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BP Claim Appeals: Exhibit 2, Policy 289, Defining Tourism

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Exhibit 2 of the BP Deepwater Horizon Property & Economic Damages Settlement describes what types of businesses the Claims Administrator should consider tourism entities. A business economic loss (BEL) claimant awarded a tourism designation enjoys preferable causation presumptions and compensation multiples (higher RTP). As such, claimants that “provide services such as attracting, transporting, accommodating or catering to the needs or wants of persons traveling to, or staying in, places outside their home community” are, according to Exhibit 2, tourism entities.

Exhibit 2 then goes on to list NAICS codes typically associated with tourism. The Claims Administrator subsequently promulgated Policy 289 – Definition of Tourism to further specify how the tourism designation is to be awarded. Policy 289 is not binding on appeals panelists.

Policy 289 states:

(a) Exhibit 2 provides that “Tourism means businesses which provide services such as attracting, transporting, accommodating or catering to the needs or wants of persons traveling to, or staying in, places outside their home community.”

(b) Exhibit 2 then provides a list of NAICS codes which qualify a claimant for inclusion in the Tourism category. The Claims Administrator finds that the list of NAICS codes is illustrative, not exhaustive.

(c) If the most appropriate NAICS code for a claimant is one of the codes listed on Exhibit 2, that claimant will be considered to fall within the Tourism definition.

(d) If the most appropriate NAICS code for a claimant is not one of the codes listed on Exhibit 2, that claimant may still be considered to fall within the Tourism definition if the Claims Administrator determines in his discretion that the claimant’s business meets the definition outlined in Subsection (a) above.

(e) The Claims Administrator has established a specialized team to assess Tourism issues on a case-by-case basis.

(f) Characterization of a claimant’s business as Tourism vs. Non-Tourism shall be based on the totality of circumstances, including consideration of the business’ activities during the Benchmark Period and the Class Period.

(g) For Multi-Facility Business Claimants evaluated as separate claims for each Facility, the Claims Administrator will evaluate each Facility separately to determine whether it meets the definition of Tourism for purposes of applying the relevant Causation standard and RTP as provided in Exhibit 5 of the Settlement Agreement, notwithstanding what NAICS code may have been assigned to the Entity as a whole.

Class Counsel has issued a supporting memorandum suggesting how appeals panelists should consider the tourism issue:

Toward the conclusion of the negotiations, there was a disagreement about how the “Tourism” Definition that had been negotiated over the previous eight months should be applied. Class Counsel took the position that the introductory definition was controlling, with all of the following NAICS Codes merely illustrative examples. BP, by contrast, took the position that the NAICS Codes listed on Exhibit 2 were exclusive, and that no other business or NAICS Code could be considered “Tourism”.

The compromise, brokered by Judge Shushan, is reflected in the final version of Exhibit 2, which describes the following NAICS Codes as neither illustrative nor exclusive.

Significantly, what was retained in Exhibit 2 is not only the lists of specific types of businesses that are identified under the relevant NAICS Codes, but the Industry Definitions themselves.

So, for example, NAICS Code 447110 is not simply the enumerated examples:

- Convenience food with gasoline stations

- Gasoline stations with convenience stores

- Gasoline with convenience stores

But also includes an Industry Definition of:

“…establishments engaged in retailing automotive fuels (e.g., diesel fuel, gasohol, gasoline) in combination with convenience store or food mart items. These establishments can either be in a convenience store (i.e. food mart) setting or a gasoline station setting. These establishments may also provide automotive repair services.”

With that background, Class Counsel respectfully submit that that the following general rules should apply in determining whether a Claimant or his Employer is treated as a “tourism” business under the Settlement Agreement:

General Rules

1. Where the Claimant (or Employer) is a business that is specifically identified on Exhibit 2, it should be treated as a “Tourism” business, irrespective of what NAICS Code the business may have used for various purposes in the ordinary course of its business.

2. When the Claimant (or Employer) actually used one of the NAICS Codes that is listed on Exhibit 2 on its tax returns, business licenses, or otherwise, for at least some purposes, in the ordinary course of its business, it should be presumed to be “Tourism” – and should be conclusively deemed to be “Tourism” where the business was actually engaged in activities reasonably described in the Industry Definition and/or examples listed.

3. When the Claimant (or Employer) is neither a business that is specifically identified on Exhibit 2 and did not use an NAICS Code that is listed on Exhibit 2 in the ordinary course of its business, then the Claims Administrator should fairly apply the entirety of Exhibit 2 – including the introductory definition of Tourism generally, the Industry Definitions that accompany each NAICS Code listed on Exhibit 2, and the examples that are specifically listed under each NAICS Code listed on Exhibit 2 – to determine whether the Claimant (or Employer) should fairly and reasonably be considered “Tourism”.

4. The Program should be looking at whether the Entity (or Employer) is engaged in substantial business activity that falls within Exhibit 2, rather than attempting to shoehorn a multi-faceted business into a single NAICS Code / description.

So, taking the example of a Liquor Store located on Highway 98 in Destin, Florida, near the beach. Applying Rule 1, the words “liquor store” do not appear on Exhibit 2. Nevertheless, applying Rule 2, if the Liquor Store used an NAICS Code listed on Exhibit 2 in the ordinary course of its business, then it should be presumed to be “Tourism”. In the alternative, applying Rule 3, this Liquor Store clearly “provides services such as attracting, transporting, accommodating or catering to the needs or wants of persons traveling to, or staying in, places outside their home community.” The Program should consider the Liquor Store to fall within the definition of “Tourism” under the totality of the circumstances.

It is important, in applying these Rules, to recognize that a business will often be engaged in activities that crossover / encompass several different types of Industry Definitions, and the inquiry should therefore be focused on whether the Entity (or Employer) in question conducts substantial business activities within the Tourism Definition and the NAICS Codes within Exhibit 2. (i.e., Rule 4)

Scope of the Tourism Definition

While it’s likely fair to say that the Codes listed are “exhaustive”, those Codes, as outlined above, both (i) include Industry Definitions which would encompass additional businesses that are not specifically listed, but which, in light of the general introductory Tourism definition, and the nature of the business, should be treated as falling under one or more of those Codes; and (ii) extend to the businesses that are specifically identified under the Codes, even if, for some reason, the Claimant (or Employer) did not use that specific Code (or Codes) in the ordinary course of its business.

A studio that takes pictures of vacationers or weddings on the beach should be placed in Tourism if it used one of the NAICS Codes identified on Exhibit 2 in the ordinary course of its business. Alternatively, the Program might consider such a business to fall within the definition of “Tourism” under a totality of the circumstances. As an initial matter, that business certainly falls within the general definition of Tourism (“provides services such as attracting, transporting, accommodating or catering to the needs or wants of persons traveling to, or staying in, places outside their home community”).

Assigning a NAICS Code

Where a business is engaged in activities that crossover / encompass several different types of Industry Definitions, the inquiry should be focused on whether the Entity (or Employer) in question conducts substantial business activities within the Tourism Definition and the NAICS Codes within Exhibit 2 – not try to pigeonhole the business into one single NAICS Code. (i.e. Rule 4).

Moreover, in close cases, where the Claimant (or Employer) can fairly and reasonably be classified as a “Tourism” business, Section 4.3.8 (and, to a lesser extent, Sections 4.3.1 and 4.3.7) should favor general application of the Tourism definition in a Claimant-favorable way.

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