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BP Business Economic Loss Claim Appeal 2017-1053: Single Location of Multi-Facility Company Not Involved In Prohibited Related Party Transaction

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

Claimant operates a multi-facility metal fabricating and welding company with locations in several places. This claim involves the Cordova facility only. The Program awarded $766,499.79 (pre-RTP). BP appeals and requests a remand or, alternatively, submits a final proposal of $0.
BP argues on appeal that the Program failed to adequately investigate, and exclude, related party transactions. The record reveals that the Program analyst requested, and received from Claimant, a schedule of related party revenue. Claimant and the Decatur facility share overlapping, but not identical, ownership. On occasions when one or the other cannot fulfill a customer’s needs, the other company will provide labor support. The Program determined that these labor costs are provided with a reasonable markup, that the revenues reimburse Claimant for its labor costs and that neither company reflects a profit on jobs sold by the other, apart from the markup on labor assistance. The Program thus included the revenue in its calculations.
BP argues that the Program should have investigated further and required Claimant to provide additional information about the size of the markup and its proportion to Claimant’s actual labor costs, given the “clear requirement that revenue from related parties be excluded” found in Policy 328 v.2.
The panel finds that BP has overstated the requirement of Policy 328 v.2 which reads, in pertinent part:
The Claims Administrator interprets the Settlement Agreement such  that the following items shall not
typically be treated as “revenue” for purposes of the various calculations to be performed under the terms
of the Settlement Agreement with regard to entities asserting BEL claims: . . . (g) related party transactions
that are not arm’s length transactions. . . The Claims Administrator in his discretion may require that the claimant
provide further explanation and/or additional documentation underlying the monthly revenue and
related expense amounts in question. In arriving at this conclusion, the Claims Administrator has in part relied
upon the fact that these items are not typically earned as revenue under the normal course of operations in an arm’s
length transaction. (emphasis added) The policy does not prohibit all revenue from related party transactions from
being considered as revenue. Rather, it excludes those that are not arms-length transactions or that are not
“typically earned as revenue under the normal course of operations.”
The panel finds neither to be applicable here. The Program adequately investigated the related party issue and appropriately exercised its discretion. Remand is not warranted and there is no support for BP’s final proposal of $0.  Accordingly, in this baseball appeal, Claimant’s final proposal is the correct result. The appeal is denied.

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