### REVI SED November 5, 2013

I N THE UNI TED STATES COURT OF APPEALS

FOR THE FI F TH CI RCUI T

No. 13-30315

IN RE: DEEPWATER HORIZON

-------------------------------------------------------------------------------------- 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

v. BP EXPLORATION & PRODUCTION, INCORPORATED; BP AMERICA PRODUCTION COMPANY; BP PIPE LINE COMPANY, Defendants - Appellants

----------------------------------------------------------------------------- Consolidated with: 13-30329
IN RE: DEEPWATER HORIZON

--------------------------------------------------------------------------
LAKE EUGENIE LAND & DEVELOPMENT, INCORPORATED; BON SECOUR FISHERIES, INCORPORATED; FORT MORGAN REALTY, INCORPORATED; LFBP 1, L.L.C., doing business as GW Fins; PANAMA U n i te d S t a t e s C o u rt o f A p p e a l s

F i f th C i rc u i t 

### F I L E D October 2, 2013 Ly le W . Cay ce Clerk Case: 13-30315 Document: 00512430729 Page: 1 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

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

v. BP EXPLORATION & PRODUCTION, INCORPORATED; BP AMERICA PRODUCTION COMPANY; BP, P.L.C., Defendants - Appellants

-------------------------------------------------------------------- BP EXPLORATION & PRODUCTION, INCORPORATED; BP AMERICA PRODUCTION COMPANY Plaintiffs - Appellants

v. 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, Intervenor Defendants - Appellees
DEEPWATER HORIZON COURT SUPERVISED SETTLEMENT PROGRAM; PATRICK A. JUNEAU, in his official capacity as Claims

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Administrator of the Deepwater Horizon Court Supervised Settlement Program administering the Deepwater Horizon Economic and Property Damages Settlement Agreement, and in his official capacity as Trustee of the Deepwater Defendants - Appellees

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

Before DENNIS, CLEMENT, and SOUTHWICK, Circuit Judges. EDITH BROWN CLEMENT, Circuit Judge: BP E xploration & Production, Inc. (“BP”) appeals the district court’s decision upholding the Claims Administrator’s interpretation of t he settlement agreement between it and the class of parties i n j ured in the De epwater Horizon oil spill. BP also appeals the district court’s dismissal of its action for breach of contract against the Admin i s t r a t o r and denial of its motion for a p reliminary injunctio n . W e affirm the district court’s dismissal o f BP’s suit against the Claims A dministrator. W e reverse the district court’s denial of BP’s motion for

a preliminar y i njunction and the district court’s order affirming the Administrator ’ s i nt e r p r e t a ti o n o f th e S e ttlement and r emand to the district court for further consideration. FACTS AND PROCEEDINGS BP leased t h e Deepwater Horizon drilling p latform from Transocean to drill its Macondo prospect off the L o u isiana coast. O n April 20, 2010, the

e x p l oratory well Transocean was drilling blew out. After the initial explosion and during the ensuing fire, the platform sank, c ausing millions o f barrels of oil

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to spill into the Gulf of Mexico. Eleven w orkers died; sixteen more were injured. Litigation followed. The Judicial Panel on Multidistrict Litigation c e n tralized the nonsecurities federal lawsuits in the District Court for the E astern District of Louisiana. BP, as lessor of the rig, was named a s a defendant i n most of these suits. BP waived its sta t u t o r y l i mit of liability and committed to pay all legitimate claims, even those in excess of the $75 m illion liability cap under the Oil Pollution Act, 33 U.S.C. § 2704(a)(3). BP initially e stablished its own claims
process and later fun d e d the claims process administered by the Gulf Coast Claims Facility (“GCCF”) to begin paying out claims immediately instead of at the conclusion of litigation. Over approximately 18 months, the company paid out more than $6.3 billion t o individual s and businesses with spill-related losses. BP began negotiating a class settlem e nt i n F ebruary 2011. In M arch 2012, the district court granted the parties’ request to implement a process to transfer claims from the GCCF to a court-supervised program that the parties agreed to in principle. The court appointed Patrick Juneau as Claims Administrato r of this pr o g r a m . T he parties filed notice of their proposed settlement (the “Settlement”) i n April 2 012, to which the district cour t g ave p reliminary approval in May and directed to begin processing claims in June. Businesses’ c laims for economic loss are one type of claim covered by the Settlement. Under t he class definition, business e conomic lo s s ( “ B EL”) claimants must have conducted c ommercial activities in the Gulf Coast region

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during the relevant peri o d

. 1 I n order t o qualify as a class m ember, BEL claimants also m u s t have suffered loss of income, earnings, o r profits a s a result of the Deepwater Horizon a c c i d e n t

. This c ategory o f economic d amage to a business is f

ully described in the attached E xh i b i t 4 , which includes requirements for d ocumenting losses (Exhibit 4A) and establis h i n g causation (Exhibit 4B), as well as the compensation scheme (Exhibit 4C). After a BEL claimant provides the documentation needed to submit a claim and evidence r equired t hat the oil spill caused its losses, t he claimant is enti t led to compensation for the difference between its actual profit “during a defined post-spill period in 2010 [and] t h e profit t hat the claimant might have expected to earn in th e c o m p a rable post-spill period of 2010.” This amount includes “the reduction in Variable Profit,” defined as “any reduc t i o n in profit b etween the 2010 Compensation Period selected by the claimant an d t h e comparable m onths of t h e Benchmark Period.” The post-spill Compensation Period “is s elected by t he Claimant to include t hree or m ore consecutive months between May and December 2010.” I t i s c o m pared to a pre-spill baseline, the “Benchmark Period,” of t he claimant’s choosing: either 200 9 , t h e average of 2008-2009, or the average of 2007-2009. Variable Profit “is calculated for both the Benchmark Period and the Compensation Period as follows: 1. Sum the monthly revenue over the period. 2. Subtract the corresponding variable expens e s f rom revenue over the same time period.”

1 B us ines s claim ants mus t h a v e ow ned , op erated , or leas ed prop erty, or cond ucted certain bus ines s activities within Louis i a n a , M is s is s ip p i, Alabam a, and certain coas tal counties in eas tern Texas and Wes tern Florid a, as w ell as s p ecif ied ad j acent G ulf w aters and bays betw een Ap ril 20, 2010 and Ap ril 16, 2012. 5 Case: 13-30315 Document: 00512430729 Page: 5 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

As early as September 28, 2012, BP raised concerns about the v a r ied accounting methods claimants used in the o rdinary c o u r s e o f t heir recordkeeping and the ways in w hich erroneously-stated expenses c o uld cause

erroneous variable profit calculations. The district court held the final fairness hearing on November 8 and granted final approval on December 21, 2012. O n December 5, 2012, BP requested that t h e A dministrator conv e n e a Claims Administration Panel to consider “the issue of the assignment o f revenue to the pro p e r m o n t h s for purposes of the BEL causation framework and the
proper matching of revenue and corresponding e xpenses for p urposes of the BEL compensation framework.” 2 BP asked to meet with the Administrato r , C l ass Counsel, and t he a ccounting vendors to discuss this issue, followed by a formal Panel, if necessary. On December 16, Class Counsel requested a Policy Announcement addressing the issue. After reviewing both par t i e s ’ written submissions, the Administrator issued a Poli cy Announcement on J anuary 15, 2013. He stated that, f or both calculation of Variable Profit and purposes of causation, h e would

“ t y pically consider both revenues and expenses in the periods in which t h o s e

revenues and ex p e n s e s w ere recorded at the time,” a nd would “not typically re-allocate such revenues or expenses to different p eriods,” but would “however,

reserve the right t o adjust the financial statements in certain c i r c u m s tances, including but not limited to, inconsistent bas i s o f a c c o u nti n g b e t w e e n b e n c h m ark

a n d c o m p e n s ation periods, errors in previously recorded transactions a n d f l a w e d

2 As s p ecif

ied in the Settlem ent, a C laim s Ad minis tration Panel is t h e f irs t s tep in res olving a d is agreem ent over how the A d m inis trator is ad minis tering th e S e t t l e m ent Program

. If the Panel, com p os ed of the Ad m inis trator and rep res entatives f rom each p arty, cannot reach a unanim ous d ecis ion, the is s ue is “ref erred to the C ourt f

or res olution. ” 6 Case: 13-30315 Document: 00512430729 Page: 6 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

or i nconsistent t r e a t m ent of accounting estimates.” T he Administrator later explained that he did not believe he was authorized “to carve out specific types of claims for additional analysis as BP had proposed.” BP was not satisfied with the Policy Announcement. B P a lleged that the Administrator’s misinterpretation of the Settle m e n t resulted in awards of hundreds of millions of d ollars to BEL claimants w ith inflated losses or no losses at all. The parties c onvened a Claim s A d m i n i s tration P anel. When the panel failed to r each a unanimous agreement, they presented the matter to the district court for resolution. B efore the district court, BP contested t he A dministrator’s interpretation of the meaning of several of the Settlement’s terms: “revenue,” “expenses,” “corresponding,” and “compar a b l e . ” According to t h e company,

r e v e n u e and expenses have generally accepted d e f i niti o n s a m o n g e c o n o m i s t s a n d accountants that do not p ermit the Administrator to calculate a BEL claimant’s Variable Profit based only on cash receipts or c a s h disbursements. Rather, a claimant’s expenses must be “ matched” t o c orresponding revenue. In a ddition, t h e Settlement’s requirement that the Administrator measure the differen c e between Vari ab l e P rofit in the Compensation P eriod and the “comparable months of the Benchmark Period” requires t hat the Administrator comp are Vari ab l e P r o f

it i n c o m p a r ab l e m o nths—in other words, w hen a c laimant engaged in similar conduct—not necessarily the “same” months. On January 30, the distr i c t court affirmed the A dministrator’s Policy Announcement. T he district court acknowledged that the Admin i s t r a tor’s interpretation “may sometimes cause apparent anomalies (in either direction) in claim determinations.” But it noted that t his consequence “appears to be the result of t he objective, strai gh t

- f o rw a r d m e c h a nisms set forth i n the Settlement.”

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I t f ound that “ BP’s proposed remedy does not a ppear t o b e based on a n y generally a ccepted accounting principle, and migh t o nly r e s u l t in adding another level of complexity and subjective analysis to the BEL calculation.” BP filed a motion to reconsi d e r , a n d the district court issued a written ruling on M arch 5 u p h olding the Administrator’s interpretation and denying B P ’ s motion. The district c ourt reasoned that “ [n]owhere does the Agre e m e n t

s t ate or indicate that revenue a nd expenses must be ‘ matched’ or reve n u e s ‘smoothed,’ nor d oes it state that one s h o u l d inquire into w hen revenue was ‘earned.’” The dis trict court held that r evenues and expenses n eed not be matched and that “the same months of the Compensation Per i o d a r e to be compared with the mon t h s i n the Benchmark Period” r ather t han “months where the claimant engaged in comparable activity.” In response to the district court’s order, BP filed a breach of contract claim

a g ai n s t th e A d m i ni s t rator a nd an emergency motion for a preliminary injun c ti o n to enjoin the Administrator f r o m implementing t he Settlement in accordance with the March 5 o rder and instead to r equire the Administrator to implement BP’s proposed interpretation. The Administrator filed a motion t o dismiss BP’s breach of contract claim, arguing that BP failed to state a claim. The district court granted the motion, concluding that t he Administrator could not breach the Settlement by interpreting and implementing the agreement in compliance with the district court’s order. It also denied BP’s request for i njunctive relief. B P a p p e als the district court’s M arch 5 order aff ir m i n g th e Ad m i ni s t r a t o r ’ s interpretation of the S e ttlement, its order granting t he Administrator’s motion to dismiss, and its order denying a preliminary injunction. STANDARD OF REVIEW

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A district court’s interpretation of a settlement agreement is a question of law, which we review de novo. Waterfowl L.L.C. v. United States , 473 F.3d 135, 141 (5th Cir. 2 006). 3 For a d enial of a preliminary injunction, a “ district court's findings of fact ‘are s ubject t o a clearly-erroneous standard of review,’ while conclusions of law ‘are subject to broad review and will be reversed if incorrect.’” Janvey v. Alguire , 647 F.3d 585, 591-92 (5th Cir. 2011) (citations omitted). DISCUSSION BP argues th a t t h e district court disregarded the p lain text of the Settlement by interpreting it to permit recovery of fictitious a nd i nflated losses. It contends that this misinterpretation a lso l eads to absurd results and contra v enes t he purpose of the Settlement, which BP characterizes as “compensat[ing] f

or actual l ost profits rather than

. . . provid[ing] unjustifiable windfalls to uninjured claimants.”

