BHP Samarco deal strained after class action firm rewrites contracts with claimant victims

A class action law firm has told more than 600,000 claimants they shouldn’t sign on to a compo plan set up by BHP and the Brazilian government over the fatal Samarco dam collapse.

A Brazilian farmer walks through an area devastated by the collapse of Samarco's iron ore waste reservoir. Picture: AFP

Class action law firm Pogust Goodhead is rewriting contracts with more than 600,000 claimants as it urges them not to sign up to a $45bn compensation scheme set up by BHP and the Brazilian government over the fatal Samarco dam collapse.

The move by London-headquartered Pogust Goodhead comes a fortnight after the English High Court started hearing what has been touted as a $70bn class action against BHP.

The Brazilian settlement threatens to blow a hole in the number of claimants eligible for any payout if Pogust Goodhead succeeds and the British case goes against BHP.

In a letter to its Brazilian lawyers this week, Pogust Goodhead said it was updating the terms of its contracts with all clients “to reflect current case developments and ensure all aspects are ­covered”.

The law firm’s founder, Tom Goodhead, has urged claimants not to sign waivers in the wake of BHP reaching a settlement with Brazilian authorities.

The settlement, thrashed out over years of negotiations on adequate compensation, was finalised in the days leading up to the start of the British court case over the 2015 dam collapse.

Pogust Goodhead founder Tom Goodhead.

Pogust Goodhead has written to its Brazilian lawyers, asking them to ensure their clients sign off on the contract changes.

“It is extremely important that all of our customers confirm this document … we suggest that, where possible, you meet with your clients and guide them through this process,” it said.

Mr Goodhead, the law firm’s chief executive, declined to discuss the contract changes but said he would continue to highlight the risks to claimants of signing up to the Brazil settlement.

“Pogust Goodhead does not comment on confidential and privileged legal advice provided to its clients or lawyers with whom it works,” he said.

“Pogust Goodhead will not however, be intimidated by BHP’s campaign of lawfare from highlighting the risks claimants in England face from participating in a settlement scheme negotiated by BHP without the claimants’ participation and in which a vast majority of benefits go to the Brazilian government and states.”

The settlement involving Samarco and its co-owners BHP and Vale is expected to see direct and indirect benefits flow to about 500,000 Brazilians and limit BHP’s exposure to the British lawsuit and legal action in other jurisdictions.

Brazilian municipalities hit by the failure of the Fundao tailings dam at the Germano iron ore mine were given 120 days to confirm they accept the settlement signed in the capital Brasilia on October 25, and in doing so give up rights to pursue legal action in other jurisdictions.

The Pogust Goodhead client list includes municipal councils, businesses, community groups as well as individuals hit by the dam collapse that killed 19 people, devastated the town of Bento Rodrigues and other communities, and caused environmental damage along the Doce River.

Pogust Goodhead has also taken to Facebook to recommend its clients seek legal advice before signing the Brazil agreement.

The terms of the agreement between BHP, Vale and the Brazilian government stipulate that those who opt to receive compensation in Brazil are ineligible to participate in Pogust Goodhead’s class action.

Pogust Goodhead labelled the Brazilian agreement a desperate attempt by BHP “to avoid being held accountable in court” and cast doubt on how much direct compensation would flow to individuals and communities.

An aerial view in 2015 of the destruction to a village caused by the Samarco dam burst. Picture: AFP

Under the settlement, 100bn reais ($26.5bn) will be paid directly to public authorities over 20 years. Another 32bn reais is earmarked for remediation and compensation measures, with individuals and small businesses hit by the dam collapse set to get 30,000 reais per person.

Brazilian Attorney-General Jorge Messias said those who signed on would be opting for the Brazilian justice system.

Connecticut hedge fund Gramercy revealed in its December quarter strategy outlook that it had created a “supplemental facility” for Pogust Goodhead on top of a $US550m ($839.3m) litigation funding loan.

Gramercy, led by chairman Mohamed El-Erian and managing partner Robert Koenigsberger, said the supplemental facility would provide the law firm with working capital to fund costs associated with its portfolio of cases in Brazil, including the case against BHP.

In documents filed with the British High Court in August, Pogust Goodhead estimated its legal fees for the Samarco trial at $US325m. BHP, represented by Slaughter and May, estimated its legal bill at $US140m.

Originally published as BHP Samarco deal strained after class action firm rewrites contracts with claimant victims