The recent appeal and 5th Circuit opinion regarding whether claimants needed to match claims to expenses have halted the processing of business claims. The trial court, under Judge Barbier, subsequently set a hearing on December 2, 2013, to determine if matching is required by the settlement agreement, and if so, how it will be structured and applied in the claims process. BP is lauding the opinion as “setting aside the claims administrator’s interpretation of the business economic loss framework in the settlement agreement BP reached with the [plaintiffs].”
Prior to the December 2 hearing notice, Judge Barbier issued an injunctive order limiting the scope of the claims affected by the 5th Circuit opinion. That order requires the claims administrator to identify claims affected by the 5th Circuit opinion that need to be reviewed based on accrual basis records, and also those where matching expenses to revenues is not at issue in the claims review process.
The 5th Circuit opinion began with a description of what lead up to its order of October 2:
BP began negotiating a class settlement in February 2011. In March 2012,
the district court granted the parties’ request to implement a process to transfer
claims from the GCCF to a court-supervised program that the parties agreed to
in principle. The court appointed Patrick Juneau as Claims Administrator of
this program. The parties filed notice of their proposed settlement (the
“Settlement”) in April 2012, to which the district court gave preliminary
approval in May and directed to begin processing claims in June.
Businesses’ claims for economic loss are one type of claim covered by the
Settlement. Under the class definition, business economic loss (“BEL”)
claimants must have conducted commercial activities in the Gulf Coast region
during the relevant period. 1
Business claimants must have owned, operated, or leased property, or conducted certain business activities within Louisiana, Mississippi, Alabama, and certain coastal counties in eastern Texas and Western Florida, as well as specified adjacent Gulf waters and bays between April 20, 2010 and April 16, 2012.
See Doc. 23, p. 4. The opinion went on to explain the “variable profit” method devised by the parties to the settlement agreement, which is the reduction in variable profit of the difference between a business claimant’s actual profits after the oil spill and the profit it might have expected to earn had the oil spill not occurred. That variable profit is the sum of the monthly revenue over the period of time selected as the “benchmark period,” for purposes of comparison, and the subtraction of the variable expenses from revenue during that same benchmark time period.
In the simplest of terms, it was the “variable profit” model that BP attacked in its appeal to the 5th Circuit (which was preceded by BP’s filing of a breach of contract suit against the claims administrator, and the trial court’s dismissal of same).
Amidst 62-pages of formal and dissenting opinions, the 5th circuit stated simply,
Given the record before us, we cannot determine with an adequate level
of certainty whether a matching principle should apply to all claims. Even with
the interpretation we outlined above, it is not wholly clear that the words
“corresponding” and “variable” unequivocally imply matching
(see Doc. 23, p. 23), but, nevertheless, went on to reverse the trial court’s order that had upheld the administrator’s interpretation of the settlement agreement penned, in part, by BP. In support of the reversal, the Court held, “[T]he district court did not acknowledge the requirement of matching that is foundational for accrual-basis claims and it did not then explain why it was interpreting the same Exhibit 4C language that leads to matching for accrual-basis claims as not requiring the matching of cash-basis claims.” Id. at pp. 24 and 36. It appears that the district court, in setting the upcoming hearings on the subject, aims to address those concerns.