Appeals from the United States District Court for the Eastern
District of Louisiana
REAVLEY, ELROD, and WILLETT, Circuit Judges.
JENNIFER WALKER ELROD, CIRCUIT JUDGE.
Management, Inc. (JME)-a vacation rental business affected by
the 2010 BP oil spill-filed five claims for compensation with
the Settlement Program. The Settlement Program determined
that JME was a "failed business" under the meaning
of the Settlement Agreement and calculated JME's
compensation according to the Failed Business Economic Loss
framework. The district court granted discretionary review
and agreed that JME was a failed business under the
Settlement Agreement. Because the district court incorrectly
interpreted the Settlement Agreement, we VACATE and REMAND.
the Deepwater Horizon oil spill in 2010, BP negotiated and
agreed to the Settlement Agreement with a proposed class of
individuals and entities. The Settlement Agreement created a
framework whereby class members can submit claims to the
Claims Administrator and receive payment for approved claims.
Under the Settlement Agreement, there are two frameworks for
calculating the compensation available to businesses that
suffered economic losses resulting from the oil spill. Class
members can submit claims under the Business Economic Loss
("BEL") framework or, where applicable, the Failed
Business Economic Loss ("FBEL") framework.
the BEL framework, claimants are generally compensated for
lost profit and lost profit growth, multiplied by a
"Risk Transfer Premium" which accounts for unknown
and future risks and injuries. By contrast, the FBEL
framework uses a business's past earnings to calculate
compensation and does not offer a Risk Transfer Premium. The
FBEL compensation is calculated by subtracting the
"Liquidation Value" from the pre-spill "Total
Enterprise Value." A failed business with negative
earnings before interest, tax, depreciation, and amortization
(EBITDA) for the twelve-month period prior to May 1, 2010, is
categorically ineligible for compensation. Moreover, because
of the Risk Transfer Premium, businesses that bring claims
under the BEL framework are generally entitled to a greater
recovery than they would be under the FBEL framework.
Settlement Agreement defines a failed business as:
[A] business Entity that commenced operations prior to
November 1, 2008 and that, subsequent to May 1, 2010 but
prior to December 31, 2011, either (i) ceased operations and
wound down, or (ii) entered bankruptcy, or (iii) otherwise
initiated or completed a liquidation of substantially all of
its assets, as more fully described in Exhibit 6.
6 explains the additional documentation requirements for an
FBEL claim. A Claims Administrator determines whether a
claimant is an ongoing or failed business and how much
compensation is due, and the claimant may request
reconsideration of these decisions. Either BP or the claimant
may appeal a final decision to the Appeal Panel. The district
court retains the discretion to review the Settlement
Program's determinations to ensure that the Claims
Administrator and the Appeal Panel correctly interpreted and
applied the Settlement Agreement.
in the short-term vacation rental business at the time of the
oil spill in 2010. In June 2011, JME entered into an
agreement with Gulf Blue Vacations Inc. (Gulf Blue), a
company founded by JME's sole owner with the members of
his family, and sold substantially all of its assets to Gulf
Blue in exchange for $800, 000.
in May 2013, JME submitted five claims to the Settlement
Agreement Claims Administrator, calculating the value of its
claims using the BEL framework. However, the Claims Administrator
classified and evaluated all five of JME's claims under
the FBEL framework. Under the FBEL framework, the Claims
Administrator determined that JME was entitled to $0 for
three locations and denied compensation altogether for two
locations. JME requested reconsideration by the Claims
Administrator, seeking valuation under the BEL framework.
However, the Claims Administrator determined that JME's
claims were properly evaluated under the FBEL framework, and
the Appeal Panel affirmed. The district court granted
discretionary review after ...