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BP Business Economic Loss Claim Appeal 2016-2092: Pharmacy Denied Tourism Designation Since 90% of Business came from Pharmaceutical Sales, Which Are Presumably Local

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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.

Claimant is a self-described “pharmacy, souvenir, and Christmas store located in Fairhope, Alabama (Zone B) that offers fine gifts, collectibles, and seasonal gifts in

addition to prescription services.” Claimant’s BEL claim was denied because Claimant did not satisfy any of the causation  tests of Exhibit 4B of the Settlement Agreement. Claimant now seeks the benefit of that provision of Exhibit 4B stating that if a claimant located in Zone B meets the “Tourism” definition, it is “not required to provide any evidence of causation.”
Claimant’s NAICS code is not one of those listed in Exhibit 2 which automatically qualifies for Tourism status. Policy 289 v.2 provides that a claimant may still be considered to fall within the Tourism definition “if the Claims Administrator determines in his discretion that the claimant’s business meets the [Tourism] definition,” to-wit: “Tourism means businesses which provide services such as attracting, transporting, accommodating or catering to the needs or wants of persons traveling to, or staying in, places outside their home community.” Moreover, “The Claims Administrator has established a specialized team to assess Tourism issues
on a case-by-case basis” and “Characterization of a claimant’s business as Tourism vs. Non-Tourism shall be based on the totality of circumstances, including consideration of the business’ activities during the Benchmark Period and the Class Period.”(Policy 289 v.2, paragraphs (e) and(f).
In reaffirming the denial of the claim, the Claims Administrator in the Re-Review Analysis section of the Post-Re-Review Denial Notice stated:
We reviewed this again and confirmed the Non-Tourism Industry Designation is correct. The firm argues that we should apply the Tourism Designation because the entity is located next to a gift shop that is aimed at attracting tourists,, and advertisements for it include notation of selling gifts. Additionally, the firm states that large festivals conducted in Fairhope attracted many visitors last year (2014), and that various on line travel guides for Alabama cite Fairhope as a place to visit, and that using these indicators we should assume that the entity it tourist based. Lastly, the firm notes that the entity is a multifaceted business, selling both pharmaceuticals and gifts; however, we assigned the NAICS Code 446110 – Pharmacies and Drug Stores because it most accurately describes the primary business activity. The entity’s P&Ls evidence it earned an average of over 90% of their revenues from “Sales – Drugs” confirming that the business is, in fact, primarily a Pharmacy/Drug Store.
We determined that the business does not otherwise meet the Tourism definition because the documentation in the file does not establish that the business received a significant amount of revenue from non-local customers.
That NAICS code assigned was also the one Claimant used on its 2010 tax return, on which it listed its primary business service or activity as “pharmacy retail sales.” However, “is not just a gift shop “next” to the pharmacy location; it is a part and parcel of Claimant’s business. As a total operation, Claimant sells a variety of goods and merchandise, much of which would have a natural appeal to tourists. Claimant argues that although “90% of its revenue is derived from the pharmaceutical portion of its business,” even some of those sales would probably be attributable to tourist traffic, and that of its two adjoining buildings’ square feet total of 7,200 square feet, the aggregate sales area is about 5,000 square feet and the pharmaceutical portion, located at the back of the main building, occupies only about 1,000 square feet of that sales area. In that regard, Claimant argues in its Reply Brief that it “sells much more than prescription drugs. In fact, the majority of its physical store is devoted to selling items other than prescription drugs.” However, certain of those items as advertised on Claimant’s website, e.g., could accommodate the needs of local residents perhaps more so than those of tourists.
The panelist has visited Fairhope in the past, usually in connection with legal conventions hosted at the nearby iconic ***, and is well aware that the town, with a 2010 census population of only 15,326, is heavily populated year round with large numbers of tourists. Claimant’s location is in the very heart of “downtown” Fairhope, on a street where numerous tourist-attracting specialty shops are located. Fairhope’s economy is heavily dependent on tourists.
Claimant argues that “While Claimant’s pharmacy portion of the business deals with prescription drug sales, the portion provides novelty items such as postcards, figurines, ornaments, home décor, and other holiday décor.” Nonetheless, prescription drug sales are inherently of a nature as to be made almost exclusively to local residents – a tourist would only very rarely obtain a prescription from his or her hometown physician and then delay until traveling to Fairhope getting it filled.
The unique character of Claimant’s overall operation makes application of the Tourism criteria a challenging proposition, and Claimant’s counsel has done an excellent job of marshalling pertinent information from numerous sources, including websites.
In the final analysis, however, the panelist is called upon to decide if the Claims Administrator abused the “discretion” expressly accorded him by Policy 289 v.2, in deciding how best to characterize Claimant’s business based on its business activities. By Claimant’s own admission, prescription drug sales account for 90%of its revenue. The panelist accepts that a claimant’s business doesn’t have to receive a majority of its revenue from Tourism to qualify for that classification under a totality of circumstances test,but such a lop-sided percentage of patently non-Tourism revenue as is involved here, prevents a finding that the Claims Administrator exceeded his discretion in making the judgment call he did.
Denial upheld, appeal denied.

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