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BP Business Economic Loss Claim Appeal 2015-1722: Reallocation of landlord’s rent revenue permitted by Policy 495 (decision affirmed)


The following is an Appeal Panel Decision issued pursuant to Section 6 of the BP Deepwater Horizon Economic & Property Damages Settlement Agreement and the Rules Governing the BP Appeals Process. Links may have been added to assist the reader. The original decision may be found here, as well as a glossary of BP Settlement terms.

Claimant, a commercial landlord, appeals the decision of the Settlement Program denying his BEL claim due to a failure to establish causation under the Exhibit 4B formula in the Settlement Agreement.

In this case, Accounting Review made adjustments to the months in which revenue was considered as received. These adjustments were made based on details provided by the claimant regarding lease terms and transaction information and resulted in the Claims Administrator allocating rent payments to months other than when it was received. Claimant alleges it was improper for the Accountants to move revenue from the month it was received since the entries at issue did not constitute an “error” as defined under Policy 495. According to claimant, the correction of “errors,” as delineated in 495, is the only basis for the Settlement Program to unilaterally adjust revenues as they were in this case. Claimant further avers that, had the revenue entries not been altered, causation under 4B would have been satisfied.

BP counters that 495 provides justification for the measures taken by the accounting vendors to correct the mismatch of revenue and expenses in this case.

This appeal presents some vexing issues with support for the arguments of both sides to be found within the text of 495. BP relies on the following language in 495:

“Contemporaneous P and Ls submitted by the claimant will be restated if, in analyzing and processing a claim, the CSSP Accounting vendors identify either an error (as previously defined) or a mismatch of revenue and variable expenses which can be explained and supported by appropriate documentation. If matching issues remain after such restatements, revenue and/or variable expenses will be allocated as per one of the methodologies set forth in Attachments B through H”.

Claimant is correct that the entry of rental income in what is arguably the wrong month does not constitute an “error” as that term is defined in 495. However, the recitation in the Policy that P and Ls may be restated if the Accountants identify either an error, OR a mismatch of revenues and expenses, provides the Program the discretion to move revenue where warranted even outside the scope of an “error”. There are numerous statements of support in the text of 495 for the exercise of the Accountant’s discretion and this discretion was warranted in this case. It is true, as claimant suggests, that several panel decisions have recognized the Claims Administrator is not required to make accounting adjustments outside the scope of an error. Nevertheless, there is still a sufficient basis within the body of 495 to support the Accounting Team’s discretion to move revenue where it is warranted.

Accordingly, this appeal is dismissed and the Settlement Program’s decision dismissing this claim is affirmed.

Editor’s Note: Section 4.3.8 of the Settlement Agreement, 5th Circuit precedent, Settlement Program Appeal 2015-1694 (issued concurrently with the instant appeal), as well as other appeal panel decisions regarding the “claimant friendly” nature of the Settlement Program, seem to be at odds with this decision.

The Settlement Agreement requires Claims Administration vendors to “faithfully implement and administer the Settlement, according to its terms and procedures, for the benefit of the Economic Class.” Claimants are members of the Economic Class, not BP.

The Settlement Agreement further states that “Claims Administration vendors shall evaluate and process the information in the completed Claim Form and all supporting documentation under the terms in the Economic Damage Claim Process to produce the greatest economic damage compensation amount that such information and supporting documentation allows under the terms of the economic damage claim framework.”

Finally, Section 4.3.7 of the Settlement Agreement reads “The Settlement Program, including the Claims Administrator and Claims Administration Vendors, shall use its best efforts to provide Economic Class Members with assistance, information, opportunities and notice so that the Economic Class Member has the best opportunity to be determined eligible for and receive the Settlement Payment(s) to which the Economic Class Member is entitled under the terms of the Agreement.”

If vendors exercise their professional discretion, it should be done in a manner that benefits the claimant, not BP. In the instant appeal, the panelist states that there is “support for the arguments of both sides.” Based on everything cited in this Editor’s Note, a tie should go to the Claimant.

[Editor’s Note II: This appeal panel decision was affirmed by Judge Barbier under Discretionary Review.]

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