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BP Business Economic Loss Claim Appeal 2016-1169: Professional judgement as to revenue recognition

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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, the owner of a shopping center in Gadsden, Alabama, appeals the second denial of its BEL claim for failure to satisfy the causation requirements of Exhibit 4B of the Settlement Agreement. Previously, on November 17,2014, this panel set aside the initial denial notice because it found the Settlement Program (SP) incorrectly excluded CAM fees and reimbursements for insurance and property tax payments from claimant’s total revenues. Claimant now asserts Policy 495 was misapplied in the course of this new evaluation:

“More specifically, the Claims Administrator has reclassified certain revenue as if [it] was received over the duration of the rental period, as opposed to the date the client actually received the payments. The Claimant landlord has leases with its tenants allowing it to invoice tenants for these expenses as they are incurred. Claimant paid the expenses directly and then immediately invoiced the tenant per the terms of the lease. The actual cash expense incurred by the landlord and the payment by the tenant typically occurred within a month of each other.”

Claimant further argues that under Policy 495 reallocation of revenue can only occur if there are “clear errors” to be corrected; and the “revenues for this Claimant should be reflected in the period in which they were paid.”

A review of the record discloses the SP, after remand, re-evaluated the claim with the aforementioned excluded revenues inserted into the calculation matrix. Applying the provisions of Policy 495, the SP reallocated certain components of revenue to months other than when charges were invoiced or payment was received. See paragraph 7 of Calculation Notes. After further review the SP determined claimant again failed the causation requirements of Exhibit 4B of the Settlement Agreement.

Following review of this record this panelist concludes the determination made by the SP was correct. These components of revenue that were reallocated and attributed to other months represent charges or reimbursements that were earned over the course of and throughout a year. Even in the absence of accounting or recording error, both prior panel and discretionary review court decisions recognize that the SP, in exercise of its professional judgment, may make such preliminary adjustments to financial records. The record supports the exercise of professional judgment by the SP. There is no error. The decision of the Claims Administrator is affirmed and the appeal of claimant is denied.

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