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BP Business Economic Loss Claim Appeal 2015-652: Expenses from related parties not necessarily indicative of revenues from same

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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.


This is a BP appeal of a Business Economic Loss award to a Troy, Alabama, based trucking support company. The Notice of Appeal contains a litany of complaints, including assertions that:

(1) the award does not comply with the terms of the Settlement Agreement, including, without limitation, the BEL Framework, Policy 495 and Policy 328;

(2) the Claims Administrator failed to apply the terms of Policy 495, including those concerning matching;

(3) failed to address distortions in contract labor expense;

(4) failed to properly evaluate 2007 invoices for fuel;

(5) failed to resolve questions regarding the proper treatment or exclusion of out-of-zone revenues; and

(6) failed to properly address related party issues.

However, BP’s Initial and Final Proposal memoranda make no mention whatsoever of error assignments (1) through (5). Accordingly, they are considered abandoned. In addition to briefing error assignment (6), BP raised a new issue, asserting that the Claims Administrator improperly treated fuel expense reimbursements received by the Claimant from one of its clients as revenue, specifically during the month of August, 2008.

Rules 9 and 14 of the Rules Governing the Appeals Process limit the issues on appeal to those originally raised by the appellant, in the Request for Appeal form/Notice of Appeal except in certain circumstances not relevant here. Appeal Panel Procedural Rule 8 declares that those rules will be interpreted to limit the issues considered on appeal to those originally raised with reasonable specificity by the appealing party, whether a Claimant or BP, in its original Request for Appeal. Since this new error assignment is unrelated to those recited in BP’s original Appeal Notice, it is rejected.

As above noted, the one complaint BP does pursue is failure of the Claims Administrator to properly address related party issues. It points specifically to line item expenses found on Claimant’s profit and loss statements for “Employee Lease,” “Truck Lease Expense,” and “Rent.” During the same time, it alleges, [XXXXX], another company owned by the same individual which also received compensation from the Settlement Program, recorded income on its profit and loss statements from various leasing operations, including an account called “Employee, inc. – Lease oper.” Given the common ownership, industry and addresses of these entities, BP argues that the Claims Administrator should have inquired whether any of Claimant’s income should have been excluded as the product of non-arms-length related party transactions, in keeping with CAO Approved Policy 328 v. 2.

The claims analyst’s Internal Review Comments state that no related party indicators were found in the documentation submitted by the Claimant. The items referenced by BP reflect expenses, not revenue.

Before proceeding further, this panelist sought input from the Claims Administrator. In due course, a Summary of Review was received. It reported as follows:

“The Claims Administrator submits the following response to the Appeal Panelist’s request for further information in the claim referenced above. Specifically, the Appeal Panelist asked for an explanation of whether the Claims Administrator should have inquired as to whether any of claimant’s expenses should have been excluded as the product of non-arm’s length related-party transactions. The Program Accountants evaluated this claim under Policy 328 v. 2, which addresses related party revenue transactions not conducted at arm’s length. As this Policy is silent on related party expenses, the Program Accountants did not evaluate the claim’s expenses for potential related party transactions.”

This document prompted a supplemental reply from BP in which it contended that the policy permits the analyst to require a Claimant to provide explanations regarding revenue and related expenses, citing a redacted Appeal Panel Decision which so held.

Policy 328 v. 2 is entitled “Business Economic Loss Claims: Non-Revenue Items of Entities.” It provides, in part, that income from related parties which is generated by non-arms length transactions shall not typically be treated as “revenue” when calculating Business Economic Loss claims. The policy does grant the claims analyst discretion to require a Claimant to provide further explanation and/or additional documentation underlying monthly revenue and related expense amounts as may be appropriate.

As above noted, the items seized upon by BP are line item expenses, not reports of revenue. The record in this case contains no evidence that this Claimant received any income from the alleged related party, This BP argument has no factual basis. It is therefore rejected.

For the foregoing reasons, this BP appeal is denied. The award of the Claims Administrator is therefore affirmed.

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