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BP Business Economic Loss Claim Appeal 2017-1088: Date on Which Start Up Begins Based on “Totality of the Circumstances”

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 sailboat charter tour business in Key West, Florida. The Settlement Program awarded $85,081.74 (pre-RTP) and BP appeals.
The issue on appeal is when Claimant began operations. The Settlement Agreement provides that BEL claimants who began operations on or before October 20, 2008 be considered under the Exhibit 4 BEL framework. Those that began operations after October 20, 2008 are considered under the Start Up BEL framework in Exhibit 7.
Claimant initially filed a BEL claim and was issued an Eligibility Notice Claimant requested Re-Review and because it did not have the P&Ls at the time the initial claim was filed and subsequently discovered that it should have been filed as a Start-Up BEL claim. The Settlement
Program agreed and reclassified the claim. BP claims this decision was error and that Claimant recorded revenue and expenses such as consulting fees and office rent indicating that operations began prior to October 20, 2008.
In response, Claimant indicates that it began consideration of expanding its operations into a Key West facility in June of 2008. Due to the limited availability and high demand for dock space in Key West, Claimant secured dock space should it ultimately decide to go forward. Claimant hired a consultant in August, September and October, 2008 to investigate the feasibility but did not even begin to transmit the vessel it would use in the business from New Jersey to Key West until October 30, 2008. The vessel arrived in Key West on November 10, 2008. Claimant did not earn revenue until November 25 and did not begin paying wages until November 28, 2008.
The date on which a business began operations is based upon a “totality of circumstances”test according to Policy 362. This requires a consideration of when the business began to sell products in the Gulf Coast Areas, when it began to perform its full time services in the GCA, as well as when it began to “incur substantial costs or expenses of a nature indicative of the actual start-up of business operations.”
BP argues the hiring of a consultant and rental of office and dock space before October 20, 2008 indicates that Claimant began operations before that date and, therefore, should not have been considered a Start-Up business, even though Claimant did not earn revenue or pay wages until a month later. Ironically, BP has argued many times that such expenses were not significant enough to consider operations in other claims where the claimant was seeking qualification as a Start-Up business.
That notwithstanding, after a de novo review of the record, the panel concludes that the totality of the circumstances demonstrate that the Settlement Program properly considered the claimant to be a Start-Up Business and properly calculated compensation under Exhibit 7. Accordingly, Claimant’s final proposal is selected as the correct result.

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