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BP Business Economic Loss Claim Appeal 2015-1232: 5 triggers tripped, vendors not required to investigate further


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 appeals the amount awarded it by the Settlement Program (“the SP”) on its BEL claim. Claimant is a charter fishing business operating out of Panama City, Florida. Initially the SP accorded a Compensation Amount of $25,182.09 and an RTP of 2.5, but offset prior VoO payment calculated as $101,371.37. Claimant requested reconsideration of that offset, but not of the Compensation Amount. The SP eventually issued a new Eligibility Notice, correcting the offset amount to $68,388.09, but also revising the Compensation Amount to reduce it to $3,013.13. With a retained RTP of 2.5, Claimant’s award after application of the offset was zero. The SP has stuck with that determination through all of subsequent review requests.

On appeal Claimant says (1) the SP should never have revisited the compensation amount, since Claimant never contested it; (2) the SP erred in applying the AVM methodology to its claim simply on the basis that five of the Policy 495 “triggers” were tripped; and (3) the SP erred in excluding from its “revenue” the amounts of its P&L category “Other Income.”

As to ground 1, the panelist can understand Claimant’s frustration about the reopening of the compensation amount analysis when no one asked for that, but Claimant cites to no provision of the Settlement Agreement, or the protocols and procedures adopted to implement it, which would preclude an across-the-board review when a reconsideration has been requested, and the panelist can think of none.

As to ground 2, the record is clear that five of the Policy 495 eight criteria for identifying mismatched claims were triggered by financial data. Claimant argues that, given the particular and seasonal activity of a charter fishing business, the SP accountants should have given more consideration to context and, in the exercise of due diligence, investigated to see if the tripped triggers were a result of the nature of the business instead of representing a real discrepancy. The panelist cannot accept that as a required approach because Policy 495 was designed after much analysis and input, and is fully court-approved, and to require ad hoc individualized probing behind the causes of an activated trigger (much less multiple triggers) would defeat the purpose of the policy as an objective, self-implementing process.

As to ground number 3, the panelist is concerned enough about the nature of the SP’s investigation and analysis of the nature of the “Other Income” constituents to order a remand for further exploration. The SP excluded “Other Income” from consideration as “revenue,” based solely on the assessment set out in the “Accountant Compensation Calculation Schedules,” at note #6, to-wit:

Other Income: Claimant provided the general ledger for this account from January 2007 to December 2010 in Doc ID Per review of the GL, DWH Accountant notes that this account contains income from the sale of equipment, long-term capital gains, returns, etc. While the annual account balances for this account were included in the Claimant’s taxable income on its federal tax returns, the nature of these transactions do not represent income earned 8/24/15 in the ordinary course of the Claimant’s business. As such, DWH Accountant classified as “Other (N/A).”

Claimant insists that its “other income” was earned in the ordinary course of its business and “there is zero evidence to the contrary.” Document ID [XXX] referenced in note #6, is ambiguous. It purports to be a recapitulation of “Other Income” for each of the years 2007 through 2010, but its item descriptions are subject to interpretation. Granted, a $1,500 entry in 2007 indicates that Claimant “sold 2 boat chairs” to a named individual for $1,500, and another individual “bought pump” for $1,000, and those may well represent “gains or losses from sales of assets” which Policy 328 v.2 says are “typically” excluded from revenue. But those items don’t represent the entire picture. BP seizes on an August 2007 entry labeled “ . . . returned grill,” arguing that it must relate to a refund, but the amount is only $30.00, in the context of other income totaling $2,565.27 for that year, and $10,104.21 for 2008, $10,640.36 for 2009, and zero for 2010. There is the cryptic entry of August of 2008 “ . . . Personal Bills,” in the amount of $8,638.03. There is no indication in the record that the Program accountants asked for an explanation of what that represented. The rest of the entries are referenced either “[XXXXX]” or “[XXXXX]” with the uninformative label “deposit” for each one, and together they total over $20,000.00. (The panelist notes that, although the claim is filed by [XXXXX], who is identified at various points in the record as “CEO” and the captain of its charter boat, the members of the LLC are shown to be [XXXXX] (96%) and [XXXXX] (14%). The panelist can speculate that the Other Income entries referencing [XXXXX] and [XXXXX] concern some sort of payments made by the majority owner. Beyond that, the panelist is left in the dark.) Apart from the conclusions drawn by the accountants described in note #6, there is nothing in the record the panelist has come across (and there are 195 documents listed in the index, many of which are voluminous) to indicate that the SP followed up on note #6 to find out what the various Other Income components represented. Even though some of the “other income” would be due to be excluded as gains or losses from sales of assets, that would not require throwing out the baby with the bathwater. If some substantial portion of the other income would qualify as revenue, Claimant is entitled to have it so categorized. After all, the panelist on de novo review is obliged to carry out the Settlement Agreement’s mandate that a claimant be provided with “the best opportunity to be determined eligible for and receive the Settlement Payment(s) to which [the Claimant] is entitled under the terms of the Agreement.” (Section 4.3.7 of the Agreement) The fact that Claimant included the Other Income amounts “as taxable income on its federal tax returns” shows that at a time when there was no reason for it to misrepresent the nature of the item, it believed they represented income to it.

Accordingly, the panelist rules as follows:

1. The appeal is denied to the extent it challenges the application of the AVM methodology to calculate the Compensation Amount.

2. The appeal is remanded with the instruction that the SP investigate and determine the actual nature and character of the various items included in “Other Income” category, in order to see which, if any, are entitled to recognition as “revenue.” Should any of those items qualify as revenue, the Compensation Amount should be recalculated accordingly.

[Editor’s Note: See commentary on this appeal: “BP claim appeal decision suggests exercise of professional judgment in Policy 495 analysis not required”]

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