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BP Business Economic Loss Claim Appeal 2016-1994: Dermatologist’s “Stipends” Not Arms-Length Transactions


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 awarded Claimant, a dermatologist in Key Largo, Florida , $9,831.47 pre-RTP. On appeal, Claimant contends that the Settlement Program erred in excluding related-party revenue from its calculation. Policy 328 excludes from the calculation of revenue income generated from “related party transactions that are not arm’s length transactions” because that income is “not typically earned as revenue under the normal course of operations in an arm’s length transaction.”

Claimant explained that she is a “partner” in YYY. “Except for some cosmetic/products/procedures, all money made by [Claimant’s practice] went directly to[the management of YYY]. YYY paid the expenses, filed insurance claims and took 8% as their fee. The remainder of the money was forwarded to [Claimant]… every two weeks as Service Income.”  The income Claimant received was “set at a fixed amount” and Claimant “had input into the amount set.” Claimant described this amount as a “stipend” and noted that she could request that the amount be changed depending on the month.

BP asserts that based on this information, the Settlement Program properly concluded three times that the income Claimant received was not the result of “arm’s length” transactions. Rather than reflecting the fair market value for her services, these “stipends” reflect a related-party transaction between Claimant and a partner organization.

Claimant states that the “Service Income” line item reflects amounts that Claimant drew from an account managed by a third-party management company associated with Claimant’s partner clinic, much in the way one might draw from a savings account. Claimant may have earned the money held in the fund through arm’s-length transactions with its clients, but the draws Claimant received each month reflected amounts either agreed to by Claimant or “determined by the net income of the practice.” Claimant does not state that the amounts recorded in its “Service Income” line item are reflective of the actual net income of the practice for any given month. Claimant admits that she “determined” not to take any draws from this account in August 2010 because of the “low number of patients being seen.” But because Claimant admits to seeing patients during that month, it is clear that Claimant’s financial data do not match the revenues Claimant earned in August 2010.

Likewise, Claimant admits that the amount she received would increase if there were “surplus funds” in the account. While Claimant does not clarify how a “surplus” is determined, this explanation appears to show that such a “surplus” amount likely did not reflect that amount earned in the month during which Claimant received it.

Thus, this revenue income appears to be generated from a related party that is not arm’s length transactions. Under the circumstances, BP’s Final Proposal, which is the same amount determined by the Settlement Program, is adopted and Claimant’s appeal is denied

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