I. Artificial Claims We repeat the relevant language of Exhibit 4C:

3 We have j uris d iction over BP’s ap p eal of the dis trict court’s M arch 5 ord er und er the collateral ord er doctrine. The ord er conclus ively d eterm ined the interp retation dis p ute, w hich is com p letely s ep arate from the m erits of BP’s liability f or the oil s pill, and it w ill be ef f ectively unreview able on ap p eal f rom f inal jud gm ent becaus e, at that p oint, the im p rop er aw ard s w ill have been d is tributed to p otentially thous and s of claim ants and BP w ill have no p ractical w ay of recovering thes e f

und s s hould it p revail. See Wa lker v. U. S. D ep ’t of H ous. & U

rba n D ev . , 99 F. 3d 761, 766- 67 ( 5th Cir. 1996)

. M oreover, the p roced ures f or res olvin g d is p utes concerning the Ad m inis trator’s ad m inis tration o f t h e S e t t lem ent s p ecif y that a dis agreem ent is “ref erred to the Court f

or res olution” if it is not res olved by the C laim s Ad minis t r a t i o n P a n e l

. Bas ed on its us e throughout the Settlem ent, the term “the Court” ap p ears to ref er to the d is trict court. Such an interp retation of the p arties ’ agreem ent w ould rend er the d is trict court’s ruling f inal. H ow ever, the parties clearly intend ed a broad er interp retation of the term – one that retained their right to ap p eal to this court – as s how n by BP’s ap p eal and Clas s C ouns e l ’ s f ailure to object. 9 Case: 13-30315 Document: 00512430729 Page: 9 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

Variable Profit : T h i s i s c alculated for both the Benchmark Period and the Compensation Period as follows: 1. Sum the monthly revenue over the period. 2. S u b t r act the corresponding variable expenses from revenue over the same time period.

BP c ontends that th e district court’s interpretation of “revenue” and “expenses” for the purposes o f Exhibi t 4 C d o e s not comport with the accepted economic and accounting meanings of t h ose terms. It also a rgues that “corresponding” necessarily implies m atching variable expenses t o t he revenues with which they are properly associated. Ac c o r d i n gly, BP argues the district court erred in concluding that “revenue” and “corresponding v ariable expenses” refer only to “cash r eceived” and “cash disbursed” in the relevant period. We will explain why this l anguage in Exhibit 4C cannot be interpreted so that it always

means cash received and cash disbursed. We leave open for remand whether it ever has that meaning. To understand our i n t erpretation of variable profit, we start with a discussion of some accounting concepts t hat are fundamental in u nderstanding the meaning of the agreement.

A. Revenue and Expense Recognition Principles The purpose of f

inancial r e c o r d

- k eeping is to provide businesses with accurate and reliable information upon which to make decisions. Principles of

revenue and expe n s e r ecognition vary based upon accounting judgment, regulatory or transactional requirements, or even inter n a l management preferences. While an i m p e r f e c t presentation of the broad a rray of accounting

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methods in the business world at-large, a delineation mi g ht b e fairly made between cash and accrual accounting. Depending on which of these methods a business chooses, the t erms “revenue” and “expen s e s ” take on widely variant meanings. T y p ically, o nly very small and fledgling businesses keep their p rimary financial records in accordance with cash accounting principles. See CPA Societies’ Amicus Brief at 7-8 (“some small en terprises

. . . use a strict or modified cash-basis approach”). T hat is, they recognize revenue when cash from

a given transaction is received and expenses when cash is paid. Id. at 11-12. Class Counsel urged in a December 201 2 m e m o r andum: “[w]hen a business keeps its books on a cash-basis, revenue is e arned during the month of receipt, i r r e s pective of w hen the contract was entered or services w ere performed.” It argued further that “ [t]he ‘corresponding variable expenses’ a ssociated with monthly revenue are t h e expenses that are expended or incurred during the

. .

. months in question.” These statements are consistent only with revenue and

e x p e nse recognition principles of cash accounting. Cash accounting can be useful f or many e n terprises as a method of a nalyzing periodic c ash needs, but this use is largely unrelated to the concepts of “revenue” and “expenses.” On the other hand, accrual accounting has as a fundamental principle the recognition o f revenue w hen the entity becomes entitled to receive payment, as opposed to when the payment is actually received. See Statement of Financial Accounting Concepts No. 6, Fin. Accounting Standards Bd

. , ¶ 139. E xpenses that can be r eadily traced to the recognized revenues are themselves recognized

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at the same time as those r evenues. I d

. a t ¶ 146. 4 This correlation gives bus i n e s s decision-makers a real-time view of the net e conomic value of a transaction in the period most relevant to its o verall economic significance. I d. at ¶ 140. This is sometimes referred to as “ matching” revenues and expenses, but in any case this p rocedure is a f u n d a m e ntal aspect of day-to-day recordkeeping on the accrual-basis. See id. at ¶ 144, 146. BP argues extensively in its brief t h at these revenue and expense recognition principles were to apply to Exhibit 4C c omputations. C lass Counsel argues t h a t t h e a greement’s language does not, in fact, p e rmit s uch an interpretation because the settlement does not state that revenues and e xpenses must be matched or that revenues must be r ecognized according t o any objective standard. Business a nd Economic Loss (“BEL”) claimants in the a g r e e m e nt are a broad spectrum of busine s s e s t hroughout t he Gulf region. S ome claimants (“cash-basis claimants”) will p resent c ash-basis r ecords because this is h ow they contemporaneously record their fina n c i a l activities. Others (“accrual-basis claimants”) will p resent accrual-basis records f or the same reason. For many of the BEL claimants who are the f o c u s o f this appeal, their contemporaneously recorded financial records, absent mere b ookkeeping err o r s , will contain “matched” revenues a nd expenses before the y e v e n s u bmit their claims. In a

4 It s hould be noted that even thos e exp ens es that cannot be directly traced to certain revenues are of

ten allocated over multip le tim e p eriod s , even if the cas h outlay occurs all at once. F or exam p le, a large advertis ing p urchas e m ay occur by a s ingle cas h p aym ent, but the p urchas ed advertis ing tim e or s p ace m ay be utilized in m ultip le f uture p eriod s . As s uch, the exp ens e is recognized increm entally over thos e relevant f utu r e p e r i o d s . See Sta tem ent of Fi na nci a l A ccounti ng Concep t s N o . 6, ¶ 147. N onetheles s , thes e are not of ten thought of as “variable” exp ens es . 12 Case: 13-30315 Document: 00512430729 Page: 12 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

December 2012 Memorandum, BP acknowledge d that many claims presented data t hat “sufficiently match” revenue and e xpenses. This is because they apply the accrual accounting recognition a nd matching p r i n c iples B P advances here

as a matter of t heir ordinary record-keeping. On the other h and , c a s h

- b a sis claimants might present records that are not so matched. The March 5 O rder apparently a dopted Class Counsel’s interpretation of Exhibit 4 C, holding that revenue and expenses referred only to cash payments and disbursements. The practical effect o f this ruling is unclear in light of the different recognition principles under diffe r e n t accounting methods. We now turn to a more focused discussion of the district court’s decision.

B. Accrual-basis Claimants Exhibit 4C directs the A dministrator to “[s]um the m onthly revenue o ver the period,” and then “[s]ubtract the c orresponding variable expenses from

revenue ove r t h e s ame time period.” In the M arch 5 order, the district court appears t o have interpreted “revenue” as “c a sh received” and “expenses” as “cash disbursed,” without reference to whether the holding was to apply to all claims

or just those f

rom cash-basis claimants

. T h e o r der derives from a series of events that we briefly trace. In December 2012, following unsucc e s s ful attempts t o raise the issue since September, BP requested a formal policy s tatement from the Administrator on matching. The Administrator responded by soliciting responses from BP and Class Counsel to h elp him make his policy d etermination. In the December 2012 memorandum to t he Admini s t r a t or, mentioned briefly above, Class Counsel urged an interpretation w h i c h c o u l d easily be read to interpret revenues and

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exp e n s es under E xhibit 4 C by their cash accounting m eanings. Counsel also explicitly stated t hat “corresponding v ariable expenses” should be cash paid out during those periods, a l so a statement consistent only with cash accounting. Class Counsel’s Memorandum was n ot clear whether its proposal applied to both cash and accrual records, despite discussing b o t h

. BP r e sponded with its December 2012 memorandum, also referenced above, by explicitly rejecting Class C ounsel’s interpretation of “correspond i n g v ariable expenses,” restating its insistence t hat t he agreement requires matching, and presenting alternative frameworks for industries it t hought were most problematic. The dissent treats this argument a s an effort to m odify t he agreement. That conclusion seems too facile. T he process for resolvi n g di sputes between the Administrator and BP was to be collaborative and cooperative. Consequently, it is not c l ear t o us that BP

was attempting to r ewrit e the agreement as much as it was attempting to resolve a pparent anomalies without derailing the entirety of the claims process. In his January 15, 2013 Policy Statement, the Administrator stated, in relevant part: In performing t hese calculations, t h e C laims A dministrator w ill typically consider bo t h r e venues and e xpenses in the periods in which those revenues and expenses were recorded at the time. The Claims A dministrator will not typically re-allocate such r evenues or expenses to different periods.
Given that “reve n u es” and “expenses” take on different meanings in the context of cash or accrual accounting, this statement is ambiguous at best as to how exactly the Administrator is processing accrual-basis claims. Further, this Policy Statement apparently rejects BP’s proposal and adopts, at least in part, Class Counsel’s interpretation.

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As we understand the district court’s March 5 o rder, it i nterp r e t e d “corresponding” to mean that any cash disbursed within a given month should be deemed to “ correspond” to cash received in that month, s imply by virtue of the fact that the cash f

lowed in and out in the same month. T his i s consistent with Class Counsel’s December 2012 memorandum. At one point, the district court said it agreed with Class C ounsel as to the method of identifying revenue and
expenses, though it is n ot e ntirely clear t o what a spect of Class Counse l ’s argu m e n t t h e court was r eferring. The district court determined that “in the

same t i m e p eriod” would be deprived of meaning if “ c orresponding” were interpreted to connect expenses to the revenues with which they are directly relate d

. Th e di s t ri c t c o u rt e c h o e d Class Counsel’s December 2012 memorandum, holding t hat “matching” would require the Administrator to look o u t s i de the claimant’s chosen B enchmark and Compensation periods. Finally, the district court’s only di scussion of cash o r a c crual-basis regarded whether one or t he other was required under Exhibit 4A’s documentation requirements. The court said there was no such requirement, and t h e parties agree that claimants m ay submit documents using either method. I n light of the proposals and rulings w e just discussed, we consider i t possible (though unlikely) that the district court w as h o ld i n g t h at the cash-in, cash-out interpretation applied to al l c l a i m s, i ncluding those s upported by accrual accounting. If so, then the inherent matching t hat occurs as a matter of

course would be undone. Regardless of whether Exhibit 4C requiresmatching when it h as not be e n u n dertaken in the o rdinary course of record-keeping, it cannot be said to permit ignoring sufficiently matched d ata from accrual-basis

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claimants. We c o n c l u de it would be error if the district court was stating that already-matched revenue and expenses could be ignored. The Administrator h a s not made c lear whether he is ignoring alreadymatched revenues and expenses in the manner the district court ’ s i nterpretation
appears to suggest. B P , t h o u g h, has n ot explicitly complained to us that he is doing so. Implicit in t his s ilence is that a ccrual-ba s e d c l aims c ontinue to be processed using the inherently matched revenue a nd expense figures. BP acknowledged, in its own December 2012 Memorandum, that “[m]any types of Business Economic Loss claims

. . . sufficiently m a t c h revenue and

c o r r e s p o nding variable expenses, and a s a result, [the Settlement] i s p roperly applying” Exhibit 4C.” This would likely be the case w ith m ost accrual-basis

c l a i m a n t s. We see no r eason for the Administrator to be doing t his, but the r e

are a few contrary indications. Class Counsel’s December 2012 M e morandum, the January 15, 2 013 Policy S tatement, and t he March 5 order do not offer any

assurance that the Administrator i s not apply ing t he cash-in, cash-out interpretation to clai m s t h a t are presented with matched revenues and
expenses. The district co u r t o n remand s hould make certain that this is not

occ u r r i n g
. The Administrator on remand should be able quickly to dispel any doubts about the h andling of accrual-basis c l a i m s . W e e xpect the dissent is correct that this is not occurring, but we wish to be assured o f that point. Once that is done, the more serious work of t he remand c an commence. We explain that beginning in the next section.

