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BP Business Economic Loss Claim Appeal 2016-1181: Claimant Must Provide Settlement Program with Information as to Potential Related Party Transactions


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 filed this Business Economic Loss claim under the Settlement Agreement. The Settlement  Program calculated a Compensation Amount of $382,172.11. BP appeals.

On appeal, BP raises two points. First, BP argues that the Settlement Program failed to inquire into transactions with a potential related party. Second, BP contends the Settlement Program misclassified “Adv/Conventions & Trade Shows” Expense.

Policy 328v2 requires that related party transactions shall not typically be treated as revenue unless the transactions are negotiated at “arm’s length.” BP cites evidence from Claimant’s 2010 Federal Corporate Income Returns. In addition, BP argues that *** is, according to tax records, owned by ***. Public records demonstrate the also have ownership interests in ***. In turn, *** incorporates LEDs such as those manufactured by into its products.

Claimant countered this argument in its Memorandum in Support of Final Proposal, at pages 2-3. In that Memorandum, Claimant noted correctly that the Settlement Program has the discretion to decide whether further investigation is needed to determine whether a related party transaction is at arm’s length. Claimant argues that the award should stand because the Settlement Program exercised its discretion not to investigate.

This Panelist sent the Settlement Program a Request for Information/Summary of Review addressing this and another issue. In its August 1, 2016 Response, the Settlement Program stated “Program Accountants were not aware of potential related party transactions….” The Settlement Program cannot exercise discretion when it has no knowledge of the related party transactions.

Claimant’s argument is disingenuous and mistaken. This claim is remanded for an investigation of all related party transactions for 2010 and 2011. Claimant claims it can prove the transactions were at arm’s length and this may be correct. However, the Settlement Program must investigate them and, if necessary, recalculate the award.

With respect to BP’s second point on the classification of expenses, Claimant has a strong position. However, the August 1, 2016 Response from the Settlement Program to the Request for Information states: “Program Accountants did not request clarification regarding the expense ‘Adv/Conventions & Trade Shows’  and based on the phrase ‘Conventions & Trade Shows’ concluded the account was Travel & Entertainment (Variable).” While on remand, the Settlement Program is requested to clarify these claimed expenses and reclassify, if necessary and proper.

This claim is remanded to the Settlement Program for the reasons stated above.

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