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BP Business Economic Loss Claim Appeal 2016-515: Entity was in existence on April 20, 2010


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.

This Claimant is a sporting goods store which is located in Prairieville, Louisiana (Zone D). Its Business Economic Loss claim was reclassified by the Claims Administrator to that of a Start-Up Business Economic Loss without further comment. Claimant’s counsel promptly sought an explanation, without success. Shortly thereafter, a Denial Notice issued containing the following explanation:

“You submitted documents indicating that your business’ operating history commenced on or after April 20, 2010. The Settlement Agreement and Claims Administrator Policy 362 require that your business’ operating history commence before April 20, 2010 to be eligible to receive compensation under the Start-Up Business Economic Loss or Failed Start-Up Business Economic Loss frameworks.”

Claimant then sought Re-Review. That request was rejected with the following comment:

“We have reviewed your Request for Re-Review of your claim based on your request for reclassification from Start-up to BEL. The additional documentation was reviewed, and it was determined that the claim was appropriately reclassified as a Start-up claim. Because the commencement date of the newly established entity was after April 20, 2010, the original determination remains unchanged.”

Claimant’s Request for Reconsideration was likewise unavailing.

On appeal, Claimant’s argument is simple: there is no “newly established entity.” The record reflects that Claimant was formed as a limited liability company pursuant to Louisiana law as documented by Articles of Organization filed with the Louisiana Secretary of State on December 18, 2006. It was organized by [XXXXX]. The record further reflects that on September 21, 2010, [XXXXX], presumably his wife, transferred all of their right title and interest in and to the LLC to [XXXXX]. Three days later, notices confirming these changes were recorded. Significantly, no change in the address or nature of the business was made. The entity remains in good standing.

Claimant concludes by asserting that ownership of the entity has remained within the family since its organization in 2006 and the fact that its tax identification number changed when ownership was transferred from father [XXXXX], does not affect the analysis because the claim is in the name of the entity, not an individual. Nothing in the Settlement Agreement, it contends, defines a “business” or an “entity” in terms of its tax identification or employer identification number.

In reply, BP argues that the key fact here is the change in ownership of the entity. It places great significance on the fact that, prior to the change in ownership, the entity’s business income was reported on the father’s individual income tax return under his social security number and after the sale, it was reported on that of the son. According to BP:

“As the owner of the business now filing the claim did not own the business at the time of the Spill, Claimant does not qualify for compensation under Exhibit 7 and Policy 362. Accordingly, the Settlement Program was correct in denying the claim.”

Settlement Agreement Exhibit 7 provides the framework for evaluating Start-Up Business claims. It defines a Start-Up Business as a “claimant with less than eighteen months of operating history at the time of the DWH Spill.” To clarify the definition of operating history, the Claims Administrator issued Policy 362 v. 2: Business Economic Loss Claims: Operating History of and Definition of Start-Up Businesses. That policy statement provides:

“For purposes of inclusion in the Start-Up BEL framework, the Claims Administrator will determine a claimant’s operating history based on when the claimant began doing business or operating in the Gulf Coast Areas or Specified Gulf Waters. Consistent with Section 1.2 of the Settlement Agreement, the Claims Administrator’s analysis of whether a business was doing business or was in operation will be based on the totality of circumstances involving the claimant’s business and will include a focus on when the business began to a) sell products in the Gulf Coast Areas or Specified Gulf Waters, b) regularly purchase Seafood harvested from Specified Gulf Waters in order to produce goods for resale, c) perform its full time services while physically present in the Gulf Coast Areas or Specified Gulf Waters, d) own, operate or lease a vessel that was Home Ported or landed seafood in the Gulf Coast Areas, or e) incur substantial costs or expenses of a nature indicative of the actual start-up of business operations. Only claimants that can establish an operating history, in accordance with this analysis, that commenced before April 20, 2010 will be eligible for compensation under the Start-Up BEL framework. For Multi-Facility Business claimants that elect to file separately for each individual Facility, the Claims Administrator will perform this analysis on each Facility included in the Multi-Facility Business.”

As above noted, this Claimant entity was formed on December 18, 2006. It has operated continuously since that time offering the same merchandise to its customers at the same location. The fact that ownership of the entity was conveyed from father to son after the Spill is of no moment in the view of this panelist. Unlike the facts found by the supervising District Court in the appeal involving [XXXXX], Claimant was in existence and in operation well in advance of the date of the Spill.

For the foregoing reasons, this Claimant appeal is sustained. The denial is therefore overturned and the claim is remanded to the Claims Administrator with instructions to process it as a Business Economic Loss claim.

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