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BP Business Economic Loss Claim Appeal 2015-1210: Claimant’s building not an asset


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 paint and wallpaper retailer that was located in Key Largo, Florida, Zone A. Causation is assumed. This is a failed business subject to the claim review framework in Exhibit 6.

A review of the records reveals this business was in existence for 31 years prior to the financial difficulty which forced its liquidation in 2011. Exhibit 6 requires the Vendor Accountants to determine the award by subtracting the Net Liquidation Value from the Total Enterprise Value. The Total Enterprise Value is determined based on the Claimant’s revenue before EBITDA and owner compensation. Then the Liquidation Value of the assets is determined and subtracted from the Total Enterprise Value.

In this claim, the Vendor Accountants calculated that the value of the assets exceeded the total business value before the spill and therefore the Claimant suffered no loss. That calculation is flawed. The Accountants decided to include the value of the land and building location of the business as assets of the business when they are not. The land/building are owned and mortgaged by the individual that owned the business entity and not the business itself. Further, the owner is upside down on the land/building. True, the business paid the mortgage, utilities, upkeep and taxes on the land/building and no written triple net lease was ever executed. The Claimant also listed these expenses as business related on its tax returns and showed the building as an asset. In this panel member’s opinion, none of those facts change the incident of ownership that resides not in the Claimant, rather in the name of the individual that owned both the land/building and business. These are separate legal entities and that fact must be recognized by the Settlement Agreement.

Therefore, this claim is remanded to the Administrator to recalculate the award after removing the value of the land and building from the liquidation assets.

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