ID 100187856 v. BP Exploration & Prodn, I ( 2018 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
No. 17-30167
Fifth Circuit
FILED
January 29, 2018
CLAIMANT ID 100187856, Lyle W. Cayce
Clerk
Requesting Party - Appellant
v.
BP EXPLORATION & PRODUCTION, INCORPORATED; BP AMERICA
PRODUCTION COMPANY; BP, P.L.C.,
Objecting Parties - Appellees
Appeal from the United States District Court
for the Eastern District of Louisiana
Before STEWART, Chief Judge, and JOLLY and OWEN, Circuit Judges.
CARL E. STEWART, Chief Judge:
This appeal arises from the class-action settlement program established for
civil claims resulting from the Deepwater Horizon Incident (“Spill”). After
being denied on every level of review within the Court Supervised Settlement
Program (“CSSP”), Plaintiff-Appellant, JAD Contractors, LLC (“JAD”), sought
discretionary review from the district court. The district court denied
discretionary review. For the reasons that follow, we AFFIRM.
No. 17-30167
I. BACKGROUND
The Claims Process
After the Spill, BP and a class of individuals reached a final E&P Settlement
Agreement (“Agreement”) in May 2012 for those individuals and entities who
experienced economic and property damages as a result of the Spill. The
Agreement provides for claim resolution using various procedures, depending
upon the type of claim and proximity to the Spill. To receive compensation,
claimants must submit a claim to the CSSP and show that they are members
of the class as defined by the Agreement.
Submitting a claim requires providing verified forms and documentation
proof such as tax returns and profit/loss statements. An existing business
seeking compensation completes a Business Economic Loss (“BEL”) form. Once
the documents are submitted the program accountants examine the provided
documents to calculate the award amount. The award amount represents the
difference between the business’s actual profit during the compensable period
and the profit it would have expected during that period had the Spill not
occurred.
After the CSSP makes a determination about a particular claim’s eligibility,
either the claimant or BP may avail themselves of a multi-tiered internal
review. After multiple levels of review, an appeal panel hears the claims de
novo and issues “final” decisions. The district court retains the power of
discretionary review, and if the decision is appealed, the court treats the
panel’s decision like a magistrate judge’s report and recommendation.
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The Class
The Agreement provides: “If a person or entity is included . . . in Section 1.2,
and their claims meet the descriptions of the Damage Categories in Section
1.3, that entity is a member of the [Class].” 1 Section 1.2 defines the class as:
All Entities doing business or operating in the Gulf Coast Areas
. . . that: are service businesses . . . who performed their full-time
services while physically present in the Gulf Coast Areas . . . at
any time from April 20, 2010 to April 16, 2012 . . . .
Section 1.3 explains “[e]ntities who meet the geographical descriptions of . . .
1.2 above are included in the Economic Class only if [they experience a l]oss of
income, earnings or profits . . . as a result of the DEEPWATER HORIZON
INCIDENT . . . .”
Exhibit 4A establishes what documents a BEL class member must provide
to be eligible for compensation. Exhibit 4B identifies class members who do not
have to show any additional evidence of causation and specifies how other class
members meet their causation requirements. These are the only causation
requirements as we established in Hutto v. BP Expl. & Prod., 753 F.3d 509 (5th
Cir. 2014). Exhibit 4C provides program accountants with the framework for
compensation. 2 Class members are only entitled to compensation for loss that
occurred between May and December 2010. Even still, their compensation is
calculated by subtracting actual earnings from the earnings they would have
expected had the Spill not occurred. If a class member has no documentary
1 JAD claimed to be an existing business, not a start-up or a business that failed as a
result of the Spill. As such, this opinion only addresses the provisions and claims pertaining
to similarly situated businesses.
2 Particularly, Exhibit 4C explains:
The compensation framework for business claimants compares the actual
profit of a business during a defined post-spill period in 2010 to the profit that
the claimant might have expected to earn in the comparable post-spill period
of 2010. . . . Compensation Period is selected by the Claimant to include three
or more consecutive months between May and December 2010.
