In re: Deepwater Horizon

Case: 15-30377 Document: 00514002580 Page: 1 Date Filed: 05/22/2017
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 15-30377 May 22, 2017
Lyle W. Cayce
In re: DEEPWATER HORIZON Clerk
_______________________________
LAKE EUGENIE LAND & DEVELOPMENT, INCORPORATED; BON
SECOUR FISHERIES, INCORPORATED; FORT MORGAN REALTY,
INCORPORATED; LFBP 1, L.L.C., doing business as GW Fins; PANAMA
CITY BEACH DOLPHIN TOURS & MORE, L.L.C.; ZEKES CHARTER
FLEET, L.L.C.; WILLIAM SELLERS; KATHLEEN IRWIN; RONALD
LUNDY; CORLISS GALLO; JOHN TESVICH; MICHAEL GUIDRY, on
behalf of themselves and all others similarly situated; HENRY HUTTO;
BRAD FRILOUX; JERRY J. KEE,
Plaintiffs - Appellants
v.
BP EXPLORATION & PRODUCTION, INCORPORATED; BP AMERICA
PRODUCTION COMPANY; BP, P.L.C.,
Defendants - Appellees
Appeal from the United States District Court
for the Eastern District of Louisiana
Before DAVIS, CLEMENT, and COSTA, Circuit Judges.
W. EUGENE DAVIS, Circuit Judge:
This appeal addresses the computation of economic losses arising out of
the BP oil spill and based on the BP Settlement Agreement. In an attempt to
adhere to our decision in In re Deepwater Horizon (“Deepwater Horizon I”), 732
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No. 15-30377
F.3d 326 (5th Cir. 2013), the district court has approved a policy adopted by
the Claims Administrator known as Policy 495. Policy 495 consists of five
methodologies pursuant to which the Claims Administrator is to calculate
claimant compensation: one Annual Variable Margin Methodology (“AVMM”)
and four Industry-Specific Methodologies (“ISMs”). Class Counsel challenges
all five. Because the AVMM is consistent with the text of the Settlement
Agreement, but the four ISMs are not, we AFFIRM as to the AVMM,
REVERSE as to the ISMs, and REMAND for proceedings consistent with this
opinion. 1
I.
The Settlement Agreement seeks to reimburse claimants for economic
losses related to the BP oil spill. Losses that bear a temporal relationship to
the spill are said to be related to the spill. Somewhat simplified, and more than
somewhat condensed, the claims process works as follows: The Claims
Administrator compares a claimant’s financial performance prior to and after
the spill. If the former is greater than the latter, BP is liable for the difference.
Causation is, in all other respects, presumed.
The Settlement Agreement grants each claimant the right to choose his
or her Compensation Period, so long as it consists of three or more consecutive
months between May and December 2010. The Compensation Period
constitutes the post-spill period, which is then subtracted from the same pre-
spill period, 2 in order to deduce the damages owed.
We first addressed damages in the context of this litigation in Deepwater
Horizon I. The question in Deepwater Horizon I was whether the Settlement
1 We have jurisdiction to decide this appeal pursuant to the collateral order doctrine.
See Deepwater Horizon I, 732 F.3d at 332 n.3.
2 Financial performance in the pre-spill period will, subject to the claimant’s choice,
be restricted to 2009; 2008 and 2009; or 2007, 2008, and 2009.
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Agreement requires the Claims Administrator to match all unmatched profit
and loss statements. Before discussing our holding in Deepwater Horizon I, an
explanation of the terms “matched” and “unmatched” is in order.
In a matched profit and loss statement, costs follow revenue, which is
registered when generated or received. The two appear as part of the same
month, and provide a clear picture of net income.
In an unmatched profit and loss statement, costs do not follow revenue.
Revenue is registered when generated or received, and costs are registered at
least one month earlier when incurred. Unmatched profit and loss statements
can, pursuant to the Settlement Agreement, make it appear as if a claimant
has suffered damages that he, in fact, did not suffer. Here’s how.
Assume that Claimant A is a used car dealer, who chose a Compensation
Period of August to October 2010. Assume that during the Compensation
Period, Claimant A sold two cars. Assume that both of those cars were sold in
September. Assume that the sale generated a combined $50,000 in revenue.
