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BP Business Economic Loss Claim Appeal2016-1881:Supplies (Expenses) Are “Fixed” Not “Variable” Under Settlement Agreement (Exhibits 4C and 4D)

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 in this appeal is an electrical contractor located in Pelham, Alabama (Zone D). The Settlement Program awarded Claimant $610,364.95 pre-RTP ($764,298.99 post-RTP). BP appeals, asserting the Settlement Program misapplied the requirements of the Settlement Agreement and erred in its calculation of Claimant’s award amount by misclassifying certain of Claimant’s expenses as fixed, and claiming they should have been classified as variable.
The Settlement Program classified Claimant’s “supplies job” expense as a fixed expense. BP takes issue with this, claiming that these costs are tied directly to production, and vary from month to month, thus variable in nature, not fixed. BP cites a variety of state and federal cases in support of this principle. BP complains that the Settlement Program mechanically deemed this item as a fixed expense because Exhibit 4D to the Settlement Agreement has a category for “supplies”, and correcting this “misclassification” would reduce Claimant’s compensation amount. BP made no calculation as to the reduction it felt would have been appropriate, and
merely made a Final Proposal of $0.
The Settlement Agreement defines which expenses are deemed to be fixed and which are variable. Exhibit 4C, which sets out the calculation for business economic losses, provides that the parties have agreed to a defined list of fixed and variable expenses, as reflected in Exhibit 4D, Attachment A. This schedule is part of the negotiated agreement of the parties, and it provides that “supplies” are deemed to be fixed, not variable. The Settlement program correctly classified this item as a fixed expense, and its overall award was correctly calculated. The award is affirmed.

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