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support of their expected earnings, program accountants cannot calculate
compensation.
The Claimant
On June 10, 2013, JAD, a construction company in operation since 2004,
timely submitted a BEL claim to the CSSP for damages it incurred in Gulf
Coast Economic Zone C. On June 10, 2015, the CSSP sent an incompleteness
notice, asking JAD to supplement the information in JAD’s profit/loss
statements. The same request was sent again on July 21, 2015. 3 On April 04,
2016, a Program Accountant again asked JAD to supplement the documents
and explain the absence of revenue between January 2010 and April 2011. On
April 12, 2016, another incompleteness notice was sent, to which JAD
responded, on April 14, stating it was still in operation and actively seeking
work. On May 9, 2016, the CSSP denied JAD’s claim because they were “unable
to determine causation and/or calculate a compensation amount under the
BEL frameworks because [JAD was] not doing business or operating in the
Gulf Coast Areas . . . at the time of the Oil Spill, April 20, 2010.”
JAD requested re-review. In its decision the administrator reiterated the
previous reasoning and further explained that JAD was inactive “from
January 2010 through April 2011 because it reported no revenues or variable
operating expenses.” It additionally reasoned that JAD, in its tax
reconciliation, stated it did not have revenue or expenses in 2010. Thus, JAD
had “not provided documents indicating that the business was operating at the
time of the Oil Spill.”
JAD requested reconsideration. This time an administrator denied JAD’s
reconsideration, stating:
3It is not clear from the record whether this second request was prompted because
JAD again submitted insufficient documents or no additional documents at all.
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The specific requirements for eligibility as a member of the
Settlement Class, as laid out in Section 1.2 and Section 1.3 of the
Settlement Agreement, have not been satisfied as the claimant has
still not provided specific documentation indicating it was doing
business or operating in the Gulf Coast areas . . . at the time of the
Oil Spill, April 20, 2010.
This was the first time class eligibility was cited as a reason for the denial.
JAD appealed to the appeal panel. Reviewing de novo, the panel affirmed
the CSSP’s original denial and did not mention class eligibility. The panel
instead held that the documents JAD presented were “simply insufficient
evidence to support the conclusion that JAD was actively seeking jobs and
incurring expenses between January 2010 and April 2011.” JAD then sought
discretionary review from the district court, which summarily denied the
claim. JAD timely appealed.
II. DISCUSSION
A. Standard of Review
We review the district court’s decision not to exercise discretionary review
for abuse of discretion. See Steering Comm. v. BP Expl. & Prod., 785 F.3d 1003,
1011 (5th Cir. 2015). However, when the district court is presented with a
purely legal question of contract interpretation, the standard of review is
effectively de novo. See id. (quoting United States v. Delgado-Nuñez, 295 F.3d
494, 496 (5th Cir. 2002) (“[A]buse of discretion review of purely legal questions
. . . is effectively de novo because a district court by definition abuses its
discretion when it makes an error of law.”). Yet still, review is not mandatory,
Lake Eugenie Land Dev., Inc. v. BP Expl. & Prod., 785 F.3d 986, 999 (5th Cir.
2015), and we may affirm on any ground supported by the record. Moncrief Oil
Int’l Inc. v. OAO Gazprom, 481 F.3d 309, 311 (5th Cir. 2007).
B. Applicable Law
The district court abuses its discretion in denying review of an appeal if the
panel substantially misapplies or misconstrues the Agreement. See Claimant
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ID 100212278 v. BP Expl. & Prod., Inc., 848 F.3d 407, 410 (5th Cir. 2017). Even
if the panel’s decision does not constitute a misapplication, if (1) the issue is
regularly before the panel; (2) panels have rendered different decisions on the
issue; and (3) the issue’s resolution will significantly impact the Agreement’s
administration, the district court may abuse its discretion in declining review.
See id.
