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BP Business Economic Loss Claim Appeal 2015-564: Primary business activity controls NAICS code selection


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 filed a BEL Claim for three retail Facilities (gas stations with convenient stores). This Claim involves one of those Facilities.

The Settlement Program denied this Claim (and the other two claims as well), concluding that Claimant’s Entity was excluded under the Oil & Gas Industry exclusion. Based on the record that available to the Settlement Program at the time of its determination, this conclusion was appropriate. However, on appeal, Claimant submitted additional documentation which this Panelist believes would have changed the outcome. Thus, for reasons set forth below, this Panelist overturns the denial.

This Panelist begins with the Settlement Agreement. Section 2.2 sets forth categories of excluded individuals or entities. One of those categories is the “Oil and Gas Industry, as identified in the NAICS codes listed on Exhibit 17.” Section Exhibit 17 is entitled “Oil & Gas Industry Exclusions. In pertinent part it reads as follows:

“Business Entities within the NAICS Code descriptions set forth below are excluded from the class. . . . The Claims Administrator shall determine the appropriate NAICS code for a Business Entity based on his review of . . . and/or (c) other evidence of the business’s activities.”

Policy 480 v.2 sets forth the criteria that the Claims Administrator follows in determining the NAICS Code of an Entity. Although this Policy is not binding, this Panelist finds the Policy helpful in reaching a decision in this matter. Part B is entitled “Appropriate NAICS Code.”

“The appropriate NAICS Code for an Entity shall be the NAICS Code that most accurately describes the Entity’s primary business activities, which are the activities in which the Entity was primarily engaged during the operative Benchmark, Compensation, and Class Periods.” (emphasis added)

Based on the above, the task in the instant matter is to examine Claimant’s Entity’s primary business activities and from that select an appropriate NAICS code. If the code appears on Exhibit 17, the Claim is excluded. If not, the Claim is eligible.

The Settlement Program assigned NAICS Code 424720 (Petroleum and Petroleum Products Merchant Wholesalers) to Claimant’s Entity, which appears on Exhibit 17 as an excluded oil and gas business. As noted earlier, based on the documentation available at that time, this determination was understandable. However, the record now reflects that Claimant, at the entity level, generates approximately 88% of its revenue from retail and about 12% from wholesale. Based on this unrefuted evidence, Claimant’s Entity argues that its primary business is retail. Thus, Claimant contends that its Entity and Facilities should be assigned NAICS Code 447110 (Gasoline Station with Convenient Store), which does not appear on Exhibit 17, hence making the Claimant eligible.

This Panelist agrees with Claimant.

BP first argues that any wholesale activity by the Claimant at the entity level must result in the Claimant being assigned an excluded NAICS code. But the Settlement Agreement language, and Policy 480 v.2, do not support BP’s position. BP next cites a ruling by the District Court in support of its position. In that appeal, Claimant sold BP fuel at certain of its stations and therefore was subject to the BP-branded exclusion set forth in Section of the Settlement Agreement. Claimant argued that it should be able to file claims on behalf of those stations that do not sell BP fuel. But the District Court held that “[t]he analysis, however must be made at the entity level – not on a location-bylocation basis.” Because some of the Entity’s activities included selling BP fuel, the District Court excluded the claim. By analogy, BP points out that even though only some of that claimant’s activities included selling BP fuel, the District Court nevertheless excluded the entire entity. Likewise, BP argues in the instant matter that Claimant’s entire entity should be excluded even though only some of the Claimant’s activities involve wholesale. But BP’s analogy is an “apples and oranges” one.

The BP-branded fuel exclusion (Section reads as follows: “Any Entity selling or marketing BP-branded fuel, including jobbers and branded dealers.” There’s no ambiguity in that language. If the Claimant sells BP fuel, then the claim is excluded. Nor does this provision direct the claims reviewer to any other part of the Settlement Agreement for further instructions on how to analyze the exclusion. On the other hand, the Oil and Gas Exclusion set forth in Section clearly directs the Claims Administrator to proceed to Exhibit 17, which in turn sets forth the process (as interpreted by Policy 480 v.2) for determining whether or not an Entity is an excluded oil and gas business.

Based on a de novo review of the record, this Panelist finds that Claimant is not excluded under the Oil & Gas Industry exclusion. Hence, the denial of this Claim is overturned.

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