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BP Business Economic Loss Claim Appeal 2017-878: Contractor Not A Real Estate Developer

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 awarded $195,058.96, pre-RTP to this contractor in New Hope, Alabama (Zone C). BP appeals, arguing that the Claimant is an excluded Real Estate Developer and submits a Final Proposal of $0.
On its claim form, Claimant provided the following description of its business: “General Contractor – subdivision development including sewer systems, storm drain systems, electrical & water systems and concrete sidewalks.”
Seizing on this description, BP argues that the Claimant is involved in the development of subdivisions and therefore an excluded Real Estate Developer under Sections 2.2.4 of the Settlement Agreement. To support this contention, BP argues that Claimant’s claim form and tax returns use NAICS Code 237210 – Land Subdivision which includes subdividing real property into lots for subsequent sale to builders as well as excavation work for installation of roads and utilities. BP also points out that Claimant’s financials segregate its revenues and expenses by subdivision project. Citing Policy 468, BP further argues that Claimant engages in the construction of sidewalks, curbs, sewers and other subdivision infrastructure indicative of real estate development activities.
Claimant responds that it engages in no real estate development. Claimant asserts that it functions solely as a subcontractor to landowners and developers, providing earth moving and concrete work. Claimant further explains that it does not own property nor perform any work for itself, only for contractors or landowners. In this regard, Claimant emphasizes that it neither purchases nor sells property and that the majority of its 2010 revenues were from earth moving projects for private residential customers. Claimant also uploaded an affidavit from its Chief Executive Officer attesting to its primary activity as earth moving and concrete work for third-party customers.
To be sure, the Settlement Agreement excludes “any natural Person or Entity that develops commercial, residential or industrial properties, including any Entity developing an entire subdivision. See Section In Policy 468, the Claims Administrator has established the criteria to be analyzed in determining if an entity qualifies as a Real Estate Developer. These factors include the business designation on the entity’s tax returns, 2010 permits and/or licenses and the nature of the entity’s revenue and expenses. Other information such as the purchase of raw land for development, sale of improved land or the planning, arranging, financing, design, zoning and marketing are also valid considerations.
Here, the record evidence does not support BP’s contention that Claimant is a Real Estate Developer. Neither the Settlement Agreement’s definition nor the Administrator’s criteria are present with the sole exception of the NAICS code utilized by the Claimant. Although Claimant describes itself as specializing in subdivision development, including sewer, storm drain, electrical and water systems, the only evidence in the record is that these activities are performed for third-
party customers. Absent from the record is any evidence that the Claimant purchased or sold land or performed any development activities for itself. To the contrary, the majority of Claimant’s 2010revenue was generated from projects for third-party residential customers.
For the foregoing reasons, BP’s appeal is not well taken. Claimant’s Final Proposal is therefore selected.

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