Tampa, Florida


Email Tom Young Tom Young on LinkedIn Tom Young on Twitter Tom Young on Facebook Tom Young on Avvo
Tom Young
Tom Young
Attorney • (813) 251-9706

BP Business Economic Loss Claim Appeal 2015-1527: “Business on verge of commencing operations” qualifies for start-up


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 denial of its Start-Up BEL Claim.

This Appeal turns on a vexing issue that has come before this Panelist on a number of occasions: What is the threshold for qualifying as a Start-Up Business?

A review of the Settlement Agreement offers some guidance. Exhibit 7 defines a Start-Up Business as one with “less than eighteen months of operating history at the time of the DWH Spill.”

At the outset, this Panelist rejects Claimant’s contention that this language does not require that a business must have commenced operations prior to the Spill. Claimant suggests that the only criteria is that a business have less than eighteen months of operating history at the time of the Spill, regardless of when it commenced operation. Under Claimant’s interpretation, a business that wasn’t even conceived prior to the Spill would qualify. Adopting Claimant’s interpretation would allow a business to be created after the Spill solely for the purpose of making a DWH claim. Surely that was not the intent of the drafters of the Settlement Agreement.

Further guidance can be found in Policy 362, which read in its original form as follows:

“For purposes of inclusion in the Start-Up framework, the Claims Administrator will define operating history as the date a Start-Up business begins incurring revenues or expenses, whichever is more beneficial for the claimant. If a business can establish that it incurred Start-Up expenses before April 20, 2010, it will be eligible for compensation, even if it did not generate revenue before April 20, 2010.”

When the instant Claim was initially processed, the above version of Policy 362 was in effect.

Claimant is the entity that owns a restaurant in New Orleans. The restaurant did not generate revenue prior to the Spill. However, Claimant provided documentation that it had incurred expenses, and undertaken considerable actions, in connection with starting up its business. Specifically, the Claimant provided a copy of a $2,500 check payable to an attorney endorsed on April 13, 2010. A portion of the payment covered the fee for reviewing a Letter of Intent related to a lease for space to operate the restaurant. Claimant contends that the time spent locating space for the restaurant, negotiating the terms of the lease, drafting the Letter of Intent, and paying an attorney to review the Letter of Intent satisfies Policy 362.

Apparently, the Settlement Program agreed, as an Eligibility Notice was issued on July 31, 2013. Following the issuance, Claimant requested a reconsideration, contending that certain expenses had been misclassified.

While this reconsideration was pending, Policy 362 was revised to read as follows:

“Consistent with Section 1.2 of the Settlement Agreement, the Claims Administrator’s analysis of whether a business was doing business or was in operation will be based on the totality of circumstances involving the claimant’s business and will include a focus on when the business began to . . . incur substantial costs or expenses of a nature indicative of the actual start-up of business operations.”

It should be noted that the Active Date of this Policy is 4/23/13 and that the Policy Impact is “All Claims Greater than Active Date.” This Panelist considers that term to be ambiguous. For instance, does version two of Policy 362 apply only to claims filed after 4/23/13, or does it apply to any claims still pending as of 4/23/13?

Interestingly, in March of this year, Claimant sent an email to the Settlement Program asking for clarification. The response reads: “It [the phrase ‘All Claims Greater than Active Date’] refers to all claims filed after the active date [4/23/13].”

Policy 362 is a “Claims Administrator Decision.” As such, neither version is binding on this Panelist. That said, this Panelist is inclined to agree with Claimant that the revised version of Policy 362 cannot be applied retroactively to this Claim. Nevertheless, this Panelist finds that Claimant satisfies the criteria set forth in either version of Policy 362.

The obvious spirit behind the Start-Up criteria is to ensure that only businesses that had begun operating prior to the Spill (though for less than eighteen months), or those business that were on the verge of commencing operations, be compensated.

In the instant matter, it is clear that Claimant had taken significant steps towards commencing operations. Claimant had searched for a location for its restaurant, negotiated a lease for space to operate the restaurant, and paid an attorney $2,500 to review a Letter of Intent to lease. These actions satisfy the Policy 362v1 criteria that “a business . . . establish that it incurred Start-Up expenses before April 20, 2010.” Further, these actions satisfy the “totality of circumstances” criteria set forth in Policy 362v2.

In light of the above, this matter is remanded with instructions to the Claims Administrator to process the Claim as a Start-Up BEL.

Leave a Comment

Have an opinion? Please leave a comment using the box below.

For information on acceptable commenting practices, please visit Lifehacker's guide to weblog comments. Comments containing spam or profanity will be filtered or deleted.