03242017Headline:

Tampa, Florida

HomeFloridaTampa

Email Tom Young Tom Young on LinkedIn Tom Young on Twitter Tom Young on Facebook Tom Young on Avvo
Tom Young
Tom Young
Attorney • (813) 251-9706

BP Business Economic Loss Claim Appeal 2016-1968: Grant Revenue Not Excluded As Income for For-Profit Biotech Company

0 comments
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 describes itself as a for-profit biotechnology company developing vaccines and other biological products to address market and public health needs. At all times pertinent hereto, Claimant was located in Birmingham, Alabama (Zone D) and filed this BEL Claim. The Claims Administrator (CA) excluded nearly all of Claimant’s revenue and determined that Claimant did not met the requirements of Exhibit 4B of the Settlement Agreement. Claimant appeals.
Based upon the nature of the services Claimant performs, the vast majority of Claimant’s pertinent annual revenues came from grants. Grant revenue totaled about $2.5 million in 2007, $900,000 in 2008, $1.9 million in 2009 and $500,000 in 2010.  In denying the Claim and excluding the grant revenue, the CA relied on Policy 328 v. 2 which states:
“The Claims Administrator interprets the Settlement Agreement
such that the following items shall not typically be treated as
‘revenue’ for purposes of the various calculations to be performed
under the terms of the Settlement Agreement with regard to entities
asserting BEL claims: (a) insurance proceeds, (b) interest income,
(c) gains or losses from sales of assets, (d) reimbursed expenses, (e)
capital assessments, (f) intercompany sales, (g) related party
transactions that are not arm’s length transactions, and (h) grants for
‘for-profit’ entities.
The foregoing is not an exhaustive list. The Claims Administrator in his discretion may require that the claimant provide further explanation and/or additional documentation underlying the monthly revenue and related expense amounts in question. In arriving at this conclusion, the Claims Administrator has in part relied upon the fact that these items are not typically earned as revenue under the normal course of operations in an arm’s length transaction.
This revised version of Policy 328 does not represent a change in policy. Rather, the additional language in this revised version of Policy 328 is intended to further illustrate how the Claims Administrator is already evaluating these issues. The Claims Administrator does not consider the following to be in nature of “grants,” and thus
does typically consider these to be ‘revenue’ for purposes of BEL claims: (a) government crop subsidies, and (b) payments under the CDSOA program.”
It is noted that the CA treats not-for profit entities differently than for-profit entities when it comes to grant revenues. The pertinent part of Policy 307 v. 2 provides:
“The Claims Administrator shall apply the Settlement as follows
with respect to business economic claims of non-profit entities:
(a) Income received by non-profit entities in the form of grant
monies or contributions shall typically be treated as revenue for
that entity for purposes of the various required calculations under
the terms of the Settlement Agreement.”
Finally, Policy 373 v. 2 addresses Recurring Revenue Streams and provides:
“All recurring revenue streams that are deemed to be within the
businesses’ normal course of operations should be included in the
analysis. For example, a restaurant that generates income from food
service and also generates rental income by renting an apartment
attached to the building.”.
Policy 328 v. 2 talks about items not “typically” treated as revenue because the items are not “typically earned as revenue under the normal course of operation in an arm’s length transaction”. Policy 328 v. 2 makes exceptions for government crop subsidies and CDSOA payments (See Footnote 2 of Policy 328 v. 2 above). Further, Policy 328 v. 2 does not state that grants to for-profit entities can never be treated as revenue. If that were the case, the use of the term “typically” would not be necessary.
Like crop subsidies and CDSOA payments, there can be rare instances where grant revenue to a for-profit entity can be “typically” earned as revenue. Here, Claimant earns the grant revenue by developing vaccines and other products to address market and public health needs. Further, Claimant reports the grants as income on its federal tax returns.
After de novo of the record in this matter and the aforementioned CA’s policies, this panelist finds that the CA erred in excluding grant revenue in the calculation of this Claim.  Accordingly, this matter is remanded to the CA to include the grant revenue and calculate what, if any, award Claimant is entitled to.

Leave a Comment

Have an opinion? Please leave a comment using the box below.

For information on acceptable commenting practices, please visit Lifehacker's guide to weblog comments. Comments containing spam or profanity will be filtered or deleted.