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BP Business Economic Loss Claim Appeal 2017-369: No Revenue Generated in Contractor’s Out-Of-Zone Facility

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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 contractor based in Largo, FL. The Settlement program awarded Claimant $795,092.23 for its BEL claim, and BP appeals, asserting that revenue and expenses attributable to an out-of-zone facility in Indiana were not removed from the calculation of Claimant’s award. BP points to discrepancies in the record,
reflecting one occasion in which the Indiana location was described as “a sales office” and another in which it was described as “an administrative support office.” BP maintains the overall record supports the conclusion that the Indiana office was a “Facility” as defined by the Settlement Agreement.
A “Facility” under Exhibit 5 of the Settlement Agreement is a “separate and distinct physical location …at which [a claimant] performs or manages its operations.” BP argues the evidence demonstrates that management or performance of operations took place in Indiana, thus meeting the definition as indicated.
BP’s principal argument centers upon the stipulated fact that Claimant filed an Indiana State income tax return in 2010 which apportioned $876,071 of Claimant’s 2010 income to sales from within Indiana. This, paired with the inconsistencies in the record as to the description of the function of the Indiana office, suggests the matter should be remanded for further investigation and analysis, per BP.
The Settlement defines the term “facility” as “a separate and distinct physical location of a Multi-Facility Business at which it performs or manages its operations.”
See Settlement Agreement, Exhibit 5. The Claims Administrator, in Policy 467, has clarified this definition and determined the following are requisites to sustain a conclusion that a location is a facility: (1) a separate and distinct physical structure or premises; (2) owned, leased, or operated by the Business Entity; and (3) at which the Business Entity performs, and/or manages its operations. See Policy 467 at pg. 5. The Policy goes on to explain the terms “perform” and “manage”, saying that the overall criteria is the identification of expenses and revenues associated with the operations at that location and which are separate from the Entity’s other locations.
Claimant acknowledges its Indiana location satisfies the first two of these requirements: it is a distinct physical location leased by the Claimant. However, Claimant
maintains the third component is lacking, and that it does not have operations or manage its business from the Indiana location.
The Claims Administrator investigated this issue. Claimant satisfied the Program Accountant that the Indiana location is merely an administrative support office. A letter from the independent accounting firm which prepared Claimant’s taxes explains that the reason why the apportionment of revenue is attributed to the Indiana location is to recognize that a portion of company sales defaulted to Indiana because the proportional holding of a Subchapter-S shareholder of the Claimant corporation (taxed like a partnership) who resided in Indiana. Further, in response to specific inquiry, Claimant reported that no sales, management or revenue generating activities took place in the Indiana office.
The Program Accountant thus reasonably concluded, based upon the greater weight of the evidence, that no revenue was generated in this office and that the employees’ efforts in this location were merely ministerial and clerical. Consequently, the accountant concluded that the Indiana office did not constitute a “Facility” under the Settlement Agreement, and no adjustment was warranted. This conclusion is supported by the record.
Based upon the foregoing, the appeal is denied, and Claimant’s Final Proposal,consistent with the award of the Claims Administrator, is hereby selected.

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