Court Has Inherent Authority to Supervise CSSP, Including Sanctioning Attorneys for Ethical Violations and Misconduct

On June 2, 2016, the U.S. Court of Appeals for the Fifth Circuit addressed another matter of alleged attorney misconduct in a Deepwater Horizon claims case and the District Court’s authority to impose sanctions for misconduct. This controversy also involves former FBI Director Louis Freeh, who was designated a Special Master by the court when allegations of impropriety surfaced involving Andry Lerner, LLC, a firm that represents claimants in the “Court-Supervised Settlement Program” (CSSP). The Fifth Circuit was asked to review the District Court’s sanction of attorneys after determining that the lawyers violated the Louisiana Rules of Professional Conduct (LRPC).

BP funded this administrative settlement program to address another set of specific claimants for oil spill damages. Two CSSP lawyers formerly represented CSSP clients before joining the CSSP staff, and they referred these clients to other attorneys in private practice. These lawyers paid referral fees of several thousand dollars to one of the new CSSP lawyers, and Freeh was asked by the court to investigate these payments. He concluded that these lawyers were guilty of misconduct, and the trial court issued sanctions disqualifying these attorneys from further participation in the CSSP program.

The Fifth Circuit reviewed the sanctions and affirmed the District Court’s determination that the lawyers violated the LRPC, including aiding and facilitating the payment of improper referral fees to Sutton and by lying during the investigation. Its ruling was based upon its conclusion that the District Court acted within its inherent authority to supervise the CSSP settlement program and did not abuse its discretion in imposing the sanctions.