In re: Deepwater Horizon ( 2015 )

Case: 14-31402 Document: 00513301016 Page: 1 Date Filed: 12/09/2015
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 14-31402 December 9, 2015
c/w No. 15-30023
Lyle W. Cayce
Clerk
IN RE: DEEPWATER HORIZON
______________________________________
LAKE EUGENIE LAND & DEVELOPMENT, INCORPORATED; ET AL
Plaintiffs
v.
BP EXPLORATION & PRODUCTION, INCORPORATED; BP AMERICA
PRODUCTION COMPANY; BP, P.L.C.,
Defendants - Appellees
v.
KEVIN S. SMITH; SOLOMON J. FLEISCHMAN,
Claimants - Appellants
IN RE: DEEPWATER HORIZON
______________________________________
LAKE EUGENIE LAND & DEVELOPMENT, INCORPORATED; et al,
Plaintiffs
v.
BP EXPLORATION & PRODUCTION, INCORPORATED; BP AMERICA
PRODUCTION COMPANY; BP, P.L.C.,
Defendants - Appellees
Case: 14-31402 Document: 00513301016 Page: 2 Date Filed: 12/09/2015
No. 14-31402 cons/w No. 15-30023
v.
JOHN C. KELLY,
Claimant - Appellant
Appeals from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:10-MD-2179
USDC No. 2:12-CV-970
Before JOLLY, HAYNES, and COSTA, Circuit Judges.
PER CURIAM:*
These parallel appeals, consolidated for the purpose of oral argument,
and now for disposition, arise from the class-action settlement program for civil
claims arising from the Deepwater Horizon oil spill. Claimants-Appellants
Kevin S. Smith, Solomon J. Fleischman, and John C. Kelly (collectively,
“Claimants”) are all co-owners of Fleischman & Garcia Architects (“Fleischman
& Garcia”). We conclude that the district court should have granted
discretionary review of the issue here and therefore VACATE the contrary
orders and REMAND these cases to the district court.
I. Background
This is the most recent case in a series of decisions considering the
Economic and Property Damages Settlement Agreement (the “Agreement”)
between Defendants-Appellees BP Exploration & Production, Inc., BP America
Production Co., and BP, PLC (collectively, “BP”), and Plaintiffs, the certified
Economic and Property Damages Class, in connection with the Deepwater
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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Horizon oil spill of April 20, 2010. The district court approved the Agreement
on December 21, 2012, and the Court Supervised Settlement Program (the
“Settlement Program”) was set up to administer the Agreement and
compensate parties with economic losses caused by the oil spill. The Economic
Loss and Property Damages Class consists of individuals and entities defined
by geographic bounds and the nature of their loss or damage. To satisfy the
loss or damage requirements, a claimant must have a claim that falls within
one of the damage categories set out in the Agreement and is not subject to any
of the exclusions set out in Section 2 of the Agreement. The damage categories
include, inter alia, an Economic Damage Category, which encompasses both
individual and business claims for “[l]oss of income, earnings or profits suffered
by Natural Persons or Entities as a result of the Deepwater Horizon Incident.”
The claims process includes the ability to seek discretionary review by the
district court.
Claimants are each officers and part owners of Fleischman & Garcia, an
architectural firm. In January 2013, Claimants each submitted individual
economic loss (“IEL”) claims to the Settlement Program. The Agreement
defines an Individual Claimant who may assert an IEL claim as:
[A] Natural Person who is an Economic Class Member
alleging Economic Damage arising out of, due to,
resulting from, or relating in any way to, directly or
indirectly, the Deepwater Horizon Incident with a
Claim in addition to or other than a Claim for
Economic Damage related to such Natural Person’s
sole proprietorship business or other self-employment
as reflected on Schedule C, D or E of a federal income
tax return.
Fleischman, as the authorized representative of Fleischman & Garcia,
also submitted a business economic loss (“BEL”) claim for the corporation’s
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damages resulting from the oil spill. The Agreement defines a Business
Claimant who may assert a BEL claim as:
[A]n Entity, or a self-employed Natural Person who
filed a Form 1040 Schedule C, E or F, which or who is
an Economic Class Member claiming Economic
Damage allegedly arising out of, due to, resulting
from, or relating in any way to, directly or indirectly,
the Deepwater Horizon Incident.
The Settlement Program generated Accountants’ Worksheets for each of
the Claimant’s IEL claims, and although the worksheets concluded that
Claimants passed the applicable causation and compensation tests under the
IEL Framework, the worksheets indicated that each of the claims would be
denied. Each Claimant thereafter received a denial notice stating:
Our records reflect that you submitted an Economic
Loss claim for your business in addition to this
Individual Economic Loss claim. You cannot recover
employment losses from a job at a business for which
you have submitted an Economic Loss Claim.
After exhausting preliminary steps, the Claimants appealed to an Appeal
Panel established by the Agreement, which denied relief. Claimants then
requested discretionary review of the Appeal Panels’ decisions by the district
court, which the district court denied. Claimants now appeal the district
court’s denial of their requests for discretionary review.
II. Jurisdiction and Standard of Review
The district court had admiralty and maritime jurisdiction over the
underlying class action and the Agreement, see U.S. CONST., art. III, § 2; 28
U.S.C. § 1333; 33 U.S.C. § 2717(b); 43 U.S.C. § 1349(b); 46 U.S.C. § 30101, and
expressly retained jurisdiction over the implementation of the Agreement, see
Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 381–82 (1994).
