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BP Business Economic Loss Claim Appeal 2016-692: Entity formed post-spill not a claimant


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 determined that Claimant does not qualify for recovery under the Settlement Agreement because it did not begin operating until after April 20, 2010, the date of the Spill. Claimant appeals, asserting it acquired a hotel that had been operating for decades, including all of its business activities, contracts, obligations, rights and privileges. Claimant argues this was a running business, and that by using the “business enterprise approach” as had been approved and applied in an analogous case, the claim should not have been excluded. Claimant cited a second case which was similarly decided, citing it as precedent. Conversely, BP argues that because Claimant did not exist or have operations before the Spill, the Settlement Program’s determination must stand and Claimant’s appeal should be denied. Claimant acknowledges it acquired the business that is the subject of this claim in 2012. The record reflects Claimant did not exist at the time of the Spill, as it was not incorporated until December 20, 2012, apparently for the purpose of acquiring assets, which is what occurred.

The key Appeal Panel decision Claimant relies upon in support of its position that the denial should be overturned was reversed by the District Court on Discretionary Review on March 30, 2016. The District Court decision was based upon the same reasoning as set forth by the Claims Administrator in denying this claim. In that case, as here, the Court observed, “[The claimant] did not exist or operate the subject business at the time of the Oil Spill, but rather the business was operated by a wholly separate and distinct entity …. [The claimant’s] involvement with this business did not come about until it bought substantially all of the assets of [the separate entity] in September 2010, well after the Oil Spill…. The transaction … was a sale of assets from one entity to a separate entity with a different set of owners. Under these circumstances, the Claims Administrator was correct to deny this claim on the grounds that the claimant entity was not operating at the time of the Oil Spill.”

Similarly, in a second opinion, published February 24, 2016, the District Court reinstated the Settlement Program’s denial of a claim where the “legal entity did not exist until … after the date of the Oil Spill.” In that case, the District Court held, “by definition, an entity could not have been in operation before that entity even existed.” In the instant claim, Claimant could not have operated prior to the Spill because it did not exist before being organized and incorporated in December, 2012. These two District Court Orders and Judgments eliminate any ambiguity with respect to the eligibility of a post-Spill formed entity to pursue a claim. That eligibility does not exist. Accordingly, Claimant’s appeal is denied, and the Denial of the Claims Administrator is hereby upheld.

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