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BP Business Economic Loss Claim Appeal 2017-172: Law Firm’s Claim Denied Despite Passing All Seven Matching Criteria of Policy 495Not Triggering

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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 brought this Business Economic Loss claim under the Settlement Agreement. The Settlement Program denied the claim because, after application of Policy 495, Claimant did not pass the causation tests in Exhibit 4B of the Settlement Agreement. Claimant appeals.
The appeal raises important questions:
(1) Where a claim is sufficiently matched and does not trigger the objective criteria that require further matching analysis , does the Settlement Program have discretion to subject the claim to further matching analysis?
(2) Does Policy 495 as applied here by the Settlement Program conflict with the Settlement Agreement’s mandate to provide Claimants “the best opportunity to be determined eligible”?
(3) In claims, such as this one, where no objective criteria are triggered, can Policy 495 be applied simply because contingency fees exist?
(4) Was Policy 495 properly applied in this specific case?
Claimant argues that their claim passed all seven matching criteria. BP does not contest this assertion. Moreover, neither does the Settlement Program. In response to a Request for Information/Summary of Review, the Settlement Program stated: “In the initial Denial Notice, Criteria 6 was triggered on the Declaration Analysis. On Re-
Review, the Claimant noted an accounting error in January 2009 which DWH Accountants corrected which resulted in no matching criteria being triggered.” Claimant contends that, in the absence of one of the seven criteria being triggered, the Settlement Program cannot exercise “unfettered discretion” and apply Policy 495.
However, Policy 495 directly addresses this situation. As the Settlement Program observed in its Response to the Request for Information, “any claim… that does not fall within one of the foregoing seven criteria shall be presumed to be ‘sufficiently matched’… however that if in the professional judgment of the CSSP Accounting Vendors, a claim may require further matching analysis…” Further, in such instances, the Accounting Vendors “will exercise their professional judgment to
determine whether that claim is ‘sufficiently matched’…. Policy 495, at 6. Thus, under Policy 495 the Accounting Vendors do have the express authority to exercise their
professional judgment whether a claim is ‘sufficiently matched’. Policy 495 has been approved by the supervising Federal Court and is binding on the Appeals Panel.
This brings us to the second question of whether Policy 495 conflicts with the Settlement Agreement’s mandate that a claimant being given its “best opportunity.” I see no inconsistency between the Settlement Agreement’s “Claimant-Friendly” approach and Policy 495. The Courts have required sufficient matching. Policy 495 is the Court-approved approach to fulfill thesufficient matching requirement of the Settlement Agreement.
Therefore, even in situations such as this where no matching criteria are triggered, the Settlement Program has discretion to conduct additional matching analysis. When it does so, the Settlement Program is acting consistently with the requirements of the Settlement Agreement. Such discretion is not unfettered, however. This brings us to the third and fourth issues, whether the existence of a contingency fee is enough to justify the Settlement Program’s exercise of its discretion and whether the Settlement Program’s action on this case was appropriate.
For purposes of its tax returns, Claimant uses a cash basis for accounting purposes. Revenue, however, is recognized on an accrual basis. Most of Claimant’s billings are based on monthly or quarterly bills. Claimant did have contingency fee revenue as well. The mere existence of contingency fee is not enough to support application of Policy 495 in the absence of any trigger of one or more of the objective criteria. Nothing in this opinion should be cited to suggest that contingency fees alone trigger the need for additional matching analysis.
We examine the record then to determine on what basis the Settlement Program could legitimately conclude additional matching analysis in this specific case. The answer to this query is found in Calculation Notes 12 and 14:
Calculation Note 12:
Claimant explained that most jobs are billed on a monthly or a quarterly basis., ith some engagements being longer term billed on a contingency basis. Claimant provided a breakdown of the start date, end date, revenue amount, and period revenue was recorded on the P&Ls for all contingency cases in the case summary. The DWH accountant, therefore, removed the revenue from the long term projects using Adjustment 1 and restated the amount as Revenue Line Item 1 to be spread over the months that the work was performed using Adjustment 2. Post 211 revenue recognized pertaining to cases opened prior to December 31st, 2011 was also included via
Adjustment 2.
Calculation Note 14:
This claim was classified under a Professional Services NAICS code. As noted in the Revenue Recognition note, the claimant bills the majority of their projects on a monthly or quarterly basis, with a small amount of contingency fee cases. DWH accountant utilized the claimant-provided case summary report to complete the Case Summary tab in the workbook, entering each case, their respective start and end dates, and the total fee amount. As such, the Professional Services Methodology was
utilized to allocate the revenue recognized from contingency cases over the life of each case. As the claimant did not provide the hourly information for case engagements, the straight line method was utilized for each case.
Here, the financial records indicate specific start and stop dates for the contingency fee cases making allocation reasonable. Other facts include whether the period in which the contingency fee revenue falls distorts the overall picture of financial results. Allocation is advisable if it leads to a more accurate picture of an entity’s results.
This is a close call. However, the record contains a sufficient basis on which to conclude the Settlement Program correctly denied the claim.

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