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BP Business Economic Loss Claim Appeal 2016-1865:Bowling Center Claimant Fails Second Prong of Customer Mix Test–Could Not Prove Addresses of Customers

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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.

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 which operates a bowling center in Diamondhead, Mississippi (Zone C), appeals the denial of its BEL claim. Although Claimant’s submitted financial data satisfied the revenue portion of the Decline-Only Revenue Pattern test, the Claims Administrator (“the CA”) determined total body of submissions did not satisfy the so-called “Customer Mix” component of that test.
A claimant can satisfy that component in one of two ways:
1.The claimant “demonstrates proof of a decline of 10% in the share of total revenue generated by non-local customers” over the three-consecutive-month period in 2010 selected by the claimant, compared to the same three months in 2009. or
2. A claimant that has customers in Zones A-C “demonstrates proof of a decline of 10% in the share of total revenue generated by customers located in Zones A-C,” over the three-consecutive-month period in 2010 selected by the claimant, compared to the same three months in 2010.
(Exhibit 4B to the Settlement Agreement, at 3-4)
A customer is considered “non-local” if the customer resides “more than 60 miles from a claimant business location.” (Exhibit 4B, footnote 9).  Exhibit 4B allows the required“demonstrated proof” to be reflected in a variety of specified business records, including “customer credit card receipts or other contemporaneously
maintained records of payment” and “documentation maintained in the ordinary course of business that lists customers by location and monthly sales associated with those customers.”
Claimant’s revenues come in the form of bowling league weekly “lineage” fees (during the league season of early September to mid-May), fees from non-league bowlers, sales of equipment, and sales of food, wine and beer to bowlers and their accompanying family members. Payment of all of those revenues are in the form of cash or credit/debit cards, and are in relatively small amounts per customer. Consequently, explains, “it is commercially impractical to require each and every customer to provide their names and address on every transaction.” Nonetheless, an analyst with the CA’s Accountant Review Team stated the positionof the CA thusly in an email sent to on November 19, 2014:
I am emailing you because the Claimant provided customer mix information that
is incomplete. The Claimant did not include the transaction amounts for each
transaction of the company. At a minimum, Customer mix data should include the
following information for each transaction of the company: customers name,
address, transaction amount, and actual date of transaction. Also, the provided
data must reconcile to the revenues reported in the P&L’s for each respective
month. Please provide complete customer mix data for each transaction of the
company.
I understand that this information may be very tough to provide considering the
Claimant is a cash-based business, but it is a requirement of the settlement.
Policy 345 states, “The Claims Administrator has observed that it is difficult
or even impossible for some claimants with BEL or Start-Up BEL claims
to satisfy this test because they do not have documentation to establish the
addresses/locations of their customers. This is particularly problematic for
businesses that deal primarily in cash, which often do not maintain the type records
specified in the above-referenced section of the Settlement Agreement.
However, the Claims Administrator interprets the Settlement Agreement’s
documentation requirements as mandatory.The settlement Agreement does not
grant the Claims Administrator discretion to waive these document requirements.”

Grounds/grievances on appeal are (1) that strict enforcement of Policy 345 effectively forecloses the ability of a cash/credit card/debit card basis business having high volume, small amount transactions to satisfy the Customer Mix test; (2) nonetheless, when the data it has submitted from its bowling league records are considered as a representative sample, it has sufficiently established the Customer Mix criteria; (3) the CA has been unreasonably unresponsive to numerous requests that the CA “provide an alternative path for Claimants that do not maintain in the normal course of business customer logs and/or addresses that track actual revenues;” and (4) that the CA has been derelict in refusing to act on repeated requests that the CA “seek a judicial review of Policy 345 and provide a viable option for Claimants that have no means to satisfy a rigid enforcement of Policy 345 in its current state.”

Policy 345 v.3 includes these provisions pertinent to the present appeal, in addition to the language excerpted from it in the above-quoted email from the Accounting Review Team analyst:
“Exhibit 4B of the Settlement Agreement places the burden on the claimant to
demonstrate that the claimant has satisfied the requirements of the Customer Mix
Test. For the purposes of performing the Customer Mix Test, revenue generated during
the Benchmark Period from customer s whose address is considered unknown will
be excluded from the claimant’s share of revenue generated by XXX. Customers
located in Zones A-C; conversely, revenue generated during the
Compensation Period from customers whose address is considered unknown will
be included in the claimant’s share of revenue generated by . . . customers located
in Zones A-C.  The claimant is still able to pass the Customer Mix test if it
can demonstrate the required percentage change in revenue derived from customers in
Zones A-C between the Benchmark Period and Compensation Period.
To that end, the Policy requires the claimant to submit documentation of “the Economic
Loss Zone of each of the claimant’s customers . . . .”
Turning first to second contention, that the customer mix information contained in the bowling league records submitted serves sufficiently to satisfy the Customer Mix Test, the panelist respectfully disagrees. The panelist has “opened” on the claim portal each of the 13 documents cites to in its Opening Memorandum as showing that it “demonstrates proof” (in the wording of Exhibit 4B) of satisfaction of the second prong of the Customer Mix Component, i.e., the revenue generated by customers in Zones A-C. ( articulates no argument that it has satisfied the first prong, dealing with non-local customers.) Most of those documents are voluminous in content and in the aggregate present almost 600 pages. Although they provide information about the addresses of certain of members of teams participating in the bowling league, they don’t break out what each such customer might individually have paid or spent; and the league membership patronage, while substantial, doesn’t account for all of
customers or money spent by league bowlers on things other than their “lineage” fees.
While Policy 345 v.3 is not binding on the appeal panelists, its requirement for proof of“the Economic Loss Zone of each of the claimant’s customers” is a defensible extension of the second prong of the Customer Mix Test, whereby the claimant must “demonstrate[ ] proof of a decline of 10% in the share of total revenue generated by customers located in Zones A-C . . . .”That requires demonstrated proof of the (1) address of customers so that the Zone of their residence can be determined, and (2) their share of the revenue. The panelist finds that did not provide the requisite level of proof in that regard.
With respect to other three grievances on appeal, the panelist can sympathize with its predicament relating to the practical inability of a business such as the one it conducts to capture the address/revenue for each of its customers that the second prong envisions, and Policy 345 v.3requires. Nonetheless, the panelist is no more authorized or able to devise an “alternative path”than was the CA: Exhibit 4B’s documentation requirements are what they are, and an appeal panelist cannot rewrite any feature of the Settlement Agreement. This panelist does agree, however, that consideration of the “Catch 22” confronting claimants such as by the supervising District Court would be appropriate, and encourages to seek a discretionary review by the Court of this decision. Denial upheld; appeal denied.

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