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BP Business Economic Loss Claim Appeal 2016-1839: New TIN and Organizational Structure With Similar Ownership Does Not Create a New Operating Entity Under Policy 362v2

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 Settlement Program determined that Claimant, ***, did not meet the requirements of Exhibit 4B of the Settlement Agreement. Claimant appeals, asserting the Settlement Program should not have excluded certain 2011 income from its award calculation.
The central issue is that the Settlement Program excluded this income after determining, as set forth in the Post-Reconsideration Denial Notice, that,“[g]iven the change in TIN (Tax Identification Number) and ownership, the LLC has been deemed a separately operating entity from that of the claimed facility. As such, the revenues affiliated with the LLC remain excluded.”
BP maintains the Settlement Program properly utilized its discretion to determine that the sole proprietorship and LLC were separate entities due to a change in  the TIN stemming from the change in the ownership structure of the business.
The record reflects that on March 1, 2011, Claimant’s owner reorganized his plumbing business from a sole proprietorship into an LLC partnership.  At that time, the owner sold a minority interest to an associate in the business. The firm’s accountant was required to register a new TIN for the newly formed partnership. Claimant argues there was no fundamental change in Claimant’s business operations, which continued to operate as the same plumbing repair business, and that the revenue figures reported on Claimant’s monthly P&Ls confirm there was not an interruption of normal business operations.
Two recent District Court decisions relate to the issue presented here, each of which disallowed claims brought by successor entities. In District Court claim ID XXX,

the court noted that, “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.”This is not the situation here. The change in ownership here was technical, not substantive, and Claimant remained in business, with identical personnel.

The second case, District Court claim ID no. YYY, the court observed, “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. (citation to record omitted) 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 Policy362 v. 2.”
Again, we had a change of ownership with new owners, not a technical reorganization involving identical personnel running a long established business.
Claimant has continuously operated as a plumbing business throughout the relevant 2007- 2011 period. There has been no substantive change in the business that is the subject of the claim; merely the business’s legal form. The District Court opinions cited above that relate to this issue involve new ownership and personnel entering the picture, unlike this case. Accordingly, upon consideration, Claimant’s appeal is granted, and the Denial hereby overturned.

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