Current legislation limits the amount of economic-related liabilities to be paid by a company on account of an oil spill to $75 million. A move to amend that legislation and raise the liability cap to $10 billion was blocked in the Senate because Big Petroleum, who is responsible for a recent spill has ?iven its word? that it would cover the cost of all damages and clean-up costs deriving from a recent oil spill in an ecologically significant marine area that supports a thriving fisheries and recreation industry and is home to many endangered and threatened marine animals and waterfowl. Big Petroleum? Chairman of the Board made the statement after convening a Special Meeting of the Board and studying videos of the damage taken by film crews.
It is estimated that actual costs of clean up and industry losses could even exceed the $10 billion proposed cap. Meanwhile, other companies involved in the oil spill have now gone to court invoking limits on their liability as provided by law.
While you sympathize with the people, animals and industries affected, as a stockholder in Big Petroleum you are outraged at the decision of the Board of Directors to accept full economic responsibility for the damage when the total is unknown. After all, there is a HUGE difference between $75 million and Billions! And, the Board even voted to pay $25 million for an ad campaign for one state to let tourists know its beaches are clean. Nuts! This liability could wipe out your investment and ruin your retirement and that of other investors, including several pension plans that are heavily invested in Big Petroleum.
(1) What kind of lawsuit would you bring and for what purpose? Explain.
(2) What defense or defenses will Big Petroleum invoke?