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BP Business Economic Loss Claim Appeal 2015-1047: Volunteer fire department not excluded government entity


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 claim by the [XXXXX] was excluded on the basis that claimant was a government affiliate. The Denial Notice Reason states:

“Your organization is a local, state or federal government; an agency, branch, commission, department, unit, or affiliate of a government; or a private organization that is at least 51% percent owned by the government. Under Section 2.2.5 of the Settlement Agreement, you are excluded from the Economic Property Damages Settlement Class as a Governmental Organization and cannot make a claim.”

According to BP, this denial was correct based on the Settlement Agreement’s definition of an “affiliate” which references:

“any other Natural Person or Entity that directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with such Natural Person or Entity.” See 38.3 of Settlement Agreement

In further support of its position, BP points out that firefighters perform an important public function and receive state funding to perform their duties. Additionally, the firefighters are entitled to receive certain state benefits, such as compensation for death or disability suffered in the line of duty. Further, appellee suggests the state exerts significant control over claimant by setting forth specific requirements that an entity must satisfy to be approved as a volunteer fire department.

Appellant, on the other hand, points to Ala. Code (1975) 9-3-17 (a) which states:

a) The term “volunteer fire department” shall apply to and be used to define an organized group of area residents who meet the following requirements, personnel, training and equipment:

1) The group shall be organized and incorporated under the laws of the State of Alabama as a nonprofit organization or as an authority of a legal subdivision.

Claimant has established herein that it is organized as a nonprofit organization and not as an authority of a legal subdivision. See By Laws which state “The Corporation shall be a non-profit organization.” Additionally, a letter in the file from the Alabama Attorney General reiterates the significance of the distinction. The AG’s opinion states:

“Volunteer fire departments may be organized in different ways…volunteer fire departments seeking certification by the State Forestry Commission must be incorporated nonprofit organizations or an ‘authority’ sanctioned by a legal subdivision… An entity incorporated under Section 9-3-18, however, handles its own financial matters, but may receive funding from the state, counties, municipalities and other public entities.” See Exhibit B attached to claimant’s Reply Brief.

Moreover, the Claimant is not controlled by the state and control is the most important criterion in determining whether an entity qualifies as a government entity or affiliate. In the instant case, Claimant not only handles its own financial matters but the By Laws make clear that the entity is directed by its own Board of Directors and the Fire Chief. These Board duties include making necessary payments to assist in its primary function of fire protection, managing the affairs of the entity, receiving funds and determining where they should be deposited. The Fire Chief is responsible for planning the operations and directing all resources. The state plays no part in the selection of Directors or the Fire Chief.

In sum, there is no indication the state exercises any control over this volunteer department. Further, claimant effectively refuted the notion that the organization is somehow controlled by the government because the fire department has to adhere to certain regulations promulgated by the state. In its brief, Claimant listed numerous vocations subject to some state regulations but who are still not a state agency or affiliate, including architects, chiropractors, professional engineers, cosmetologists and many others. In fact, virtually all of the criteria referenced in BP’s brief are not determinative with respect to the threshold issue in this case. Entitlement to benefits, performing a public function and adherence to regulatory schemes do not establish that an entity is controlled by the state.

There is a finding herein that the Claimant is not a government entity or affiliate. Accordingly, the denial of this claim is overturned and the matter is returned to the Settlement Program for proper assessment of the claim under the appropriate framework.

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