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BP Business Economic Loss Claim Appeal 2015-1073: Private prison excluded as government affiliate


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 is a private company that owns and operates a prison in that houses state inmates. The Claims Administrator found to be an excluded affiliate of a Governmental Organization and denied the claim. Claimant appeals.

Section 2.2.5 of the Settlement Agreement excludes “Governmental Organizations” from participation in the class settlement. Section 38.77 defines Governmental Organizations to include any Affiliate of, or any business or organization of any type that is owned in whole or at least 51% in part by the federal government or any state or local government or any of their agencies, branches, commissions, departments, or units. Section 38.3 defines an “Affiliate” as:

“Affiliate means with respect to any . . . Entity, any other . . . Entity that directly, or indirectly, controls, or is controlled by, or is under common control with, such . . . Entity.”

The Claims Administrator has provided a detailed summary of review. In it, the Claims Administrator agreed that Claimant was neither the state or federal government nor an agency, branch, department, commission, or unit thereof. The Claims Administrator also noted that management yielded no evidence or governmental involvement in the selection of the company’s management. However, in defining a Governmental Organization in section 38.77, a key distinction is made in subsection (d). An entity is excluded if it is an Affiliate or, is owned by at least 51% of a Governmental Organization. Thus, regardless of ownership, an entity may still be excluded if it is deemed an Affiliate.

In this claim, the Claims Administrator found that private prison contract such as the one under which Claimant operates are subject to a plethora of statutory restrictions, including:

  • Regulation by the Louisiana Corrections Private Management Act;
  • Continuous oversight by the Louisiana Joint Legislative Committee on the Budget;
  • Monitoring by the Louisiana Department of Public Safety and Corrections as well as local governmental subdivisions;
  • Prohibition from developing or implanting procedures for calculating inmate release or parole eligibility dates;
  • Prohibition from approving inmates for furloughs or work release;
  • Prohibiting private prison contractors from approving the type of work inmates may perform and all proceeds from such work revert to the Louisiana Department of Public Safety and Corrections;
  • State regulation of the discipline that may be imposed on inmates;
  • The same qualified immunity applied to private prison contractors as is enjoyed by employees of the Louisiana Department of Public Safety and Corrections.

Based upon the above, the Claims Administrator determined that Claimant’s ability to manage its own internal corporate affairs was outweighed by the heavy statutory and regulatory controls imposed by the Louisiana Department of Public Safety and Corrections. Claimant’s attempts to draw analogies of its operations to previous panel decisions involving a humane society and a recreational park which this panelist finds to be inapplicable. In both instances, the humane society and recreational park had complete control over their operations without governmental interference. The same cannot be said for the private prison operated by Claimant.

The claim is properly excluded and the appeal is denied.

[Editor’s Note: But see BP Claim Discretionary Review: Claimant not excluded as government affiliate]

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