What is the BP Deepwater Horizon Oil Spill Settlement?
On December 21, 2012, a federal court overseeing the litigation arising from the April 2010 Deepwater Horizon Oil Spill approved a class settlement extending economic damages to businesses as a result of the spill. The total settlement package is valued at $7.8 billion, but there is no cap on the amount that may be paid.
Are we eligible?
Almost any business with facilities located in Alabama, Mississippi, Louisiana or parts of Texas or Florida may be eligible, even if the corporate entity is headquartered outside of the region. Your business model does not have to be directly tied tourism, hospitality, seafood or the Gulf in order to qualify.
Is every type of industry covered by the settlement?
Most industries are eligible under the terms of the settlement. However, there are some excluded industries including certain financial institutions, gaming (casinos, etc), insurance entities, investment funds and financial vehicles, defense contractors, governmental entities, any entity selling or marketing BP-branded fuel, certain oil and gas concerns, and real estate developers.
But our facilities are located inland?
Most businesses, even if they are located inland, are class members and thus are eligible to participate.
How do we prove that the oil spill negatively impacted our financial performance?
There is no requirement to conventionally prove that the April 20, 2010 BP Deepwater Horizon Oil Spill caused your loss. The system was intentionally created this way, as precisely allocating the cause of a business downturn would be nearly impossible given the general economic malaise of the period. Instead, an objective revenue test is used to establish causation. If your revenue trends follow certain prescribed patterns, then all losses are presumed to be caused by the spill.
So if we don’t have to conventionally prove our case, what are the qualifying requirements?
Contained in the 1,200+ page settlement agreement are many ways to qualify, based largely on your geographic location and industry. In the most restrictive geographic zone (Zone D, generally located up to 325 miles inland), your 2010 revenue for a specific three month period between May and December must be down at least 15% from the same three month period in 2009 or an average of those same months in 2008 & 2009 or an average of those months in 2007, 2008 & 2009. The applicable three month period, as well as the benchmark years, are chosen by the claimant. Subsequently, your 2011 revenue for the same three month period must rebound at least 10% from the 2010 low.

The closer you move to the coast, the less stringent the financial test becomes. In Zone C for instance (anywhere from 1 mile to approximately 20 miles inland), your 2010 revenue for any three month period between May and December must only be down 8.5% and up only 5% during the same months in 2011. Finally, in Zone A, largely comprised of barrier islands, there is no financial test to meet. Most business operations in Zone A automatically qualify.

The agreement is very nuanced and there are many exceptions to what is stated above. As such, it is important to consult with an experienced BP claims attorney to understand your options.

We’ve looked at our books, and doubt we qualify. Should we even bother?
Yes. Because of the complexity of the agreement, we have met many business owners and CFO’s who give a cursory review of their financial statements and come to the conclusion that they cannot participate. Subsequently our team of lawyers, CPA’s and Chartered Financial Analysts review the same materials and often identify valid claims.
Is it true that an initial claim evaluation is free?
Yes. If you provide us with monthly profit and loss statements in spreadsheet format for the years 2007 through 2011, we will provide a free claims analysis to determine whether you qualify for payment. There is no charge for this service, nor is there any obligation to further engage our law firm. While the initial evaluation is free, if you subsequently retain our firm, preparing and filing your claim is a complex process for which we charge a contingency fee. In other words, we are paid a percentage of whatever amount we can recover for you. If we are unsuccessful in pursuing your claim, you owe us nothing.
We are reluctant to disclose our financial data. Will this be kept confidential?
Absolutely. We represent many business owners, from closely held family enterprises, to publicly traded corporations, and a common concern is privacy. If you hire us, we will be bound by attorney-client privilege and confidentiality requirements. In addition, the Court recently issued an order mandating that financial information disclosed through this process be kept confidential.
How long does the entire process take?
Once we determine that you have a valid claim we will request some additional basic documentation. This usually includes your Articles of Incorporation, annual tax filings, and any business licenses you hold. Based on your unique circumstances, some other documents may be required.

We will then begin a forensic accounting review which may take two to six weeks. Upon completion we will submit your claim to the Claims Administrator. In general, should we be successful, you should expect payment within six to ten months.

It should be noted that the Claims Administrator expects over 300,000 claims to be filed. Currently approximately 225,000 claims have been filed. We believe that the sooner you file (and take your place in line), the sooner payment will be made. While we cannot control the Claims Administrator’s process, common sense dictates that as more claims are filed, the timeline for payment may extend. All things being equal, it is better to file now than later.

