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BP Business Economic Loss Claim Appeal 2016-263: Successor entity entitled to bring claim (decision overruled)


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 issue on this appeal is whether the successor owner of an entity with a longstanding history of operation in the Gulf Coast Areas is excluded based on its acquisition of the entity after the spill. The Claims Administrator denied the BEL claim of the parent company of the owner/operator LLC of a [XXXXX] in Naples, Florida. The Administrator concluded that because of the post-spill acquisition, Claimant was not doing business or operating in the Gulf Coast Areas at the time of the spill. Claimant appeals.

Claimant’s primary argument is that it acquired the LLC that owned and operated the [XXXXX] in November of 2011. However, up to and until that time, [XXXXX] had been in operation since 2007 as the hotel operator without interruption. Claimant also acquired the LLC that owns the property and structure, which completed its acquisition of the property and hotel operation. As the parent company of these LLCs, Claimant argues that the business was, in fact, in operation at the time of the spill and had been during the Benchmark and Compensation Periods. After the acquisition, the same hotel management agreement, leases, employees and franchise agreement remained in effect. Claimant argues that as a business enterprise, it has conducted the same uninterrupted business operation, at the same location, with the same trade name since 2007. As an entity, Claimant argues that it acquired ownership of all interests, claims, and rights of [XXXXX], including the right to assert a BEL claim.

BP’s position is uncomplicated. Because Claimant did not own the hotel until after the spill, BP argues that it was not in operation on April 20, 2010. BP also points out that Claimant was not formed as a legal entity until June of 2011 and therefore had no Benchmark against which to measure economic performance before or after the spill.

The Settlement Agreement does not address the analysis of businesses with substantive changes in ownership or operations that occur during the Benchmark or Compensation Periods. The Claims Administrator previously adopted Policy 354 that provided guidance as to the evaluation of Claimants with changes in business ownership. This policy was later withdrawn based on the concurrence of BP and Class Counsel that a formal policy on this topic was no longer necessary. At least one appeal panel has addressed a similar issue and determined that the details of the purchase transaction were salient to the analysis. In that case, the claimant underwent a restructuring after the spill in which it changed its form of operation from a corporation to an LLC. However, it continued to operate in the Gulf Coast Areas without interruption. The appeal panel expressly found that the right to make a BEL claim under the Settlement Agreement was transferred to the claimant entity, thereby entitling it to membership in the Settlement Class. Here, all interests of the previous owners were transferred to the Claimant in the Plan of Reorganization as reflected by the record. Similarly, the hotel has continued to operate as a without interruption, with the same trade name, employees, leases and management agreement. Hence, under both the business enterprise approach and the entity approach, Claimant is a member of the Settlement Class and entitled to bring the instant BEL claim.

For the foregoing reasons, the denial of this claim is overturned. This claim is remanded to the Settlement Program with instructions to assess causation and determine the appropriate award of compensation, if any.

[Editor’s Note: This appeal panel decision was reversed by Judge Barbier under Discretionary Review.]

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