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BP Business Economic Loss Claim Appeal 2017-479: Post-Spill Incorporation Fatal To Start-Up Claim

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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


 

The Claims Administrator denied the Start-Up BEL claim of this non-profit company that sponsors a songwriters festival. The Administrator determined that the Claimant did not have an operating history prior to the Spill because it was not incorporated until July 7, 2010. Claimant appeals.

The facts are essentially undisputed. Claimant began operations in the summer of 2009 as an unincorporated entity. During that year, it conducted the first of its annual festivals which generated revenue as reflected on its 2009 P&Ls. Claimant was preparing for the 2010 event at the time of the Spill. Later, Claimant officially incorporated by filing Articles of Incorporation with the Florida Secretary of State on July 7, 2010. The 2010 festival was less successful and Claimant argues that this was a direct result of the Oil Spill. By all accounts, the event bounced back in 2011 and subsequent years.

Claimant argues that the fact that it officially incorporated after the Spill should not disqualify it since the P&Ls show continuous business activity since 2009. In response, BP argues that the present claiming entity did not exist prior to the Spill and therefore could not have been doing business in the Gulf Coast Areas. In other words, since Claimant incorporated two months after the Spill, it could not have had an operating history before April 20, 2010.

Both the District Court and 5 Circuit have weighed in on this issue. In Discretionary Review Decision No. 2015-1699, the District Court held that, by definition, a Claimant entity that was not in existence at the time of the Spill could not have been in operation on April 20, 2010.  More recently, the 5 Circuit upheld the District Court’s denial of discretionary review where a real the state agent who was an independent contractor before the Spill but incorporated his agency after April 20, 2010 had no operating history.  Claimant v. BP Exploration and Production, Incorporated, No. 16-30648, (5 Cir., Feb 15, 2017). The Claimant’s incorporation subsequent to the Spill is decisive because appeal panels are bound by controlling decisions of the Courts. Accordingly, the denial is upheld and Claimant’s appeal is dismissed.

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