NEW ORLEANS – The U.S. Court of Appeals for the Fifth Circuit ruled Jan. 28 that the Walmart store in Pass Christian, Miss. was correctly classified as a startup business in the settlement agreement process following the Deepwater Horizon Oil Spill in 2010, which is the exact opposite of the claim filed by BP Exploration & Production.
The Court of Appeals upheld a classification by the settlement program administrators that designated the Pass Christian Walmart as a startup instead of an active business and gave the company an award of nearly $1 million. After that classification, BP asked the U.S. District Court for the Eastern District of Louisiana to review the decision, and that court declined to review the classification.
The Pass Christian store, located across the highway from the Gulf of Mexico, initially opened in 2003. The store operated and generated revenue until August 2005, when Hurricane Katrina hit. The store remained closed, although the company purchased 34 acres in 2007 and began construction to expand the location in 2008, continuing into 2009. The store had no revenue between August 2005 and early October 2009, although it re-opened for business on Oct. 14, 2009.
Six months later, the Deepwater Horizon oil rig exploded, and Walmart put in a claim for economic and property damages in a class action settlement agreement.
As part of the settlement agreement, affected businesses were classified as qualifying for regular Business Economic Loss (BEL), or Start-Up Business Economic Loss (SBEL). Businesses were able to submit claims for losses computed by comparing actual profits during a post-spill period to the expected profits for the same time frame.
According to this framework, the regular BEL claimant could use figures from 2009, an average of profits from 2008-2009, or the average of 2007-2009. A startup would not have the same history, so the SBEL allows a business to claim for a post-spill benchmark period, which was May 2011 and April 2012, a year after the Deepwater Horizon spill. SBEL claimants must show that profits were lower during the year of the incident than in the year that followed.
Because Walmart had operated in Christian Pass before the Deepwater Horizon event, BP argued that it should be included in the regular Business Economic Loss framework, even though the big box store only had officially been open and running for a few months before the incident, but had operated before Hurricane Katrina, with an official opening in 2003.
With the Pass Christian store classified as a startup, Walmart received a total compensation of $817,392.13.
BP challenged the award and pointed out that “longstanding history” and argued that Walmart should not have been included as a startup, and should not receive compensation, because it hadn’t served customers between January 2008 and April 2009. In challenging the award, BP asked for discretionary review of the appeal panel’s decision.