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BP Business Economic Loss Claim Appeal 2015-935: Negative EBITDA disallows failed claim

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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.


Claimant, appeals the original and reconsidered denial of its Failed BEL claim arising out of its Destin, Florida concert business. On both occasions the Program vendors denied the claim on the grounds that under Exhibit 6 of the Settlement Agreement, Claimant’s pre-denial financials showed a negative Earnings Before Interest, Taxes, Depreciation, Amortization and Owner’s Compensation (“EBITDA”) in the available period of operation before May 1, 2010 (up to a maximum of 12 months), disqualifying it from participation in the Program.

Claimant’s counsel forcefully and creatively presents its case on appeal. First, it relies on its retained expert’s report to opine that taking appropriate financials into account, Claimant actually experienced a positive EBITDA of $12, 459.30 before May 1, 2010, but that even if it was negative, the 40 days of operation before May 1 was an insufficient time to assess whether it was on its way to be a successful business. Counsel next embarks on a detailed discussion essentially arguing for the piercing of his client’s own corporate veil under the tort theory of Enterprise Liability or Parent-Subsidiary Liability, in attempt to have the Program consider not only the the Destin business’s financials, but also the financials of its ongoing predecessor entity in Jackson, Mississippi.

Admitting that Claimant filed its own new and separate business entity instruments in Florida and filed separate tax returns, Claimant argues that this was “a mere formality” necessitated by Florida liquor license requirements. It alternatively argues the application of the factors to have considered a single partnership under Uniform Partnership Act. In sum, it avers that if the financials are combined, Claimant would more than pass the positive EBITDA requisites of Exhibit 6 and requests a remand for recomputation of financials of both entities.

While this panelist appreciates the financial position of Claimant’s owner, who undoubtedly was severely affected by the Spill, our limited role is to apply a very hotly contested and detailed Settlement Agreement to the financial facts presented. Section IIIa of Exhibit 6 of the Agreement specifically disqualifies from eligibility those entities showing a negative EBITDA for the period up to 12 months of operation prior to May 1, 2010. No equitable or economic argument can modify that requirement, even if, as here, the 40-day window of start-up operations before May 1 was a very short one. Claimant’s counsel’s admirable legal exposition concerning various theories by which, post-Denial Notice, he attempts to infuse additional financials into the EBITDA formula runs in contravention to Policy 473, which though not binding on this panel is a sound one which this panelist chooses to follow. That Policy prohibits post-Denial submissions of revised financials.

The fact remains that in its Claim submission, Claimant represented itself to be a separate and independent business entity with a single separate physical facility located in Destin, Fl. It cannot now, post-Denial, attempt to transform itself into a different combined entity in an effort to salvage its claim. It was only on that combined basis that Claimant could assert a positive EBITDA, and this panelist, in compliance with its interpretation of the Agreement, cannot in a de novo review allow Claimant essentially a second bite at the apple.

As such, the denial must be affirmed.

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