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Claimant Id. 100081155 v. BP Exploration & Production, Inc.

United States Court of Appeals, Fifth Circuit

April 9, 2019

CLAIMANT ID 100081155, Requesting Party-Appellant,
v.
BP EXPLORATION & PRODUCTION, INCORPORATED; BP AMERICA PRODUCTION COMPANY; BP, P.L.C., Objecting Parties-Appellees.

          Appeals from the United States District Court for the Eastern District of Louisiana

          Before REAVLEY, ELROD, and WILLETT, Circuit Judges.

          JENNIFER WALKER ELROD, CIRCUIT JUDGE.

         JME 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.

         I.

         A.

         Following 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.

         Under 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.

         The 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.

         Exhibit 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.

         B.

         JME was 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.

         Subsequently, in May 2013, JME submitted five claims to the Settlement Agreement Claims Administrator, calculating the value of its claims using the BEL framework.[1] 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 ...


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