BP Deepwater Horizon Claim Policy 495 Gutted by 5th Circuit

A few weeks ago the United States Court of Appeals for the 5th Circuit ripped the heart out of Policy 495’s claimant-unfriendly “matching” methodology. Specifically, the Court held that certain specialized formulas, those used to “match” the “unmatched” profit and loss statements of entities in the construction, professional services, education and agricultural industries, ran contrary to the plain terms of the Settlement Agreement. In addition, the Court opined that any movement of revenue from one month to another – “smoothing” – also contravened the Settlement Agreement. Revenue reallocation can be particularly troublesome for claimants, as Exhibit 4B’s causation tests are rooted in monthly revenue patterns. Take some sales out of one month and move or “smooth” them into another and you can fail causation in a New York minute.

Tragically, the nefarious aspects of Policy 495 which were rejected by the 5th Circuit were used to the detriment of claimants for over three years. Who knows how many economic loss victims received nothing due to this misapplication. Worse, most if not all of those whose claims were wrongfully denied (or values diminished) under this nefarious policy are likely out of luck (unless they preserved their appellate rights – which, for practical reasons, few did).

Policy 495 was originally concocted after BP successfully argued to the 5th Circuit that the original formula found in Exhibit 4C of the Settlement Agreement could lead to inflated awards, or as BP put it, “absurd” results. While the plaintiffs certainly disagreed with such hyperbole, the result was an 80+ page addendum to the Settlement Agreement (a.k.a. Policy 495) which attempted to implement the 5th Circuit’s earlier directive. Now it appears that Policy 495 was an unfortunate overreach.

Last week Judge Barbier entered an Interim Order requiring that any claims pending in the internal appeals process which were subjected to the offending Policy 495 construction, professional services, agriculture or education methodologies (or where revenues were moved short of error) be remanded to the Claims Administrator for treatment under the standardized Policy 495 methodology (annual variable margin – AVM). Impacted claimants should ask their counsel how treatment under AVM versus the specialized formulas will impact their claim’s value.

Finally, BP, disappointed with the 5th Circuit’s ruling, has asked that body for a rehearing. It is this attorney’s opinion that BP is barking up the wrong tree in that request. Of course, stranger things have happened in this unprecedented litigation.

BP Business Economic Loss Claim Appeal 2017-809: Auto Auction Claimant’s Financials Sufficiently Matched–BP’s Argument is “Speculative”

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 an auto auction in Tampa, Florida and submitted a BEL claim. The Claims Administrator found Claimant’s financials to be sufficiently matched (no matching criteria were triggered) and the claim proceeded under the BEL Methodology, resulting in a pre-RTP award of $1,016,665.88. BP appeals the award, claiming the Program erred by failing to investigate two “spikes” in Claimant’s revenue in August and October, 2011. BP contends that Claimant only passed causation because of these “spikes” and, for that reason, the Program should have selected these months for special scrutiny before making an award that exceeds $1 million.
The record demonstrates that Claimant reported $1,030,243 in revenue in August 2011 and $1,062,334 in October 2011, compared with September ($894,755) and November ($845,948). This represents a differential of 14% (Aug.–Sept.) and 20% (Oct.Nov.) respectively. BP argues that these “spikes” “may reflect revenues earned in prior months” and, if so, they should be reallocated.
The panel has examined Claimant’s revenue for 2011 and finds the above differentials consistent with other months. For example, Claimant’s revenue fluctuated by 14% in November – December as well as June–July, by 19% in January February and 20% in March–April. Claimant also reported monthly revenue in excess of $1 million in January 2011.
After a de novo review of the record, this panel unanimously concludes BP’s argument to be purely speculative and finds no error on the part of the Claims ministrator. There is no basis for remand nor is there record support for BP’s final proposal of $0. Accordingly, in this “baseball” appeal, the panel concludes that Claimant’s final proposal is the correct result. The appeal is denied.
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