     Case: 16-30482   Document: 00513903751    Page: 1   Date Filed: 03/08/2017




        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT   United States Court of Appeals
                                                  Fifth Circuit

                                                                    FILED
                                                                 March 8, 2017
                                No. 16-30482
                                                                 Lyle W. Cayce
                                                                      Clerk
BP EXPLORATION & PRODUCTION, INCORPORATED; BP AMERICA
PRODUCTION COMPANY; BP, P.L.C.,

             Requesting Parties - Appellees

v.

CLAIMANT ID 100169608,

             Objecting Party - Appellant

                              Consolidated w/ No. 16-30822 and No. 16-30823

CLAIMANT ID 100169608,

             Requesting Party - Appellant

v.

BP EXPLORATION & PRODUCTION, INCORPORATED; BP AMERICA
PRODUCTION COMPANY; BP, P.L.C.,

             Objecting Parties - Appellees


                Appeals from the United States District Court
                    for the Eastern District of Louisiana
                           USDC No. 2:16-CV-2087
                           USDC No. 2:16-CV-5705
                           USDC No. 2:16-CV-5706
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                                   No. 16-30482
                      cons w/ No. 16-30822 and No. 16-30823

Before STEWART, Chief Judge, and KING and DENNIS, Circuit Judges.
PER CURIAM:*
       Appellant Adams Produce Company, LLC submitted to the Court
Supervised Settlement Program three claims for damages relating to the
Deepwater Horizon oil spill. The district court denied one of the claims on its
merits after granting discretionary review.            The district court declined to
exercise its discretion to review the other two claims, both of which had
previously been denied by the Court Supervised Settlement Program. For the
following reasons, we AFFIRM.
            I. FACTUAL AND PROCEDURAL BACKGROUND
       In these consolidated appeals, we are once again asked to review claims
relating to the Economic and Property Damages Settlement Agreement
(Settlement Agreement), which was entered into between Appellees BP
Exploration & Production, Inc., BP America Production Company, and BP,
P.L.C. (collectively, BP) and the Economic and Property Damages Settlement
Class following the Deepwater Horizon oil spill. The claimant, Adams Produce
Company, LLC (Adams LLC), is a Delaware limited liability company. Adams
LLC was formed in July 2010 and began operations in September 2010 after it
received, following an asset transfer, certain assets from Adams Produce
Company, Inc. (Adams Inc.), a Delaware corporation. Importantly, Adams
LLC was formed and began operations after the Deepwater Horizon oil spill
began on April 20, 2010.
       At the time of the oil spill, Adams Inc. had operated for more than 50
years, distributing food to restaurants located throughout Alabama, Florida,


       * 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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and Mississippi. 1     In September 2010, Adams Inc. approved a plan of
liquidation and also executed an asset contribution agreement with Adams
LLC (“Asset Transfer Agreement”). As part of the Asset Transfer Agreement,
Adams Inc. transferred to Adams LLC “certain assets to be used by [Adams
LLC] in connection with the operation of [its business].” Specifically, the Asset
Transfer Agreement listed which assets would be transferred to Adams LLC
and which assets would be retained by Adams Inc. For example, the Asset
Transfer Agreement excluded several motor vehicles from being transferred to
Adams LLC. The Asset Transfer Agreement also listed the liabilities that
Adams Inc. would transfer to Adams LLC and stated that, except for those
liabilities, Adams LLC “shall not assume and shall not be responsible or liable
for any [c]laims, commitments, [c]ontracts, obligations or other [l]iabilities of
[Adams Inc.] or any stockholder of [Adams Inc.]” In November 2010, Adams
Inc. was dissolved.
      In July 2013, Adams LLC submitted to the Court Supervised Settlement
Program (CSSP) three separate Business Economic Loss (BEL) claims for
facilities located in Destin, Florida; Biloxi, Mississippi; and Pensacola, Florida.
In August 2015, the CSSP denied the claim related to the Destin facility for
the following reason:
      We cannot allow your claim for the reason that we are unable to
      determine causation and/or calculate a compensation amount
      under the BEL frameworks because you were not doing business
      or operating in the Gulf Coast Areas or Specified Gulf Waters at
      the time of the Oil Spill, April 20, 2010.




