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BP Business Economic Loss Claim Appeal 2016-2036: Despite Timely Purchase, Claimant Denied Start-Up Recovery Because Purchase of Assets Instead of Purchase of Stock

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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 tax and accounting service in New Port Richey, Florida (Zone D). The Administrator converted the claim to a Start-Up BEL claim and then concluded that Claimant’s operating history failed to meet the requirements of the Start-Up BEL framework.
On appeal, Claimant argues that it should have been treated as a newly acquired business because it purchased the assets of another entity, effective November 13, 2009 and continued to operate under this trade name. Claimant therefore argues that it is entitled to the benefit of 25 year operating history. As the successor and interest of Claimant argues that it operated continuously during the Benchmark and Compensation Periods.
Claimant also makes an interesting argument regarding the language of the standard release used by the Settlement Program. That instrument’s language includes corporate parents, predecessors, successors and subsidiaries of an entity as releasing parties. Similar language is found in Section 2.1’s exclusionary language. Claimant also argues that the Settlement Agreement itself does not require that a successor entity be treated as a Start-Up. As Claimant sees it, it is the only entity that has the legal right to pursue any BEL claim that may have accrued to  since it purchased all the assets of the predecessor entity. Claimant also argues that the provisions of withdrawn Policy 354 entitle it to be treated as a newly required business rather than a Start-Up. Claimant acknowledges that the Administrator previously withdrew this policy but maintains that the Settlement Program continues to follow its provisions.
Before its withdrawal, Policy 354 permitted a newly acquired business to be treated as a standard BEL claim if it could support an operating history with P&Ls from the prior ownership. Claimant maintains that whether the policy is written or unwritten, this requirement is satisfied.
BP argues that upon transfer of ownership of the assets of Claimant became a Start-Up business in the eyes of the Settlement Agreement. As a Start-Up, Claimant
lacked sufficient pre-spill financial data to demonstrate a loss according to BP.
Careful de novo review reveals that the Claimant was a legal entity prior to the spill and that it had completed purchase of the assets of as of November 13, 2009, prior to the spill. On these factors, Claimant does not run afoul of several discretionary review decisions in which the District Court has determined that an entity not yet formed can have no operating history. Unfortunately for Claimant, the fact that this was an asset sale conflicts with other decisions of the controlling DistrictCourt. In at least two discretionary review decisions, the District Court has clearly held that the sale of assets from one entity to a separate entity, with a different set of owners, that is not a stock sale, the Claimant entity was not operating as of the date of the spill.
That is precisely the case here. The decisions of the District Court are binding on appeal panels. Accordingly, the denial of this claim was correct and is upheld.

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