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BP Business Economic Loss Claim Appeal 2015-850: Government Entities & Affiliates Excluded


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 Appeals Process. Links may have been added to assist the reader. The original decision may be found here.

Claimant appeals the denial of its BEL claim. The Claims Administrator (“the CA”) based the denial on its conclusions that Claimant was an Entity excluded from the Economic Class under Section 2.2.5. of the Settlement Agreement (“the SA”), as a Governmental Organization. Because the parties invoke, and argue competing construction of, several pertinent provisions of the SA, they are here set out verbatim:

38.77. Governmental Organization shall mean: (a) the government of the United States of America, (b) any state or local government, (c) any agency, branch, commission, department, or unit of the government of the United States of America or of any state or local government, or (d) any Affiliate of, or any business or organization of any type that is owned in whole or at least 51% in part by the government of the United States of America or any state or local government, or any of their agencies, branches, commissions, departments, or units.

38.3. Affiliate means with respect to any Natural Person or Entity, any other Natural Person or Entity that directly, or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such Natural Person or Entity.

38.65. Entity shall mean an organization or entity, other than a GOVERNMENTAL ORGANIZATION, operating or having operated for profit or not-for-profit, including a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture or an unincorporated association of any kind or description.

Although the CA’s successive denial notices never specified which of the various types of Governmental Organization of §38.77 the CA considered to represent, BP argues only that Claimant qualifies as an “Affiliate,” principally of the State of Louisiana.

As a threshold argument, Claimant contends that it could not be an Affiliate of either government because an affiliate has to be an “Entity” under §38.3 (the “Natural Person” alternative not being implicated) and §38.65 says an “Entity” can’t be “a Governmental Organization.” The panelist does not accept that construction of the terms, and his reasons for doing so parallel those concisely expressed by BP in its Supplemental Memorandum, which he hereby adopts:

Claimant ignores that the definition of “Governmental Organization” expressly includes an Affiliate “of the United States of America or any state or local government, or any of their agencies, branches, commissions, departments, or units.” Id. at § 38.77(d). Thus, the definition of Governmental Organization expressly applies the definition of Affiliate to various governmental bodies, even though the term Affiliate, standing alone and without its use in the definition of Governmental Organization, would not apply to governmental bodies. Claimant’s argument would render the use of the term Affiliate in the definition of Governmental Organization entirely meaningless. As multiple Appeal Panel decisions have found, a claimant that is controlled by a federal, state or local government is a Governmental Organization under the Settlement Agreement and is excluded.

Turning to the more substantive issue of the character of an Affiliate, this panelist understands the meaning and interaction of the referenced provisions of the SA to be, as applicable to this appeal, that is due to be classified an Affiliate of the State of Louisiana and/or the if it is “controlled by” either or both. (The panelist rejects the construction of § 38.77(d) which puts forth as part of its argument, and at least one other panelist appears to have adopted in the past, whereby for an Entity to be an Affiliate, it has to be owned (or controlled) “at least 51% in part” by a government.)

The only basis BP cites for recognizing Parish control over Claimant is that the largest source of funding comes from an ad valorem tax on property in the Parish. submissions demonstrate, however, that the Parish Council certified on December 3, 2008 that the citizens of the Parish had voted at a special election held November 4, 2008 for the benefit of “beginning with the year 2010 and ending with the year 2019.” The tax revenues are collected by the Parish, but then remitted by it to with only cost of collection withheld. The Parish has no say in how spends the funds and they will flow to for use as it sees fit (subject to State controls, as discussed hereafter) until at least 2019. Therefore, the consolidated Government does not exercise any meaningful control over Claimant.

With respect to the relationship between the State of Louisiana and Claimant the following facts are relevant: Claimant provides services to the elderly residents of and was created to fulfill the State of Louisiana’s responsibilities under the Federal Older Americans Act. Combining the revenue Claimant receives with the funding it receives from the State, 96% of 2010 revenue came from public sources.

In the Independent Auditor’s Report to Board of Directors for the year ended June 30, 2010, this informative history and statement of status was presented: The statutory authorization for parish councils on aging is found at La.Rev.Stat. §46:1606 et seq. §1604 commences, “It shall be the duty of each parish voluntary council on the aging [followed by a long list of prescribed duties].” §1605 provides, in pertinent part:

A. The functions of each parish voluntary council on the aging shall comply with the objectives of state laws and shall be governed by the policies and regulations established by the [Governor’s Office of Elderly Affairs] and upon review and recommendation of the Louisiana Executive Board on Aging as provided in R.S. 46:934.                                                                                                                                      ·

B. The office, with approval of the governor, and upon review and recommendation of the Louisiana Executive Board on Aging, may revoke the charter of any parish voluntary council on the aging for noncompliance with the provisions of this Chapter or the policies, regulations, or amendments thereto established by the office. . . . Upon revocation or surrender of the charter, a parish council shall cease to function under the provisions of this Chapter.

The panelist is persuaded by the totality of the circumstances of the creation, mission, funding, state oversight, and potential dissolution by the state, of that is properly deemed an Affiliate of the State of Louisiana and, therefore, excluded from the Economic Class.

Appeal denied.

[Editor’s Note: But see BP Claim Discretionary Review: Claimant not excluded as government affiliate]

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