C. Cash-basis Claimants

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Neither the Policy Statement nor t he Ord e r m a ke any r e ference to the recognition principles discussed above. The district court’s interpretation gives l i t t l e weight to the terms “corresponding” and “variable,” and t he partie s apparently a gree t hat m atching is req u ired 5 and occurring with respect to the vast majority of accrual-basis claims. For these reasons, BP’s argument that matching applies to all claims warrants significant further consideration. As noted above, the district court held that the words “corresponding” and “in the same time period” must b e read to mean that expenses correspond to the time period in whi c h t hey were recorded and further that “expenses” means “cash p aid.” T he court did not quali f y i t s interpretation to state that this was not true of accrual-basis claimants, or to e xplain why one form of claims would be matched but not o thers. The district cour t ’ s i nterpretation would fit the language o f E xhibit 4C better if the agreement had said this about the Benchmark and Compensation Periods: 1. Sum the monthly revenue over the period. 2. Sum the expenses over the same time period, and subtract. Instead, step 2 says t hi s : “Subtract the corresponding variable expenses from revenue over the same time period.” Had the words “corresponding” a nd “variable” been omitted, the district court’s e xplanation would n ot be so difficult to accept, economic i ncoherence notwithstanding. T he difficulty is that subtracting temporally-related revenues and expenses recorded b y c ash-basis claimants would not result in n umbers that

5 As to accrual- bas is claim ants , m atching is “required ” in the s ens e that claim ants are not p erm itted to p res ent s tatem ents w hich contain incons is tent m ethod ologies

. This m eans that if a claim ant’s record s are alread y matched , it m us t s ubm it them i n t h a t f orm . Furtherm ore, accrual- bas is claim ants are not allow ed to ad jus t their record s to the cas h- bas is , though the revers e is p erm itted

. SeeO ctober 8, 2012, Policy Statem ent on the m atter. 17 Case: 13-30315 Document: 00512430729 Page: 17 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

could fairly be said to represent actual e conomic losses or lost “variable profits.” It is difficult to understand why some claimants would b e compensated for lost “variable profits,” while others would be compensat e d f o r negative cash flows, based s olely on h ow claimants maintained their financial records. Though in our view the agreement fails to pr o vide absolutely clear direction on processing claims based on cash-basis records, w e conclude that the district court’s holding too quickly dismissed the concept of matching, and did not deal with the inconsistent r esults the court’s interpretatio n gives to claims presented on an accrual-basis and those on a cash-basis. We suggest a more c onsistent i nterpre t a t i o n o f Exhibit 4C, one that fits both a ccrual- and cash-basis claims, i s as follows. Such parol evidence as would assist the district court in d eciding if this is correct can b e p resented on remand. After the heading “Variable Profit,” Exhibit 4C reads “This is calculated for both the Benchmark Period and the Compensation Period.” Then, part 1 references

a “period, ” w h ich seems reasonably to refer either to the Benchmark or to the Compensation designations set out immediately above, depending o n which one is being calculated. Part 2 is where the “corresponding” expenses are subtracted from revenues “over the same time period.” This reasonably could be interpreted to mean that the expenses to be subtracted must be those that “correspond” to the revenue earned and that the “ same time period” refers t o the Benchmark period on the one hand, and to the Compensation period on the other, whichever i s b e i n g calculated. In other words, sum the monthly revenue over t h e [Benchmark or Compe n s a ti o n] p eriod and then subtract corresponding e xpenses

over the same [Benchmark o r Compensation] time p eriod. Such an

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interpretation seems amply supported by the l a nguage of Exhibit 4C and much more consistent with general accounting and economic norms. Weight to such an interpretation comes from the fact that t he agreement cannot be r ead to permit ignoring “sufficiently-matched” revenue and e xpenses from accrual-basis claimants. The fact that Exh ib it 4C requires processing of claims supported by s u fficiently-matched, accrual-basis accounting should inform but does not necessarily control how cash-basis claims are to be analyzed. In any case, it does n ot appear to us that the district court gave real meaning to “cor r e s ponding” a nd “variable” when interpreting Exhibit 4C. It also did not articulate a basis to distinguish between determining a ctual economic losses for those claimants whose records were mainta i ned on an accrual-basis, but abandoning that purpose when cash-basi s c laims were presented, with such a distinction being supported by exactly the same words in Exhibit 4C. BP has been arguing at least since September 2012 t h a t t reating cashbasis claims by their own terms, that is, treating cash in f l o w s and o utflows as

revenues and expenses, violates the express language of the agreement. As we understand i ts contention, BP argues that Exhibit 4C r epresents a n agreement

on a sp e c i f

ic accounting methodology, b ased loosely on accrual accounting

revenue and expense recognition p rinciples. Central to this argument is that the term “ corresponding v ariable expenses,” the detailed computation instructions, the d etailed e x p ense classifications, and extensive documentation requirements would be largely superfluous if all c laims, but especially cash-basis ones, were meant to be treated on their own terms. A s discussed above, t he district court held that “corresponding” referred to a temporal connection between cash i n f l o w s a nd o utflows. That is, cash

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receipts and payments c orresponded to one another because they flow in and out during a given month. In a literal sense, this is true. But cash accounting, by nature, ignores any sig n i f i c a nce that might be r e lated to the timing of cash receipts and payments, beyond mere c a sh flow c o n cerns. See CPA Societies’ Amicus Brief at 7-8. Because cash accounting d oes not inhere n tly recognize

r e lationships between c ash flows and their underlying transactions, the t e r m “corresponding variable expenses” reasonably c ould imply an accrual-st yle framework inherent in Exhibit 4C. BP a rgues t hat the detailed expense classifications and adjustments outlined in E xhibit 4 C as well as t he require m e n t o f a n nual and tax financial statements i n addition to monthly profit-and-loss statements in Exhi b i t 4A indicate that claims are to be adjusted to “match” revenue and exp e n s e s a nd then provide for the records necessary to doing. Exhibit 4A lists numerous documents a claimant must s ubmit t o make a claim. These documents presumably would allow accountants fairly, if at t imes imperfectly, t o “match” revenues and expenses if such were required. Class C oun s e l a n d the Administrator argue t hat BP fully agreed during negotiations in 2012 to the district court’s March 2013 interpretation in order to achieve “glo b a l peace,” and that it should not now be p ermitted to extract itself from its bargain. T his a nalysis p ersuaded the dissent, w hich argues that BP’s purpose here i s to modify the agreement to require conversion of cash-basis

c l a i mants’ records to the accrual-basis, even though i t specifically agreed that such was not r equired. Our a nalysis finds di fferent m eaning in what was agreed. The difference is between what claimants had to present – either cash-basis or accrual-basis claims – and what the Administrator thereafter was to do. At least

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as to claims presented on an accrual-basis, not only did BP not assent t o ignoring the need f

or matching revenues with expenses, it clearly i nsisted on it. In December 2012, the parties seemingly agreed that p roperly matched claims led to fair and proper results. We do n o t agree that the record of negotiations supports that BP w a s o b l i vious until quite recently to the desirability of matchin g ; t h e r ecord actually supports t hat both parties agreed all along that properly-matched accrual-basis cl a ims should not be disturbed and indeed should n ot be converted to cash-basis cla i m s p r e c i sely because of the risk of artificially-inflated or entirely fictitious losses. The record creates a different perplexity, namely, w hy would parties who

a g r e e as to the p ropriety of matching for one s et of claims reject it for o t h e r claims? Our dou bt is particularly strong due to the fact that only matching provides a realistic chance of achieving the ostensible goal of the settlement of compensating claimants for r eal losses. Furthermore, the only support for not matching seems to d erive from the conclusion t h a t cash-basis claimants’ own books are not matched. It hardly seems conclusive to us that a claimant ’s idiosyncratically-maintained records dictate the way E xhibit 4C is applied to a claim, especially if Exhibit 4C is supposed to be an objective formula. C l a s s C o u n s e l a n d th e A d m i ni s t r a t o r argue t hat s ignificant pa r o l e vi d e n c e , including e-mails where BP counsel appears to accept the o ccasional false positive, shows BP’s acquiescence. One f orm of a f

alse positive discussed during negotiations would arise from the agreement to assume factual c au s a ti o n . U n d er Exhibit 4 B, causat i o n i s g e nerally assumed if economic loss can properly be shown. BP did agree that alternative causes of losses w e r e i r relevant if the financial figures supported t hat a loss occurred. The false positives BP c riticizes

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now are based on l oss calculations p r o d u c e d u nder the district court’s cash-in, cash-out approach. The approach could lead to false positives o r false negatives, though negatives p resumably would not l ead to cl a i m s . I n either event, the issue is whether it i s permissible to allow the often economically m eaningless temporal coinciding of c ash received a nd paid to determine the value of a claim. BP never acquiesced t o a cash accounting i nterpretation o f “revenue” and “expenses” for a ll claims, i.e. , not for accrual-based ones. It h as argued consis t ently that t he formula was intended to compensate for real economic losses, not artificial losses that appear only from the timing of cash flows. The dissent concludes that t he course of dealing outlined above, b eginning with the September 28 correspondence betwe e n B P and the A dministrator, shows that BP missed its o pportunity to raise these objections. Much has been made of an October 2 conference call, w here the concerns BP rais e d on September 2 8 were to b e resolved. During that call, a ccording to a number of affidavits, B P asked about the treatment o f certain cash-basis claims and apparently left assured that they need not fear the w ay the A dministrator was proceeding. The dissent cites t h e a f f idavit of Charles H acker, partner in the PriceWaterhouse accounting firm. He states that he told BP that accountants

were not converting cash-bas is claims t o accrual-basis for the purposes of the agreement. According to the disse n t , B P ’ s apparent silence at t hat moment shows their assent to treatment o f cash-basis claims by their own terms. We d o not find the dissent’s interpretation of the limited factual matter from the October 2 conference call c onclusive. Hacker also asserted that “[w]ith respect to irregularly received revenue, the accountants’ p r actice w as to follow up with claimants to better u nderstand significant outliers

. . . the accountants were not

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auditing claimants’ financial inform a tion but

. . . were performing certain procedures to analyze the accuracy, validity, and a uthenticity of outlier items.” Perhap s w hatever w as specifically s aid in the O ctober 2 conference call indicated to BP t h a t t h e a ccountants were making E xhibit 4C calculations in accordance with the interpretation it advances h e r e . Thus, BP would have agreed t o finalizing the a gr e ement. That possibility would support that BP thought the agreement was functioning properly, and then raised these issues later when BP came to believe that something was amiss. After all t he other arguments are c o nsidered, it remains of s ignificance that the interpretation urged by the Admini strator is completely disconnected from a ny reasonable understanding of calculation of damages. In interpreting a settlement, surely some weight has to be given to what damages recoverable in civil litigation actually are. If clear w ords in a s ettlement require the use of randomly associated numbers for calculating d a mages, e ven if there is little likelihood that, a fter s ubtracting one of tho s e n u mbers from the other, the remainder will in fact show anything relevant to damages, then so be it. We d o not perceive such clarity here. G i v en the record before us, w e cannot determine with an adequate l e v e l of c ertainty whether a matching principle should apply to a ll claims. Even with the interpretation we outlined above, it is not wholly clear that the words “correspon d ing” and “variable” unequivocally imply matching. G iven the divergent e f

f e c t s o f differing recognition principles, we hold that Exhibit 4C is ambiguous a s to whether claims that are not based on matched revenues and expenditures a re to be matched for Exhibit 4C purposes. We have not discovered whether, before the agreement was signed, the parties di scussed the divergent

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effects of cash- and accrual-basis accounting records on the Exhibit 4C formula. Furthermore, neither the Ja n u a r y 1 5 , 2013 Policy S tatement nor t he March 5 order mentions the inherent but crucial differences i n these recognition principles. Instead, w e r emand to the district c ourt to develop a m ore c omplete factual r e cord regarding t he m eaning of Exhibit 4C o r other relevant parts of the agreement and make relevant findings. The A dministrator needs t o assure the court that he is not ignoring already-matched accrual-basis accounting records. We remand b e c a u se the district court did not a cknowledge the requirement of m atching t hat is f oundational for accrual-basis claims and it did not then explain why i t was interpreting the same Exhibit 4C language that leads to matching f

or a c crual-based claims a s not requiring the matching of cash-basis claims. This is particularly questionable when t he a g r e e ment contains not only the t erms “corresponding” and “variable,” bu t e x tensive documentation requirement s w hich would allow c laims a dministration accountants to process claims in accordance with economic reality.

