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BP Business Economic Loss Claim Appeal 2017-1512: Hotel’s Expenses Properly Categorized

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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 hotel and resort located in Key West, Florida . The Settlement Program awarded Claimant $745,318.93, pre-RTP. BP appeals contending that the Settlement Program erred in its classification of a number of Claimant’s expenses “that are clearly tied to the volume of Claimant’s guests as fixed when those expenses should have been treated as variable expenses.” BP asserts that the Settlement Program misclassified Claimant’s “Rooms Department Other Expenses –Cleaning Supplies” as fixed, again citing Morton M. Goldberg Auction Galleries, Inc. v. Canco, Inc., 650 So.2d 801, 803–04 (La. Ct. App. 1995) for the proposition that the amount a hotel business such as Claimant’s spends on consumable goods used to refresh hotel rooms in between guests varies in direct relation to the number of hotel guests the business serves—it is thus a classic variable expense.
Along the same lines, the Settlement Program, according to BP, should have also treated Claimant’s “Rooms Department Other Expenses — Laundry & Dry Cleaning” and “Special Concessions Other Expenses — Guest Laundry & Dry Cleaning” expenses as variable. Like with cleaning supplies, the amount a hotel business spends on laundry and dry cleaning of bedding and other linens, or on laundry services for its guests, varies in direct relation to the number of hotel guests the business serves.
Lastly, BP says the Settlement Program erred in its classification of Claimant’s “Property Operations Other Expenses — HVAC Repair” expense as fixed. Under Exhibit 4D to the Settlement Agreement “repair” costs are classified as variable and neither Claimant nor the Settlement Program has offered any justification for treating the “HVAC Repair” cost as fixed. According to BP re-classifying each of the aforementioned accounts as variable would reduce Claimant’s award.
The attorney for the Claimant’s miserably inadequate response in this substantial claim is set out below in full to illustrate its characterization:
“Please allow this summary to serve as a response to BP’s meritless appeal. BP’s appeal is not in good faith, and
asserts that no monies should be allocated to Claim ant on this sizable claim. It is Claimant’s position that the DHECC
properly treated the expenses in its allocation as fixed. BP has delayed payment on claim, and tried to undercut the
claimant’s at every turn. This claim was analyzed by numerous accountants and was properly determined
after years of consideration. Please proceed to issue the award in favor of Claimant. The issues raised by BP relating
to the treatment of expenses, was proper and the expenses were fixed. Regardless, even if BP’s argument had any merit,
such variance is nominal at best, and not in line with the Settlement Agreement. BP continues to delay and harass to
prevent payment.”
However, in spite of this pathetic performance by Claimant’s counsel, Claimant prevails on the merits. This panelist finds no merit in BP’s contention that the Settlement Program misclassified certain expenses. Of those specifically named, I find that the Settlement Program was well within its discretion to find that they appropriately fit in one of the following fixed items listed in Exhibit 4D, Attachment “A”, the first two under “Cleaning and Housekeeping cost,” and “Supplies.” “Repairs (excluding maintenance)” (emphasis supplied) is a variable expense under Exhibit 4D, Attachment “A.” This expense appears to relate to maintenance, and therefore, is a fixed expense. Consequently , BP’s assertion as to misclassification is rejected and BP’s appeal is denied.

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