Litigating Catastrophic Economic Loss Claims For Our Clients

BP Claims Appeal Process, Discretionary & 5th Circuit Review

Important Update 6/12/2017: Our law firm now restricts representation of new BP business economic loss clients to those with claim appeals exceeding $500,000.

When the BP Deepwater Horizon Economic & Property Damages Settlement was approved in 2012, scant attention was paid to Section 6, titled “Claims Appeal Process.” In fact, the section comprises only six of the document’s 1,200 pages. The expectation was that the much touted “claimant-friendly” nature of the Settlement would result in few appeals, by either BP or claimants.

Unfortunately, since early 2013, BP has shown a propensity for appealing a large number of Business Economic Loss (BEL) Claims, regardless of merit. It has become painfully clear that Settlement negotiators should have paid greater attention to Section 6, particularly the penalty imposed upon BP for filing frivolous appeals. Such appeals at a minimum delay payment by months to deserving claimants, and often take advantage of Pro Se claimants or those represented only by claims consultants, CPA’s or other non-attorney para-professionals.

In addition to the threat of a BP initiated appeal, Claimants themselves sometimes need to correct errors made by Claims Administration accountants and other vendors. The Claimant-initiated appellate process is a multi-step exercise that involves first applying for Reconsideration. Filing for same is required before a Section 6 appeal may be taken by a Claimant.

Because of these complexities, navigating an appeal without the counsel of an attorney experienced in this unique BP claims appeal process is a fool’s errand, as illustrated in the following Appeal Panelist decision (“Pro Se” means without an attorney).

Pro Se BP Claim Appeal Decision

As of a recent report made available by the Claims Administrator (January 31, 2018), BP has appealed 11,060 claims. This represents a BP appeal rate of approximately 23%. Claimants have appealed 7,841 claims (either appealing outright denials or contesting the amount awarded). Of the BEL appeals that have been resolved, the Claimant has persuaded the Appeal Panelist(s) to increase the award amount in 252 instances, while BP has succeeded in lowering the amount in 2,104 claims. In 3,604 instances the amount awarded has remained the same post-appeal. 1,723 outright denials were upheld, while 271 were reversed in favor of the Claimant. You may read some of the more recent appeal decisions here.

BP Deepwater Horizon - Outcome After Appeal

BP Appeals

BP may appeal any pre-RTP compensation award in excess of $25,000. The time period within which BP must file a Notice of Appeal varies with the size of the award. Smaller awards must be appealed within 10 days of the Claims Administrator’s issuance of an Eligibility Notice. Larger awards must be appealed within 15-20 days. BP must pay nonrefundable appellate fees ranging from $400 to $5,000 for each appeal initiated, again depending on the amount contested. In addition, should BP lose the appeal, it must pay a penalty to the Claimant of 5% of the pre-RTP compensation amount.

In hindsight, Plaintiff negotiators should have fought for a more painful appellate penalty, as the 5% “cost” to BP for filing frivolous appeals has proven to have little preventative teeth.

BP Deepwater Horizon appeals filed by BP as of January 31, 2018.

BP Deepwater Horizon appeals filed by BP as of January 31, 2018.

Claimant Appeals

Before a Claimant may initiate an appeal with the Appeals Coordinator, he must first seek Reconsideration from the Claims Administrator. Once the Claims Administrator issues a Post-Reconsideration Notice, the Claimant has 30 days to file a Notice of Appeal. Claimant appeals involve either disputes over outright denials (causation, zone disputes, exclusions, moratoria) or the compensation amount.

BP Deepwater Horizon appeals filed by Claimants as of January 31, 2018.

BP Deepwater Horizon appeals filed by Claimants as of January 31, 2018.

Appeal Process – Baseball 

Disputes over  compensation amounts are handled using a “baseball process.” Either party may appeal based on compensation calculation errors. The Appellant initiates the appeal within the applicable time periods by filing a Notice of Appeal with the Appeals Coordinator. The Appellant must state all of its reasons for the appeal in the original Notice of Appeal.

Within 15 days, both the Appellant and Appellee must submit Initial Proposals with any supporting memoranda or documents. However, the Appellant is not permitted to raise any new issue not originally included in the Notice of Appeal (with the possible exception described in Rule 19 of the Rules Governing the Appeals Process and Rules 7 & 8 of the Appeal Panel Procedures). The Appellee may raise new issues in the Initial Proposal (the Appellant is permitted to respond to such issues in his Final Proposal). Before the submission of Final Proposals, either party may accept the other party’s Initial Proposal amount.

