     Case: 18-31115   Document: 00515271492    Page: 1   Date Filed: 01/14/2020




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

                                                                       FILED
                                No. 18-31115                    January 14, 2020
                                                                  Lyle W. Cayce
Consolidated with 18-31118, 18-31122, 18-31123, 18-31128               Clerk


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

             Requesting Parties - Appellants

v.

CLAIMANT ID 100354107,

             Objecting Party - Appellee




                Appeals from the United States District Court
                    for the Eastern District of Louisiana


Before SOUTHWICK, GRAVES, and ENGELHARDT, Circuit Judges.
LESLIE H. SOUTHWICK, Circuit Judge:
      In these consolidated cases, BP appeals the district court’s denial of
discretionary review of five awards made to Walmart under the Settlement
Agreement arising from the 2010 Deepwater Horizon disaster. The arguments
before us arise from the change in accounting systems Walmart adopted in
May 2010. We AFFIRM.
    Case: 18-31115    Document: 00515271492     Page: 2   Date Filed: 01/14/2020


                              No. 18-31115 c/w
                 Nos. 18-31118, 18-31122, 18-31123 18-31128
              FACTUAL AND PROCEDURAL BACKGROUND
      On April 20, 2010, an explosion and fire caused the collapse of the
Deepwater Horizon drilling rig in the Gulf of Mexico. Among other effects of
that disaster was an enormous release of oil into the Gulf.          In time, a
Settlement Agreement was negotiated between BP, which was leasing the rig
at the time of the disaster, and class-action representatives for those who
claimed damage from the disaster. In that agreement were provisions for
business economic loss (“BEL”) claims. Such claims are initially decided by a
Claims Administrator as part of a Court Supervised Settlement Program
(“CSSP”). PricewaterhouseCoopers (“PWC”) is one of the accounting firms that
perform initial analysis of the claims for the Claims Administrator.
      The current appeal concerns BP’s challenge to BEL awards made to Wal-
Mart Stores East, L.P.     The arguments center on the fact that Walmart
changed its accounting system in May 2010, the month after the Deepwater
Horizon explosion, which BP argues resulted in artificially inflated award
amounts. The accounting change complicated the review of Walmart’s BEL
claims, which depend in part on showing expenses both before and after the
disaster.
      In June 2015, Walmart submitted a separate BEL claim to the Claims
Administrator for each of Walmart’s nine stores along the Gulf Coast. Only
five of the claims are at issue here. Each of the five claims was the basis for a
separate appeal from BP to this court. The five appeals were consolidated for
decision by this panel.    In April 2017, Walmart submitted supplemental
documentation to the Claims Administrator for each claim.                   This
documentation included a notification to the Claims Administrator that
Walmart had changed its accounting system. In these submissions, Walmart
sought to reconcile the differences between the two accounting systems.


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                              No. 18-31115 c/w
                 Nos. 18-31118, 18-31122, 18-31123 18-31128
      The Claims Administrator reviewed Walmart’s claims with the
assistance of PWC accountants.       In July and December 2017, PWC and
Walmart exchanged emails discussing the changes in Walmart’s accounting
system. The Claims Administrator’s calculation notes give some indication
that Walmart’s explanations were considered. In February 2018, the Claims
Administrator issued awards totaling just over $17.4 million.
      BP appealed each of the CSSP’s five awards, arguing that Walmart’s
accounting system change made its profit and loss data for the pre-May 2010
period inconsistent with the same data in the subsequent period. BP identified
three accounts that had been treated differently in the pre-May 2010
accounting system than the post-May 2010 accounting system. Specifically,
BP noted that “Tires” and “Trailer Parts” were categorized as fixed costs in the
pre-May 2010 accounting system, but those two categories did not appear in
the post-May 2010 accounting system. A new category, “Trailer Tires,” had
appeared, though, labeled as a variable cost. According to BP’s argument to
the Appeal Panels, the result was that, at least for these accounts, Walmart’s
change in accounting systems caused the pre-disaster period to appear more
profitable in comparison to the later period than it really was, thus artificially
inflating Walmart’s awards. Without stating a position as to whether the three
specific accounts were handled appropriately, Walmart in its proposals to the
five Appeal Panels agreed to treat all three accounts as variable.
      Each of the five Appeal Panels selected Walmart’s proposal for the final
award amount. Regarding BP’s claims that Walmart’s change in accounting
system skewed the calculations, the Appeal Panels addressed the matter to
varying degrees.     One Appeal Panel expressly concluded that the CSSP
adequately addressed the changes, and all the Appeal Panels concluded that
the amount in question BP had identified was minimal and that Walmart’s


