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BP Business Economic Loss Claim Appeal 2016-982: Related party revenue permitted if “arm’s length”


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.

BP appeals the BEL award to the claimant who leases commercial property in Largo, FL. On appeal, BP asserts that the Program improperly considered related party revenue in the settlement calculations.

Claimant leases part of its building to a mortgage company of which Claimant’s husband is the president. Another tenant, XXXXX, is a real estate company of which Claimant’s husband is president and Claimant is a director. Claimant’s financials reflect months in which no revenue was received which Claimant explained was due to the inability of the tenants to pay. While such a situation is not uncommon, particularly in a down economy, the record does not reflect that the Program considered these as related party transactions and whether they should be excluded. This justifies a remand to the Program for further consideration.

The above notwithstanding, this panelist is compelled to comment on BP’s position. In its memoranda, BP seems to argue that all related party transactions should be excluded from the revenue calculations. Such a position is not consistent with Policy 328. The policy states that “related party transactions that are not arm’s length transactions . . . shall not typically be treated as ‘revenue’ …”. Thus, the consideration is not merely whether the revenue source is a related party but, if it is, whether the transaction is an arm’s length one. If it is, it still may be considered as revenue for compensation calculations. It does not appear that the Program determined whether the transactions between the Claimant and were arm’s length transactions. Accordingly, this claim is remanded for the Program to inquire into that issue and for further proceedings consistent therewith.

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