BP Business Economic Loss Claim Appeal 2017-1583: Law Firm’s Revenue Properly Reallocated Under Professional Services Methodology

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

BP appeals a BEL award of $127,062.85, pre-RTP to a law firm in Tampa, Florida(Zone D). After matching criteria were triggered, the Professional Services Methodology was used to achieve sufficient matching. On appeal, BP argues that the vendor accountants improperly reallocated revenues from Claimant’s contingency fee cases by incorrectly assuming the dates upon which each case was concluded. According to BP, this resulted in new anomalies in the financials which allowed Claimant to satisfy causation which it would otherwise have failed.
BP does not take issue with the program accountant’s selection of the Professional Services Methodology to correct matching issues. The basis of its argument is that in
reallocating revenues over the life of the contingency fee engagements, the accountant erroneously assumed that the end date of each case was the date when Claimant received payment. BP argues that the revenue was actually received and recorded later than the completion date of the engagements. This resulted in the misallocation of revenue and expenses which allowed the Claimant to pass causation.
Claimant responds by initially pointing out that its practice involves bankruptcy and mortgage foreclosures with relatively few contingency fee cases. Hence, most of Claimant’s work was billed and paid within a few days of the conclusion of the engagement. Claimant agrees that the Professional Services Methodology requires that revenue be reallocated on a straight line basis over the life of the engagement. However, Claimant adds that the vast majority of its cases were not contingency cases. Instead, most of its cases relate to bankruptcy, foreclosures and other cases that extend over several months. Thus, when the program accountant requested a summary of engagements, only cases that involved long term (several months) engagements were included. Claimant also points out that the program accountant adjusted the start and end dates from the summary which were used in the reallocation. Claimant therefore argues that there was no error in the application of the
Professional Services Methodology.
De novo review discloses no basis for disturbing the approach taken by the program accountant in reallocating the Claimant’s revenue. The record demonstrates that the accountant went into considerable depth and detail in application of the Professional Services Methodology. No misapplication of Policy 495 has been shown. Accordingly, BP’s appealis denied and Claimant’s Final Proposal is selected.
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BP Business Economic Loss Claim Appeal 2017-1433: Professional Services Methodology Correct for Accounting Firm

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, an accounting firm in Flowood, Mississippi, appeals the denial of its BEL claim on the basis it failed to satisfy the causation requirements of Exhibit 4B of the Settlement Agreement. Claimant asserts the Settlement Program(SP), in applying the Professional Services methodology,wrongfully reallocated a portion of October 2011 gross revenues to the months of August 2011 ad September 2011, causing claimant not to fulfill the 10% upturn of income for the benchmark period of October through December 2011.Claimant argues all the income reported in October 2011 was from work actually performed in October 2011. Claimant contends the SP case summary template is misleading and unclear on how claims will be processed.Claimant also argues it was not given opportunity to have its claim submitted to the Neutrals for review.
BP posits the protocol of policy 495 was properly applied and followed and that the SP had a basis to reallocate revenue in light of claimant’s financial submissions. A review of the record discloses claimant is an accounting firm with a majority of clients whose undertakings involve short-term engagements;and revenues are recognized in the period when earned. Claimant also has clients with long-term engagements whose work is performed over a longer period of time. In such instances,the SP utilized the Professional Services methodology to allocate the revenue recognized from the fee income over the life of each such engagements. Since claimant did not break down in its records the work performed on an hourly basis,the straight line method was utilized for these engagements. For calculation purposes,the SP used the first month for all case start dates and the end of the month for all case end dates.
In this regard, claimant takes issue with the case summary template and how “case start” and “case end” dates are measured. “Case Start” date on the template is defined as the “date that work on an engagement began or an engagement was opened”. For “Case End” date it is defined as the “date that work on an engagement was completed or engagement was closed.” Claimant argues these periods are too broad and should be confined or restricted to the period when work was actually performed. Thus,as to the one engagement the subject of the challenged reallocation,claimant says all work was performed in October 2011 when the client was  charged.
Claimant contends that none of these revenues should be reallocated to earlier periods. The SP reallocated revenues because records showed the client engagement began or was opened on August 10,2011, and concluded on October 20,2011. This panelist concludes this reallocation is consistent with the application of the Professional Services methodology in other claims and decisions,and is not violative of policy 495. The template is not misleading or vague and its terms were interpreted and applied in a correct manner.
Finally,there is no basis for claimant’s argument that the SP should have allowed this claim to be reviewed by the Neutrals. This assignment of error is not a cognizable issue for review under the appeal process established by the Settlement Agreement. Accordingly, the decision of the Claims Administrator is affirmed and the appeal of claimant is denied.
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