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Claimant ID 100235033 v. BP Exploration & Production, Inc.

United States Court of Appeals, Fifth Circuit

October 30, 2019

CLAIMANT ID 100235033, Requesting Party-Appellant

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

          Before OWEN, Chief Judge, and SOUTHWICK and HIGGINSON, Circuit Judges.


         As our court and the public well know, the Deepwater Horizon oil spill in 2010 led to a massive settlement between BP and class action plaintiffs. The Economic and Property Damages Class Action Settlement Agreement adopted streamlined procedures for processing claims in the hopes of speedily granting relief and concluding litigation. To that end, one innovation of the Settlement Agreement was to simplify the inquiry into causation--the process of determining whether and to what extent the oil spill caused a given claimant's asserted injury. See In re Deepwater Horizon, 753 F.3d 509 (5th Cir. 2014); In re Deepwater Horizon, 744 F.3d 370 (5th Cir. 2014); In re Deepwater Horizon, 732 F.3d 326 (5th Cir. 2013). This simplification reduced much of the scrutiny that might be devoted to causation in an ordinary tort case. In some instances, this has meant an award might go to a claimant who, in conventional litigation, would have failed to establish causation for one reason or another. This altered causation inquiry furthered a fundamental goal: avoiding the "overwhelming" administrative burden that would follow if we treated every Deepwater Horizon claimant with the scrutiny that confronts the typical tort plaintiff. In re Deepwater Horizon, 744 F.3d at 377. It likewise made it possible to encompass the extensive but diffuse effects of the environmental catastrophe and regionalized economic crisis that was the Deepwater Horizon disaster, which might otherwise have seemed too attenuated under ordinary causation analysis.

         The questions in the present appeal stem from that reduced causation inquiry: whether a claimant's alleged unlawful conduct wholly or partially disqualifies it from the Settlement Program and, if so, what evidence is adequate to show that the claimant engaged in such conduct. Common sense would seem to furnish answers. Surely bank robbers could not file a Deepwater Horizon claim on the ground that the oil spill left banks along the Gulf Coast with less cash to grab. Just as surely, the mere allegation of wrongdoing, without more, should not disqualify a claimant from recovering its damages.

         And yet, simple as these questions may seem, the parties have been unable to give us clear answers that are rooted in the Settlement Agreement or other law. Given that, and given the recurrence of the issues this appeal implicates, we reverse the district court's decision to decline discretionary review and remand for further proceedings.


         The Claimant describes itself as "a Florida company that provided back office support to clients," such as voicemail, fax, and tech support. According to BP, the Claimant is no longer in business, though the record does not make the current status of the company entirely clear.

         The Claimant submitted a Business Economic Loss (BEL) claim as a Zone C claimant in July 2013.

         In 2011, the Claimant featured in a report by the majority staff of the U.S. Senate Committee on Commerce, Science, and Transportation, Unauthorized Charges on Telephone Bills.[1] The report concerned the problem of "cramming": unauthorized charges to telephone users by third-party vendors--that is, by companies other than the provider of the phone service. The report described the scope of the problem, as well as enforcement efforts by the Federal Trade Commission (FTC) and various state attorneys general. The Committee's investigation initially focused on the then-largest companies providing landline phone service, AT&T, Qwest, and Verizon, and eventually expanded to include the Claimant, among others. Though couched in suggestive language, the Committee's report made damning allegations against the Claimant. For instance, the report alleged that the Claimant and other companies were "each part of complex enterprises that are engaged in cramming and designed to conceal their true activities and structure from the public and telephone companies."

