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BP Business Economic Loss Claim Appeal 2017-245:Construction Methodology Sufficiently Matches Construction Company’s P&L’s

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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 construction company located in Birmingham, Alabama. The Settlement Program awarded this BEL Claimant $291,140.38, pre-RTP. BP appeals alleging that the Settlement Program failed to evaluate a $275,000 negative variable expense in Claimant’s “Commissions/NS” account in October 2010, the end of Claimant’s fiscal year. BP points to the fact that Claimant’s monthly variable expenses are stable throughout the relevant period (between January 2007 and December 2011) with the exception of a dip in December 2009 and a spike in a corresponding amount in October 2010. BP contends that the dip and spike, both in the same fiscal year, are
due solely to a large, anomalous expense of $300,000 in Claimant’s “Commissions/NS” account in December 2009, and an anomalous negative entry of -$275,000 in the same account in October 2010. The only other entries in this account are all positive and all in October of 2007, 2008, and 2009.
Because Claimant failed the Matching Test, the Settlement Program applied the Construction Methodology under Policy 495. However, according to BP, there is no indication that the Settlement Program inquired into the account that caused the Matching Test failure. BP asserts that the negative entry in the October 2010—the last month of Claimant’s fiscal year—is indicative of a year-end accounting adjustment that relates to activity in an earlier month, and attributing the October 2010 negative expense to offset the anomalous December 2009 expense corrects the reason why this claim triggers Policy 495’s sixth criteria for unmatched claims. But, contends BP, leaving a large, atypical positive amount in an expense account (a negative expense) is an error that drives the award amount and should have been addressed by the Settlement Program.
Claimant counters by pointing out that Section 4 of “Underlying Issues and Principles” states: “It is not feasible in the context of a class-wide settlement involving
thousands of different claims, with each claimant’s financial information potentially spanning a time period in excess of four years, to attempt to match specific expenses to specific revenues on an individual transaction by transaction basis.” Scores of Appeal Panel decisions have determined the Settlement Programs application of Policy 495 and its various methodologies to be the mechanism that produces P&Ls that are sufficiently matched.
The Settlement Program is given the authority under Policy 495 to review the submitted documentation and request additional information “if necessary.” Attachment C of Policy 495 states: “The Construction Methodology shall be applied to adjust a construction claimant’s contemporaneous P&Ls that have been deemed not to be
‘sufficiently matched.’” The Settlement Program applied the 7 tests suggested by Policy 495 and using professional judgement determined the P&Ls were not sufficiently matched and proceeded to calculate the claim utilizing the Construction Methodology. Section 11 of “Underlying Issues and Principles” states: “Consideration
of whether revenues and expenses are sufficiently matched necessarily involves an element of professional judgment. The CSSP recognizes and reserves the right of the CSSP Accounting Vendors to exercise such professional judgment to achieve sufficient matching as ordered by the Court.” In this case the Settlement Program using their professional judgement determined that the P&Ls of Claimant, after making adjustments would be sufficiently matched by applying the Construction Methodology, a methodology to which BP agreed.
Claimant then refers to recent Appeal Panel decisions it asserts support its position. This panelist finds that the record, provisions of the Settlement Agreement and certain policies thereunder is sufficient to support Settlement Program’s exercise of its professional judgement in this matter. BP’s appeal is denied.

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