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BP Business Economic Loss Claim Appeal 2017-1360: Start Up Identity Change Means Not In Existence At Time Of Spill

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 provides engineering and environmental services and is located in St. Petersburg, FL. Claimant filed a “Regular Existing” Business Economic Loss Claim on December 6, 2013. The Settlement Program, according to Claimant, unilaterally and improperly reclassified the claim to a Start-Up Business Claim on August 17, 2015. It then denied the claim explaining that Claimant had submitted documents indicating that it’s business’ operating history commenced on or after April 20,2010, and that the Settlement Agreement and Claims Administrator Policy 362 require that Claimant’s business’ operating history commence before April 20, 2010 to be eligible to receive compensation under the Start-Up Business Economic Loss or Failed Start-Up Business Economic Loss frameworks.
Claimant appeals alleging that the record reveals that the Claimant commenced operations as early as 2005 and shows that the business had an operating history of more than eighteen months before the Spill, and thus, is not a “Start-Up” business under the terms of the Settlement Agreement. Claimant asserts that if the Settlement Program would have analyzed Claimant’s financials under the criteria for “Regular Existing Businesses,” the Claimant meets the “V-Shaped” causation
pattern of Settlement Agreement Exhibit 4B. Claimant asserts that it should not be viewed as a Start-Up business. The Claimant changed from XXX. to YYY in 2010.
XXX had 2 owners up until 2010. The major shareholder took sole possession of the business in 2010. At that time, as the sole shareholder, the owner changed from
Inc. to LLC for liability reasons. The type of business remained the same, the work being performed remained the same, the location remained the same, and the customer base remained the same. XXX and YYY should be evaluated as one claim under the Settlement Program. Thus, Claimant asserts that a simple organizational change due to the departure of an officer does not change the fact that this was a single, continuing business during all material years. Therefore, the Claimant requests this claim be remanded with instructions to analyze it as a “Regular Existing Business.”
BP counters that Claimant and XXX/YYY are wholly separate and distinct entities. Claimant admits that the businesses are not the same entity and that, as their names suggest, the two entities have different organizational structures. Claimant also describes the differing ownership structures of these two entities. Furthermore, ???
continued operating long after Claimant was formed. BP point out that the District Court has held that a claimant may not use the pre-Spill operations of another entity to satisfy the operating history requirement where the other entity is wholly separate and distinct. As with this claim, two companies are wholly separate and distinct if their organizational form and ownership differ. Thus, Claimant cannot satisfy the Settlement Agreement’s operating requirements with the operations of ???.
In support of its argument that it is the same entity as ???, BP asserts that Claimant cites an Appeal Panel Decision that is inconsistent with the District Court’s ruling on this issue. Furthermore, unlike the claimant in the Appeal Panel Decision cited by Claimant, which merely changed organizational structure, here Claimant changed
organizational structure as well as its ownership structure. Claimant and are wholly separate and distinct.  Thus, according to BP, Claimant cannot satisfy the operating history requirement of Exhibit 7, and BP contends that the determinations of the Settlement Program should be upheld, and this appeal should be denied.
This appeal presents a difficult issue for this panelist, but I am duty bound to follow the dictates of the Federal Courts, and while those applicable decisions may be distinguished in part, whether those distinctions are substantive is questionable, and I am, among other things, struck by the language in the Federal Court decision in Appeal Decision 2015-1699 that “by definition, an entity could not have been in operation before that entity even existed.” Claimant’s appeal is denied.

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