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BP Business Economic Loss Claim Appeal 2017-1054: Analysis of SA Exhibit 5 and Policy 467 Show Claimant Is Not A “Multi-Facility Business”

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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

Claimant is a high pressure pipe cleaning service provider which the Settlement Program awarded $371,959.49, pre-RTP. BP appeals alleging that the award is improperly based onincome and profits that did not arise in the Gulf Coast Areas (“GCA”). BP refers to the Settlement Agreement provision that compensates Business Economic Loss (“BEL”) claimants for “Economic Damage,” defined as “loss of profits, income and/or earnings arising in the Gulf Coast Areas or Specified Gulf Waters allegedly arising out of, due to, resulting from, or relating in any way to, directly or indirectly, the Deepwater Horizon Incident.”
BP asserts that consistent with this limitation that compensable damages are for loss of profits “arising in” a specified geographic area, business claimants asserting Business Economic Damages are members of the Settlement Class only insofar as they either (1) “sold products in the Gulf Coast Areas or Specified Gulf Waters” (either directly to end users, or to another business one step removed from end users), or (2) “are service businesses with one or more full-time employees … who performed their full-time services while physically present in the Gulf Coast Areas or Specified Gulf Waters…”
BP asserts that there is significant evidence indicating that Claimant earned revenue from numerous projects outside the Gulf Coast Areas throughout 2007-2011, including through a facility in North Carolina. According to BP, the income and profits from these and any other out-of-zone projects did not “arise in” the Gulf Coast Areas. As such, the purported loss of profits associated with these and any other out-of-zone projects cannot form the basis of an award. BP requests that this claim be remanded to address the issues described above, and in the alternative, BP submits a Final Proposal of $0.
The Claimant responds that it has always maintained one facility, and that single facility is located in Lutz, Florida, within the settlement zone. The Claimant was required by the state of North Carolina to provide an address as a prerequisite to obtain a business license that would allow the Claimant to perform any work within the state’s borders. This is a standard registration requirement for any business. The Claimant obtained a PO Box solely for this purpose, and no mail or business correspondence was ever utilized at this PO Box address. There was no physical structure, no real estate lease, and no operations conducted from the PO Box. All contracts, invoicing, business correspondence, and operations was purely managed at the Claimant’s sole location in Florida. Since all of the Claimant’s business was generated from its sole location in Florida, all the Claimant’s revenue and profit/loss arose from its only location, which is within the covered settlement
geography.
This panelist finds that BP failed again to utilize the correct standard by which to determine whether revenue “arose in” the GCA and is “due to” the spill. To do so one must determine whether out-of-zone revenue was generated from an out-of-zone “Facility” for it to be excluded from the analysis. In effect, BP is actually arguing that Claimant qualifies as a multi-facility business which disallows any profit generated from “Facilities” located outside the GCA. However, the framework that governs the multi-facility analysis is found in Exhibit 5 of the Settlement Agreement and in Policy 467. Before the spill and after, Claimant asserts it has operated from its sole location in Florida.
Exhibit 5 defines a “Multi-Facility Business” as “a business entity that, during the period April 1, 2010 through December 31, 2010, maintained Facilities in more than one location and had at least one Facility within the Gulf Coast Areas.” It further defines a “Facility” as a “separate and distinct physical location of a Multi-Facility
Business at which it performs or manages its operations.” Section IV of Policy 467 also governs what qualifies as a “Facility” and discusses whether a claimant ultimately should be designated a “Multi-Facility Business.” This section states that a location must meet all three of the following elements: 1. A separate and distinct physical structure or premises; 2. Owned, leased, or operated by the Business Entity; and 3. At which the Business Entity performs and/or manages its operations.
The policy further defines the terms “performs” and “manages” to determine the extent of a claimant’s operations at the additional locations. One “performs operations at a location if, in the normal course of its business, it has employees or agents who perform their work at that location and/or it provides services or products at that location.” A business “manages its operations at a location if, in the normal course of business, it has employees or agents present at the location, on a full-time or part-time basis, who are responsible for the management, supervision, or direction of the operations of the Entity.” Claimant does not manage its operations from any “separate and distinct physical structure or premises.” Policy 467 requires that all three elements of the definition must be met to qualify as a “Facility.”
Thus, the record evidence shows to this panelist’s satisfaction that Claimant does not qualify as a “Multi-Facility Business” because its operations are managed from its sole facility location in Florida. Consequently, the Settlement Program properly determined this was a single-facility business and calculated the claim under Exhibit 4. Based on the above, this panelist affirms the decision issued by the Settlement Program and BP’s appeal is denied.

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