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BP Business Economic Loss Claim Appeal 2016-1185: Insufficient Matching of Expenses and Revenue Merits Application of AVM Methodology Under Policy 495

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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, a non-profit museum, appeals the post-Reconsideration award of a negative amount to it by the Program accountants. Its basis of appeal is that the Program exceeded its authority under Policy 495 by making improper adjustments to its contemporary financials. Claimant asserts that the movement of revenue as a first step under Policy 495 is allowed only where there is on “obvious” or “apparent” mismatch between revenue and variable expenses. It then claims that the accountants herein did not analyze variable expenses of Claimant, and therefore it was impossible for them to have taken the next step of finding obvious or apparent mismatches.
Claimant notes that it is on a cash accounting basis, and that the actions of the Program accountants impermissibly converted their financials into accrual basis ones. It proposes a revised positive award, which it computes in an attachment to its brief.
This panelist requested a Summary of Review to obtain feedback from the Program concerning Claimant’s allegation that its variable expenses were not analyzed at all,
and that the Program accountants exceeded their discretion under Policy 495 by moving revenue as a first step without justification.The Program’s brief  response was that the 5th criteria of Policy 495 was triggered in review of Claimant’s financials, which under Policy 495 was indicative of insufficient matching of revenue and variable expenses. It then applied the AVM methodology, allocating Claimant’s variable expenses as a percentage of monthly revenue.
Very frankly, had this appeal occurred earlier in the processing of BEL claims, this panelist would have been very open to reversing the Program’s actions as exceeding their discretion in analyzing and shifting revenue. However, to do so at this later date would appear to run counter to a multiplicity of discretionary decisions by the district court which have allowed just such an action by the Program as a first step in analyzing financials, emphasizing their broad discretion to do so under Policy 495. These decisions include 2015-1696, 2015-1722, 2015-1694, 2015-1732,2015-1765, 2016-100, and 2016-267.
Indeed, this very panelist was reversed by the Court in one of the above decisions for doing exactly what Claimant herein is advocating. It is quite apparent that to reverse the Program’s actions herein would invite another such reversal by the Court, and this panelist is bound by its decisions. The Program having given a palpable if brief basis forits actions in its response to the requested Summary of Review, this panelist must follow the court’s rulings and accede to the accountants’ broad discretion to do so. The proposal of BP, calling for affirmance of the negativeaward, is therefore chosen.

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