This court has jurisdiction over these appeals under the collateral-order
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doctrine. 1 In re Deepwater Horizon, 785 F.3d 1003, 1009 (5th Cir. 2015)
(“Deepwater Horizon IV”) (quoting Henry v. Lake Charles Am. Press, L.L.C.,
566 F.3d 164, 171 (5th Cir. 2009)). The district court’s refusal to review the
Appeal Panels’ denials of Claimants’ IEL claims under the Agreement had the
effect of conclusively determining that each Claimant was not entitled to any
recovery; this question is separate from the merits of BP’s liability for the oil
spill; and the district court’s denial of discretionary review is final and there is
no provision for further review under the Agreement. Therefore, the district
court’s orders denying discretionary review meet the requirements of the
collateral order doctrine. We review the district court’s denial of discretionary
review for abuse of discretion. Deepwater Horizon IV, 785 F.3d at 1011 (citing
Wilton v. Seven Falls Co., 515 U.S. 277, 289–90 (1995)).
III. Discussion
Claimants allege that the Agreement unambiguously mandates that
Claimants’ lost earnings for their work as officers of Fleischman & Garcia be
compensated under the IEL Framework, and that nothing in the Agreement
bars owners or officers of BEL claimants from the IEL claims process. 2 In the
alternative, assuming arguendo that they are not permitted to receive funds
that would constitute a “double recovery,” Claimants argue that permitting
1 Just over one week after Claimants filed their briefs in these cases, a panel of this
court settled the question whether this court has jurisdiction to hear appeals from the district
court’s denials of discretionary review over claims made under the Agreement. See In re
Deepwater Horizon, 785 F.3d 1003 (5th Cir. 2015) (“Deepwater Horizon IV”); In re Deepwater
Horizon, 785 F.3d 986 (5th Cir. 2015) (“Deepwater Horizon V”).
2 BP argues that Claimants waived this argument by failing to raise it before the
district court in their requests for discretionary review. Because we conclude that the district
abused its discretion in denying Claimants’ requests for discretionary review and remand
these cases for the district court’s consideration of Claimants’ IEL claims, we decline to
address BP’s waiver argument.
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them to recover at least a portion of their IEL claims here would not result in
a double recovery.
The Agreement itself does not provide guidance on the factors to consider
in determining whether to grant discretionary review. Analogizing to other
discretionary review situations, we conclude that the exercise of discretion
should be guided by its purpose. See, e.g., Alvarez v. Midland Credit Mgmt.,
585 F.3d 890, 894 (5th Cir. 2009) (although Class Action Fairness Act does not
provide guidance on exercise of discretion, court concluded purpose of
interlocutory appeal was to develop law in this area). The Agreement was
drafted against a backdrop of anticipated numerous claims presenting
potentially recurring issues. We conclude that the issues in this case have and
will come up repeatedly, and the district court has not previously ruled on
whether owners/officers of a business that has successfully made a claim under
the Agreement’s BEL framework can also recover their lost W-2 wages under
the IEL framework. The Appeal Panels are split on this question.
The Appeal Panels that reviewed Claimants’ IEL claims each concluded
that because the Agreement treats owner/officer compensation as a fixed cost
under the BEL framework, IEL claims by the owners or officers of a business
that has received compensation under the BEL framework are barred. But the
record indicates that at the time the district court denied Claimants’ requests
for discretionary review, other Appeal Panels had also reached the opposite
conclusion. Claimants have included in the record at least four decisions by
other Appeal Panels concluding that the Settlement Agreement draws no
distinction between owners or officers of a business and other employees who
earn wages reported on a Form W-2, and that no provision in the Agreement
precludes officers/owners from pursuing an IEL claim if they otherwise qualify
as a class member. One of these Appeal Panel decisions acknowledges the
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many conflicting decisions generated by this question. 3 The presence of this
“split” among the Appeal Panels indicates that this issue has arisen in a
number of claims and the resolution of the question will substantially impact
the administration of the Agreement. See, e.g., In re Deepwater Horizon, 793
F.3d 479, 490–91 (5th Cir. 2015) (noting that prior cases considering
accounting methods used to make profit calculations or the right to appeal
under the Agreement’s Final Rules involved issues that “would unquestionably
and substantially impact the judicially-managed administrative framework”).
Further, as evidenced by the Appeal Panels’ decisions reaching varying
conclusions about the proper interpretation of the Agreement, it is apparent
that there is substantial ground for difference of opinion with respect to this
question. Accordingly, we conclude that the question of contract interpretation
presented in these appeals would be best addressed first by the district court
charged with administering the Agreement. We thus conclude that the district
court should have granted discretionary review to address this question.
IV. Conclusion
We find that the district court abused its discretion in declining to grant
discretionary review in these cases. We therefore VACATE the district court’s
order denying discretionary review and REMAND these cases to the district
court for further proceedings in conformity with the opinion of the court.
3In fact, during oral argument, Claimants’ counsel represented to the court that over
thirty Appeal Panels have heard appeals on this issue, and that discretionary review is
pending in some of those cases awaiting this court’s decision.
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