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BP Business Economic Loss Claim Appeal 2015-1350: Contract Labor (variable) & Contract Services (fixed)


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.

BP appeals a pre-RTP BEL award of $108,722.51 to a Ft. Myers, Florida anti-aging clinic on two grounds.

First, it argues that the “Outside Services” category was misclassified as Fixed when Claimant admitted that it entailed payments to subcontractors for services, and should thus have been considered variable Contract Labor under the listing in Exhibit 4D. It asserts that Claimant reported this item as variable COGS in its tax returns, and that redesignating it as such would make a pre-RTP difference of $74,097.00 in the award. In reply, Claimant represents that the entirety of this category entailed fees paid to its owners and officers, who were thusly compensated in lieu of salaries. As such, the item was properly considered a fixed Contract Service or owner/officer compensation under Ex. 4D.

In a very close call, this panelist admits that it is often difficult to discern a distinction in the Agreement between Contract Labor (deemed variable) and Contract Services (deemed fixed). Nevertheless, given a palpable explanation by Claimant, and mindful of the great degree of discretion given to the vendors under Policy 361v5, this panelist accepts the fixed classification of this item.

BP’s second assertion questions whether a cross-year adjustment should have been made to Claimant’s financials, arguing that the AVM methodology was not designed to make needed adjustments between years. Claimant’s terse and conclusory response is patently insufficient. However, applying the rules of the designated baseball appeal process, where BP admits that a cross-adjustment would have resulted in only a difference of $21,589.00 in this award, yet makes a final proposal of $10,036.51, the final proposal of Claimant, seeking full affirmance of the $108,722.51 award, comes much closer to reality and must therefore be chosen. No basis exists for the alternative remand sought by BP.

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