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BP Claim Discretionary Review of Appeal 2015-1237: Alternative causes of loss not to be considered

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The following is a Discretionary Review Order issued by Judge Barbier pursuant to the Rules Governing Discretionary Court Review of Appeal Determinations. Judge Barbier’s rulings are binding on the Claims Administrator and the Appeal Panelists. 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.


Considering the request for discretionary review and having reviewed the objection and the record; Accordingly, IT IS ORDERED that the request for discretionary review is hereby GRANTED.

Claimant is a company that owns and operates many commercial rental properties. As allowed by the Settlement Agreement, claimant filed a consolidated claim which incorporated all of its properties and business operations in the Gulf Coast Areas. The scope of claimant’s operations changed over time – most significantly in this instance due to changes in the make-up of its commercial property portfolio. Specifically, the claimant sold a shopping center approximately a year and a half before the spill, which decreased its income in the period following the sale, and therefore impacted the compensation calculation for this claim. Such a result is a by-product of the objective causation and compensation formulas that were agreed to by the parties and which are foundational to the Settlement Agreement.

The Appeal Panel decision here effectively imposes an “alternative cause” analysis and/or applies a stricter definition of what is a “comparable period,” both of which have been considered and rejected by this Court and by the Fifth Circuit Court of Appeals.

The Settlement Agreement allows a claimant to pick months of the “Benchmark” and “Compensation” and compare them. See DEEPWATER HORIZON Economic and Property Damages Settlement Agreement as Amended on May 2, 2012, Volume I, Exhibit 4C; Rec. doc. 6430-10.¹  In this case, the claimant, as provided for in the Settlement Agreement, selected a Benchmark Period which included revenue from the property that was sold prior to the spill. The claimant then compared the same calendar months to the Compensation Period and computed its reduction in profit. As the Fifth Circuit has found, “’comparable,’ clearly indicate[s] that the Benchmark and Compensation Periods were referring to months of the same name, without any complex analysis of what type of business activities took place within those months.” In re Deepwater Horizon, 732 F.3d 326, 340 (5 2th Cir. 2013). Thus, in this case the computation of lost revenue was in accord with the Settlement Agreement and should not be modified to account for losses that may not be reasonably attributed to the spill.

Of equal significance is the fact that, under Exhibit 4B, “causation is generally assumed if economic loss can properly be shown. BP did agree that alternative causes of losses were irrelevant if the financial figures supported that a loss occurred.” 732 F.3d at 338. “There is nothing fundamentally unreasonable about what BP accepted but now wishes it had not.… The claims administrator, in working through how the proposed claims processing would apply in specific situations, submitted a hypothetical to BP and others. It posited three accountants being partners in a small firm located in a relevant geographic region. One of the three partners takes medical leave in the period immediately following the disaster, thus reducing profits in that period because the partner is not performing services for the firm. At least some of the firm’s loss, then, would have resulted from the absence of the partner during his medical leave. BP responded that such a claim should be paid.” In re Deepwater Horizon, 744 F.3d 370, 378 (5th Cir. 2014). The response was unequivocal.

In this case, the claimant selected its Benchmark Period, compared it to the Compensation Period and calculated its lost revenue. That is what the Settlement Agreement requires and the Claims Administrator was correct when it made the award to the claimant.

For these reasons, the decision of the Appeal Panel is REVERSED, and the determination of the Claims Administrator is REINSTATED.

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¹The Settlement Agreement defines Compensation Period as: the Compensation Period is selected by the claimant to include 3 or more consecutive months between May and December 2010. Benchmark Period is “the pre-DWH Spill time period which claimant chooses as the baseline for measuring its historical financial performance.” Id.

[Editor’s Note: This Order reverses the holding of the appeal panelist in Appeal 2015-1237]

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