      1  Adams Brothers Produce Company, Inc. (Adams Brothers Inc.) was originally
incorporated in Delaware in 1959. In 2008, Adams Brothers Inc. changed its name to Adams
Produce Company, Inc.
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Adams LLC then sought reconsideration, which was denied in September
2015.
         Following the denial of the Destin claim, Adams LLC sought review by
the Appeal Panel. On December 16, 2015, the Appeal Panel reversed the denial
of the claim, concluding that Adams LLC was a class member of the Settlement
Agreement and, therefore, entitled to pursue the claim. The Appeal Panel’s
analysis was based on the theory that the general business of “Adams Produce”
continued both pre- and post-oil spill, and although the form of the entity
changed from Adams Inc. to Adams LLC via an asset transfer, the actual
business enterprise did not change. Thus, according to the Appeal Panel,
Adams LLC could in fact pursue the claim because the “Adams Produce”
business enterprise did not change following the asset transfer.
         BP then sought discretionary review in the district court of the Appeal
Panel’s decision. BP argued that Adams LLC was a new entity that was not
in existence at the time of the oil spill, and therefore, Adams LLC did not have
a claim under the BEL framework. In March 2016, the district court granted
the request for discretionary review and reversed the Appeal Panel’s decision.
The district court largely adopted the arguments of BP, reasoning that it was
undisputed that Adams LLC did not exist prior to the oil spill and that Adams
LLC is a wholly separate and distinct entity from Adams Inc. Critical to the
district court’s reasoning was the type of transaction—an asset sale—used by
Adams LLC to transfer the underlying food business operations from Adams
Inc. 2


         2 In full, the district court held:
         IT IS ORDERED that the request for discretionary review is hereby
         GRANTED. The claimant here is Adams Produce Company, LLC, an entity
         formed on July 8, 2010. It is undisputed that Adams Produce Company, LLC
         did not exist or operate the subject business at the time of the Oil Spill, but
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      While the above appeals process was unfolding for the Destin facility,
the claims for the Biloxi and Pensacola facilities followed slightly different
procedural routes. First, on September 16, 2015, the CSSP denied the Biloxi
and Pensacola claims for the same reason that the Destin claim had been
denied. After re-review and reconsideration were denied, in separate decisions
the Appeal Panel upheld the denials of the Biloxi and Pensacola claims. While
the Appeal Panel decisions for the Biloxi and Pensacola claims recognized that
Adams LLC had succeeded before the Appeal Panel for its claim for the Destin
facility, they rejected the reasoning of the prior Appeal Panel. Adams LLC
sought discretionary review by the district court for both claims. In June 2016,
the district court declined to exercise its discretion to review the claims,
effectively affirming the Appeal Panel decisions denying Adams LLC’s claims
for its Biloxi and Pensacola facilities. Notably, by June 2016, the district court
had already granted discretionary review and denied Adams LLC’s claim for
the Destin facility.
      Adams LLC filed a timely notice of appeal for each claim. The claims
were subsequently consolidated.




      rather the business was operated by a wholly separate and distinct entity,
      Adams Produce, Inc. Adams Produce Company, LLC’s involvement with this
      business did not come about until it bought substantially all of the assets of
      Adams Produce, Inc. in September, 2010, well after the Oil Spill. The
      transaction was a sale of assets, not a sale of the company’s stock. Further, it
      was not merely a change in corporate organization. The transaction was
      something other than a single entity merely changing its legal form of
      organization; it was a sale of assets from one entity to a separate entity with a
      different set of owners. Under these circumstances, the Claims Administrator
      was correct to deny this claim on grounds that the claimant entity was not
      operating at the time of the Oil Spill. The decision of the Appeal Panel is
      therefore REVERSED, and the Claims Administrator’s denial is
      REINSTATED.
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                                    No. 16-30482
                       cons w/ No. 16-30822 and No. 16-30823

