IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 18-30562

BP EXPLORATION & PRODUCTION, INCORPORATED; BP AMERICA 

PRODUCTION COMPANY; BP, P.L.C., 

 Requesting Parties - Appellants

v.

CLAIMANT ID 100195328, 

 Objecting Party - Appellee

Appeal from the United States District Court

for the Eastern District of Louisiana

USDC No. 2:18-CV-3215

Before STEWART, Chief Judge, SOUTHWICK and ENGELHARDT, Circuit 

Judges.

PER CURIAM:*

The claimant in this Deepwater Horizon settlement program appeal 

operates a motor vehicle dealership. The Claims Administrator awarded a 

substantial sum on the claim. BP appealed, arguing it was a misapplication of 

the settlement to remove from the relevant calculations of lost profits the 

 

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not 

be published and is not precedent except under the limited circumstances set forth in 5TH 

CIR. R. 47.5.4.

United States Court of Appeals

Fifth Circuit

FILED

April 3, 2019

Lyle W. Cayce

Clerk

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revenue allocable to related-party transactions but not the expenses. The 

Appeal Panel declined to make any adjustment, and the district court denied 

discretionary review. BP appeals from that denial. We conclude that the 

Appeal Panel misapplied the Settlement Agreement in a manner that required 

the district court to accept review. We REMAND to the district court.

FACTUAL AND PROCEDURAL BACKGROUND

This case arises out of the Settlement Agreement negotiated between BP 

and class action representatives in response to the catastrophic discharge of oil 

after BP’s Deepwater Horizon offshore drilling rig exploded and sank in 2010. 

The Settlement Agreement permits individuals and entities that experienced 

economic and property damage from that disaster to recover from BP through 

a Court Supervised Settlement Program (“Settlement Program”). Business 

Economic Loss claims are calculated under the Settlement Agreement by 

comparing the “actual profit of a business during a defined post-spill period in 

2010 to the profit that the claimant might have expected to earn in the 

comparable post-spill period of 2010.”

There are several steps used to calculate a claimant’s total award under 

the Settlement Agreement. This appeal focuses on the calculation of “Step 1 

Compensation.” That compensation reflects the reduction in a claimant’s 

profit between a period selected by the claimant that post-dates the Deepwater 

Horizon discharge of oil into the Gulf of Mexico, called “the 2010 Compensation 

Period,” and comparable months of the “Benchmark Period” prior to the 

discharge. Step 1 Compensation is a calculation of any reduction in Variable 

Profit from the earlier period to the later one. Variable Profit is the sum of the 

monthly revenue over the relevant period minus “the corresponding variable 

expenses from revenue over the same time period.”

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At issue in this appeal is Policy 328 v.2 adopted by the Claims 

Administrator. It directs the Settlement Program’s accountants to review 

claims to exclude in their Business Economic Loss calculations any income of 

the kind “not typically earned as revenue under the normal course of 

operations.” This Policy directs exclusion of “related party transactions that 

are not arm’s length transactions.” It also states that the “Claims 

Administrator in his discretion may require that the claimant provide further 

explanation and/or additional documentation underlying the monthly revenue 

and related expense accounts in question.”

The claimant here operates a motor vehicle dealership. The claimant 

filed a claim under the Settlement Agreement in March 2013. The Claims 

Administrator requested information concerning transactions between the 

claimant and two related entities. The claimant submitted the information, 

which generally showed that certain vehicles purchased by the claimant were 

sold to the two related entities at cost. The Claims Administrator could not 

determine whether transactions between the claimant and the related entities

were arms-length transactions, and therefore decided to exclude the revenue

from those transactions due to Policy 328 v.2. It did not exclude the earlier 

costs of those same vehicles from the calculation. The Claims Administrator 

ultimately awarded the claimant about $2.5 million.

The central point on this appeal is that the Claims Administrator

calculated Variable Profit for the post-disaster period by removing relatedparty revenue from the revenue total for that period but did not remove the

corresponding related-party expenses. The result was that the Variable Profit

for the post-disaster period was lower, i.e., the loss was greater, than if the 

related-party revenue remained in the calculation or the related-party 

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expenses had been removed.1 Here, as the Variable Profit in the period after 

the disaster decreases, the award for lost profits to the claimant increases.

BP sought review of that award by an Appeal Panel. BP challenged the 

Claims Administrator’s treatment of the claimant’s related-party transactions. 

BP claimed that the Claims Administrator erred by failing to remove 

corresponding related-party expenses when it removed the related party 

revenue from the Variable Profit calculations. BP’s appeal included a proposed 

award of $0, whereas the claimant’s proposed award was the amount awarded

by the Claims Administrator. The Appeal Panel ruled in favor of the claimant, 

finding that it was proper to exclude the related-party revenue from the 

calculation of compensation and that the related-party expenses were properly 

included because the claimant “had to buy and pay for the vehicles that it sold 

to the related party at cost.” 

Pursuant to the “baseball appeals” process required by the Settlement 

Agreement in which an Appeal Panel selects the party’s Final Proposal closest 

to the correct result “and no other amount,” the claimant’s Final Proposal was 

 

1 An illustration follows. 

Pre-Disaster Period

Revenues: $300 

Expenses: $100

Pre-Disaster Variable Profit (Rev. – Exp.) 

$300 – $100 = $200

Post-Disaster Variable Profit Loss Calc.