And assume that Claimant A paid $40,000 for those two cars in June.
If the costs follow the revenue, i.e., if the claimant’s profit and loss
statements are matched, the Claims Administrator should conclude that
Claimant A generated $10,000 in profits during the Compensation Period. His
profit and loss statements, from August to October 2010, should list $50,000 in
revenue and $40,000 in costs. The fact that the costs were incurred outside of
the Compensation Period in June does not matter, because the costs follow the
revenue, which was both generated and received during the Compensation
Period in September. Claimant A generated $10,000 in net profits from August
to October 2010.
Now assume that Claimant A’s financial performance in August to
October 2009 mirrored that of August to October 2010. But assume that
Claimant A submitted his 2009 profit and loss statements unmatched. If the
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costs do not follow the revenue, the $40,000 that Claimant A incurred in June
will not be considered, because June falls outside of the Compensation Period.
Claimant A will thus appear to have generated $50,000 in net profits from
August to October 2009, and $10,000 in net profits from August to October
2010. And after subtracting the latter from the former, Claimant A will be
entitled to 40,000 in damages related to the spill.
In Deepwater Horizon I, we sought to determine whether the Settlement
Agreement supports this result, or whether the Claims Administrator should
be required to match all unmatched profit and loss statements. We noted that
In interpreting a settlement, surely some weight has to be given to
what damages recoverable in civil litigation actually are. If clear
words in a settlement require the use of randomly associated
numbers for calculating damages, even if there is little likelihood
that, after subtracting one of those numbers from the other, the
remainder will in fact show anything relevant to damages, then so
be it. We do not perceive such clarity here. 3
Finding the text of the Settlement Agreement ambiguous, we remanded to the
district court with instructions to review relevant extrinsic evidence to ensure
that the Settlement Agreement was being implemented in a manner consistent
with intent of the parties at the time of the Settlement Agreement’s
ratification.
On remand, the district court held that the parties did not discuss the
issue of “matching” prior to signing the Settlement Agreement, but “did discuss
and were in agreement that similarly situated claimants must be treated
alike.” In order to treat similarly situated claimants alike, the district court
held that the Settlement Agreement should be interpreted to mandate the
3 732 F.3d at 339.
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matching of all unmatched profit and loss statements, and ordered the Claims
Administrator to craft a policy to that end.
The resultant policy is Policy 495. Policy 495 consists of five
methodologies, and effectively divides claimants into two categories: those
engaged in construction, education, agriculture, and professional services are
subject to ISMs, and those engaged in everything else are subject to an AVMM.
Class Counsel objects to all five methodologies. We review the AVMM
separately, and the four ISMs together.
II.
A.
The AVMM requires the Claims Administrator to match all unmatched
profit and loss statements. This means that prior to calculating damages, the
Claims Administrator must ensure that costs are registered in the same month
as corresponding revenue, regardless of when those costs were incurred. In
Deepwater Horizon I, we held that the Settlement Agreement is ambiguous as
to matching. Where a contractual provision “is ambiguous, such that its
construction turns on a consideration of extrinsic evidence, . . . we review the
district court's interpretation for clear error.” 4
Class Counsel has not presented evidence sufficient for us to find that
the district court’s approval of the AVMM constituted clear error, and we now
hold that it did not. The Settlement Agreement is a maritime contract, 5
pursuant to which all ambiguities are to be resolved “consistent with the intent
of the parties.” 6 The parties intended for all “similarly situated claimants [to]
be treated alike.” Matching unmatched profit and loss statements promotes
4 See Alford v. Kuhlman Elec. Corp., 716 F.3d 909, 912 (5th Cir. 2013).
5 Holmes Motors, Inc. v. BP Expl. & Prod., Inc., 829 F.3d 313, 315 (5th Cir. 2016); see
also Guidry v. Halliburton Geophysical Servs., Inc., 976 F.2d 938, 940 (5th Cir. 1992) (“A
settlement agreement is a contract.”).
6 See Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 31 (2004).
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this goal. Error is clear when it leaves us with a “definite and firm conviction
that a mistake has been committed.” 7 Because we hold no such conviction, the
district court’s approval of the AVMM is affirmed.