                            II. STANDARD OF REVIEW
       Our review of the district court’s judgment is for abuse of discretion. See
Claimant ID 100197593 v. BP Expl. & Prod., Inc., -- F. App’x --, 2016 WL
7029142, at *1 (5th Cir. Nov. 16, 2016) (per curiam). “‘However, the standard
of review is effectively de novo’ when the district court is ‘presented with purely
legal questions of contract interpretation.’”             Id. (quoting In re Deepwater
Horizon, 785 F.3d 1003, 1011 (5th Cir. 2015)). 3
           III. ADAMS LLC’S CLAIMS WERE PROPERLY DENIED
       At the outset, it is instructive to state several principles upon which both
parties agree. First, neither party disputes that a business claimant that did
not exist prior to the oil spill cannot recover under the Settlement Agreement. 4



       3   We have not yet directly addressed whether the abuse of discretion standard of
review varies depending on whether the district court granted or denied a request for review,
and neither party addresses this point. Compare Claimant ID 100197593, -- F. App’x --, 2016
WL 7029142, at *1 (reviewing the district court’s order after the district court granted
discretionary review); with Claimant ID 100212278 v. BP Expl. & Prod., Inc., -- F.3d --, 2017
WL 540999, at *2 (5th Cir. Feb. 9, 2017) (per curiam) (reviewing the district court’s denial of
discretionary review and stating that “[w]e generally assess whether the district court abused
its discretion by looking to ‘whether the decision not reviewed by the district court actually
contradicted or misapplied the Settlement Agreement, or had the clear potential to contradict
or misapply the Settlement Agreement.’” (quoting Holmes Motors, Inc. v. BP Expl. & Prod.,
Inc., 829 F.3d 313, 315 (5th Cir. 2016))). Although these consolidated appeals present a
situation in which the district court granted discretionary review for one claim but denied it
for the other two claims, we need not and do not address any potential nuances. Even
assuming that our review of the district court’s judgment following the grant of discretionary
review is more lenient, Adams LLC’s claims all fail because, as discussed below, the district
court did not misinterpret the Settlement Agreement.
         4 Although Adams LLC does not directly explain the reasoning supporting this

principle, BP does include an argument about why an entity that did not exist until after the
oil spill cannot recover. Under the terms of the Settlement Agreement, an entity that meets
one of the geographical descriptions is a class member only if its claims “meet the descriptions
of one or more of the Damage Categories.” However, an entity that did not exist until after
the oil spill cannot meet one of the damage categories for a BEL claim because each of the
compensation frameworks requires the entity to have existed at the time of the oil spill.
Accordingly, such an entity would not be included as a class member. Although Adams LLC
does not directly address that argument, it does state that the “parties agree that the
threshold issue is whether this Business Economic Loss Claimant existed at the time of the
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                                    No. 16-30482
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Second, neither party disputes that, under certain circumstances, a business
claimant that reorganizes or changes its form may still recover even if the
change occurs after the oil spill (i.e., the newly organized entity is still
considered to be the same business claimant as the pre-spill entity for the
purpose of establishing a BEL claim under the Settlement Agreement).
       Putting aside the unique background on how Adams LLC came into
existence, Adams LLC would not be a class member and could not recover on
its claims because it did not exist at the time of the oil spill. However, Adams
LLC argues that, even though it technically did not exist in its current form at
the time of the oil spill, it is simply an uninterrupted continuation of the
underlying business in a different form, and therefore, it should be able to
recover on a claim for the underlying food business. Put another way, Adams
LLC’s argument is that the asset transfer and change in business form (from
Adams Inc. to Adams LLC) should have no effect on its ability to establish a
BEL claim, and instead, the Settlement Agreement looks to whether the actual
food business was operating at the time of the oil spill. This court recently
addressed a similar question in an unpublished opinion. In Claimant ID
100009540 v. BP Exploration & Production, Inc., -- F. App’x --, 2017 WL 664026
(5th Cir. Feb. 17, 2017) (per curiam), the claimant entity had purchased in May
2009, via an asset sale, an oyster processing business that had previously been
operated by a different entity. Id. at *1. One of the issues in that case was
whether the claimant entity should be classified as a failed start-up business
or a failed business. Id. at *3. This issue turned, in part, on whether the
purchasing entity, which did not begin operating the oyster processing