Do we really need outside counsel? Can our corporate attorney handle this? Or can we do this on our own, in-house?
This settlement agreement is overseen by a United States Federal District Court in New Orleans. As with any legal proceeding, you are free to represent yourself, “pro se”. However, if you do not like to prepare your own annual tax returns, you will not enjoy trying to navigate this process. In addition, without the assistance of experienced legal and financial professionals, with hundreds of BP filings under their belts, you run the risk of failing to maximize the value of your claim, or having it denied altogether.

Finally, we have encountered many general practice attorneys, in-house counsel, CPA’s and para-professionals (claims “adjusters” and “consultants”) who simply do not understand the complexity of this voluminous settlement agreement. A recent report issued by the Claims Administrator highlighted the significant number of claims that are being denied outright or returned for deficiencies because they were prepared by inexperienced and unqualified attorneys or non-lawyer para-professionals. The old adage “you get what you pay for” is apropos.

Is the compensation fund capped?
We sometimes encounter business owners and other individuals who are understandably reluctant. They wonder if by filing a claim will they be taking money out of a “more deserving” party’s hands. The answer is no. This compensation fund is not capped. BP has agreed to pay all valid claims submitted between now and April 2014, no matter the amount.

We also run into those who believe that they have suffered a loss as a result of the oil spill, but are concerned that they may not be able to prove to a jury a direct correlation between the spill and their financial circumstances. The parties to this agreement were very intentional in designing the compensation criteria in a way that does not require a conventional causation analysis, as it would be nearly impossible to isolate the exact impact of the oil spill on Gulf area businesses. Rather, certain formulas are applied to determine if a loss you experienced was the result of the spill. If your revenue trend corresponds with the parameters dictated by these formulas, then all losses are presumed to have been caused by the incident.

After reviewing thousands of monthly profit and loss statements, we can report that many businesses were impacted by the spill as defined by this agreement. Only through a forensic accounting analysis will this be apparent. The trickle down effect is clearly evident on many businesses’ books.

Did BP really agree to this?
Yes. BP and the plaintiffs negotiated for several months before reaching this voluntary settlement agreement. Both parties concluded that settling under these terms was in their best interest and the best interest of individuals and businesses in Gulf Coast states. The company believes that it is good PR, and more fundamentally, the right thing to do. BP wants all valid claimants to participate in this program. In fact, upon the December 21, 2012 approval of the settlement by the court, BP issued the following statement in a press release:

“We believe the settlement, which avoids years of lengthy litigation, is good for the people, businesses and communities of the Gulf and is in the best interests of BP’s stakeholders.”

What happens if we do not participate?
If you are located in a geographic area covered by the agreement, and you are in an included industry (almost every type of business is covered), then you are automatically a class member. However, if you do not file your claim by April 2014, you will be forever barred from taking any action against BP relating to the Deepwater Horizon Spill.
What does opting out mean?
While this agreement is designed to serve the best interests of as many individuals and businesses as possible, not every person or entity affected by the spill will benefit. As the primary driver of qualification is a reduction in 2010 partial-year revenue, some businesses may have experienced a downturn in 2011 rather than 2010. For those clients, we may advise opting out so that they preserve their rights to file separate legal proceedings against BP. That said, the overwhelming majority of affected businesses and individuals will not need to opt out.
What is the deadline for opting out?
Class members must opt out, in writing, by November 1, 2012.
What is the average claim value?
While each claim is unique, of the thousands of businesses we’ve evaluated, we are seeing an average claim value that exceeds $400,000.
Our business has multiple physical locations. How do we determine which geographic zone we are in?
There is a specific provision in the settlement agreement for “multi-facility entities”. Much will depend on whether you keep distinct financial records for each location.
Our business is new. I notice that you require financial records back to 2007. We didn’t start operations until 2009. What can we do?
There is a provision for “start-up” businesses which requires records for different time periods. Your performance in 2011 and parts of 2012 will be important in calculating your claim value.
Our company went out of business in 2010 after the spill. I see that you require 2011 financial performance numbers. We don’t have those?
As with start-ups, “failed businesses” can participate in this process. We will simply have to evaluate some additional financial records.
What if we already filed a claim with the Gulf Coast Claims Facility?
We can still help you as long as you did not sign a final Gulf Coast Claims Facility (GCCF) release prior to February 27, 2012. Even if you have been previously denied by the GCCF, you can still participate in this process.
When does it end?
The settlement processing facility opened its doors on June 4, 2012. The first opinion letters on the validity of filed claims were issued the week of July 15, 2012 and the first settlement checks were delivered in August 2012. This is expected to continue through April 2014, but may be extended or curtailed early.