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BP Business Economic Loss Claim Appeal 2016-1303:Successor Company Allowed to “Bootstrap” onto a Prior Company and Was Not Considered a Start-UP

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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, an accounting and tax services firm, received a BEL award of $45,052.80 pre-RTP. BP appeals, suggesting the Program erred by failing to evaluate this claim under the Start Up Business framework. BP urges a remand or, alternatively, a zero award.
BP correctly states an entity is to be considered a Start Up if it had less than 18 months of operating history at the time of the spill and pointed out that claimant was incorporated in December 2009, within the 18 month time frame. Claimant, for some reason, seems to take exception with this position.  BP also suggests the company operated under the previous name of XXX starting in 2007. According to this line of reasoning, the claimant operated as one continuous business from 2007 to current with only a name change, and the ownership, operations and location remaining the same. BP counters that the 2 companies had different names and different Employee Identification Numbers.
There is little guidance in the Settlement Agreement with respect to whether a company can bootstrap its existence to a predecessor entity for purposes of determining operating history.  However, there is some guidance from the Court. In Discretionary Decision 2015-1820, the court found that the claimant was not operating at the time of the spill. However, the evaluation articulated in this decision is instructive. The Court did not allow one company to bootstrap onto the operating history of the other entity where the claimant only  “purchased assets as opposed to a sale of the company’s stock.” Additionally, the District Court found it significant that the
transaction “was not merely a change in corporate organization. The transaction was something other than a single entity merely changing its legal form of organization. It was a sale of assets from 1 entity to a separate entity with a different set of owners.”
The factors which the Court held to be lacking, and also material in that case, are present in the immediate case. The history of the 2 companies in this case was more than a sale of assets. It represented a continuation of the predecessor company’s business. Moreover, the progression from 1 entity to another was entirely “a single entity merely changing its legal form of ownership.” Further, there were not different owners as in the case referenced above, but instead common ownership between the 2 entities in question.
All of the factors which the Court found to be material in the cited decision militate in favor of the Program considering the claimant as a continuation of the business of the predecessor company in this case.  Accordingly, there was no need to evaluate the claimant under the Start Up Business framework and, therefore, BP’s appeal is dismissed.

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