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BP Business Economic Loss Claim Appeal 2016-10: To “operate” as it relates to facility definition

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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.


I. Background

This Multi-Facility Business Claim comes before this Panelist for the second time. On the first appearance, this Panelist reversed the Claim Administrator’s finding that Claimant was an excluded Oil and Gas Business and remanded this matter to determine whether or not Claimant qualified for an award. On remand, the Settlement Program again denied the Claim, this time on the grounds that Claimant “submitted a claim for a component of [its] . . . business that is not a Facility as defined in Exhibit 5 [Compensation for Multi-Facility Businesses] of the Settlement Agreement and as the Settlement Program defines that term.”

Claimant appeals this second denial on two grounds: First, that the location in question is a Facility, thus making the Claimant an eligible Class Member under Sections 1.2 and 1.2.1 of the Settlement Agreement. Second, and in the alternative, Claimant argues that, even if the location in question is not a Facility, Claimant is still a member of the Economic and Property Damages Settlement Class pursuant to Sections 1.2 and 1.2.4 of the Settlement Agreement and further that it should be deemed to be located in Zone D pursuant to Policy 482.

Claimant’s headquarters is located in Dallas, Texas. Claimant owns an undivided interest in approximately 168 parcels of land located in Louisiana. Claimant contracted with a land management company to manage its Louisiana properties. Claimant paid a fee to [XXXXX] for this service and may have funded some of [XXXXX]’s operating expenses. [XXXXX] leased office space at [XXXXX] Louisiana from the [XXXXX].

II. Is the location a Facility?

Section 1 of the Settlement Agreement defines the Economic and Property Damages Settlement Class as those Natural Persons and Entities defined in Section 1. Per Sections 1.2 and 1.2.1, eligible Entities are “[a]ll Entities doing business or operating in the Gulf Coast Areas . . . that . . . owned, operated, or leased a physical facility in the Gulf Coast Areas.”

Because Claimant filed as a Multi-Facility Business, Exhibit 5’s definition of “Facility” is also relevant: “A separate and distinct physical location of a Multi-Facility Business at which it performs or manages its operations.”

The Settlement Agreement does not define various terms set forth in Sections 1.2 and 1.2.1 and Exhibit 5 – e.g., “doing business,” “operating,” “operated,” “physical facility,” “performs,” “manages.” Consequently, the Claims Administrator issued a series of policies, culminating in the eight page Policy 467.

Policy 467 defines a Facility of a Business Entity as:

(a) A separate and distinct physical structure or premises;

(b) Owned, leased or operated by the Business Entity;

(c) At which the Business Entity performs and/or manages its operation.

The location would appear to satisfy part (a) of Policy 467’s definition.

As to part (b), Claimant acknowledges that it does not own or lease the location. However, Claimant’s position is that it “operates” this location.

Claimant is correct that the phrase “owned, leased or operated” in part (b) suggests that a Claimant need not own or lease the physical structure or premises. Unfortunately, neither the Settlement Agreement nor Policy 467 define “operate”. Webster’s Dictionary uses the word “control” in several of its definitions – e.g., “to use and control (something) or to have control of (something, such as a business, department, program, etc.) Linking “control” with “operate” in this context seems reasonable in that “control” is an essential and common element of “owned” or “leased.”

Hence, the inquiry is whether or not Claimant exercised control over the location sufficient to satisfy part (b) of Policy 467’s definition of Facility. As noted above, the location was leased by an independent contractor, not by the Claimant. Hence, legal control rested with not Claimant. Further, Claimant does not maintain any employees at the location. Nothing in the record suggests that anyone other than [XXXXX] controlled the location. As such, this Panelist finds that Claimant does not satisfy part (b) of Policy 467’s definition.

As noted above, Claimant has filed as a Multi-Facility Business. Exhibit 5 (Compensation for Multi-Facility Businesses) defines Facility as “[a] separate and distinct physical location of a Multi-Facility Business at which it performs or manages its operations.” Nowhere in Exhibit 5’s definition is reference made to “owned, leased, or operated.” Essentially, Exhibit 5 creates a two-part rather than a three-part test (Policy 467) for defining Facility. Hence, Claimant could argue that part (b) of Policy 467 inappropriately modifies the Settlement Agreement’s plain language and that Claimant’s failure to show that it owned, leased or operated the location is of no moment.