C. Analysis
1. Dormancy & Award Calculation
When parties enter into a settlement agreement, the terms of that
agreement govern disputes arising from the agreement’s implementation. See
Lake Eugenie, 785 F.3d at 994. According to the present Agreement, a
claimant’s class membership does not guarantee it will receive an award. Once
a claimant clears the hurdle of class eligibility, it faces additional obstacles.
The Agreement sets compensation calculations and requires the class member
to provide certain documents that render program accountants able to
calculate an award amount using the agreed upon equation. Upon receipt, the
accountants then use those documents to determine the profit the company
made in the years before the Spill, review the entity’s actual profit during the
specified months, and then calculate the award amount, subtracting actual
profits from expected profit. Using this calculation, claimants can be class
members because they meet the class definition and still receive no
compensation because they were inactive during the entire agreed upon
compensable period.
Although the period that defines the class ranges from April 20, 2010 to
April 16, 2012, the parties agreed that the compensable period is May 2010
through December 2010 for BEL class members. Accordingly, regardless of
whether the panel found that JAD’s inactivity from April 2010 through April
2011 made it ineligible for the class, program accountants could not have
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No. 17-30167
calculated an amount to award JAD because JAD was inactive during the
entire compensable period.
JAD submitted its claim on June 10, 2013. The CSSP asked JAD to
supplement the documents multiple times and gave JAD ample opportunity to
prove that it was active during the compensable period. The CSSP eventually
denied JAD’s claim because it was “unable to determine causation and/or
calculate a compensation amount under the BEL frameworks because [JAD
was] not doing business or operating in the Gulf Coast Areas . . . at the time
of the Oil Spill, April 20, 2010.” The administrator who conducted re-review
found the same. Then the reconsideration administrator, for the first time,
found that JAD had not satisfied the requirements for class eligibility. The
panel, after receiving even more documents and reviewing the record de novo,
did not address class eligibility and found instead that JAD presented
insufficient evidence to support the company’s assertion that it actively sought
work during the compensable period. 4
This decision was correct. Although JAD sufficiently alleged that it was a
business entity located in the Gulf Area between April 2010 and April 2012, it
did not provide the CSSP with adequate documentation to calculate profits
JAD expected to generate between May and December 2010, as the Agreement
required. Program accountants asked JAD to provide documentation showing
activity or explaining its inactivity four times between January 2009 and April
2011. When it finally responded, JAD simply stated that it was actively
working. At the final level of appeal, it provided additional documents in
support of that assertion: insurance documents, a payment request, and
invoices for office supplies. These documents were inadequate. The insurance
4JAD argued that the panel required it to be in business on the day of the Spill, April
20, 2010. This is not supported by the record. The panel, in accord with the Agreement, asked
JAD to show it was in business May through December 2010.
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documents represented a premium refund for insurance predating 2010 and
illuminated that JAD was also uninsured from April 2010 through December
2010. JAD had one policy from April 2009 through April 2010, and it renewed
in December 2010 through December 2011. So although JAD presented the
documents to invoke the inference that it had to be in business since it was
insured, the documents did the opposite, showing JAD was not insured during
the entire compensable period. The payment request was for work completed
before April 2010, and the invoices were dated April 2011, after the
compensation period. All of these documents further supported that JAD was
inactive during the compensation period, and they did not provide the program
accountants with the ability to calculate the profits JAD expected May through
December 2010.
Panels consistently deny claims where the entity shows no revenue or
expenses for that period and also presents no documentation evidencing an
ardent attempt to find work. In 37 APD 2017-370 (Mar. 23, 2017), the panel
upheld a commercial real estate lessor’s claim denial because the property
went without a tenant, no revenue, and minimum expenses. When asked to
provide documentation to assist the program accountant in calculating an
award amount, the claimant presented insufficient evidence that it was
actively seeking a tenant during the compensable period. The panel decided
similarly in 23 APD 2015-186 (Nov. 20, 2016), when it upheld the denial of a
window cleaning business’s claim where the business was inactive during the
entire compensable period.