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                               No. 18-31115 c/w
                  Nos. 18-31118, 18-31122, 18-31123 18-31128
treatment of the three identified expense accounts as variable across time
periods was adequate.
      After the variable adjustment in addition to an agreed-upon downward
adjustment not relevant here, the final total award amount was just over
$15 million. The district court later denied BP’s request for discretionary
review. This appeal followed.


                                 DISCUSSION
      The issue before us is whether we should reverse the district court for
refusing to review the final awards for the five claims. This court applies an
abuse-of-discretion standard to the district court’s refusal to review a final
award under the Settlement Program. Claimant ID 100212278 v. BP Expl. &
Prod., Inc., 848 F.3d 407, 410 (5th Cir. 2017). That standard of review requires
us to decide whether the final award “actually contradicted or misapplied the
Settlement Agreement or had the clear potential to contradict or misapply the
Settlement Agreement.” Id. (punctuation edited) (quoting Holmes Motors, Inc.
v. BP Expl. & Prod., Inc., 829 F.3d 313, 315 (5th Cir. 2016)). “It may [also] be
an abuse of discretion to deny a request for review that raises a recurring issue
on which the Appeal Panels are split if the resolution of the question will
substantially impact the administration of the Agreement.” Id. (quotation
marks omitted).
      On the other hand, the district court does not abuse its discretion if it
denies a request for review that “involves no pressing question of how the
Settlement Agreement should be interpreted and implemented, but simply
raises the correctness of a discretionary administrative decision in the facts of
a single claimant’s case.” BP Expl. & Prod., Inc. v. Claimant ID 100094497
(Texas Gulf Seafood), 910 F.3d 797, 800 (5th Cir. 2018).


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                              No. 18-31115 c/w
                 Nos. 18-31118, 18-31122, 18-31123 18-31128
      To decide whether the district court’s refusal to review these final
awards should be reversed, we must understand both how BEL claims under
the Deepwater Horizon Settlement Agreement are to be processed, and
whether the claims before us now resulted from a misapplication or
contradiction of those requirements. Claimants must provide evidence to allow
the CSSP to compare the actual profits of a business during a claimant-selected
pre-disaster period (“Benchmark Period”) to the profit that the claimant might
have expected to earn in the comparable post-disaster period (“Compensation
Period”). The Benchmark Period is the “time period which [a] claimant chooses
as the baseline for measuring its historical financial performance.” For the
Benchmark Period, a claimant may choose “2009; the average of 2008–2009; or
the average of 2007–2009.” The Compensation Period is the time period after
the calamity “selected by the Claimant to include three or more consecutive
months between May and December 2010.” Awards are calculated by adding
together two compensation amounts, calculated in “Step 1” and “Step 2,” and
then multiplying the sum by an agreed upon “Risk Transfer Premium.”
      Step 1 Compensation is the difference between Benchmark Period
Variable Profit and Compensation Period Variable Profit. Variable Profit, in
turn, is the sum of monthly revenue over the relevant period minus variable
costs identified in Attachment A to the Settlement Agreement, the variable
portion of salaries, and the variable portion of Costs of Goods Sold, for that
respective period. Attachment A contains a list of “Variable Costs,” which are
used to calculate Variable Profit, as well as a list of “Fixed Costs,” which are
not used to calculate Variable Profit. Thus, whether a cost is defined as
“Variable” or “Fixed” alters the size of the award. Step 1 Compensation reflects
a claimant’s reduction in Variable Profit (revenue minus variable costs) from
the Benchmark Period to the Compensation Period.