As such, this Panelist also reviewed the record to determine whether or not the location satisfies part (c) of Policy 467, which corresponds to the second part of Exhibit 5’s two-part test. Part (c) of Policy 467’s definition requires that the “Business Entity performs and/or manages its operations” at the physical structure or premises. In contrast to its lack of definition for the terms set forth in part (b), Policy 467 provides a definition for “performs and/or manages.” An Entity “performs” its operations at a location if “it has employees or agents who perform their work at that location and/or it provides services . . . at that location.” An Entity “manages” its operations at a location if “it has employees or agents at the location . . . who are responsible for the management, supervision, or direction of the operations of the Entity.”

As noted earlier, Claimant does not maintain any employees at the location. Claimant may argue that is its agent, but nothing in the record suggests that [XXXXX] has the legal authority to bind the Claimant. Further, Policy 467 prohibits Claimant from “bootstrapping” on to [XXXXX] “If a Business Entity uses independent contractors to provide services in structures or locations not owned, leased or operated by the business, the location of each contractor is not a separate Facility of the business.” In light of the above, this Panelist finds that Claimant does not satisfy part (c) of Policy 467’s definition of Facility, nor does it satisfy part two of Exhibit 5’s definition.

In summary, this Panelist affirms the Settlement Program’s conclusion that the location is not a Facility.

III. Is Claimant a member of the Economic and Property Damages Settlement Class pursuant to Sections 1.2 and 1.2.4 of the Settlement Agreement and further should Claimant be deemed to be located in Zone D pursuant to Policy 482?

Claimant’s alternative position is that, even if the location is not a Facility, Claimant is still a member of the Economic and Property Damages Settlement Class pursuant to Sections 1.2 and 1.2.4 of the Settlement Agreement and should be deemed to be located in Zone D pursuant to Policy 482.

Section 1 of the Settlement Agreement defines the Economic and Property Damages Settlement Class as those Natural Persons and Entities defined in Section 1. Per Sections 1.2 and 1.2.4, eligible Entities are “[a]ll Entities doing business or operating in the Gulf Coast Areas . . . that . . . owned or leased Real Property in the Gulf Coast Areas.”

No one contests that Claimant owned parcels of land in the Gulf Coast Areas. As such, Claimant appears to be a member of the Economic Class. However, what is not clear is whether, in light of this Panelist’s finding that the location is not a Facility, Claimant remains eligible for an award from the Settlement Program, and if so, the basis for Claimant’s eligibility.

Claimant argues in the alternative that it has no Facilities in the Gulf Coast Areas. As such, Claimant argues that Policy 482 should be applied to its Claim. Part 4 II (1) of Policy 482 states in pertinent part: “For purposes of the assignment of a Risk Transfer Premium and application of the Causation review process required under the Settlement Agreement, the Claims Administrator will evaluate businesses that are Class Members with all Facilities located outside the Gulf Coast Areas as Zone D businesses.”

This Panelist requested a Summary of Review wherein the Claims Administrator was asked why Policy 482 was not applied to this Claim. The response was that “the Claimant appears to have Facilities in the GCAs such that Policy 482 would not apply.” (emphasis added)

The basis for this statement by the Claims Administrator is the fact that the Claimant filed separate claims for each of its Louisiana parcels. These claims were later withdrawn. The record reflects some disagreement as to why these claims were filed. Claimant contends that the Settlement Program indicated that individual claims would have to be filed if Claimant wanted these parcels included in the review of this Claim. Claimant initially filed a claim for each individual parcel, but later withdraw these claims after concluding on its own that these parcels did not meet the definition of Facilities.

This Panelist’s review of the record and the Summary of Review leads this Panelist to conclude that the Settlement Program has not conclusively determined whether or not Claimant maintains multiple Facilities, and if so, the location of these Facilities. This determination is now critical in light of this Panelist’s finding that the location in not a Facility. For instance, if Claimant does not have any Facilities in the Gulf Coast Areas, then Claimant does not meet the definition of a Multi-Facility Business set forth in Exhibit 5. Further, if Claimant does not have any Facilities in the Gulf Coast Areas, the Claimant may be entitled to a Zone D designation under Policy 482. [It should be noted that BP, for reasons different than those offered by the Claims Administrator, argues that Policy 482 is not applicable to Claimant.]

In light of this ambiguity in the record, this matter is partially remanded for the purpose of (a) determining whether or not Claimant has multiple Facilities (excluding the location), and if so, the location of these Facilities, and (b) upon making that determination, processing this Claim in accordance with that determination.

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