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In re Horizon

United States Court of Appeals, Fifth Circuit

June 26, 2019

In re: DEEPWATER HORIZON
v.
BP EXPLORATION & PRODUCTION, INCORPORATED; BP AMERICA PRODUCTION COMPANY; BP, P.L.C., Defendants-Appellants. LAKE EUGENIE LAND & DEVELOPMENT, INCORPORATED; BON SECOUR FISHERIES, INCORPORATED; FORT MORGAN REALTY, INCORPORATED; LFBP 1, L.L.C., doing business as GW Fins; PANAMA CITY BEACH DOLPHIN TOURS & MORE, L.L.C.; ZEKES CHARTER FLEET, L.L.C.; WILLIAM SELLERS; KATHLEEN IRWIN; RONALD LUNDY; CORLISS GALLO; JOHN TESVICH; MICHAEL GUIDRY, on behalf of themselves and all others similarly situated; HENRY HUTTO; BRAD FRILOUX; JERRY J. KEE, Plaintiffs-Appellees,

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

          Before GRAVES and OLDHAM, Circuit Judges.z [*]

          ANDREW S. OLDHAM, CIRCUIT JUDGE

         We've twice before explained how to "match" revenues and expenses under the Deepwater Horizon Class Action Settlement Agreement. The question presented is whether the district court deviated from our mandate. It did.

         I.

         On April 20, 2010, Deepwater Horizon exploded and began leaking oil into the Gulf of Mexico. Two years later, the district court simultaneously certified a class of plaintiffs and approved a class action Settlement Agreement. We ultimately affirmed the district court's decision. See In re Deepwater Horizon, 739 F.3d 790, 796, 821 (5th Cir. 2014).

         The "settlement" settled little. To the contrary, it sparked vehement disputes over its terms and the amounts claimants were entitled to recover. The Settlement Agreement establishes a Court Supervised Settlement Program ("CSSP"): A Claims Administrator oversees third-party accountants who process individual claims in the first instance. See Deepwater Horizon Economic and Property Damages Settlement Agreement § 4.3.2. Either party can appeal an initial claim determination to a three-person Claims Administration Panel. Id. §§ 4.3.4, 5.11.4, 6.1.2.3, 6.1.2.4. At the back end, the district court has discretion to review any disputes over the settlement's implementation-including claim determinations. Id. §§ 4.3.2, 4.3.4, 4.4.7, 6.6. From there, either party can appeal to us. See In re Deepwater Horizon (Matching Decision), 732 F.3d 326, 332 n.3 (5th Cir. 2013) ("Based on its use throughout the Settlement, the term 'the Court' appears to refer to the district court. . . . However, the parties clearly intended a broader interpretation of the term-one that retained their right to appeal to this court-as shown by BP's appeal and Class Counsel's failure to object."). And while the district court's review is discretionary, see Settlement Agreement § 6.6, ours apparently is not, see Matching Decision, 732 F.3d at 332 n.3 (finding jurisdiction under the collateral order doctrine).

         Underlying this elaborate apparatus are myriad claims for money. This appeal involves only one-a "Business Economic Loss" ("BEL") claim. BEL claims provide compensation for the difference between a business's actual profits during a three-month period after the oil spill and its expected profits over that same period. Expected profits are calculated based on actual profits during a "comparable" period before the spill. Settlement Agreement Ex. 4C at 1-2. The claimant provides the comparators by designating a post-spill Compensation Period-"three or more consecutive months between May and December 2010"-and a pre-spill Benchmark Period-those same months in 2009, averaged over 2008-2009, or averaged over 2007-2009. Id. at 2-3. In relevant part, the Claims Administrator then determines the variable profits for both periods and subtracts the Compensation Period profits from the Benchmark Period profits. Id. at 3.

         The parties' disputes over this seemingly simple formula have generated an entire body of federal common law in this Circuit. At the risk of adding still more pages to the corpus, we briefly recount the bare essentials here.

         In the beginning, the Claims Administrator announced "he would typically consider both revenue and expenses in the period in which those revenues and expenses were recorded" no matter how the claimant recorded them; he "would not typically re-allocate such revenues or expenses to different periods." Matching Decision, 732 F.3d at 330-31 (quotations omitted). BP objected that this approach would give some claimants inflated awards simply because they recorded associated revenues and expenses at different times. Id. at 331. It argued the Settlement Agreement required the Claims Administrator to reallocate or "match" a business's expenses to any associated revenues when calculating profits for the Benchmark Period and the Compensation Period. The district court disagreed. Ibid.

         In the Matching Decision, we reversed in part and vacated in part. Insofar as the Claims Administrator asserted the power to disaggregate revenues and expenses that a claimant had already matched, we instructed the district court to "make certain that this is not occurring." Id. at 335. With respect to those claimants who did not match their expenses to revenues, we suggested the Settlement Agreement might require the Claims Administrator to match those claims as well. Id. at 336-38. But we ultimately elected not to decide "whether a matching principle should apply to all claims." Id. at 339. Instead, we directed the district court to address that question in the first instance after "develop[ing] a more complete factual record." Ibid.

         On remand, the district court did just that. After revisiting the Settlement Agreement's language, the court concluded "that the provision for subtracting corresponding variable expenses requires that revenue must be matched with the variable expenses incurred by a claimant in conducting its business, and that does not necessarily coincide with when revenue and variable expenses are recorded." In re Oil Spill by the Oil Rig "Deepwater Horizon" in the Gulf of Mexico, No. MDL 2179, 2013 WL 10767663, at *3 (E.D. La. Dec. 24, 2013). It then instructed the Claims Administrator to develop a policy implementing that view. Ibid.

         The result was Policy 495. In it, the Claims Administrator established different methods for correcting unmatched financial statements. Policy 495 at 3-4. First, it created an "Annual Variable Margin Methodology ("AVMM")- the default method for any claims that were insufficiently matched. Id. at B1- B6. Second, it created Industry-Specific Methodologies ("ISMs") for claimants working in construction, agriculture, education, and professional services. Id. at C1-F13.

         On appeal, we upheld the AVMM but rejected the ISMs. In re Deepwater Horizon (Policy 495 Decision), 858 F.3d 298, 304 (5th Cir. 2017). The AVMM appropriately required the Claims Administrator to "ensure that costs are registered in the same month as corresponding revenue, regardless of when those costs were incurred." Id. at 302. The ISMs, however, went too far by requiring "smooth[ing]" profits in addition to "matching" revenues and expenses. Id. at 303. Accordingly, we held "that all claimants-including those engaged in construction, agriculture, education, and professional services- shall, on remand, be subject to the AVMM." Id. at 304. Our decretal language reiterated the point: "For the ...


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