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TribBlog: The Spillover Effect

The oil spill has so far bypassed Texas, but Houston could still see a big impact — in the courtrooms.

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The oil spill has so far bypassed Texas, but Houston could still see a big impact — in its courtrooms. In July, the Judicial Panel on Multidistrict Litigation, where spill class-action lawsuits are currently being collected, will decide whether the cases will be heard in Houston, or in another Gulf state. BP, naturally, is pushing for Houston, an oil-friendly town whose nearby beaches didn't get coated. The plaintiffs — fishermen and others devastated by the spill — mostly want the cases to be heard in Louisiana.

If they come to Houston, it would be quite a spectacle — reminiscent, perhaps, of another energy-law bonanza not so long ago.

"I think an event like that would be similar to Enron in 2001, when a number of corporations with divergent interests represented by law firms from across the country converged on Houston," said Jeff Nichols, a Houston-based partner with the law firm Haynes & Boone, LLP.

Houston will see plenty of legal wrangling in any case. The major oil companies — including BP, Transocean, Halliburton and Anadarko — have their U.S. or global headquarters in the city. They're all trying to blame each other, so many lawyers will be needed to sort it out. This week, according to Bloomberg Businessweek, the federal government filed a motion in the Houston-based U.S. District Court for the Southern District of Texas to stop Transocean's efforts to limit its spill liability to $27 million. 

But Houston's top oil and gas lawyers face a big and painful irony: According to Nichols, many of them will have to sit out the proceedings due to conflicts of interest. (His firm, Haynes & Boone, is among those currently on the sidelines.) A large number of companies are involved in the spill, and firms often have relationships with several of them. "Conflicts can be waived in certain circumstances," Nichols said, but this spill is so gargantuan and complex as to make this unlikely. 

With dark-suited lawyers descending from Washington and New York, does that mean a potential boon for restaurants and hotels? During the Enron debacle, lawyers (and journalists) arrived in droves; Nichols recalled a time of booked hotel rooms, busy copy centers and technology consulting firms engaged to help review data.

But Enron did not provide quite as much of a business bump as it would appear, noted Stephanie Haynes, president of the Hotel & Lodging Association of Greater Houston. Thus, BP might not either. Rooms booked during the Enron trial accounted for only a small fraction of Houston's occupancy, averaged over a year. Also, the collapse of Enron was devastating to hoteliers, said Randy McCaslin, of the Houston office of PKF Consulting (which specializes in the hotel and tourism industry), because energy traders stopped traveling to the city. BP, McCaslin noted, might have to resort to cutbacks after paying for the Gulf disaster — which, by the way, is far from over.

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