Within 25 days of the Notice of Appeal, both parties must submit their Final Proposals. Either party may accept the other’s Final Proposal amount within 5 days of filing. After 5 days, the appeal is sent to an Appeals Panelist (or panel of three in claims where the contested value exceeds $1M). The Appeals Panelist must choose either party’s Final Proposal amount, but no other. There can be no “splitting of the baby.”

At any time before the Appeals Panelist rules, the parties may jointly confer and resolve the appeal. If no resolution occurs, the Appeals Panelist’s decision is final (with discretionary review at the option of the Court).

Appeal Process – Non-Baseball

Non-baseball appeals occur when the claimant seeks appellate review of a claim denial. Since the dispute does not involve the amount of compensation but rather the right to receive any compensation, there is no need for the baseball process as the outcome can only be a binary one. When a claimant receives a Denial Notice he must first seek Reconsideration from the Claims Administrator before initiating an appeal.

Assuming the claimant does so and a Post-Reconsideration Denial Notice is issued, the Claimant can then file a Notice of Appeal with the Appeals Coordinator. Within 10 days the Claimant must file an Opening Memorandum explaining why the denial was error. Within 25 days of the Notice of Appeal BP must submit its Opposition Memorandum. The Claimant may then submit a Reply Brief responding to BP’s Opposition memorandum within 35 days of the Notice of Appeal. The dispute will then be decided by an Appeals Panelist.

The exception to this process is an Incompleteness Denial issued to a claimant who has failed to submit adequate documentation to support his claim. Denial for incompleteness must be resolved within the Claims Administrator’s Office of the Document Reviewer. Such reviews are not within the purview of the Appeals Coordinator.

Record on Appeal

The record on appeal consists of the Settlement Agreement and all Exhibits, Court rulings on similar issues, prior Appeal Panelists rulings on similar issues (non-binding), Claims Administrator policies issued pursuant to the Formal Administrative Review Process discussed in Section 4.3.4 of the Settlement Agreement, the Claims Administrator’s entire claim file associated with the disputed claim, the Claims Administrator’s Summary Review of the claim, and the Initial and Final Proposals and supporting memoranda.

The Standard of Review is de novo.

Discretionary Review & Appeals to the 5th Circuit Court of Appeals

Claimants and BP can ask the District Court to exercise its Discretionary Review jurisdiction. The District Court will only review decisions of the Appeal Panel in extraordinary circumstances, and then only pursuant to the Rules Governing Discretionary Court Review. If a party objects to the District Court’s refusal to grant Discretionary Review the Appellant may appeal such decision to the United States Court of Appeals for the 5th Circuit. The 5th Circuit will review the District Court’s Order or Judgement for abuse of discretion.

A District Court abuses its discretion when: (1) the request for review raises an issue that has split the Appeal Panels and would substantially impact the Settlement Agreement’s administration once resolved; (2) the dispute concerns a pressing question about how to interpret or implement the Settlement Agreement’s rules; (3) the Appeal Panel misapplied or contradicted the Settlement Agreement, or had the clear potential to do so; or (4) the district court’s decision was premised on an error of law. The 5th Circuit has been careful not to transform Discretionary Review into mandatory review. Accordingly, the District Court need not review a claim that raises a non-pressing Settlement Agreement interpretation issue, or that merely challenges the correctness of a discretionary administrative decision in the facts of a single claimant’s case.

Common Appellate Issues

Common errors raised in appeals by both BP and Claimants include zone designation errors, failure to properly apply the tourism classification, determination of NAICS codes for exclusion or moratoria purposes, and valuation errors by the Claims Administrator.

BP also frequently argues matching issues and its catch-all causation position (which has been soundly rejected by the Court). Other groundless appeal tactics by BP include regularly filling its appellate memos with cites to webpages, screenshots, and other “new documentation” that is outside of the Record on Appeal. Of late, BP has also revived its oft-rejected attestation argument. At the end of the day, most of BP’s machinations seem to be aimed at delay in order to preserve cash flow for the pleasure of shareholders. This is certainly not the promise BP made to residents and businesses of the Gulf of Mexico.

Contact us for help with your appeal.