Decision looms for Gulf Coast shrimp processors


SeafoodSource staff

Published on
October 28, 2012

Gulf Coast shrimp processors face a difficult decision this week that could make or break the region’s entire shrimp industry. Claims for damages related to the 2010 BP oil spill were consolidated into a class-action settlement, and the deadline to opt out of the settlement is 1 November. However, a hearing to consider motions objecting to the fairness of the settlement is not until 8 November. Shrimp processors in the region can either reject the class-action settlement and possibly face further delays in compensation, or remain part of the settlement and accept its terms, which processors claim are less favorable terms than other seafood businesses.

 All lawsuits related to damages from the spill were consolidated before one court, and negotiations between BP and plaintiffs’ attorneys led to a settlement agreement. The government closed the Gulf Coast Claims Facility, and a court-supervised settlement program, which converted all claims to a class action, began in June 2012.

 “We find ourselves back to step one,” said Eddy Hayes, council for the American Shrimp Processors Association. “We’ve gone through an extensive educational process with BP, its accounting firm and the Gulf Coast Claims Facility to help each one understand the nature of the shrimp processing industry. Now, those efforts have been totally thwarted.”

 The court-supervised process has caused all negotiations to cease, even those in progress and outside of the court system.
“Even though we purposefully avoided litigation, we’ve been forced into the class-action settlement agreement that uses a simplified accounting model that doesn’t allow for the complexities of the seafood industry,” Hayes said.

 The class-action settlement acknowledges the damages incurred by shrimpers, commercial fisherman and seafood vessels with a special Seafood Compensation Program but then places the processors who buy the product from the boats into a separate compensation category.

 “Notably excluded from the Seafood Compensation Program are various key links in the seafood supply chain, namely docks, processors, distributors and packaging supply businesses,” said David Veal, executive director of the ASPA.
Processors who used their inventory to meet demand in 2010, anticipating reimbursement from BP, have now found their credit lines slashed.

 “Banks look at a processor’s balance sheet, see less collateral and thus approve less credit,” Veal said. “A business can’t get credit based on the assumption that BP is going to make them whole eventually. Processors are trying to rebuild inventory and meet current demand with less operating cash and less credit.”

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