B.
The ISMs also require matching, but go a significant step farther,
requiring the Claims Administrator to move, smooth, or otherwise reallocate
revenue for claimants engaged in construction, education, agriculture, and
professional services. Claimants in these four industries tend to be paid in
lump sums, which are capable of generating damages awards that do not
comport with tort principles. Thus, BP argues that the ISMs are necessary in
order to ensure that the Claims Administrator can “process claims in
accordance with economic reality,” 8 quoting our opinion in Deepwater
Horizon I.
An example is, once again, helpful. Assume that Claimant A is a farmer,
who chose a Compensation Period of August to October 2010. Assume that in
2009, Claimant A sold all of his crops on October 31st, generating $200,000 in
net profits. And assume that in 2010, Claimant A sold all of his crops on
November 1st, generating $200,000 in net profits again.
Claimant A did not suffer economic losses pursuant to tort principles.
His net profits, after all, did not decline from 2009 to 2010.
Claimant A did, however, suffer economic losses pursuant to the
Settlement Agreement. The Settlement Agreement precludes the Claims
Administrator from considering the 2010 transaction, because it took place in
November, outside of the Compensation Period. Thus, BP owes Claimant A
7 United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948).
8 732 F.3d at 339.
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$200,000. $200,000 in net profits in 2009 minus $0 in net profits in 2010 equals
$200,000 in damages for Claimant A.
BP argues that the parties did not intend for Claimant A to collect
$200,000. And the relevant ISM would preclude this result. The relevant ISM
would spread revenue across the crop season, ensuring that damages are
awarded to those who have suffered real losses. This may well be a fairer
alternative. But it cannot be implemented, because it is inconsistent with the
plain text of the Settlement Agreement. 9
“The interpretation of an unambiguous contract[ual provision] is a
question of law, subject to de novo review.” 10 “De novo [review warrants] here,
as it ordinarily does, a fresh, independent determination of the matter at
stake.” 11
The Settlement Agreement grants each claimant the right to choose his
or her Compensation Period, consisting of three or more consecutive months
between May and December 2010. If the Claims Administrator is permitted to
remove revenue from the Compensation Period, and spread it throughout the
non-compensation months, the claimant’s choice no longer matters. June is the
same as December, and November is the same as July.
This is not the agreement that the parties entered into. And we decline
to re-write the Settlement Agreement under the guise of contractual
interpretation. When we said, in Deepwater Horizon I, that the Claims
Administrator should “process claims in accordance with economic reality,” we
9 See Luv N' Care, Ltd. v. Groupo Rimar, 844 F.3d 442, 447 (5th Cir. 2016)
(“Contractual intent is determined by the words of the contract.”).
10 Alford, 716 F.3d at 912.
11 Doe v. United States, 821 F.2d 694, 697—98 (D.C. Cir. 1987) (en banc) (internal
quotations omitted); see also Goodman v. United States, 518 F.2d 505, 509 (5th Cir. 1975)
(“The phrase ‘de novo’ means ‘the court should make an independent determination of the
issues.’”).
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assumed that doing so would comport with the text of the Settlement
Agreement. That assumption has proven to be wrong in light of the moving,
smoothing, and otherwise reallocation of revenue inherent in the ISMs.
The Settlement Agreement grants claimants the right to choose their
own Compensation Period. Because the ISMs infringe upon that right, the
district court’s approval of the ISMs was in error and is reversed.
III.
The district court’s approval of the ISMs was in error because the ISMs
require the Claims Administrator to move, smooth, or otherwise reallocate
revenue in violation of the Settlement Agreement. However, the ISMs, as
stated, also require the Claims Administrator to match all unmatched profit
and loss statements.
Having the Claims Administrator match all unmatched profit and loss
statements helps ensure that all similarly situated claimants are treated alike,
and is consistent with the text of the Settlement Agreement. Thus, we hold
that all claimants – including those engaged in construction, agriculture,
education, and professional services – shall, on remand, be subject to the
AVMM.
IV.
For the reasons set out above, we AFFIRM as to the AVMM, REVERSE
as to the ISMs, and REMAND for further proceedings consistent with this
opinion.
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