     Case: 18-31304      Document: 00515273407         Page: 1    Date Filed: 01/15/2020




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

                                      No. 18-31304                             FILED
                                                                        January 15, 2020
                                                                          Lyle W. Cayce
CLAIMANT ID 100245152,                                                         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
                            USDC No. 2:18-CV-10457


Before JOLLY, GRAVES, and HIGGINSON, Circuit Judges.
PER CURIAM:*
       This is an appeal from a district court order denying discretionary review
of a claim submitted to the BP Settlement Program. We reverse and remand.
                                  I. BACKGROUND
       Following the Deepwater Horizon oil spill in 2010, BP negotiated and
agreed to a settlement agreement (the “Settlement Agreement”) with a



       * 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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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                                 No. 18-31304
proposed class of individuals and entities. The Settlement Agreement created
a system (the “Settlement Program”) through which class members can submit
claims and receive payment for those claims that are approved. USA Hosts,
Ltd. (“USA Hosts”), the claimant in this case, disputes the Settlement
Program’s application of the Settlement Agreement to its claim.
      A. Relevant Provisions of the Settlement Agreement
      Under the Settlement Agreement, there are two frameworks for
calculating the available compensation: the business economic loss (“BEL”)
framework and the failed business economic loss (“FBEL”) framework. See,
e.g., Claimant ID 100081155 v. BP Expl. & Prod., Inc., 920 F.3d 925, 927 (5th
Cir. 2019). The FBEL framework is at issue here. That framework applies to
“failed businesses,” a term which has a substantially broader meaning under
the provisions of the Settlement Agreement than it does in colloquial use.
Specifically, Exhibit 6 to the Settlement Agreement defines a “failed business”
as a business entity that
      commenced operations prior to November 1, 2008 and that,
      subsequent to May 1, 2010 but prior to December 31, 2011, either
      (i) ceased operations and wound down, or (ii) entered bankruptcy
      (through the filing of a petition for bankruptcy protection in a court
      of competent jurisdiction), or (iii) otherwise initiated or completed
      a liquidation of substantially all of its assets.

      Policy 506, which was adopted to construe and implement Exhibit 6,
“interprets the definition” of a failed business to include any entity that
      initiated or completed a liquidation of substantially all of its
      assets, irrespective of whether or not the sale was initiated in
      connection with a formal bankruptcy proceeding administered by
      the Court, a foreclosure situation, short sale or deed in lieu of
      foreclosure. A voluntary sale of a business, or substantially all of
      the assets of an Entity, that occurred after May 1, 2010 but before




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                                       No. 18-31304
       December 31, 2011 would cause such Entity to be considered a
       Failed Business or Failed Start-Up Business. 1

       The FBEL framework uses a business’s past earnings to calculate
compensation, which it does by subtracting the value the entity or its owner
realized from the business between the spill and the time the business
discontinued (the “liquidation value”) from the estimated pre-spill value of the
business (the “total enterprise value”). If that calculation results in a negative
value, a claimant is not entitled to compensation through the settlement
agreement.
       Exhibit 6 to the Settlement Agreement provides that the base liquidation
value of a failed business should be calculated based on what we refer to as
either the “bankruptcy compensation methodology” or the “sales proceeds
compensation        methodology.”       Under       the     bankruptcy       compensation
methodology, the starting point for determining an entity’s liquidation value
is “the court-approved reorganization value, to the extent [the business was]
reorganized under [the] bankruptcy law process.” Under the sales proceeds
compensation methodology, the starting point for determining an entity’s
liquidation value is the “sales proceeds from assets liquidated plus [the]
certified appraisal values of assets yet to be liquidated under a plan of
liquidation, net of actual or anticipated liquidation costs . . . as relevant.”
Whether calculated using the bankruptcy compensation methodology or the
sales proceeds compensation methodology, the total liquidation value is then
increased to reflect
       any creditor claims existing [pre-spill] and discharged during
       bankruptcy, and any amounts received by the claimant from BP or
       the [Gulf Coast Claims Facility (“GCCF”)] pursuant to BP’s [Oil



       1  A second version of Policy 506 (Policy 506 v.2) is currently in use. For brevity, we
refer to the policy simply as “Policy 506.”
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                                No. 18-31304
      Pollution Act] claims process, or profits earned by the claimant by
      participating in any BP-sponsored spill remediation program . . . .