D. “Comparable” Periods BP further argues that “comparable” months o f the Benchmark and Compensation p eriod refer to months i n which comparable activities took place. We find nothing in the record to support that interpretation. The district court held that “ c omparable” refers to t he same calendar months in both the Benchmark and C ompensation p eriod. W e do n o t disturb this holding for t wo reasons. First, we conclude that this i s the most natural reading of the w ord “comparable” in the c o n t e x t o f t he agreement. The agreement allows the claimant to pick as few as three months or as much as an

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average of nine m o n t h s o v e r three calendar years. This, along with t he word “comparable,” clearly indic a t e t hat the Benchmark and Compensation periods

w ere referring to m o n ths of the same n ame, without any c omplex analysis o f what t ype of business activities took place within those months. Second, we

c o n c l u d e that our holding as to cash a nd a ccrual-basis claimants will resolve

some of the issues BP c l a i m s r esults from the district court’s interpretation of “comparable.” BP’s primary concern seems to be the uneven cash flows of certain types of businesses. We accept this possibility, but we see nothing in the agreement that provides a basis for BP’s interpretation. D espite the potential existence of this kind of distortion, the parties may not have c onsidered it, agreed to ignore it, or f ailed for other reasons t o provide clearly for this e ventuality. The district court w as correct that BP’s propo s e d i nterpretation i s not what the parties agreed.

II. “Fictitious” claims BP alleges not only that the Administrator’s interpretation o f t h e disputed terms inflates awards t o legitimate BEL c l aimants, but also that the interpretation results in awards to BEL claimants who admittedly either have

s u f f e r e d no loss at all or have suffered losses that were not caused by the oil spill. Such claimants would have no c o lorable legal claim. See Richardson v. United States , 468 U.S. 3 17, 3 26 n.6 (1984) ( defining a “colorable claim” as one with “ some possible validity”). Absent a loss, a claimant has suffered no injury. Unless a claimant can colorably assert a loss, it l acks s t anding. Se e L u j a n v. Defenders of Wildlife , 504 U.S. 555, 5 6 0 ( 1 992) (noting that an injury is a

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required element of c onstitutional standing); Jobe v . A TR Mktg., Inc. , 87 F.3d 751, 753 (5th Cir. 1996) (“[T]he conventional tort elements in a negligence action

are duty, breach o f duty, p roximate causation and injury.”). Similarly, if a claimant has suffered a loss, but it has no c o lorable c laim that the loss was caused b y the spill, i t a l so lacks standing and c annot s tate a claim. It lacks standing because it c annot allege “a causal connection” between its loss and the spill. Lujan , 504 U.S. at 560. Its injury i s not “fairly traceable to t he challenged action of the defendant;” rather, it is “the result o f the independent action of

some third party not b efore the court.” Id. (citation, quotation marks, and alteration omitted). Moreover, it cannot s t a t e a claim because it is u nable to p l e ad the causation element of a negligence cause of action. See Jobe , 87 F.3d at 753. Therefore, such non-colorable claims do not constitute Article III cases or controversies and are not founded on any substantive right. 6 The Supreme Court has cautioned that “Rule 23’s requirements must be interpreted in keeping with Article III constraints, and with the Rules Enabling Act, which instructs that rules of procedure ‘shall not abridge, enlarge or modify
any substantive right.’” 7 Amchem Products, I nc. v. Windsor , 521 U.S. 591, 613

6 The d is s ent contend s that it is hornbook law that s tand ing is never an is s ue in the clas s acti o n c ontext so long as one clas s rep res entative has s tand ing. While the hornbook quoted d oes ref

er to a narrow us e of the w ord stand ing, the s am e m aterial als o conced es that courts us e the term in a broad er context to ad d res s Article III cons traints s uch as actual injury and traceability as w ell as R ule 23 requirem ents s uch as typ icality and com m onality. W I LL IA M B. R U B I N ST E I N , N E W B E R G ON C L A SS A C T I ON S 2 : 1 , 2 : 5 ( 5th ed .)

. This analys is utilizes this broad er m eaning of the term , valid ated by other aus p icious courts w i t h a c c e s s to the hornbook s . A m chem Products, Inc. v . Wi ndsor , 521 U

. S. 591, 612 ( 1997) (ref erring to a clas s is sue of uninjured p laintif f s as concerning “s tand ing, ” even w hen s om e of the nam ed p laintif f s in the cas e had actual injuries )

.

7 The Sup rem e Court in A m chem cons id ered the ap p roval of a global s ettlem ent clas s in the as bes tos litigation that cons is ted of ind ivid uals injured by as bes tos and thos e w ho had 26 Case: 13-30315 Document: 00512430729 Page: 26 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

(1997) (quoting 2 8 U

. S .C. § 2072(b)); see also id. (quoting Fed. R. Civ. P. 82’s mandate that “rules shall not be construed to e xtend

. . . the [subject- m a t t er] jurisdiction of the United States district courts” ( a l t e r ations in original)); Sullivan v. DB I

n v e s t m e n ts, Inc. , 667 F .3d 273, 343 (3d Cir. 2011) (Jordan, J. dissenting) (“Rule 23

. . . is designed to efficiently handle claims recognized by law, not to create new claims.”); Broussard v. Meineke Disc. Muffler Shops, Inc. , 155 F.3d 331, 345 (4th Cir. 1998) (“It is axiomatic that the procedural device of Rule 23 cannot b e a llowed to expand the substance of the claims of class members.”); c

f. Cimino v . Raymark Indus., I nc. , 151 F.3d 297, 312 (5th Cir. 1998) (concluding t hat t h e Rules Enabling Act mandates t hat “use of R ule 23(b)(3)

. .

. does not alter the required elements which m u s t b e f ound to i mpose liability and fix damages (or the burden of proof t hereon) o r t h e i d entity of the substantive l aw . . . which determines such elements). 8 B y including claimants

been exp os ed to as bes tos but not yet injured

. A m chem , 521 U

. S. at 597. Although conclud ing that the clas s couldnot be certif ied becaus e it did not meet the requirem ents of Rule 23, the Court noted that, “[ i] f certif ication is s ues w ere genuinely in doubt, how ever, the juris d ictional is sues [ concerning the r i p enes s of the exp os ure- only clas s m em bers ’ claim s ] w ould loom larger. ” Id. at 613 n. 15. The Court d irected attention to Jud g e Wellf ord ’s concurrence in the court below that a r g u e d t h a t there could be no s tand ing f or uninjured p laintif f s and em p has ized again the im p ortance of lim itations im p os ed by Article III and the R ules Enabling Act. Id. at 611- 13.

8 I n ad d ition, “[ Rule 23’s pred om inance] inquiry trains on the legal or f actual ques tions that qualif

y e a c h c l a s s m em ber’s cas e as a genui ne controv ersy . ” A m chem , 521 U

. S. at 623 ( em p has is ad d ed)

. Thus , an interp retation of the Settlem ent that d ef ines the clas s to includ e claim ants w ho “have s uf f ered no actual injury f

rom [ BP’s ] alleged ly [tortious acts ] on the bas is of a m uch s m aller group of [ claim ants ] w ho have s us tained s uch injury” als o m a y call into ques tion w hether the s ettlem ent clas s s atis f ies the p red om inance tes t f or c e r t i f i cation. Ka rv a ly v . eBa

y, Inc. , 245 F. R. D

. 71, 85 ( E. D

. N

. Y

. 2007) ; see also S ul l i v an , 667 F. 3d at 343- 47 (Jord an, J. d is senting) ( p ointing out that includ ing “p utative clas s m em bers w ho d o not even h a ve an arguable caus e of action und er ap p licable law” in the clas s d ef inition als o c a l l s t h e related requirem ent of com monality into d oubt, becaus e it “requires plaintif fs to s how that the elem e n t s o f t heir claim are cap able of p roof at trial through evid ence that is com mon to the 27 Case: 13-30315 Document: 00512430729 Page: 27 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

in the c lass definition t hat lack colorable claims, a court disregards this warning. It ignores the s tanding r equirement of Article III and creates a substantive right where none existed before. Allowing r ecovery from t he settlement fund by those who have no case and cannot state a claim, the court acts ultra vires

. “To avoid dismissal based on a lack of standing, the court must b e able to find that both the class and the representatives have suffered s o m e i nj u ry requiring court intervention. The class m ust therefore be defined in such a way that anyone within it would have standing.” Denney v. Deutsche Bank AG , 443 F.3d 253, 264 (2d Cir. 2006) (internal citati o n s a n d quotation marks omitted). “In o rder to state a c lass action claim upon which relief can be granted, there must be alleged at t he minimum (1) a reasonably defined class of p laintiffs, (2) all o f who have suffered a constitutional or statutory violation (3) inflicted by the defendants.” Adashunas v . Negley , 626 F.2d 600, 603 (7th C ir. 1980) (affirming the denial of a plaintiff c l a s s )

. A claimant “must actually have a legal claim before getting i n l i n e f or a legal recovery. When objections are raised that persuasively d emonstrate that a portion o f a proposed c lass does n ot have any

s u c h c laim, courts of law are obliged t o follow the law.” Sullivan , 667 F.3d a t 347 (Jordan, J. dissenting); see I n re Chicken Antitrust Litig. Am. Poultry , 669 F.2d 228, 2 38 (5th Cir. Unit B 1982) (“Of c ourse, had i ndirect purchasers been completely without any colorable legal claims against defendants, it would have been an abuse o f the court’s discretion to allow them to share in the settlement fund.”); see also I

n re Agent Orange Prod. Liab. L itig. MDL N o. 3 8 1 , 8 1 8 F.2d 179, 1 84 (2d Cir. 1987) (appro v i n g a settlement distribution plan to class

clas s rather than ind ivid ual to its m em bers ” and , “f or p laintif

f s who lack any claim , there are certainly no elem ents of a claim that are cap able of proof, either com m on or ind i v i d u a l ” ( citation and quotation m ark s om itted) )

