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BP Business Economic Loss Claim Appeal 2016-1106: Claimant’s post-spill acquisition disqualified


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.

The issue on this appeal is whether the Claimant, a successor owner of a business, may assert a BEL claim after a post-spill acquisition of the assets of the former entity. On August 31, 2011, Claimant acquired all the assets of XXXXX. Cooperative had a longstanding history of operation in the Gulf Coast Areas prior to the spill. Using the P&Ls and tax returns of XXXXX, Claimant filed a BEL claim which was converted to a Start-Up BEL claim and later denied by the Claims Administrator. The basis of the denial was the Administrator’s determination that Claimant was not operating any facilities at the time of the spill.

On appeal, Claimant argues that its purchase of XXXXX’s assets included an assignment of all claims, including the instant BEL claim. Claimant further urges that Policy 354 v.3, which permitted the use of P&Ls from a prior owner to establish an operating history, was in effect at the time its claim was filed. Although Policy 354 was subsequently withdrawn, Claimant argues that the Claims Administrator continues to follow this policy with regard to the establishment of an operating history. Thus, Claimant argues that it qualifies under this now unwritten policy.

This panelist is sympathetic to the Claimant’s arguments, having authored the appeal panel decision in Discretionary Review Case No. 2016 – 263. That case involved the acquisition of a hotel that continued as an uninterrupted business operation. This panelist concluded that the acquisition of the entity included the right to assert a BEL claim. On discretionary review, the District Court disagreed, holding that the status of the prior owner as a separate legal entity foreclosed a claim by the acquiring entity:

“The claimant here is XXXXX, an entity that did not come into existence until June 22, 2011, over a year after the Oil Spill. (citations omitted). Claimant acknowledges that the subject hotel property has always been owned by a wholly separate legal entity, , . (citations omitted). That being the case, any claim for losses as the owner of this property should be brought by the actual owner. What was before the Claims Administrator and is now before the Court however, is the claim of a separate legal entity that has never owned the subject property and which did not own it at the time of the Oil Spill. The Claimant entity was not in business nor operating as of the date of the Oil Spill as required by Claims Administrator Policy 362 v.2. The decision of the Appeal Panel is REVERSED, and the Claims Administrator’s DENIAL reinstated.”

In accord is the District Court’s decision in Discretionary Review Case No. 2016-300 (“The flaw in the Appeal Panel’s decision lies in the fact that the June 2010 transaction at issue was one where the claimant entity purchased certain assets, not where the predecessor entities themselves were purchased. The Claims Administrator was correct in determining that the Claimant entity was not operating as of the date of the Oil Spill as required by Claims Administrator Policy 362 v.2.”)

Decisions by the supervising District Court are binding on appeal panels. Indeed, such decisions are an important component of the jurisprudence interpreting the provisions of the Settlement Agreement. Because the District Court has spoken on this issue, this panelist is duty bound to follow the same reasoning here. For these reasons, the Claims Administrator’s denial of this claim was correct and must be affirmed.

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