Furthermore, panels consistently reverse denials when BEL claimants
demonstrate they actively sought work. Although the commercial real estate
lessor in 25 APD 2016-128 (Feb. 24, 2016) had no revenue or expenses from
February 2010 through April 2011, the panel reversed the denial because the
owner showed that it was actively seeking business during the compensable
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period. The same was done in multiple other claims. See 26 APD 2016-279
(Apr. 4, 2016) (reversed denial because inactivity from January 2009 through
August 2010 did not preclude entity from class membership, it only negatively
affected the award amount); 39 APD 2017-742 (2017) (reversed denial of real
estate agent’s claim even though it had no revenue and expenses for a period
of time because it showed that the nature of its work was sporadic). JAD made
no attempt to provide similar support, and the documents it offered further
supported the panel’s decision. Class members who do not provide any
documentation explaining their inactivity during the compensable period are
consistently denied. Therefore, the panel did not misapply the Agreement in
denying JAD’s claim, and the district court did not abuse its discretion.
2. Class Membership
Foregoing argument that the CSSP misapplied the Agreement by holding
that it was unable to calculate an award, JAD instead offered the same
argument as BP. Both BP and JAD aver that the panel found that JAD was
not entitled to compensation because it experienced a period of inactivity and,
thus, was not a class member. JAD argues that this was an errant decision. BP
argues that this was the right one. The panel found that JAD was not entitled
to compensation as a result of its inactivity; however, the panel’s “why”
surrounded the compensation calculation, not class membership.
As previously contested by BP, traceability is again challenged here. See
Hutto, 753 F.3d at 512–13. In order for an individual to have standing to bring
a case, there must be, inter alia, a causal connection between a plaintiff’s injury
and a defendant’s conduct. See id. at 513. In Hutto, we held that in class action
claims, individuals who meet the class definition maintain traceability and are
class members. Id. at 512–13 (citing Lujan v. Defenders of Wildlife, 504 U.S.
555, 561 (1992)). The class action claimants simply have to allege causation to
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satisfy Article III traceability. See id. (“Allegations of causation are sufficient
to satisfy Article III in a class action complaint and in class action definition.”).
The panel did not misapply or misconstrue the Agreement in determining
JAD’s class status. Contrary to the parties’ beliefs, 5 the panel did not conclude
that JAD was ineligible for the class. A claimant seeking class membership
must only allege that the defendant caused its injury. Id. at 513. The parties
agreed that a class member is one who meets the requirements of section 1 of
the Agreement. Section 1.2 of the Agreement’s plain language says any entity
operating in the Gulf area at any time from April 20, 2010 through April 16,
2012 is a class member 6 if they experience a loss defined in section 1.3. Section
1.3 of the Agreement further defines class members as those individuals or
entities defined in section 1.2 who experienced a loss as a result of the spill. 7
As established in Hutto, claimants simply have to allege that they are
members of the class. Id. at 512–13. Here, that allegation is made in the
parties’ agreed-upon claimant form, which requires claimants to certify they
meet the class definition under penalty of perjury. JAD completed and signed
the forms and thus sufficiently alleged that it was a class member.
The parties’ misunderstanding is not without merit. Instead of conducting
the analysis piece-by-piece and determining class membership separately from
award calculation, the administrator simply gives the reasoning as to why a
5JAD makes an argument similar to the one previously made by BP: the class
administrator was supposed to use Exhibit 4B to find a causal nexus and approve its claim.
This argument fails. We have already held Exhibit 4B causation requirements do not affect
class membership. Hutto, 753 F.3d at 513. (“Exhibit 4B . . . [is an] evidentiary framework[]
that [has] no effect on the claimants’ allegations or on the class definition.”). Neither do
Exhibit 4C requirements.