. 28 Case: 13-30315 Document: 00512430729 Page: 28 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

members w ho had “ s tated ‘ colorable legal claims against defendants’” because their claims “ d[id] n ot entirely disregard traditional tort principles o f causation” (citation omitted)). But see Sullivan , 667 F.3d at 3 1 0 ( “ [ W] e re we to mandate that a class i n c l u d e only those alleging ‘colorable’ claims, we would effectively rule out the ability of a defendant to achieve ‘global peace.’”). There is a distinction here between whether a claim is co l orable and whether it is meritorious. A plaintiff’s claim is colorable if he can a l lege standing and t h e elements necessary to state a claim o n w h i c h relief can be granted – whether or not his claim is ultimately meritorious – whether he can prove his

case. See Sullivan , 667 F.3d at 340 ( 3d Cir. 2011) (Jorda n , J

. d i s s e nting) (explaining that the p roblem with the class “ is not that it may include people with marginal o r dubious claims” but that it “includes p eople who have no legal claim whatsoever” a s is “clear on the face of the [ applicable] s t a t u t o r y and decisional law”). Class settlements certainly can encompass unmeritorious claims, b ecause such claims, successful or not, are b ased on existing substantive rights. Class settlements, h owever, cannot c reate n ew r i g h t s and then settle claims brought u nder them. See id. (dis s e n t i n g because “the Majority has endorsed the fa b r i c a t i on of substantive rights where n one before existed”); see

a ls o M essner v. N

orthshore Univ. HealthSystem , 6 69 F.3d 802, 8 24 (7th C i r . 2012). 9

9 “At f irs t glance, it w ould s eem that N orths hore is arguing

. . . that certif ication m us t be d enied becaus e p laintif f s ’ p rop os ed clas s contains m em bers w hos e claim s w ill f ail on the
m erits

. In actuality, how ever, N orths hore is arguing that the clas s f or w hich certif

ication is reques ted is f

atally overbroad becaus e it contains mem bers w ho could not have been harm ed by any p os t- m erger price increas es . . . This d is tinction is critic a l f o r c las s certif

ication p urp os es . As exp lained above, if a p rop os ed clas s cons is ts largely ( or entirely, f or that m atter) of m em bers w ho are ultim ately show n to have s uf f ered no harm , that m ay not mean that the clas s was im p rop erly certif ied but only that the clas s f ailed to meet its burd en of p roof on the 29 Case: 13-30315 Document: 00512430729 Page: 29 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

It makes no difference that a defendant may b argain for global peace by agreeing to allow c laimants with no colorable legal claim t o recover f rom the settlement fund. A c lass settlement is not a private agreement between the parties. It is a creature o f Rule 23, which authorizes its use to resolve the legal claims of a c lass “only with the court’s approval.” F E D

. R. C I V

. P. 23(e); see also Amchem , 521 U .S. at 6 20 ( explaining i n a related circums t a n c e that the speci f i c a t i o ns of Rule 23 designed to “block[] unwarranted or overbroad class definitions

. . . demand undiluted, even heightened, [judicial] attention in the settlement c ontext”). In granting approval, t h e c o u r t must, as always, adhere to t h e p r e c epts of Article III and the Rules Enabling Act. 1 0 While a “welcome byproduct” of deciding cases o r co n t r o v e r s ies on a c l ass-wide basis, the goal of global peace does not t rump Article III o r f ederal law. Sullivan , 667 F .3d at 355- 56 (Jordan, J. dissenting). Courts do not have the authority to c reate a cause of action (and their c orresponding subjec t -matter jurisdiction over i t) and then give peace with regard to that cause of action. 1 1

m erits

. If, how ever, a clas s is def ined s o broad ly as to includ e a great num ber of mem bers w ho f or s om e reas on could not have been harm ed by the d ef end ant’s alleged ly unlaw f ul cond uct, the clas s is d ef

inedtoo broad ly to p erm it certif ication. ” Id. ( citations om itted)

.

1 0 This is p ar t i c u l arly true here, as the d is trict court, in its ord er ap p roving the Settlem ent, “retain[ ed] continuing and exclus ive j uris d iction to in t erp ret, im p lem ent, ad m inis ter and enf

orce the Settlem ent Agreem ent, in accord ance w ith i ts term s , and to im p lem ent and com p lete the claim s ad m inis tration and d is tribution p roces s , in accor d a n c e w ith the Settlem ent Agreem ent. ”

1 1 T he d is s ent critiques as “unw ork able” an ap p roach that w ould require that clas s m e m b ers have a colorable claim becaus e it w ould require s om e analys is of harm at the certif ication s tage. The Sup rem e Court in Wa l- Ma rt Stores , I n c . v . D ukes , 131 S. Ct. 2541 ( 2011) clarif

ied that “Rule 23 d oes not s et f orth a mere p lead ing s tand ard

. . . certif ication is p rop er only if the t r i al court is s atis f ied , af ter a rigorous analys is , that the p rerequis ites of Rule 23( a) have been s atis f ied

. . . . Frequently that rigorous analys is w ill entail s om e overlap
w ith the m erits o f the p laintif f ’s und erlying claim

. That cannot be help ed

. . . . N or is there

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Turning to the present case, the district court had no a uthority to approve the settlement o f a class that incl u d e d m e m b ers that had not sustained losses at all, o r had sustained losses unrel a t e d t o t h e o il spill, as BP alleges. If the Administrator is i nterpreting the Settlement to include such claimants, the Settlement i s unlawful. Should B P’s proposed interpretation of the Settlement exclude putative class members with no colorable legal c laim, t he district court should have rendered t he S e ttlement l awful by adopting that i nterpretation, as long as the interpretation is reasonable a nd effective. See Harvey v . Joyce , 199 F.3d 790, 794 (5th Cir. 2000) (“A court mus t strive to reach an interpretation whi c h gives a reasonable, lawful, and effective meaning t o a ll the terms of an agreement.”). Moreover, if B P’s counsel did negotiate a S e t tl e m ent that included payouts to businesses whose l osses were not c a u s e d b y t h e oil spill, agreeing to pay a client’s funds to claimants that concede t hat they have n o causally related injury is counterintuitive and contradictory to common tenets o f b oth tort and contract law—and to common s e n s e . The f act that these claimants cannot show causation translates to a Settlement that lacks valid consideration. Why would BP pay to resolve c l a i m s t h a t c annot be p lead? The myth of “global peace” through payment o f admittedly n o n - spill-related claims is a legal nullity that cannot remedy this deficiency. There is no need to secure peace with those with

anything unus ual about that cons equence: The neces s ity of touching as p ects of the m erits in ord er to res olve p relim inary matters , e . g
. , j uris d iction and venue, is a f am iliar feature of litigation. ” Id. at 2251- 52 (int e r n a l citations and quotation m ark s om itted )

. Prelim inary
m atters s uch as w hether broad sw aths of the p rop os ed clas s would have s tand ing are no more d if ficult to as certain. 31 Case: 13-30315 Document: 00512430729 Page: 31 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

whom one is not a t war. Total lack o f consideration for non-recoverable claims would call into question the validity of the Settlement Agreement. The class settlement case s t h e dissent cites to the contrary all i nvolved classes that suffered a ctual economic loss that resulted from t he conduct of the party agreeing to the settlement. In Sullivan , direct and indirect purchasers of diamonds settled a class action suit a gainst t h e operator of a diamond c artel for violations of federal and state antitrust laws. 6 67 F.3d at 285-293. The Sullivan majority pointed out that w hile considering pr e d o m i nance, “commonality is informed by the defendant’s conduct as to all class members and any resulting injuries c ommon to all class members.” Id. at 297 (emphasis added). Both the majority and the dissent recognized “that, well yes, there must be some limiting feature of the class a nd that feature is injury; cl a s s members must have been injured by De Beers’s unlawful conduct.” Id. at 343 (Jordan, J. dissenting). In Sullivan , the majority and the dissent sparred over whether or not this financial injury was legally cognizable, because the settlement proposed to settle claims in all 50 states whether or not the states h ad c auses of a ction for these kinds of injury. What the S ullivan majority never approved was a class that consisted of people who had never purchased diamonds at all and thus suffered no losses. In In re American International Group, Inc. Securities L itigation , 689 F.3d 229 (2d Cir. 2 012), t hree public pension f un d s s o ught class certification to settle a securities fraud claim against an issuer f or violations of federal securities fraud that led to losses i n their portfolios. Id. at 232

- 3 7

. “Al l plaintiffs here claim injury that by reason o f defendant s ’ conduct

. . . has caused a c o mmon and

m easurable form of economic damage.” Id. a t 2 40 (quoting Sullivan , 667 F

. 3 d at 3 38 (Scirica, J., concurring))

. S i m i l a rly, this case did not involve class

32 Case: 13-30315 Document: 00512430729 Page: 32 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

approval of people who h ad never invested in the stock market and therefore

never could have experienced traceable loss. 1 2 Surely, t hese cases do not stand for the proposition that there is no judicial role to ensure that class definitions comply with statutory and constitutional strictures. T h e se issues are i mportant in this case, and not just in future cases, because these legal p r i n c i p les further undermine an i nterpretation of the Settlement A greement that includes businesses without colorable legal claims. Such an interpretation could imperil a final approval of the settlement and can be considered in evaluating the correct interpretation of possible ambiguities in this agreement.

III. Preliminary Injunction “It takes time to decide a c ase on appeal. Sometimes a little; sometimes

a lot. No court can make time stand s till while it c onsiders an appeal

. . . and if

a court t a kes t he time it needs, the court’s decision may in some cases come too late for the party seeking review.” Nken v. Holder , 5 5 6 U.S. 418, 421 (2009) (internal quotations and citations omitted). Despite t h e g enerally deferential standard accorded to a district court’s denial of a p r eliminary injunc tion, “a decision grounded on erroneous legal principles is reviewed de novo.” Byrum v. Landreth , 566 F.3d 442, 445 (5th Cir. 2009).

1 2 The d is s ent als o cites to Kohen v . Pa cif i c Inv estm ent M

a na gem ent Com

p a ny LLC, 571 F. 3d 672 ( 7th Cir. 2009)

. In Kohen , buyers of s hort p os itions in ten- year Treas ury notes f iled
s uit agains t an inves tm ent f irm w hich had tak en long p os itions , s eek ing sum s los t w hen the f irm alleged ly cornered the m ark et in violation of the Com m od ity Exchange Act. 571 F. 3d at 674- 77. Koh e n w a s n o t a settlem ent clas s action and d id not rais e caus ation concerns . “If PIM CO is f

ound to have cornered the m ark et

. . . then each m em ber of the clas s w ill have to s ubm it a claim f

or the d am ages it s us tained a s a resul t of the corner. ” Id. at 676 (internal citations om itted ) ( em p has is ad d ed)

. 33 Case: 13-30315 Document: 00512430729 Page: 33 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

BP moved for a p reliminary injunction and a stay pending appeal, arguing that th e c o nti n u e d distribution of its a ssets u nder a potentially improper reading of the Agreement w as causing it irreparable harm. The district court denied the motions from the bench and in a subsequent minute entry. The c ourt believed that BP was asking it to enjoin an interpretation of the Settlement Agreement that the court itself had ordered on March 5

. As such, the court viewed it as a request for reconsideration of an issue the court had considered. “As t o each element of the district court's preliminary-injunction analysis, the district court's findings of fact ‘are s ubject t o a c learly-erroneous standard of review,’ while conclusions of law ‘are s u bj e c t t o broad review and will be reversed if incorrect.’” Janvey v. Alguire , 647 F.3d 585, 591-92 (5th C i r . 2011) (citations and quotation omitted). T h e conclusions the district court m ade here were conclusions of l a w . Contract interpretation, s u ch as the meaning of the Settlement Agreement, is a question of law. Becker v. Tidewater, Inc. , 586 F.3d 358, 369 (5th Cir. 2009). Proper claimants under a class are a question of law. Wal-Mart Stores, I nc. , 131 S

. Ct. at 2550-51. For this reason, errors in conclusions of law are subjec t t o broad review and will b e reversed if incorrect. The errors in c o nclusions of law involved are laid out in the preceding s ections of this opinion. Because of these, the preliminary injunction should be granted w hile the judicial process takes its

course. The traditional four-factor test for a stay pending appeal is typically used to analyze requests for a p reliminary injunction. 1 3However, “where there is a

1 3 “Four f

actors m us t be cons id ered by this Court in determ ining whether to s tay the d is trict court's ord er und er Fed

