BP Trying to Save Money Via Federal Appeals Court

By: Jeff Lieser Posted on: Sunday, January 19th, 2014

Last year, BP filed an appeal over concerns regarding claimants using cash versus accrual accounting.  We blogged about it here.   BP was concerned about scenarios in which a contractor, for example, could buy $100,000 worth of materials in June for a project that was set to begin in November; if the contractor received his first installment payment for the project in September, but then choose June, July and August as his “benchmark period,” as opposed to September, October, November, it would result in the appearance of a loss in June, which would, of course, be artificial.

purple sky with pier in oceanOn October 2, 2013, the Fifth Circuit Court of Appeal instructed the District Court (trial court) to issue a “narrowly tailored” injunction stopping the further payment of any claims that did not properly match revenues with expenses.   Ultimately, the trial court concluded that “revenue must be matched with the variable expenses incurred by a claimant in conducting its business.”  As a result, the trial court recently instructed the Claims Administrator, Patrick A. Juneau, “to adopt and implement an appropriate protocol or policy for handling business economic loss claims in which the claimant’s financial records do not match revenue with corresponding variable expenses.”

BP’s appeal also involved their concerns that the trial court and the Claims Administrator were not requiring claimants to produce any evidence of causation.  Indeed, certain claimants have not been required to in any way prove that the spill caused their losses.   The trial court has repeatedly rejected BP’s arguments that such proof is necessary on the basis that such a causation analysis is not required by the terms of the settlement agreement.  BP disagrees, of course – thus their appeal of the issue.

Buried in the aforementioned opinion from the Fifth Circuit Court of Appeal was an order that the trial court “allow the parties to give causation the attention it deserves.”   This was a pretty vague order and one that the trial court essentially failed to address.    When BP subsequently requested that the trial court address the causation issues, they were again rebuffed.

In response, BP filed an emergency motion with the Fifth Circuit Court of Appeal.  This time the Fifth Circuit was more clear and in its guidance to the trial court, ruled as follows: “IT IS ORDERED that the issue of causation is again remanded for expeditious consideration and resolution in crafting “[a] stay tailored so that those who experienced actual injury traceable to loss from the Deepwater Horizon accident continue to receive recovery but those who did not, do not receive their payments until this case is fully heard and decided through the judicial process,” including by any other panel of this court that resolves these issues.”

In response, the trial court ruled that BP waived or is estopped from raising the causation request so late in the process.  The trial court held that  BP’s current position is inconsistent with its past position on the issue and that  it should have raised the causation issue and/or requested additional proof of claimants before, but failed to do so.  In essence, the trial court has concluded that BP is precluded from raising the issue now.

Not surprisingly, BP has again appealed this decision.  Briefs are currently being submitted and it is unclear how the Fifth Circuit will rule upon revisiting the issue.