      Policy 506 makes clear that “creditor claims existing [pre-spill] and
discharged during bankruptcy” include any “long term interest bearing debt
that has been forgiven by a lender, as well as               distributions to
owners/shareholders” made after the spill. Payments made to owners and/or
shareholders can be made in forms “that may include, but are not limited to[,]
capital withdrawals, owner’s compensation, dividend payments[,] or the
forgiveness of an owner’s loan.” Conversely, if creditor claims increased after
the spill—including increases in amounts due to an owner and/or
shareholder—the liquidation value is reduced accordingly.
      After a claimant submits a claim, the Claims Administrator determines
whether that claimant is an ongoing or failed business and how much
compensation is due. The claimant may request reconsideration of those
decisions. Either BP or the claimant may appeal a final decision of the Claims
Administrator to a Settlement Program appeal panel (an “Appeal Panel”), and
the district court retains discretion to review the Settlement Program’s
determinations to ensure that the Claims Administrator and the Appeal Panel
correctly interpreted and applied the Settlement Agreement. See Claimant ID
100081155, 920 F.3d at 927.
      B. USA Hosts’ Claim and Appeal
      USA Hosts is a Nevada corporation engaged in                 “destination
management.”    It   designs   and   implements   “events,   activities,    tours,
transportation, and program logistics in a particular geographic area.” At the
time of the oil spill, USA Hosts had locations in Dallas, Hawaii, Las Vegas,
New Orleans, and Washington, D.C.
      In January 2011, USA Hosts sold the New Orleans branch of its
operations as part of a sale that also included the company’s Las Vegas and
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                                  No. 18-31304
Washington, D.C. facilities. All three facilities were sold for a lump-sum
purchase price of $1,000,000, which was broken down by category of asset but
not by location. USA Hosts submitted a business economic loss claim solely on
behalf of its New Orleans location. Because the New Orleans location was sold
between May 1, 2010 and December 31, 2011, the Claims Administrator
classified the claim as one for a failed business economic loss.
      USA    Hosts    received    several   eligibility   notices   regarding    its
compensation determination. The first two, which both used the sales proceeds
compensation methodology, incorrectly attributed the entire price of the
January 2011 sale to the New Orleans location. They therefore determined
that USA Hosts was entitled to negative $310,319.63 in compensation and
should receive a zero-dollar award. USA Hosts filed requests for review and
reconsideration, resulting in a third eligibility notice. That notice also used the
sales proceeds compensation methodology and again resulted in a zero-dollar
award. (It calculated the compensation amount as negative $12,812.62.) But
as USA Hosts pointed out to the Appeals Panel, the Claims Administrator
made a mistake when calculating revenue. The Appeals Panel thus remanded
the claim for recalculation.
      On remand, the Claims Administrator for the first time used a different
methodology. Instead of using the sales proceeds compensation methodology,
as had been used in the prior three eligibility notices, the fourth notice applied
the bankruptcy compensation methodology. Specifically, it used forgiven debts
and shareholder payments to increase the liquidated value calculation. This
final eligibility notice also resulted in a zero-dollar award, though it calculated
the compensation amount due to USA Hosts as negative $7,367.41.
      USA Hosts objected to the use of the bankruptcy compensation
methodology and filed a request for reconsideration and an administrative


