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BP Business Economic Loss Claim Appeal 2016-1996: Despite Other Activities, Failure to Timely File Articles of Incorporation Dooms 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.

The Claims Administrator denied the Start-Up BEL claim of this boating club in Largo, Florida on the basis that it could not demonstrate an operating history prior to the spill. More specifically, the Administrator determined that the Claimant’s documentation did not establish that it generated revenue or incurred expenses sufficient to meet the “totality of the circumstances”standard of Policy 362 v.2. Claimant appeals.
Claimant argues that it began conducting start-up functions prior to the spill that included obtaining licenses and insurance, purchasing equipment and negotiating contracts. More specifically, Claimant argues that in late 2009, its owner had his attorney begin the preparation of business formation documents and enter into negotiations for a licensing agreement and lease. A business plan and Articles of Incorporation were also created during the first quarter of 2010. Thus, Claimant argues that it was engaged in day-to-day start-up operations between December 2009 and April 1, 2010, the date when it received its license agreement. Claimant argues that the expenses associated with these start-up functions are sufficient to satisfy the requirements of Policy 362 v.2.
Claimant makes no argument that its actual business operations as a boat club commenced prior to the spill.
BP responds that Claimant was not formed as an entity until June 2010 and did not incur expenses shown on its P&Ls until July 2010. BP also points out that Claimant’s tax returns show June 22, 2010 as the business’s start date which is consistent with its Articles of Incorporation filed on the same date. BP therefore urges that  Claimant was simply not in business or operating at the time of the spill and that its expenses and start-up activities were minor.
Although Policy 362 v.2 does establish a totality of the circumstances standard, a Claimant seeking to rely on expenses to establish an operating history must show that such costs are indicative of the actual start-up of business operations. Here, the record only establishes preliminary activities and associated expenses that fall short of the actual start-up of Claimant’s business. Additionally, the District Court has spoken on this issue, holding that an entity that was not in existence prior to the spill cannot satisfy the requirements of a Start-Up BEL claim. Thus, even if Claimant’s expenses were sufficient to demonstrate the actual start-up of business operations, the fact that its Articles of Incorporation were not filed until June 22, 2010 dooms its claim and is determinative of this appeal.
The denial of this claim was correct under Policy 362 v.2 and the controlling decisions of the District Court. Appeal denied.

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