6 JAD easily clears the Section 1.2 hurdle. Although there was some time of inactivity,
the parties concede that JAD was operating a business by April 2011 and continues to
operate. Thus, JAD operated in the Gulf area between April 20, 2010 and April 16, 2012.
7 JAD also alleged economic loss, during that time and as a result of the Spill, meeting
the Section 1.3 requirements. Therefore, JAD is a class member as defined by the Agreement.
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claimant would not receive an award. The initial review administrator, the re-
review administrator, and the final review panel did not reason that JAD’s lack
of activity precluded it from the class. 8 Instead the panel stated it could not
calculate an award because of the lack of activity during the compensable
period.
Despite BP’s familiar argument, 9 JAD’s alleged temporary dormancy does
not affect its class status. Beyond the established rule that we must “assume
arguendo the elements of [each claimant’s] legal claim,” Cole v. Gen. Motors
Corp., 484 F.3d 717, 723 (5th Cir. 2007), the required claim form that a
claimant must complete and submit is signed under the penalty of perjury,
further establishing that allegations are sufficient. Furthermore, this
argument ignores precedent and attempts to set a higher burden for class
action claimants in blatant disregard of that same precedent. Hutto, 753 F.3d
at 512–13.
Accepting JAD’s class membership but otherwise denying the claim is in
line with other panel decisions. In fact, the panel has explicitly stated that
dormancy has no effect on class membership. In 26 APD 2016-279 (Apr. 4,
8 The administrator who conducted the reconsideration did find that JAD was not a
member of the class because of the period of inactivity. However, it does not necessarily follow
that the panel affirmed for these reasons. The panel conducts a de novo review and makes
its own determination. In its decision, the panel did not repeat the language the
reconsideration administrator used. It did not mention class eligibility or causation. If the
panel followed the reasoning of the reconsideration administrator, this was likely error and
a misinterpretation of the Agreement that should have been reviewed by the district court.
That methodology goes directly against precedent set by this Court and heightens Article III
standing requirements. See Hutto, 753 F.3d at 512. However, this is likely not the
methodology the CSSP undertook because again, only one of the four review panels said that
JAD was ineligible to be a part of the class because of its dormancy.
9 In 2014 BP attempted to argue that if the panel did not ensure that a claim contained
a direct causal nexus, its constitutional and contractual rights would be violated. Hutto, 753
F.3d at 512–13. Now it argues that here the panel conducted this causal calculation that this
court held was inaccurate and ruled in its favor as a result. We again disagree. If the panel
acted as BP avers, it committed substantial error reviewable by the district court.
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No. 17-30167
2016), the panel reversed an administrator’s decision to deny the claim of a
commercial real estate lessor, who generated no revenues or expenses from
January 2009 through August 2010. The initial reviewer determined that this
time of inactivity made the business ineligible for class membership. The panel
directly addressed this error saying:
The fact that the property was not leased from January 2009
through August 2010 is of no real importance as to whether the
Claimant is a member of the class. It most certainly is. The issue
which appears to stump the Vendor Accountants was the amount
of the award.
26 APD 2016-279. Thus, the CSSP has already found that dormancy does not
affect class status but only the calculation of the award.
Because JAD’s allegations of class membership are sufficient, JAD is a class
member. Despite the period of inactivity, the parties concede that JAD
provided documentation demonstrating it was operating by April 2011 and
continues to operate. So JAD meets section 1.2 requirements. JAD also alleged
economic loss as a result of the Spill, meeting the Section 1.3 requirements.
Therefore, the CSSP likely did not misapply or misconstrue the agreement
because it did not decide that JAD’s inactivity precluded it from the class. It
instead found that JAD was a class member, who did not provide sufficient
documentation for the Program Accountant to calculate an award. 10
III. CONCLUSION
The district court’s judgment is AFFIRMED.
10 Although there was likely no misapplication of the Agreement, this is likely a
question of law that can potentially substantially impact Agreement administration if the
CSSP precludes dormant individuals from the class, instead of considering them class
members presenting noncompensable claims.
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