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BP Business Economic Loss Claim Appeal 2017-453:Professional Services Methodology Applied To Law Firm–Claim Denied

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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 law firm located in St. Petersburg, Florida. Claimant appeals from the denial of its BEL claim, asserting that it “met the V-criteria for causation,” and
the “re-calculations were done incorrectly for matching revenue to time in the file.” Claimant argues, essentially, that most of the work spent on its files occurs in the
weeks prior to settlement. By taking the total revenue number and dividing it evenly over the time the matter is open “over-smooths” the data. Claimant concludes that this results in the appearance that there was no effect from the BP spill, when in fact that was not the case.
The Settlement Program determined Claimant did not meet the V-Shaped Revenue Pattern test after it applied Policy 495 to Claimant’s unmatched financial data.
Claimant’s financial data failed four of the seven Policy 495 matching criteria. As a result, the Settlement Program applied the Professional Services Methodology to address the matching issues, finding that, “this claim is classified as a Professional NAICS code” and “is on a cash basis.”
Policy 495 provides, “The majority of professional services claims presented to the program to date have not maintained books and records on an accrual basis, but rather have been prepared predominantly on a modified cash basis. As such, the timing of revenue recognized on the claimant’s P&Ls may not correlate with the timing of activities performed to earn such revenue….Recording revenue when cash is received in payment of such invoices can, therefore, result in considerable timing differences in the months that sales are recorded relative to when work was performed.”
Accordingly, Policy 495’s Professional Services methodology was appropriately applied to this law firm’s claim. Although not addressed directly in its memorandum, Claimant appears to argue that the Settlement Program should not have applied the Professional Services Methodology to correct its unmatched financial data. However Claimant informed the Settlement Program via correspondence that it invoices clients on a quarterly basis and revenue is recognized when it is received. Accordingly, Claimant does not record revenue when it is earned, but when it is received. The Settlement Program correctly used the case summary document provided by Claimant to determine the appropriate start and end dates and the total fee amount per case.
Claimant did not provide hourly information for its case engagements. Consequently, the straight-line method was utilized for each project, as directed by Policy 495 at F2, which provides, “Those claimants that submit P&Ls that are deemed not ‘sufficiently matched’ will have the P&Ls adjusted to allocate revenue on a straight line basis over the period of the case/engagement, unless the claimant can submit appropriate, reliable and complete records that permit an alternative allocation of revenue based on when activity generating the revenue occurred.” Claimant submitted no such records.
Based upon the foregoing, the Settlement Program properly applied Policy 495 and the Professional Services Methodology to this claim. Claimant failed to meet the requirements of Exhibit 4B and is not entitled to an award under the terms of the Settlement Agreement. Claimant’s appeal is thus denied, and the Denial is hereby upheld.

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