. R. Ap p . P. 8. Thes e are ( 1) w hether the m ovant has m ad e a s how ing of lik elihood of s ucces s o n t h e m erits , (2) whether the movant has m ad e a s how ing 34 Case: 13-30315 Document: 00512430729 Page: 34 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

serious legal question i nvolved and the b alance of the equities heavily favors a stay

. . . th e m o v a n t only needs to present a substantial case on the merits.” Weingarten Realty I

nvestors v . M

i l l er , 6 61 F.3d 904, 910 (5th Cir. 2011). This case is one o f t he largest and most novel class actions in American history. As such, significant legal questions are involved t hat will a ffect t he course of class action law in this country going forward, a nd the c lass action as a suita ble vehicle for the resolution of conflict for businesses and litigants. The balance of equities favors a tailored s tay. The interests of individuals who may be r eaping windfall r e coveries because of a n i nappropriate interpretation o f the Settlement Agreement and those who could never have recovered in individual suits for failure t o show causation are outweighed by the potential loss to a c ompany and its public shareholders of hundreds of millions of dollar s o f unrecoverable awards. A stay tailored so that those who experienced actual injury traceable to loss from the Deepwater Horizon accident continue to receive recovery but those who did not do not receive their payments until this case i s fully heard and decided through the judicial process w eighs in favor of BP. We t herefore REVERSE t he denial of the preliminary injunction 1 4 and instruct the d i s t rict court to e xpeditiously craft a narrowly-tailored

of irrep arable injury if the s tay is not granted , ( 3) w hether the granting of the s t a y w ould
s ubs tantially harm the other p arties , and ( 4) whether the granting of the s tay w ould s erve the p ublic interes t. ” Uni t ed Sta tes v . Ba yl or U ni v . M ed. Ctr. , 711 F. 2d 38, 39 ( 5th Cir. 1983)

.

1 4 By w ay of exam p le, BP’s p rop o s ed tailored injunction read as f ollow s: “The Claim s Ad m inis trator and Settlem ent Program are EN JO I N ED f rom is s uing or paying to claim ants in the agriculture, cons truction, p r of es s ional s ervices , real es tate, w holes ale trad e, m anuf acturin g , a n d r etail trad e ind us tries any d eterm inations f or bus ines s econom ic los s claim s und er the Ec onom ic and Prop erty D am ages Settlem ent Agreem ent ( “Settlem ent Agreem ent”)

. The N orth Am erican Ind us try Clas sif ication Sys tem ( “NAICS”) cod es f or thes e s p ecif ied ind us tries are all cod es s tarting w ith 11 ( excep t 1141 1 1 , 1 1 4 1 1 2 , 114119, and 114210) , 23, 31 (excep t 311711 and 311712) , 32, 33, 42 ( excep t 424460) , 44, 45, 53, or 54. ” 35 Case: 13-30315 Document: 00512430729 Page: 35 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

injunction that allows the time necessary for deliberate reconsideration of these significant issues on remand.

CONCLUSION We AFFIRM t he district court’s dismissal of BP’s suit against the Claims Administrator. We REVER SE the district court’s order affirming the Administrator’s i nterpretation of the Settlement and denial of a p reliminary injunction and REMAND t o the district co u r t f o r further consideration while retaining jurisdiction.

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LESLIE H. SOUTHWICK, Circuit Judge, concurring:

I concur in Part I of the opinion, which analyzes w hy we are vacating and remanding f

or further consideration of the interpretation of Exhibit 4 C of the Settlement A greement. I also agree, as stated in Part III, that the district court should enter a narrowly t ailored a nd p otentially b rief stay to allow the purposes of the r emand to b e realized. I do not join t he b roader Rule 23 a nalysis that
appears in Part I I. The discussion is lo g i c a l in finding that constitutional infirmities would e xist if certain corrections are not m ade t o the interpretation of Exhibit 4C. There is, though, no briefing on the c onstitutional issues that are addressed. I am concerned that those observations imply – though they m ay well not b e intended to go that far

– an invalidity t o the Settlement A greement’s causation framework, which no one chall e n g e s . I would n ot make the pronouncements that appear in Part II. Instead, I would defer the issue and allow the parties on remand to give it the attention it deserves. The Settlement Agr e e m e n t r esolved two s e parate issues by, in effect, combining them. One concerned loss causation , and t h e other loss measurement

. If a BEL claimant could prove an e conomic loss, properly measured, that proof subs t i t uted f

or evidence of causation. Improper measurement o f losses under Exhibit 4C might compensate claimants without actual losses. That p otential raises the c a u s a t i o n question in the s ense that a party who s uffered no loss regardless of cause certainly did not have a loss caused b y the oil spill. Even so, the parties a greed b y E xh ibit 4B’s causation framework t o ignore alternative explanations for actual losses that occurred t o claimants during the proper time

37 Case: 13-30315 Document: 00512430729 Page: 37 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

period. The agreement simplified t he claims process by making proof of loss a substitute for proof of factual causation. The question of loss measurement i s clearly b efore us. BP argues almost exclusively that the Administrator a nd the district court misint e r preted the formula for measurement of business an d economic losses that appears in Exhibit 4C. Part I of the panel o pinion i dentifies the c r ucial questio n for remand: should matching be required for all claims when it is clearly required for many? I agree to remand with instructions to reconsider t he interpretation of Exhibit 4C for unmatched claims in light of the necessity of revenue and expense matching to realistic measurement of economic loss. Part II of the opinion e laborates on a c ausation issue under Rule 23, which affects the class definitions. As n oted already, causation was addressed by the parties in E x h i b i t 4B of the Settlement A greement. BEL claimants within a defined geographic region closest to t he Gulf do not need to present any evidence of factual c a u s a t i o n . The same is true of BEL c laimants i n certain sensitive industries, such as seafood processors, regardless o f geographic l ocation. For those groups of B EL claimants, a mathematical loss as calculated under Exhibit 4C is compensated without any proof of t h e c a u s e o f the loss. BEL claimants operating further from the Gulf must show a mathematical loss under Exhibit 4C, subject to a requirement that the loss meet a certain percentage threshold, and mus t a l s o provide documentation that the claimant lost revenues from certain c lasses of customers. As the l a st alternative to other forms of evidence, these more distant claimants could offer evidence of factual causation. Thus, Exhibit 4 B o f the Settlement Agreement allowed causation to be supported simply by loss calculations under Exhibit 4C r ather than by requiring

38 Case: 13-30315 Document: 00512430729 Page: 38 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

the c laimant to prove that t he loss had any factual relationship to BP’s actions. No one on appeal is challenging Exhibit 4B. BP is arguing t h a t t h e erroneous variable profit decision endangers class certificat i o n by potentially allowing parties not harmed by BP’s actions to r ecover from the settlement fund. That potential a rises from miscalculating loss. Othe r than by the challenge to the application of the method of s howing loss, BP has not argued that the Settlement Agreement is defective under Rule 23. Given that we are remanding so that t he i nterpretation of v ariable profit will b e r econsidered, it is not apparent that w e should reach a ny fundamental Rule 23 c o n c e r n s at this time. I agree that parts of the analysis have been briefed. For example, i f the m e t h o d s of computing losses do not, a t least for a large number of claimants, determine in any reasonable f ashion w h ether a financial loss actually o ccurred, there are significant Rule 23 pr o b lems in the incoherence of the c alculation method. Because proof of loss largely substitutes for proof of causation, to allow the means of showing loss to become disconnected from economic realities threatens to distort entry into t he class and is a defect under Rule 2 3. T here is no evidence y et presented that BP ever agreed to this. Because the Rule 2 3 problem BP r aises is confined to the measurement of loss and not to questions of standing of claimants w ho cannot show t heir losses were caused by BP’s actions, I would not at t his time suggest there is a fundamental Rule 23 defect in the Settlement Agreement. I do not m inimize the concern about recognizing limitat i o n s for Rule 23. The o pinion correctly n o t e s t h a t class actions are not meant t o be vessels for achieving “global peace” by creating substantive ri ghts that would not o therwise exist. See Amchem Pr o d u c t s , I nc. v. Windsor , 521 U.S. 591, 612-13 ( 1997). I

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would o nly have identifi e d the relevant principles and authorities, then remanded for s uch consideration as the parties and the district court b ring to the issue of causation as they address the measurement of loss.

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JAMES L. DENNIS, Circuit Judge, concurring in part and dissenting in part: This case arises out of BP’s proposal to t he Administrator that he modify the consent decree and settlement agreement, or his interpretation of them, to provide t h a t the A dministrator must convert a c laimant’s cash-method accounting d ata into the a ccrual-method data proposed by BP before using the data to c a lculate the business economic loss of the claimant. The Administrator rejected BP’s proposal and the di s t r i ct court affirmed the A dministrator’s decision. BP appealed to this court. The majority, instead of addressing the only
qu e s ti o n p r e s e nt e d , wh e th e r conversion o f c a s h

- m e th o d d a t a i nt o a c c ru al

- m e th o d data is or s hould be required, declares the record confusing, intuits a different issue, whether the Administrator has been converting accrual-method data into cash-method data before p rocessing claims, an d r e m a n ds f or the district court to determine whether the Administrator has done so. In my view, w e s hould a ffirm the district court’s judgment for the reasons assigned hereinafter. M oreover, the remand i s unnecessary because the record clearly reflects t hat the dispute between the A dministrator and BP is only about whether the Administrator must convert a c laimant’s cash-method data into BP’s proposed accrual-method data before calculating a claimant’s business economic loss. BP does not contend t hat the Administra t or is mishandling claimants’ accrual-method data claims. In this opinion, I first e xplain why this appellate court must uphold the district court’s judgments affirming th e A d m i ni s trator’s rejection of B P’s actions to force him t o modify, or to rev i s e h i s interpretation of, the district court’s consent decree incorporating the parties’ settlement agreement. S e cond, I explain how the majority misunderstands t h e record, sails past the only issue on

41 Case: 13-30315 Document: 00512430729 Page: 41 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

appeal, and unnecessarily and prematurely remands the ca s e to the district court. Finally, I respectfully disagree w ith Judge Clement’s separate opinion, which expounds o n class-action-law i ssues that are not presented t o this panel but t o a different three-judge panel scheduled to hear that appeal in November and which purports to instruct the district c ourt t o issue an injunction pursuant to her class-action-law declarations. I. Having failed to con v i n c e the Administrator to modify the terms of the di s t rict court’s consent decree, which approves an d a d o p t s th e p a rti e s ’ s e t tl e m e nt agreement, or to persuade the district court to reve r s e t he A dministrator’s decision, BP appeals to this court. Because BP agreed to t h e settlement and, in fact, actively sought the district court’s a pproval and adoption o f i t in its consent decree, BP cannot seek to modify the c onsent decree u nless it d emonstrates that there h as b een a significant c hange in circumstances o r the law that w arrants

a revision of the decree by the district court. BP appears t o acknowledge that it failed to carry this burden below, for it n ow argues t h at the parties’ settlement agreement incorporated i n t he district court’s consent decree h as always required the Administrator to convert a claimant’s cash-method data into BP’s proposed accrual-method data before calculating a claimant’s business economic loss. However, the Supreme Court, in United States v. Armour & Co. , 402 U.S. 673 (1971), and its progeny, has explained that a consent decree m ust be interpreted within its “four corners” and that an appellate court cannot add to

or subtract from the consen t d e c r e e or i nterpret it according t o w hat the court thinks is the purpose of the agreement. This court, a pplying the four corners of

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Armour , must find that the decree does not contain the conversion and matching requirements that BP asks us read into it. A. I s tart by r eviewing b ackground t hat highlights t he true is s u e o n these appeals. In this case, the settlement agreement and consent decree resolved all claims for b usiness econo m i c l o s s es a gainst B P resulting from the 2010 explosion and oil spill of the BP Deepwater H o r i z o n rig. The settlement establishes formulas by which the Administrator is a uthorized to identify eligible c l aimants, calculate their business economic losses, a n d pay their claims. BP agreed to fund the settlement p rogram without ceiling o r l imit (other than those limits inherent in the formulas for calculating l oss) with respect to the a mount that the Administrator may a ward to business-economic-loss claimants. Clas s c o u nsel sought and obtained the district court’s certification of a s ettlement-only class, and, in exchange, BP received a class- and region-wide release from liability for spill-related business-economic-loss claims. 1 The Administrator b egan identi f y i n g, calculating, a nd paying businesseconomic-loss claims in May 2 012 and continued t o d o so w ithout any o bjection from the parties relating to his calculations or otherwise. 2 O n Sept e m b er 28, 2012, BP requested a discussion regarding how the Administrato r c a l c ulated

1 The s ettlem ent als o entitled BP to w alk aw ay f rom t h e p arties ’ agreem ent p rior to f in a l a p p r oval if too m any p laintif f s op ted out. BP never availed its elf of this right, ins tead actively s eek ing the d is trict court’s f inal ap p roval.