Oil Spill. BP admits that no express exclusion applies and that the issue of class membership
and eligibility is answered by this question.”
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business until after it purchased the assets from a different entity, should be
treated as the claimant or whether the oyster processing business, which had
been operating prior to the asset sale, should be treated as the claimant even
though it had been sold between two different entities as part of an asset sale.
Id. at *3–4.      This court rejected the argument that the oyster processing
business was the claimant, concluding instead that the Settlement Agreement
“makes clear that the proper claimant is the ‘entity’ asserting a business
economic damages claim, and not, as [the claimant] contends, the business
(here, [the oyster processing business]) that is operated by that entity.” Id. at
*4. In making this determination, this court further recognized that “[i]t is
well-established that the life of an entity continues in a stock sale, whereas
assets are transferred to a different entity in an asset sale.” Id.
       We agree and, applying the same principles from Claimant ID
100009540, conclude that Adams LLC’s claims were properly denied because
Adams LLC did not exist at the time of the oil spill. The Settlement Agreement
makes clear that, under these circumstances, Adams LLC is the proper
business claimant, not the underlying food business that Adams LLC operated.
The Settlement Agreement does not support the interpretation, advocated by
Adams LLC, that a valid BEL claim is based on the underlying business
operations regardless of how that business was transferred between two
distinct entities. Instead, the Settlement Agreement’s definitions of business
claimant 5 and entity, 6 as well as the compensation frameworks, clearly support


       5  “Business Claimant” is defined as “an Entity . . . which . . . 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.”
        6 “Entity” is defined as “an organization or entity . . . operating or having operated for

profit or not-for-profit, including a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture or an unincorporated association
of any kind or description.”
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the interpretation that Adams LLC is the “entity” and proper “business
claimant.” Accordingly, because Adams LLC, the business claimant, did not
exist at the time of the oil spill, it cannot recover on its BEL claims regardless
of the fact that the underlying food business was operated by a different entity,
Adams Inc., at the time of the oil spill. In other words, the two distinct entities
in this case, Adams LLC and Adams Inc., cannot combine to form one business
claimant with one BEL claim simply because Adams Inc. transferred
substantially all of its assets to Adams LLC, which continued to operate the
underlying food business.
      Adams LLC’s arguments to the contrary are unavailing. Adams LLC
argues that this interpretation creates an “artificial distinction” between
Adams LLC and Adams Inc. and improperly focuses on form over substance.
We disagree. The substance of the transaction—an asset transfer—is critical
to the outcome of this case. Although substantially all of Adams Inc.’s assets
and liabilities were transferred as part of the transaction, it is undisputed that
Adams Inc. retained certain assets and liabilities. Although there may be
certain business reorganizations or transactions in which the same business
claimant and BEL claim continue throughout, the asset transfer used in this
case does not present such a situation. Simply put, Adams Inc. and Adams
LLC are two distinct entities, and the asset transfer that occurred here was
not just a change in form. See Claimant ID 100009540, 2017 WL 664026, at
*4. Just as the purchasing entity in Claimant ID 100009540 was a different
“entity” than the selling entity for the purpose of establishing a claim under
the Settlement Agreement, Adams LLC is a distinct “entity” from Adams Inc.




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                                    No. 16-30482
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for the purpose of establishing a BEL claim. 7 Accordingly, Adams LLC cannot
establish a BEL claim, under the plain terms of the Settlement Agreement, by
relying on the fact that a distinct entity, Adams Inc., existed and operated the
underlying food business at the time of the oil spill. Instead, given that Adams
LLC did not come into existence until after the oil spill, the district court
properly concluded that it could not recover under the Settlement Agreement.
                                  IV. CONCLUSION
       For the foregoing reasons, the judgments of the district court are
AFFIRMED.




       7  Adams LLC argues that the record does not support the district court’s
characterization of the transaction as an asset sale. According to Adams LLC, the record
does not show that money was directly exchanged as part of the Asset Transfer Agreement
and, therefore, the district court erred in characterizing the transaction as an asset sale.
However, even assuming that Adams LLC did not directly pay Adams Inc. as part of the
Asset Transfer Agreement, the principles from Claimant ID 100009540 would still apply to
this case. As discussed above, it is undisputed that, as part of the Asset Transfer Agreement,
certain assets and liabilities remained with Adams Inc. Adams LLC and Adams Inc. are not
the same “entity.”
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