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BP Business Economic Loss Claim Appeal 2017-368: HVAC Wholesale Distributor’s Separate Facility Not a “Failed Business” Under Policy 506


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 was a plumbing, HVAC, water and sewer wholesale distributor headquartered in Meridian, Mississippi. This claim relates to its facility in Cullman, Alabama. In its initial review, the Settlement Program classified this claim as a Failed Business claim and thus found it ineligible for compensation under the Settlement Agreement.
After entering its Post-Re-Review Denial Notice, however, the Settlement Program reversed its previous finding, and reviewed the claim under the Business Economic Loss Framework. It then awarded Claimant $239,425, post-RTP.
BP appeals alleging that Claimant’s Pullman, Alabama facility is a Failed Business because it ceased operations, wound down, and began liquidating its assets prior to December 31, 2011. As such, says BP, the Settlement Program’s initial determination that Claimant is ineligible for an award is correct, and the Settlement Program erred in then reversing course and calculating an award for this claim under the Business Economic Loss framework.
Exhibit 6 of the Settlement Agreement, provides “[a] ‘Failed Business’ shall be an entity that commenced operations prior to November 1, 2008, and that, subsequent to May 1, 2010 but prior to December 31, 2011, either (i) ceased operations and wound down, or (ii) entered bankruptcy, or (iii) otherwise initiated or completed a liquidation of substantially all of its assets.” BP asserts that there is no requirement that the Claimant complete liquidation, or that it actually cease all operations or dissolve its legal entity.
According to Policy 506 the actual failure date is based on when “the claimant ceased to . . . perform its full time services.” Because Claimant here is a Multi-Facility business that has elected to file separately for each location, “the Settlement Program will perform this analysis on each Facility included in the Multi-Facility Business.” BP contends that the record shows that between November and December 2011, Claimant consolidated its Cullman facility with a nearby facility in Albertville and closed the Cullman branch. Thus, according to BP, because Claimant is located in Zone D and is neither a “Tourism” or “Seafood Distribution Chain” business, it is excluded from receiving compensation under the Failed Business Framework.
Claimant responds that Policy 506 states that “the Settlement Program will apply professional judgment in determining the actual failure date,” and that is just what the Settlement Program ultimately did in this instance. The Claimant did not initiate a liquidation of its assets. The assets were still maintained by the Claimant, and sales of the Cullman facility inventory continued well beyond December 31, 2011. Further, the Claimant neither had completely ceased operations nor had completely wound down its operations as of December 31, 2011. Customers of the Cullman facility were still being serviced by the Claimant into 2012.
This panelist finds that the Settlement Program properly exercised its discretion based on the record evidence, the Settlement Agreement and applicable policies and for the reasons set forth above, BP’s grounds for the appeal of this claim are without merit. Thus, the decision of the Settlement Program is upheld and BP’s appeal is denied.

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