a daunting task for the attorneys but all of the basic information is already developed.
A chapter 11 would allow BP to redesign its method of satisfying debts through a plan based on the net value of the company; so why not expect it?
First, while the claims are liable (federal, state, local governments; individual and corporate) to form a substantial part of the equity of the companies under the BP banner involved in the litigation; they should fall short of the dollar number necessary to completely undermine the company. I start to say "far short" but in truth, the payment of all of these claims will be a burden on the company that would challenge any company and many a government.
Second, the day that bp files bankruptcy, it loses control of its own destiny. BP can file a plan or reorganization, by way of example, but the court can agree or disagree with the plan and the creditors in time can file their own plans. While BP could "petition" to get out of bankruptcy, those decisions would be made by the judge, not the company.
Third, the case would not change overly much. You would only substitute one judge for another. The BP case is not a series of jury trials, but is largely based on hearings before a judge and will likely involve a series of settlements and mediations; perhaps voluntary arbitrations to resolve these. How do these work?
1) Everyone who is subject to the settlement is compartmentalized. Their claims rise and fall on the settlement. They should involve perhaps 1/2 of the total claims, perhaps something short of a half. Since State claims are included in the excluded claims class, it is likely that the claims outside of the settlement will exceed those within it.
2) The excluded classes are by this time well defined by the statute of limitations and the claim filing requirements. Hence at this point in time, BP has some idea of what they are facing.
Fourth: When a filing is appropriate is another question. One way to handle this would be to enter into a settlement with the various creditors thereby fixing the amount that they were owed and then file a chapter 11 to control the method of payment. This might well involve "bad faith" so it is likely to be avoided in favor of other techniques to limit their liability and restructure payment, such as the current ongoing appeal on the BEL issue-tying income to expenses for purposes of determining causation under the settlement.
Fifth-How claims will be handled outside of the class and outside of bankruptcy is too similar to require a bankruptcy filing. Settlements may be negotiated by class (groups of claims settled with court approval), they may be negotiated individually, they may be resolved through mediation where the parties agree to talk before an impartial person without being bound to a result, they may be resolved through arbitration where the arbitrator decides liability of the parties without recourse to challenge the result. The claims may be resolved by trial, but the court is unlikely to do more than handle test cases by and large. Other claims may face a "politically daunting" trial process where the court would be hostile and the logistical hurdles very high.
Many cases may run through a series of these "sample options". For example, the "opt outs" those whose claims were not adequately handled by the settlement have already been exposed to a class settlement and elected not to participate and to file claims and then suits. Now they are awaiting the resolution of certain test cases before they are potentially put into another class settlement which they will have to accept or reject at their peril. If they do not, eventually they will be set for trial and the evidence developed so far will be supplemented according to the federal pre-trial order, witnesses identified, documents numbered, experts hired for purposes of liability and damages. Many of these issues may well be determined by the case in chief and applied to various cases according to their ability to fall within a class; such as those "moratorium" cases where losses are based on the Federal Government stopping drilling activity in part. I say "in part" because it is unlikely that any case will be determined to be caused sole by these events.
Part of the "whittling down" process will be to limit these cases so that the end result (based on the claims filed) will easily be small enough for BP to handle as a part of their day to day operations. But this is not the only issue facing BP at present and the future remains as uncertain for BP as for anyone else.