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                              No. 18-31115 c/w
                 Nos. 18-31118, 18-31122, 18-31123 18-31128
      Step 2 of the calculation is “intended to compensate claimants for
incremental profits the claimant might have been expected to generate in 2010
in the absence of the spill, based on the claimant’s growth in revenue in
January–April 2010 relative to the claimant-selected Benchmark Period.”
Step 2 Compensation is not at issue here.
      Once Step 1 and Step 2 Compensation are determined, they are added
together, and then the agreed-upon “Risk Transfer Premium” is applied to
determine the total award.         The Claims Administrator makes these
calculations to determine the final compensation award. Either party, the
Claimant or BP, may appeal the Claims Administrator’s final award
determination to a CSSP Appeal Panel. Then, the Claimant or BP can request
discretionary review from the district court.
      Walmart supported its BEL claims with two sets of financial statements.
First were financial statements from the pre-May 2010 accounting system,
which covered Walmart’s Benchmark Period of 2007 through 2009 as well as
January through April 2010. Second, it included financial statements from the
post-May 2010 accounting system, which covered May through December
2010, the remaining eight months of Walmart’s Compensation Period. In a
memorandum accompanying these submissions, Walmart explained the
reconciliation of what it describes as “several dozen” accounts between the pre-
May 2010 financial statements and the post-May 2010 financial statements.
For variable costs, Walmart noted that “there is greater granularity in the
ledger categories in the May–December 2010 financials.” By that, Walmart
meant “there are additional ledger categories included in the May–December
2010 Financials that are relevant to the compensation calculation.”
      BP argues that the district court’s refusal to review these awards should
be reversed because that court’s denial of review failed both parts of our review


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     Case: 18-31115   Document: 00515271492     Page: 7   Date Filed: 01/14/2020


                              No. 18-31115 c/w
                 Nos. 18-31118, 18-31122, 18-31123 18-31128
standard: the Appeal Panels contradicted or misapplied the Settlement
Agreement, and there is a split in Appeal Panels on how to address a change
in accounting systems when calculating compensation.          We consider the
arguments separately.


I.    Contradiction or misapplication of Settlement Agreement
      In its first argument, BP relies on a decision in which we held that the
Settlement Agreement required “claims administrators to use their
independent judgment and classify expenses as ‘fixed’ or ‘variable’ according to
their substantive nature, rather than rational basis review of the claimants’
own descriptions.” Texas Gulf Seafood, 910 F.3d at 802. In that precedent, we
vacated the district court’s denial of BP’s request for discretionary review and
remanded for further proceedings. See id. at 803. That claimant conceded it
had misclassified certain costs as fixed when those costs should have been
classified as variable, but the claimant argued the Appeal Panel had correctly
evaluated the claimant’s categorizations under a rational-basis standard and
thus had correctly accepted such categorizations. Id. at 801. We characterized
the claimant’s argument as one “for a claims regime that essentially takes
claimants at their word and classifies items as they request.” Id. We concluded
that “such an approach would lead to absurd results, in which the CSSP could
find itself classifying identical costs enumerated in [Attachment A] as fixed in
one claim and variable in another, depending on each claimant’s choice.” Id.
      BP argues that our reasoning in Texas Gulf Seafood means a claimant
who changed its accounting system during the relevant time period, like
Walmart did, must provide a comprehensive map detailing how each expense
was categorized before and after the change. BP argues that Walmart’s change
in classification of expenses regarding “Tires,” “Trailer Parts,” and “Trailer