Post-Disaster Period

Revenues: $200

Non-Related: $175

Related-Party: $25

Expenses: $100

Non-Related: $75

Related-Party: $25

Scenario #1: Include All Rev. & Exp.

$200 – $100 = $100

$200 – $100 =

$100

Scenario #2: Exclude Rel. Rev.

$175 – $100 = $75

$200 – $75 = 

$125

Scenario #3: Exclude Rel. Rev. & Exp.

$175 – $75 = $100 

$200 – $100 = 

$100

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accepted and BP’s was rejected. BP then sought discretionary review in the 

district court, which was denied.

DISCUSSION

This court reviews “the district court’s denial of discretionary review for 

abuse of discretion.” Claimant ID 100212278 v. BP Expl. & Prod., Inc., 848 

F.3d 407, 410 (5th Cir. 2017). To determine if the district court abused its 

discretion, this court decides “whether the decision not reviewed by the district 

court actually contradicted or misapplied the Settlement Agreement, or had 

the clear potential to contradict or misapply the Settlement Agreement.” Id.

(quoting Holmes Motors, Inc. v. BP Expl. & Prod., Inc., 829 F.3d 313, 315 (5th 

Cir. 2016)). “It may [also] be an abuse of discretion to deny a request for review 

that raises a recurring issue on which the Appeal Panels are split if ‘the 

resolution of the question will substantially impact the administration of the 

Agreement.’” Id. (quoting In re Deepwater Horizon, 632 F. App’x 199, 203-04 

(5th Cir. 2015)).

BP claims that the district court abused its discretion when it declined 

to review the Appeal Panel’s decision in this claim because the Settlement 

Program contradicted or misapplied the Settlement Agreement. Specifically, 

BP emphasizes that Variable Profit must be calculated by summing the 

monthly revenue over the time period, then subtracting the corresponding

expenses. If related-party revenue is removed from the Variable Profit

calculation, BP argues that not subtracting related-party expenses from the 

remaining non-related-party revenue would violate the terms of the 

Settlement Agreement.

As to the claimant’s arguments, it is correct that Policy 328 v.2 requires 

the exclusion of related-party revenue but says nothing about excluding 

associated costs. The claimant also states that expenses may be considered in 

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the Claims Administrator’s discretion under the Policy but the consideration 

is for the purpose of determining if related-party revenue should be excluded, 

not to include the expenses themselves.

The claimant also argues that if related-party revenue were to be 

removed for the period before the discharge of oil instead of after the discharge 

as it was here, BP would benefit because it would reduce overall recovery to 

claimants. Because the effects of the application of this Policy will vary, 

sometimes benefitting and other times disadvantaging BP, the claimant 

argues this is a “technical accounting issue that will turn on the unique 

circumstances of every claimant’s business.” The problem with that argument 

is that the calculations need to be properly made to uphold the interests of 

claimants and BP. If BP is advantaged by an improper calculation at times, 

then on those occasions a claimant has been harmed.

The claimant also relies on the fact that the district court in June 2018 

held that Policy 328 v.2 did not authorize the exclusion of related-party 

expenses. Even if Policy 328 v.2 has already been interpreted by the district 

court in a manner consistent with what was done in this case, it is the 

Settlement Agreement that binds the parties and governs this dispute. See, 

e.g., In re Deepwater Horizon, 858 F.3d 298, 300-01 (5th Cir. 2017). 

We now turn to whether the Policy as interpreted is consistent with the 

Settlement Agreement, which requires that Variable Profit be calculated by 

summing the monthly revenue over the relevant period, then subtracting “the 

corresponding variable expenses from revenue over the same time period.” The 

Settlement Agreement states that only corresponding variable expenses 

should be subtracted from the revenue included in the calculation to determine 

Variable Profit. Because we apply admiralty law to our interpretation of the 

terms of this agreement, we must avoid rendering terms meaningless. See 

Chembulk Trading LLC v. Chemex Ltd., 393 F.3d 550, 555 (5th Cir. 2004). 

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Consequently, we must avoid making the word “corresponding” 

irrelevant. If revenue is removed pursuant to Policy 328 v.2, and that revenue 

is from related-party transactions, there may well be corresponding expenses 

as there were here. The expenses that remain from related-party transactions 

no longer correspond to anything in the monthly revenue, because the

attendant revenue was excluded. We acknowledge that the Policy is concerned 

with the distortions caused by revenue from related-party transactions, and 

the corresponding expense side likely did not involve related parties. 

Apparently, it did not here. Still, if the related-party expenses are included in 

calculating Variable Profit and the corresponding revenue is not, the 

calculation is inconsistent with the Settlement Agreement because the 

subtracted expenses do not “correspond” to revenue. 

We conclude that the Settlement Agreement is not being followed given

the manner in which Policy 328 v.2 is being applied, or that an inadequate 

explanation for that approach has been provided. It is also the case that 

several examples of the application of this Policy appear to exist. 

Consequently, “the decision not reviewed by the district court actually 

contradicted or misapplied the Settlement Agreement.” Holmes Motors, Inc., 

829 F.3d at 315 (citation omitted). Therefore, with respect, we conclude the 

district court abused its discretion when it declined to grant review. 

We REMAND to the district court in order to remove the expenses from

the calculation of Variable Profit that correspond with related-party revenue, 

or to have the Claims Administrator provide a sufficient accounting 

justification demonstrating there is no violation of the Settlement Agreement. 

The claimant’s request for sanctions is hereby DENIED.

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