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 operates a K-3 through 12 Christian school in Mobile, Alabama (Zone D). Claimant filed a BEL claim and, after application of the Education Methodology, the Settlement Program determined that Claimant had failed to satisfy causation and denied the claim. Claimant appeals that determination.
Claimant raises two issues on appeal. First, Claimant contends that the appeal should be stayed due to the pendency of an appeal before the Fifth Circuit challenging Policy 495 and the matching methodologies contained therein. The panel notes that Policy 495 has been approved by the District Court and, since neither the District Court nor the Fifth Circuit have stayed further appeals, the panel will not do so here. Alternatively, Claimant contends that application of the Educational Institutions Methodology (EIM) in this instance was inappropriate and that the Program should have applied the AVM which would have resulted in a compensation award to the claimant.
De novo review reveals that the school operates on a 180 day academic calendar. Claimant’s income is mainly derived from tuition with some cafeteria and book sales. Unlike most educational institutions, Claimant invoices tuition on a monthly basis and cafeteria and book sales are recorded daily at the time of sale. Claimant maintains that since it invoices and receives tuition monthly and utilizes accrual based accounting, its revenue and expenses are already recorded in the months incurred thereby obviating the need to restate revenue based on the academic calendar. Claimant argues that, if any adjustments were needed to achieve sufficient matching, the AVM could easily have been utilized.
In the creation of Policy 495, the Program recognized several conclusions, among which is that “for the majority of claimants, sufficient‘ matching’. . . will best be accomplished through the annual variable methodology . . . [T]his approach . . . is the most feasible methodology in the context of a class-wide settlement.”
Policy 495 further recognizes that “a claimant with a given NAICS code will not automatically be assigned to a given methodology by virtue of the NAICS code if, in
the judgment of the Claims Administrator’s office, there are factors that indicate that revenues and expenses would be more sufficiently matched by applying an
The EIM is a deviation from the AVM and recognizes that there may be a disparity between how a K-12 institution bills attendees and the manner in which a college or university may bill on a semester or trimester basis. The methodology requires the Accounting Vendors to determine if the claimant’s financial records contain errors or matching issues. If so, correcting entries will be made to restate revenue and/or expenses and if such restatement results in insufficient matching, the claim with thereafter be analyzed under the EIM.
In this appeal, the claimant’s financial statements triggered Matching Criteria 7 for only one month – June 2010. Otherwise, Claimant’ s financials would be
“sufficiently matched.” Closer analysis reveals that Claimant’s financials relate without variance to its tax returns. Further, Claimant’s revenues are relatively
consistent throughout 2009 and 2010, except for June of 2010. For reasons that are not apparent in the record or addressed by the parties, Claimant records a
negative $244,197.50 in tuition revenue for that month. The panel could not find evidence in the record that that anomaly was discussed between the Program and Claimant.
Calculation note 5 reflects the Program’s reason for using the EIM: This claim was classified under an Education NAICS code. DWH Accountant has utilized the Education methodology based on the description and length of time of the academic / educational services provided to attendees, and that the Claimant’s contemporaneous P&Ls are not otherwise sufficiently matched. The Program then readjusted Claimant’s revenue based upon its academic calendar which then created more issues such as lumping 88% of Claimant’s revenue into the month of November in 2009 and 2010. This, in turn, created more Policy 495 “matching issues”
that required the application of the EIM. When Claimant questioned the use of the EIM at the outset on Re-Review, the Program responded: . . . [t]he Education methodology was utilized based on the Education NAICS code, the description and length of time of the academic/educational services provided to attendees, and that the Claimant’s contemporaneous P&Ls are not otherwise sufficiently matched. (emphasis added).
After careful consideration, this panel concludes that the NAICS code itself is insufficient to warrant the use of the EIM and that there is a lack of evidence that
Claimant’s revenue and expenses were “not otherwise sufficiently matched” with the exception of the anomaly in June 2010. The panel finds Claimant’s argument
that, under these specific facts, the AVM would be the more appropriate methodology and therefore remands the claim for recalculation.
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