         Enforcement actions by the FTC followed. AT&T, which appeared in the report, agreed to pay $105 million to settle cramming charges.[2] The Claimant points to another substantial settlement by numerous corporate and individual defendants.[3] The Claimant notes that, by contrast, the FTC "closed its inquiry" into the Claimant in 2013 without a penalty or settlement.[4]

         In December 2013, the Claimant and associated entities and individuals entered into a settlement agreement with the Florida Attorney General, labeled an "Assurance of Voluntary Compliance" (AVC) by that office. The AVC had the following disclaimer:

[T]his AVC does not constitute a finding of law or fact, or any evidence supporting any such finding of law or fact by any court or agency that Respondents have engaged in any act or practice declared unlawful by any laws, rules, or regulations of the State of Florida or as might apply or be applied in Florida. Respondents deny any liability or violation of law and enter into this AVC without any admission of liability. The parties intend that this AVC shall not be used as evidence against Respondents in any action or proceeding other than in an action or proceedings brought by the Attorney General to enforce its terms.

         The AVC briefly described the Claimant's billing practices and noted that it and its associates had already refunded or credited customers $2 million. The AVC provided that the Claimant would pay an additional $165, 447 in restitution to various consumers and government entities. The AVC also enjoined the Claimant from enrolling any Florida customers in "services billable to Florida landline or mobile telephone bills" or causing any charges to appear on Florida telephone bills.

         As noted, the Claimant submitted a BEL claim to the Court-Supervised Settlement Program in 2013. In April 2015, the Claims Administrator issued a "Notice of Request for Document Verification" to the Claimant concerning the Florida settlement. The notice directed the Claimant to

Provide a breakout of the revenues and corresponding expenses reported on the 2007, 2008, 2009, 2010, and 2011 profit and loss statements that are applicable to the terms in the settlement agreement reached with the Florida Attorney General's office related to unauthorized charges billed by the claimant to its clients.

         In June, [5] the Claimant submitted a spreadsheet of "revenue and corresponding expenses refunded to Claimant's Customers, by month and year, according to the settlement agreement reached with the Florida Attorney General's office."[6]

         In December 2015, the Claims Administrator notified the Claimant that its claim had been flagged for review by the Fraud, Waste, or Abuse (FWA) Department, and it gave the Claimant the option to withdraw.[7] In February 2016, the Claims Administrator notified the Claimant that an investigation had been opened. That October, the Claims Administrator informed the Claimant that its claim had been denied. The FWA review had "revealed clear and compelling evidence" that the claim contained "false, misleading, forged, or fabricated documents, information, or statements." The Claims Administrator explained that the Claimant's allegedly lost revenues were "derived primarily, if not solely from Cramming, an illegal activity." The Claims Administrator ruled that "such damages are not cognizable under the terms of the Settlement Agreement, nor allowed as a matter of public policy," though it did not mention any particular law or Settlement Agreement provision. As evidence, the Claims Administrator cited the Senate report on cramming.

         The Claimant sought reconsideration, challenging the Senate report's contents as "unsubstantiated and unproven charges" and not the work of a "law enforcement agency." The Claimant professed full cooperation with the FTC and represented that the FTC's investigation "found no wrongdoing" and closed without charges or a settlement. The Claimant also enclosed a "white paper" from the law firm of Skadden Arps that described the Claimant's legitimate business practices and critiqued the Senate report.

         In August 2017, the Claims Administrator again denied the Claimant's claim. The denial notice added no new reasoning but noted that a new reviewer had made the decision.

         In December 2017, however, the Claims Administrator informed the Claimant that the initial "Notice of FWA Claim Denial" had been "overturned" and the claim "referred for continued processing." It did not say why.

         But on January 9, 2018, the Claims Administrator again denied the Claimant's claim. The notice, now more equivocal, explained that the Claimant's revenues "relate[d, ] at least in part, to cramming" from 2007 to 2011. It no longer mentioned the FWA review, and no reference to any evidence or to any provision of the Settlement Agreement appeared in the notice. The Claimant again requested reconsideration, protesting the dearth of evidence and pointing to the outcome of the FTC's investigation as exculpatory. In February 2018, the Settlement Program again denied the claim, the fourth time it did so, providing precisely the same explanation as the previous denial.

         The Claimant appealed, addressing the Senate report, FTC investigation, and settlement with ...

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