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BP Business Economic Loss Claim Appeal 2017-1427:”Implausible” Argument Rejected Again;Fixed and Variable Costs Properly Allocated

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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 wholesale distributor of electrical, communications, and data networking equipment located in Birmingham, Alabama. The Settlement Program awarded Claimant $712,628.30 pre-RTP. BP appeals asserting that Claimant’s award rests on the implausible attestation that an oil spill in the waters of the Gulf of Mexico resulted in loss for an electrical equipment wholesaler. Here, again, BP makes its “implausible and suspicious” argument that has been rejected time after time by the Appeals Panel. BP asserts that given the nature of Claimant’s business Claimant has no basis to attest that it suffered a spill-related loss.
However, BP reads the Fifth’s Circuit’s opinion out of context to propose it allows for a new causation test. The alternative causation argument has been repeatedly rejected and BP has provided nothing to justify the attempted resurrection of the discredited alternative causation argument. In its Memorandum in Support of Approval of the Settlement Agreement BP specifically stated there was “no analysis required to determine whether the declines [in revenue] might have been due, at least in part, to other causes.” However, after that when BP previously presented an “alternative causation” argument, BP argued that Section 1.3.1.2 required a claimant to show to the Administrator’s satisfaction it suffered loss from the Deepwater Horizon Spill. After Judge Barbier held the causation test in the Settlement
Agreement was the exclusive causation test, and ordered appeals based on the argument to be summarily denied, BP appealed. The Fifth Circuit affirmed Judge Barbier, and held that under the terms of the Settlement Agreement, losses are caused by the “Deepwater Horizon Incident” if the tests set out in Exhibit 4 are satisfied. No further inquiry or tests were allowed.
In In re Deepwater Horizon, the Fifth Circuit also noted that the attestation BP seeks to rely on only attests to the “financial figures and other details” which make up the claim. The Court recognized that it “was a contractual concession by BP to limit the issue of factual causation in the processing of claims” and there “is nothing unreasonable about what BP accepted but now wishes it had not.” See also Policy 308 v2. This panelist will again decline BP’s attempt to revive and revise the alternate causation argument by denying BP’s appeal on this basis.
As to misclassifying Claimant’s “Auto/Truck Operating” expenses as fixed, BP asserts that Claimant’s auto/truck operating expenses are approximately 1-1.5% of Claimant’s monthly earned revenues rising and falling in direct relation to the level of Claimant’s business–the very definition of a variable expense.
As to misclassifying Claimant’s “Computer Program/Repairs” expenses as variable, BP asserts that Exhibit 4D of the Settlement Agreement classifies “Computer and Internet Expenses” as fixed. Furthermore, this expense does not appear to correlate with Claimant’s sales activity.
As to misclassifying Claimant’s “Equipment Rental/Leased” expenses as fixed, BP asserts that Claimant included its equipment rental/leased expenses under Cost of Goods Sold on its income tax return. Additionally, the monthly amounts are inconsistent and related to sales activity, which is, according to BP, “the very definition of a variable expense.” This account was 1.7% of annual revenue in both 2008 and 2009. Accordingly, the Settlement Program should reclassify Claimant’s “Equipment Rental/Leased” expenses as Variable costs of goods sold pursuant to Exhibit 4D.
Claimant responds that Auto Expense is listed on Attachment A as a Fixed Cost. The Claims Administrator classified Claimant’s Auto/Truck Operating Expense as a Fixed Cost. Similarly, both Rental Expense and Lease Expense are listed on Attachment A as Fixed Costs. The Claims Administrator classified Claimant’s Equipment Rental/Leased expense as a Fixed Cost. Finally, Repairs (excluding maintenance) is listed on Attachment A as a Variable Cost. The Claims Administrator classified Claimant’s Computer Program/Repairs as a Variable Cost.
Therefore, according to Claimant, there is no error in the classification of these expense items. This panelist will also note that BP’s Final Proposal is $0, and under the “baseball” process even if BP where correct in its assertions about these expenses it is inconceivable that the resulting deductions would bring BP’s Final Proposal closer to the adjusted amount than Claimant’s Final Proposal. Claimant’s Final proposal is adopted and BP’s appeal is denied.

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