Late Wednesday afternoon the 5th Circuit Court of Appeals in New Orleans issued an opinion requiring District Court Judge Carl Barbier to reexamine the evaluation of certain BP business economic loss claims (BEL). While the universe of affected claims remains uncertain at this time, it is believed to mostly encompass a small subset of BEL claims which are supported by P&L’s generated through cash based accounting.

While the submission of cash based P&L’s is an acceptable form of establishing a BEL claim, the appellate court’s decision seems to interpret the settlement agreement as requiring the Claims Administrator to “match” expenses to revenues, something not typically done in cash accounting. Such matching is usually inherent in accrual accounting, so we generally do not believe claims supported by accrual based P&L’s will be affected, although there may be exceptions.

This is good news as the vast majority of our clients utilize accrual accounting methods.

Delay in Claim Processing

In order to allow for the time necessary to implement the new requirements mandated by the appellate court, on Thursday Judge Barbier ordered the Claims Administrator to postpone the issuance of eligibility notices and payments on any claims in which the matching of expenses to revenues may be an issue. We expect clarification on exactly which claims may be subject to this stay by late next week or early the following.

While we are hopeful that the stay will be limited in scope and duration, once lifted the new evaluation standards will require additional accounting resources and such claims will naturally take longer to resolve. BP continues to contribute to these delays by refusing to adequately fund the claims administration, compounding the problem now that additional accountants and administrative staff will be needed to implement the new review policies for which the company lobbied.

November 4th Hearing

On November 4, 2013 the 5th Circuit Court of Appeals will hold a hearing on a separate but closely related appeal dealing with the overall validity of the Deepwater Horizon class action certification. While this is an issue distinct from the one decided earlier this week, in some sense the upcoming hearing is more critical.

Certain 5th Circuit and United States Supreme Court justices (which may be the final arbiter of this dispute) are generally skeptical of the class action model for resolving litigation. There is a chance that class certification may be reversed, nullified or otherwise materially modified.

The settlement agreement contemplates this possibility in Section 21.3 by requiring payment of all eligible claims filed by the date such an event occurs. As we have been urging for months, eligible claimants should file claims as soon as possible. Waiting to participate only increases the likelihood that you may be left out in the cold.