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appeal. Both were unsuccessful. The district court denied discretionary review,
and USA Hosts appealed to this court.
                            II. STANDARD OF REVIEW
       When the district court refuses to exercise its discretion under the
Settlement Program to review an Appeal Panel decision, this court reviews
that refusal for abuse of discretion. Holmes Motors, Inc. v. BP Expl. & Prod.,
Inc., 829 F.3d 313, 315 (5th Cir. 2016). A declination may be an abuse of
discretion in two situations. BP Expl. & Prod., Inc. v. Claimant ID 100317640,
766 F. App’x 112, 115 (5th Cir. 2019) (per curiam) (unpublished). One is when
the panel decision “actually contradicted or misapplied the Settlement
Agreement, or had the clear potential to contradict or misapply the Settlement
Agreement.” Holmes Motors, 829 F.3d at 315 (5th Cir. 2016) (quoting In re
Deepwater Horizon, 641 F. App’x 405, 409–10 (5th Cir. 2016)). The other is
when the decision “raises a recurring issue on which the Appeal Panels are
split” and “the resolution of the question will substantially impact the
administration of the Agreement.” Claimant ID 100212278 v. BP Expl. &
Prod., Inc., 848 F.3d 407, 410 (5th Cir. 2017) (quoting In re Deepwater Horizon,
632 F. App’x 199, 203–04 (5th Cir. 2015)). 2
                                   III. DISCUSSION
       We agree with USA Hosts that the district court abused its discretion
in denying discretionary review of the claim at issue.
       Multiple Appeal Panel decisions have addressed the same issue. Those
panels found, in contrast to the Appeal Panel here, that pre-spill debts
discharged during bankruptcy—and Policy 506’s interpretation of that phrase


       2 “The interpretation of a settlement agreement is a question of contract law that this
Court reviews de novo.” In re Deepwater Horizon, 785 F.3d 1003, 1011 (5th Cir. 2015). But
here, reviewing the district court’s denial of discretionary review merely requires evaluating
whether the Appeals Panels are split on an issue that could substantially impact the
administration of the Settlement Agreement.
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to include forgiven debts and shareholder payments—do not apply to non-
bankrupt failed businesses. See Appeal Panel Decision (“APD”) 2018-1178
(remanding to the Claims Administrator for recalculation because the
Settlement Program “erred in increasing the total liquidation value by the
different, non-bankruptcy discharged, items it added in”); APD 2017-3203
(noting that “[t]he company never filed for bankruptcy” and finding that “the
calculations should be run without consideration of creditor claims existing
pre-spill” that were subsequently discharged).
      BP argues that none of those Appeal Panel decisions “involved the
specific issue that the Claims Administrator was faced with here.” But BP’s
characterization of that issue—administration of “failed business claims
involving the sale of a location in the Gulf Coast area, as part of a bundle with
other operations outside the Gulf Coast, for an undifferentiated lump sum”—
is excessively narrow. The question raised by USA Hosts, and confronted by
the Claims Administrator in the examples cited above, is whether or not pre-
spill debts discharged during bankruptcy can be used to increase a failed
business’s liquidation value even when the business did not go bankrupt.
      “Different facts leading to different outcomes do not create a split.” BP
Exp. & Prod., Inc. v. Claimant ID 100237661, 766 F. App’x 161, 164 (5th Cir.
2019) (unpublished). But the Appeals Panel decisions identified by USA Hosts
have shared factual backgrounds in at least one important sense: they involve
failed business claimants that did not go through bankruptcy but whose
balance sheets reflected forgiven debts and shareholder payments within the
meaning of the Settlement Program. Appeal Panel decision 2018-1178 makes
that commonality clear: it notes that “three previous Appeal Panel decision[s]
. . . held that the [Settlement Program’s] increases to total liquidation value in
the form of items of the type at issue here, where the claimant never filed
bankruptcy, exceeded the bounds of Exhibit 6.” APD 2018-1178.
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        It is not an abuse of discretion to deny a request for review that “simply
raise[s] the correctness of a discretionary administrative decision in the facts
of a single claimant’s case.” Claimant ID 100212278, 848 F.3d at 410. But the
Settlement Program’s alleged violation of Exhibit 6 is recurring. A recent
Appeal Panel decision quotes, in full, the Account Compensation Calculation
Schedule used by the Settlement Program “for all claims involving [f]ailed
[b]usinesses.” APD 2019-16. That schedule directs all claims administrators—
in contravention of the Appeal Panel decisions quoted above—to add creditor
claims that existed prior to the spill and were “[d]ischarged [s]ubsequently” to
the liquidation value of an entity’s assets, regardless of whether or not that
entity went through bankruptcy. A split on this issue would certainly
“substantially impact the administration of the Agreement.” In re Deepwater
Horizon, 632 F. App’x at 203–04. We therefore find that the district court
abused its discretion by declining to review the Appeal Panel decision in this
case.
                               IV. CONCLUSION
        We REVERSE the district court’s opinion refusing discretionary review
and REMAND this case for further proceedings.




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