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BP Business Economic Loss Claim Appeal 2017-202: AVM Applied Over Education Methodology As Revenue Not Related to Time When Instruction Received


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

EDITOR’S NOTE: Lengthy Opinion Redacted for Publication–Only Summary Provided
The Educational Methodology expressly states that it is a deviation from the AVM Methodology which is intended to correct matching issues that arise when tuition fees are recorded and/or paid in months different from when the education is provided. The fundamental premise, then, is a direct relationship between the amount of tuition and the duration of instruction. This methodology calls for reallocation of such revenue on a straight line basis across the months covered by the tuition; that is, the term during which students receive their instruction.
The essence of Claimant’s argument is that the premise behind this methodology is not present in this case. In other words, allocation of the revenue over a period of months bears no relationship to the time period of instruction because the payments made by the contractors are not tuition but instead are contributions negotiated by and between them and the union as documented in the Collective Bargaining Agreement. Those contributions are predicated upon the number of hours worked by non-apprentice iron workers and have nothing to do with the duration of instruction or the number of apprentices in attendance.
Apparently the Administrator believed a relationship between the contractor payments and the time period of instruction did exist. According to Calculation Note 9:
The Claimant’s revenue is primarily comprised of contributions paid by contractors for the hours that apprentices worked in the field. Additionally, the School System makes quarterly payments based on the number of apprentices that move to the next level in training or complete one year successfully.
That conclusion apparently led the Administrator to apply the Educational Methodology to smooth the contractor payments mandated by the Collective Bargaining Agreement. To the contrary, as above noted, those payments are based upon a prearranged schedule of hours that journeymen iron workers, as opposed to apprentices, worked. While this panelist does not quarrel with the NAICS Code assigned by the Administrator, it does appear he gave undue weight to it due to its classification as an educational code. As is well known, an entity bearing a particular NAICS Code will not automatically be assigned to a particular methodology merely by virtue of its code in circumstances where factors exist which indicate an alternative methodology would be more appropriate.
Finally, the Appeal Panel Decision relied upon by BP arises from a different set of facts and is inapplicable here. In that case, there was no dispute that the Claimant’s high revenues in the months of August and July corresponded with its academic calendar. Here, there is no such calendar or other specified time period of instruction. Indeed, the contractor payments are more concentrated in the month of January, only. Consequently, Claimant’s P&Ls do not appear to demonstrate any of the typical attributes of an educational institution.
For the foregoing reasons, this Claimant appeal is sustained and the denial is overturned. The claim is remanded to the Claims Administrator with instructions to utilize
the Annual Variable Margin Methodology to evaluate it.

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