BP is denied discretionary review in appeal of Deepwater Horizon settlement

By Charmaine Little | May 9, 2019

NEW ORLEANS – In one of the remaining ongoing litigations from the 2010 Deepwater Horizon oil spill, the U.S. Court of Appeals for the 5th Circuit affirmed a ruling concerning costs in a settlement agreement that BP appealed.

Circuit Judge Jennifer Walker Elrod wrote the opinion as Circuit Judges Carl Stewart and W. Eugene Davis concurred. 

In this case, the issue is the fixed vs. variable cost notion that has come up in appeals claims amid BP’s Economic and Property Damages Settlement Agreement. BP appealed a ruling that denied its petition for a review after a claimant, Ordes Services LLC, an electrical contractor that provided installation and repair services in the southeast area of Louisiana, was awarded $2.1 million.

“Because the reviews conducted by the Claims Administrator and Appeal Panel were consistent with our recent decision in Texas Gulf Seafood, and because BP’s arguments regarding the substantive accuracy of the ‘fixed’ classification only raise the correctness of a fact-dependent decision in a single claimant’s case, we affirm the district court’s judgment,” Elrod wrote in agreeing with the denial of the review.

As for Texas Gulf Seafood, the court ironed out the fixed vs. variable costs issue in a settlement agreement. While it vacated an award because the appeals panel failed to address a substantive nature of the actual expense, BP said the same concern applies. The appeals court said it does not.

“The claims administrator therefore expressly considered the substantive nature of the management fee: it examined the types of costs included as well as the fact that the amount is calculated on Ordes’ sales,” Elrod wrote. She went on to say the claims administrator went further than simply depending on whether the label was listed as a fixed cost in the settlement agreement.

Ultimately, BP failed to raise an issue that would actually call for a review, so the appeals court affirmed the lower judgment that denied BP’s request.

It was the U.S. District Court for the Eastern District of Louisiana that ruled in favor of Ordes, issuing a claim for the settlement agreement and submitting its profit-and-loss statements. Ordes also had one expense called “Management Fee,” about which the claims administrator requested more information. It ultimately decided that Ordes was owed $2.1 million in the agreement. 

The claims administrator determined Ordes’ management fee was a cost instead of a variable cost. BP subsequently appealed, saying the administrator misapplied the fees. The lower court shut down BP’s petition for a discretionary review.

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