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                               No. 18-31115 c/w
                  Nos. 18-31118, 18-31122, 18-31123 18-31128
Tires” is exemplary of the kind of changes that took place. Further, without
exhaustive information regarding every expense account, BP argues that
neither it nor those involved with evaluating Walmart’s claim can know
whether there were other relevant changes in classification.
      Walmart responds that by providing the supplemental information and
reconciliation memorandum to the Claims Administrator, it provided the
information necessary for the change in its accounting system to be factored
into the calculations. Further, the Claims Administrator took the change into
account in making the awards.        Walmart also refers us to the Claims
Administrator’s calculation notes, which indicate awareness of the change in
accounting system and that the accounts had been reconciled across systems
and time periods as necessary.      Further evidence is in Walmart’s email
exchanges with PWC in which those accountants asked for explanations of
certain account changes between the old and new accounting systems.
Admitting to the “Tires,” “Trailer Parts,” and “Trailer Tires” discrepancy,
which Walmart asserts it properly resolved before the Appeal Panels by
treating the expenses as variable throughout, Walmart argues BP has not
identified any other discrepancies even after having access to Walmart’s
financial statements.
      BP is correct that Walmart controlled the information it provided to the
Claims Administrator and Appeal Panels. BP argues this information should
have been more exhaustive. Nevertheless, BP has not shown that the Claims
Administrator or any Appeal Panel contradicted or misapplied the Settlement
Agreement, or that there was a clear potential for such contradiction or
misapplication.    As far as this record shows, the Claims Administrator
conducted a searching review of the financial statements Walmart provided
from both its old and new accounting system, and the PWC accountants


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                               No. 18-31115 c/w
                  Nos. 18-31118, 18-31122, 18-31123 18-31128
brought specific clarification questions to Walmart regarding the changes.
Walmart responded to the satisfaction of the Claims Administrator.          The
Appeal Panels considered the parties’ positions and concluded that BP had not
shown sufficient evidence to warrant remand to the Claims Administrator and
that the effect of any identified discrepancy was minimal.
       There was not a showing of a misapplication or contradiction of the
Settlement Agreement requiring the district court’s review.


II.    Split among Appeal Panels
       BP also insists there is a split among Appeal Panels on how to address
changes in accounting systems like the one at issue here. On one side of the
supposed split, BP places two of the five Appeal Panels’ decisions at issue here
regarding Walmart’s change in accounting system, and also one other Appeal
Panel decision of which the district court denied BP’s request for discretionary
review. On the other side of the supposed split, BP places one Appeal Panel
decision that remanded a claim to the CSSP after the claimant had shown that,
due to a change in the claimant’s accounting system, certain accounts were
incorrectly classified as variable costs for the Benchmark Period but were
correctly classified as fixed costs for the Compensation Period.
       Walmart responds that the one Appeal Panel BP has identified, which
remanded to the CSSP, was presented with a specific list of 27 accounts that
had been classified differently, and from that the Appeal Panel determined
that there was sufficient doubt regarding appropriate classification of accounts
to justify remand. Walmart argues the Appeal Panel there was presented with
specific instances of misclassifications, while the Appeal Panels here were only
presented with potential inconsistences.




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                              No. 18-31115 c/w
                 Nos. 18-31118, 18-31122, 18-31123 18-31128
      BP replies that the only reason the Appeal Panel was presented with a
specific list of misclassified accounts was that it was the claimant there, not
BP, who appealed the CSSP’s award determination. The claimant had access
to the information necessary to show specific inconsistencies. Here, BP argues,
it could not possibly have identified specific misclassifications because it did
not have the information necessary to do so.                For BP to identify
misclassifications,   it   argues,   Walmart    was    required   to   provide   a
comprehensive map describing how each expense classified in Walmart’s pre-
May 2010 accounting system was classified in its post-May 2010 accounting
system.
      Although we are sympathetic, we are unconvinced by BP’s pleas for more
information. Before us is an exercise of judgment, not only by the district court
but also by Appeal Panels and the Claims Administrator in deciding when
there is enough evidence under the terms of the Settlement Agreement to make
an award. In the single Appeal Panel decision that has created BP’s purported
split, there was extensive evidence that there had been misclassifications that
significantly altered the award amount and ordered remand to address the
changes. Here, BP is unsatisfied with the amount of information Walmart
provided to the Claims Administrator and how extensively the Claims
Administrator and its accountants investigated the accounting system change.
We see this as a challenge to the Appeal Panels’ decisions that “simply raises
the correctness of a discretionary administrative decision in the facts of a single
claimant’s case.” Texas Gulf Seafood, 910 F.3d at 800.
      The district court’s denial of a request for discretionary review of such a
decision is not an abuse of discretion. AFFIRMED.




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