2 O n M ay 2, 2012, the p ar t i e s e n t e r e d into a s ettlem ent agreem ent that w as p r e lim inarily ap p roved by the d is trict court. In its p relim inary- ap p roval ord er, th e c o u r t ord ered the Ad m inis trator to com m ence the s e t tlem ent p rogram und er the term s of the
s ettlem ent agreem ent. The s ubs tance, term s, and cond itions of the M ay 2, 2012 p relim inary
s ettlem ent agreem ent are id entical to thos e that the d is trict court f inally ap p roved and m ad e p art of its cons ent d ecree on D ecem ber 21, 2012. 43 Case: 13-30315 Document: 00512430729 Page: 43 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

compensation with r espect to busines s-economic-loss claimants that m aintain their books using cash-basis accounting principles. On October 2, 2012, Charles R. Hacker, an accountant employed by the settlement program, participated in a conference call with t he Administrator’s staff and the parties to answer BP’s questions. During the call, M r. Hacker stated that “the Settlement Agreement d o e s not specify a prescribed accounting methodology” and that “a claim a n t ’ s accounting m ethod needed to be applied on a consistent basis,” in other words, that t h e A d m i nistrator and his team would consider revenue and expenses as they were booked by t he claimant. R. 18336- 3 7

. 3 In other words, Mr. Hacker told the conference call participants that claims submitted with data from a claimant’s b ooks using cash-method a ccoun ting would be accepted by the settlement progr a m s o l ong as the claimant utilized that accounting practice consistently. See R. 18336-37. After t he call, BP made no objection, did not file

a complaint, or a sk f or a n administrative panel hearing on t he m a t t ers discussed. On November 8, 2012, t h e district court conducted a hearing on final approval of the p arties’ class action a nd s ettlement agreement. By this time, the settlement program had received o ver 79,000 completed claims and authorized payment in excess o f $1.3 billion. At the hearing, BP supported final approval

3 The m ajority thus om its s ignif icant parts of M r. H ack er’s af f id avit. A com p lete and accurate read ing of his af f id avit m ak es clear that the Ad minis trator and his team w ere us ing the d ata p rovid e d by each claim ant f rom its bus ines s record s , regard les s of w hether it had been kep t by cas h- m ethod or accrual- m ethod accounting. Moreover, the f ragm ent that the
m aj o r i ty d oes quote d em ons trates that the s ettlem ent p rogram would “f ollow up w ith claim ants to better und ers tand s ignif i c ant outliers ” and “analyze the accuracy, valid ity and authentic i t y of outlier item s . ” R

. 18336. It would have been unreas onable f or BP to have tak en f rom this any rep res entation that “the accountants w ere m ak ing Exhibit 4 C c alculations in accord ance w ith the interp retations [ BP] advances here. ” A nte , at 23. 44 Case: 13-30315 Document: 00512430729 Page: 44 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

o f the settlement and, with class counsel, rebutted the objections of cer t a i n

o bj e c t o r s . In fact, mere weeks after BP was told on t he October 2, 2012 conference call t hat the A dministrator and his a ccountants were a ccepting and processing claims based o n claimants’ cash-met h o d accounting data, BP informed the court that, “[t]he settlement i s wo r k i n g as we anticipated and as

we negotiated.” R. 8251. BP did n ot a r g u e a t t h e hearing, or in any filings submitted in connection with the hear i n g , that it had any objection or disagreement regarding the Administrator’s use of c laimants’ cash-method accounting data to c alculate the claimants’ business economic l osses. On D e c e m b er 21, 2012, the district c ourt granted final a pproval of the settlement agreement and adopted it in its c onsent decree. In short, BP did not complain

or object to the court in respect t o the consent decree or ask f o r a n y provision that would allow it to change the decree after it became final. It was not until December 5 , 2012, a lmost a month after the final-approval hearing, that B P first expressed its c o ncern to the Administrator that his use of claimants’ cash-method data, particularly in connection with construction and professional

- s e rvices firms’ claims, m ight, according to B P, result in overcompensation of those c l a i m a n ts. See R. 18325. S everal days later, on D e cember 11, 2012, BP sent a follow-up email t o the Administrator’s sp e c i a l counsel, raising a number of qu e s t i o n s and posing several h ypotheticals i nvo lvi n g c l aims b y construction, professional-services, and a gri c ul t u r e - i n du s t ry claimants. R. 18372-74. In particular, BP asked, “[i]f f inancial data submitted by a claimant does not accurately assign revenue to t he months in which it was earned” (which, a ccording to BP, occurs with cash basis accounting), “what steps do you take to o btain fin a n c ial data t hat accurately reflects t he earning of

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revenue by month?” R. 18372. Days l a ter, on December 1 6, 2012, class counsel responded by asking the A dministrator to issue a p olicy s t atement providing that, “[w]hen a business k eeps i ts books on a ca s h b a sis, revenue i s earned during the month of receipt, irrespec t i v e of when t h e contract was entered or services were performed.” R. 18381. BP’s next move, on the 8th or 9th of January 2013, w as to s eek to have the A d m i n istrator modify the settlement’s formula for compensating busines s

econ o m i c l o s s or revise his interpretation of that f ormula. 4 In a lengthy memorandu m , BP expressed its opinion, based o n its reading i n isolation the terms “revenue,” “earned,” “corresponding,” and “comparab l e ,” that the

s e t tl e m e nt r e qu ir e s th e A d m i ni s t r a t o r , b e f o r e c al c ulating business ec o n o m i c l o s s , to c onvert t he books of a ll claimants using cash-basis ac c ounting to accrual-basis accounting, displaying revenue in the months earned and matching i t with the
expenses that produced i t, regardless of when the expenses may have been incurred. BP, however, i n a n attachment to its memorandum l abeled “Tab 1,”
p r o p osed a compromise: “In a good faith e ffort to i mplement the [businesseconomic-loss] framework, B P p roposes a simpl e [] a n d workable approach for each industry [construction, agricultur e , and professional services] that is claimant-friendly and requires limited additional effort b y t he Settlement Program.” R. 18399 (emphasis ad d e d)

. B P then proceeded to s et forth its proposed modifications to t he business-economic-loss compensation formula for

4 It is unclear f

rom the record w hether this res p ons e f rom BP was s ent on January 8 or 9 of 2013. BP p rop os ed thes e mod if ications as part of its res p ons e to the Decem ber 16, 2012 reques t f

or a p olicy s tatem ent, w hich, accord ing to an em ail f rom the Ad m inis trator’s s p ecial
couns el es tablis hing a brief ing s ched ule, w as d ue on January 8, 2012. See R. 18388. H ow ever, in a later p iece of corres p ond ence f rom BP, the com p any ref ers to its January 9, 2012 res p ons e. See R. 18402. 46 Case: 13-30315 Document: 00512430729 Page: 46 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

claimants from the concerned industries. For construction claims, for instance, BP proposed the following:

Alignment of revenue and corresponding v a riable e xpenses can be substantially improved in two steps: First, determine the ratio o f claimant’s annual rev e n u e to annual variable exp e n s e s for 2010 and each of the Benchmark Period years. Second, match revenue to corresponding variable expenses by multiplying (i) v a riable expenses reported for a given month and (ii) the ratio of revenue to variable c o sts calculated on an annual b asis. Last, adjustments s h o uld b e made f or irregular or extraordinary c ost entries that can a ppear in mon t h l y financial statements. . . . After undertaking these steps, the variable profit calculation in Step 1 o f the [business-economic-loss] compensation formula and t h e r e v enue calculations of the causation formula c an proceed a s usual with t he Settlement P rogram selecting the Compensation Period months and Benchmark Period year(s) that maximize t h e claimant’s award. R. 18399-400. Following this section, B P’s Tab 1 s e t s f orth similar detailed changes and a dditions with respect to farming firms’ claims that i t d e scribes as

a “proposed approach to i m p r oving the alignment o f revenue to corresponding
expenses for farm claims [that] generally tracks the two-step approach proposed

. . . for construction firm c l a i m s . ” R

. 18400. Finally, BP’s Tab 1 outlines its
propos a ls with respect to professional services firms, including a detailed “proposed approach to align revenue t o corresponding e xpenses for professional services firms [that also] generally tracks the two-step approach proposed

. . . for construction and farming claims.” R. 18401.

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Having reviewed the p arties’ submissions, the Administrator, on January 15, 2013, issued a policy statement stating that, i n performing t h e calculations under the business-economic-loss framework, he w ould typically consider both revenue and expenses in the periods i n which the revenues and expenses were recorded at t he t ime and would not typically reallocate such revenue or e xpenses to di fferent p e ri o ds, but he would reserve the right to adjust financial statements in c e r t a i n circumstances, including but not l imited to, i nconsistent basis of accounting b etween the Benchmark a n d Compensation Periods, errors in previously r ecorde d transactions, and flawed or i nconsistent treatment of accounting e stimates. R. 18327-28. Import a ntly, t h e Administrator’s special

c o unsel, in the cover letter transmitting the policy statement, made clear t h a t the Administrator “d[id] n ot v i ew it within his authority to c arve out specific types o f c laims in the fashion” prop o sed by BP. R. 18326. BP appealed to the district c ourt, compla i n i n g o f the Administrator’s refusal to e ither m odify the settlement decree or revise his interpretation o f t he compensation formula so as to bring about t he same result as a modification. The district court, h owever, upheld the decision of the Administrator, ruling that BP’s p roposed modification would both conflict with the terms of the p arties’ agreement and add substantive provisions thereto that had not been agreed to by the p arties o r approved of by the court during the final-approval hearing in which BP could h ave c omplained but did not. BP has now appealed to this court. B. Because BP has not satisfied its heavy burden of s how i n g t hat a change in circumstances or l aw warranted the modifications it sought, the district court correctly affirmed the Adminis t r ator’s decision rejecting BP’s argument and

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actions to m odify the agreement to which the parties had a greed and w hich the district court had approved and adopted in its consent decree. A party seeking to m odify the substance of a district court’s consent decree bears a heavy burden of e stablishing that revision of the decree is justified. See Rufo v. Inmates of Suffolk Cnty. Jail , 502 U.S. 36 7 , 3 8 3 ( 1992). I n Rufo , the Supreme Court explained that, [a]lthough

. . . a district court should exercise flexib i l i t y in considering requests for m o d i f i cation of a[]

. . . consent decree, it does not follow t hat a modification will be warranted in all circumstances. Rule 60(b)(5) provides that a party may o btain relief from a court order when “it is no longer equitable that the judgment should have prospective a pplication,” not when it i s n o longer convenient to live with the terms of a consent decree. Accordingly, a party seeking modification o f a consent decree bears the burden of establishing that a significant change in c ircumstances warrants revision of the decree. Id. 5 Further, the Court said that, “[a] p arty seeking m o d i f i c a t i o n o f a consent decree may meet its initial burden by s howing either a significant c hange either in factual conditions or in law.” Id. at 3 84 ( emphasis a d d e d)

. “ Ordinarily, however, modification should not be granted where a p arty relies upon events that actually were anticipated at the time it entered i n t o a decree.” Id. at 385 (citing T w elve John Does v. District of Columbia , 861 F.2d 295, 298-99 (D.C. Cir. 1988), and Ruiz v. Lynaugh , 811 F.2d 856, 862-63 (5th Cir. 1987)). But, “[i]f it is clear that a p arty anticipated ch a n g i n g conditions that w o uld make

5 R uf o a rticulated thes e p rincip les in the context of ins titutional- ref orm cons ent d ecrees . See i d. H ow ever, the s am e p rincip les ap p ly to all cons ent d ecrees . See, e. g. , A l exi s Li chi ne & Ci e v . Sa cha A

. Li chi n e Es t a t e Se l ecti ons, Ltd. , 45 F. 3d 582, 586 (1s t Cir. 1995) ( “While Ruf

o w as a cas e involving ins titutional ref orm , w e d o not read it as being conf ined in p rincip le to s uch cas es .”)

