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BP Business Economic Loss Claim Appeal 2017-1611: Restaurant Royalty Fees Are Fixed; Claimant Belongs in Zone C Instead of Zone D

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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 operates a XXX location inside in Tampa, Florida. BP appeals alleging that the Settlement Program erred in classifying Claimant’s “Contract Concession Fee” expense as fixed (rent) rather than variable. BP asserts that a publicly available contract that Claimant entered into with the shows that this expense was not rent under Florida law and was calculated as a percentage of gross  revenues. According to the contract, Claimant pays a “Concessions Services Fee” to the not as additional rent but
as a payment excluded from the tax imposed by a Florida Statute and as payment for the performance by the on behalf of the Concessions Services specified in the contract. In addition, according to BP, the Settlement Program erred in classifying Claimant’s “Royalty fee expense” as fixed rather than variable. These fees are always exactly 5% of monthly and annual revenues. BP contends that expenses that fluctuate exactly in proportion to revenue are variable citing Morton M. Goldberg Auction Galleries, 650 So.2d 804. BP points out that the Settlement Agreement also classifies Franchise Fees as a variable expense.
Claimant counters that it is undisputed the “concession fee” is a payment by for the use of space at to operate a restaurant. What the statute cited by BP does is prevent local authorities from collecting sales tax on rent paid by airport concessionaires to airport authorities because it would be a tax by a local government on another governmental entity. The statute is specifically limited to prevent the collection of sales tax by local governments on rent at airports and does not apply in any other situation.
To accept BP’s argument that the “concession fee” is not payment for the use of space requires the finding that is not paying a rental expense to operate its restaurants at YYY. The Settlement Program properly determined that “royalty fees” are a fixed expense. Exhibit 4D identifies “Fees” and “Dues and Subscriptions” as fixed expenses. These are the closest categories in the list of fixed and variable expenses. This Panelist finds that the Settlement Program properly classified these items.
Claimant cross-appeals contending the Settlement Program erred in placing Claimant in Zone D with instead of Zone C. Pursuant to the Zone Classification and Implementation Rules of the Settlement Agreement an extension of the boundaries is allowed if a claimant is within .25 miles of the exit ramp abutting said boundary. BP cites evidence that Exit 39 of the I-275 boundary between Zone D and Zone C when viewed from a southerly direction is outside the .25-mile radius. Claimant cites evidence that said exit from a northerly direction is within the .25-mile radius. After a thorough de novo review of all documents, maps, photos, and briefing of the parties, and taking into consideration the “claimant friendly” interpretation of the evidence called for in the Settlement Agreement, this Panelist concludes that the is within .25-mile radius of Exit 39, and therefore, Claimant’s concession is in Zone C. This Panelist remands the claim back to the Settlement Program for calculation of the award as a Zone C Claimant.

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