NEW ORLEANS – The U.S. Court of Appeals for the Fifth Circuit recently affirmed a nearly $15 million award to a nonprofit organization in its claim against BP in the aftermath of the Deepwater Horizon oil spill.
U.S. Circuit Judges Jacques Wiener, James L. Dennis and Priscilla Owen issued the opinion filed March 18.
The nonprofit, identified in court filings as "Claimant ID 100217946," was awarded the amount through a settlement program created following the 2010 spill. It was located in Zone A, which was an area that isn’t obliged to determine that the oil spill actually caused damages to its property and operations.
A claims adjuster first determined $14,542,831.98 was a fitting amount for the nonprofit, and an appeal panel inside the settlement program affirmed. The U.S. District Court for the Eastern District of Louisiana also denied BP’s discretionary review, which BP then challenged arguing that the claims administrator incorrectly counted two donations, totaling $8.9 million, which required the lower court to review the awarded amount.
BP attempted to use a previous case to argue the appeal panel was split when it excluded “revenue funds received by a nonprofit that were immediately distributed to other nonprofit affiliates,” but the Fifth Circuit said that isn’t the case. “The appeal panel here explicitly rejected BP’s argument that claimant is primary a pass-through organization because a large part of its donations are passed through and donors are involved in the ultimate decision about where donated funds are spent,” the ruling states.
The appeals court also dismissed BP’s challenge that the amount of award needs to undergo review and added that while it is a multimillion-dollar award, the amount alone is not enough to raise concern. Plus, the “unusually lengthy” time the appeal panel spent in coming up with the award amount gives more reason to trust the ruling.
BP said the lower court erred because the $15 million award doesn’t comply with the settlement agreement. BP said the donations in relevance to this case aren’t considered revenue, and if they are, the appeal panel didn’t correctly match the expenses to the review in the month earned. BP added that if the donations are to be considered revenue, the $8.9 million shouldn’t be recorded in the related year, 2009.
“The district court’s decision to defer to the claim administrator’s substantiation requirements and factual finding that the two donations at issue were unrestricted grants was not an abuse of discretion,” the Fifth Circuit held.
It added that BP failed to point out specific areas on the $8.9 million that should be fixed. Instead, it only offered a general statement that it was donated to fund other organizations. Plus, the appeal panel also used the claimant’s standard accounting process, which didn’t conflict with the settlement agreement, the appeals court said as it affirmed the award.