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performance of the decree more onerous but nevertheless agreed to the decree, that party would have t o s atisfy a heavy burden t o c onvince a c o urt that it agreed to the decree in good faith, made a reasonable effort to comply with the decree, and should be relieved of the undertaking under Rule 60(b).” I d. BP h as failed to demonstrate t hat t h e r e has been a significant change either in circumstances o r i n the law s ince it entered into—and, in fact, affirmatively sought a doption of—t he consent decree approving and incorporating the s ettlement agreement. As the record reflects, BP w as fully

aware that i t w o uld be required to pay claims by firms in the construction, agr i culture, and p rofessional-services i ndustries that were s upported by these businesses’ cash-basis accounting data and y et, nevertheless, BP agreed to the settlement and act i v e l y s ought the district court’s approval of the e ventual

conse n t decree. Accordingly, it i s this court’s clear duty to affirm the district

cou rt ’ s j u d g m e nt r e

j e c ti ng B P’s attempts to force t he Administrator to m odify the consent decr e e a n d the parties’ settlement simply because i t is no longer convenient for BP to live with the terms to which it agreed. C. In its appeals to this court, B P conveniently f orgets that it s o ught to have t he Administrator modify the settlement agreement’s f ormula for calcul a t i n g business economic loss by adding the detailed p r ovisions that it proposed in Tab 1, at t a c h e d t o i ts J anuary 2 013 memorandum. N o w, B P argues, belied by its

a t t e m p t t o h av e th e A dministrator modify the settlement decree, t hat the parties intended all along to require the A dministrator to convert each c laimant’s cashbasis data to accrual-basis data by restating revenue in the m onth in which it

was earned and matching it to t h e e x p e nses that generated i t , regardless of

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when the expenses were incurred. Th e w o r d s of t he district court’s consent decree, and th e s e t tl e m ent agreement approved therein, however, do not support BP’s proposed interpretation. In reviewing a district c ourt’s consent d e cree, our primary rule of interpretation is t he “four corners” doctrine, under which the decree is construed according to its terms, not on t he basis of “what might s a tisfy the purpose of one of the p arties to it.” See U nited Sta t e s v . Armour & Co. , 402 U.S. 673, 682 (1971). In addition, certain “aids to constr u c t i o n” commonly employed in constr u i n g contracts may be referenced. See United States v. ITT Continental Baking Co. , 420 U.S. 223, 2 38 (1972). “Such a ids includ e t h e c ircumstances surrounding the formation o f the consent order, any technical meaning words used may have had to the parties, and a ny other documents expressly incorporated in the decree.” Id. In so doing, we must not strain t he d e c r e e ’ s precise t erms or impose o ther terms in an attempt to reconcile the decree with our own conception of its purpose. See Armour , 402 U.S. at 681-82. A consent decree is the p roduct of negotiation between the parties and e mbodies a compromise struck among various factors, including the pa rti e s ’ c o m p e ti n g go al s

a n d t h e t ime, expense, and risk of litigation. See id. a t 681. In this w ay, “ t h e decree itself cannot b e said t o have a purpose; rather t he parties have purposes, generally opposed to each other, and the resultant decree embodies as much of those opposing purposes as t he respective p a rti e s h av e the bargaining power and skill to a c h i e v e . ” I

d. at 681-82. 6 By consenting to a decree, the parties have

6 In this regard , the m ajority d oes w hat Arm our d irects us not to d o, v iz . , the m ajority d ef ines the “p urp os e” of the s ettlem ent agreem ent f rom outs id e s ources and the n us es that “p urp os e” to interp ret the cons e n t d e c r e e . N othing w ithin the f our corners of the cons ent d ecree ind icates that the overrid ing p urp os e of the agreem ent, as the m ajority as s um es , w as 51 Case: 13-30315 Document: 00512430729 Page: 51 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

waived their rights under the Due Process Clause to litigate the issues r aised by

a c o m p l a i n t

. I

d. a t 682. A court should n ot later modify the decree by interposing terms not agreed to by t he parties o r n o t i n c l uded in the language of the decree

. Se e i d

. ; see also U nited States v. Atl. Ref. Co. , 360 U.S. 19, 23 (1959); H

ughes v. United States , 342 U.S. 353, 357 (1952). Exhibit 4C of the settlement and consent d ecree, which i s the pertinent

s u bj e c t of these appeals, details the c ompensation framework f or business economic loss. 7 B y its terms, the framework “ c o m p a r e s t he a ctual profit of a business during a defined p ost-spill period in 2010 to the profit that the claimant might have e xpected to earn in the comparable po s t

- s p i ll period of 2010.” R. 4277. The framework incl u d e s two steps. S tep one, which is at issue here, “[c]ompensat e s c l aimants for a ny reduction in profit between the 2010 Compensation P e ri o d s elected by the claimant and the comparable months of the Benchmark P eriod” and “reflects the reduction i n Variable Profit (which reflects the claimant’s revenue less its variable costs) over this period.” R

. 4277. Step two, which is not a t i s s u e in these appeals, i s intended to “ [c]ompensate[] claimants for i ncremental profits or losses the c l aimant m ight have been expected to generate in t he ab sence of the spill relative to sales from the Benchmark Period.” R. 4277.

to p erf ectly m atch revenue to the exp ens es that generated it. See A nte , at 21.

7 “The Settlem ent recognizes s ix categories of d am age: ( 1) sp ecif ied typ es of econom ic los s f or bus ines s es and ind ivid uals , ( 2 ) s p ecif ied typ es of real prop erty d am age ( coas tal,
w etland s , and real prop erty s ales d am age) , ( 3) Ves s el of Op p ortunity Charter Paym ent, ( 4) Ves s el Phys ical D a m a g e, ( 5) Subs is tence D am age, and ( 6) the Seaf ood Com p ens ation Program

. ” In re O i l Sp il l by O i l Ri g D eep w a t er H

ori zon i n G ul

f of Mexi co, on A

p ri l 20, 2010 , 910 F. Sup p . 2d 891, 903 ( E. D

. La. 2012)

. Categories of d am age other than bus ines s econom ic los s are not at is s ue in thes e ap peals

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With regard to step one, the Compensatio n Period is “selected by the claimant and m ay include three or more consecutive months between May and D e c e m b e r 2010” (in other words, several m onths shortly after the oil s pil l began). R. 4277. The “Benchmark Period” is “ t he pre-[spill] period which claimant chooses as the baseline for m e a s uring its historical financial performance”; for the B enchmark Period, “the claimant can sel e ct a mong the following

. . . [p]eriods: 2009; t he a v e r a g e o f 2008–2009; or t he average of 20 0 7

– 2 009, provided that t he range of years selected by the claimant will be uti lized for all B enchmark Period purposes.” R. 4 277. Variable Profit is then defined as follows: Variable Profit : This is calculated for both the Benchmark Period and the Compensation Period as follows: 1. Sum the monthly revenue over the period. 2. S u b t r a c t the correspondi n g v a r i a b l e e x p e n s e s f r o m revenue over the same time period. R. 4 277. Having de fined t he relevant terms, the settlement finally prescribes “Step 1 Compensatio n” as follows: “Step 1 of the compensation c alculation is determined as the difference in Variable Profit between the 2010 Compensation Period selected by the claimant and the Variable P rofit over the comparable months of the Benchmark Period.” R. 4277. The majority states, and I agree, that the settlement permits a businesseconomic-loss claimant to select a comparison interval as short a s three months (or as long as eight months). That is, c l a i m ants may c hoose income from any three c o nsecutive months between May a nd December of 2010 to compare with income in a B enchmark Period of the same three t o e i g h t months in 2009, the average of 2008–2009, o r the average of 2007–2009. This flexibility to choose a

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shorter comparison interval a llows a c laimant to take advantage of the natural variability in r evenue over the course of a given year. Claimants may choose a three-month p eriod i n whi c h t h e i r income was particularly b ad in 2010, or particularly goo d i n t he Benchmark Period, and exclude from t he calculation other months in which their 2010 i ncome might have actually been quite good. The text of the settlement illustrates t h is feature ( and others i nvolving the settlement’s causation framework) with three examples as follows: Scenario 1: 1) Claimant selected the m onths o f May–July 2010 for the purpose of determining causation, and the claimant, using t h ese months, meets the c ausation t est for t h e Benchm a r k period years of 2009, 2008–2009 and 2007–2009; 2) I n d e t e r m i n i n g C o m p e n s a t i o n , C l a i m a n t w ould b e allowed to select the months of August through November 2010 as compared to the months of August through November in either 2009, 2008–20 0 9 or 2 0 07–2009 as the Benchmark years—whichever provides the highest compensation. Scenario 2: 1) C l a i m a n t s e l e cted the months of Octob e r

–D e c e m b e r 2010 for the purpose o f determining causation and t h e claimant, using these m onths, m eets the causation test for the Benchmark period years of 2009, 2008–2009; 2) I n d e t e r m i ni ng compensation, Claimant c o u l d s e l e c tth e months of May–September 2010 as compared t o t h e months of May–September in either 2009 or 2 0 0 8

– 2 0 0 9

— w h i c h e v e r p r o v i d e s t h e h i g h e s t compensation. Scenario 3:

54 Case: 13-30315 Document: 00512430729 Page: 54 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329 1) Claimant selected the months of June–August 2010 for the purpose of determining causation and the claimant, using t h ese months, meets the causation te s t for t h e Benchmark period year of 2 009. In addition, Claimant se l e c ted the months of August–October 2 010 f or t h e purpose of determining causation, and the claimant, using t h ese months, meets the causatio n t est for t h e Benchmark period years of 2007–2009; 2) In determining c o m p e n s a ti o n , C l ai m a nt c o u l d s elect the months of May–December 2010 as compared to t h e months of May–December in eith e r 2009 or 2 0 0 7

– 2 0 0 9

— w h i c h e v e r p r o v i d e s t h e h i g h e s t compensation. R. 4283. Consequently, if this court were to interpret the settlement agreement to require the Administrator to convert each claimant’s cash-method data into accrual-method data s h o w i n g monthly revenue as earned matched with the
expenses that generated i t regardless of when the r evenue and e xpenses were recorded on t h e c l aimant’s books, we necessarily w ould be violating Armour’s four-corners rule: BP’s proposed conversion and matching requirements, which would require the Administrator to r estate t he m onths in w hich claimants recorded their revenue and expenses, are not contained within the four corners of the decree and settlement. And, for the reasons already stated, w e, in effect, would be modifying the terms of the consent decree without BP having satisfied its burden of s howing a significant change i n circumstances or law justifying that modification. S u c h a modification of the settlement d ecree would conflict with the clear examples i n the settlement ag r e e m e n t a nd w ould require the Administrator go outside and perhaps f ar beyond the Compensation and Benchmark Periods selected by t he c laimant to t race t he generative e xpenses t o m atch with revenue earned in those periods. Further, even if such a

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reconstruction o f the claimant’s business history were possible, it would likely differ markedly f

rom the cash-method claimant’s records kept in 2009 and the first quarter of 2 010 when the claimant had no inkling that an oil spill a ffecting his business would o ccur o n April 20, 2010. The effect o f our so i nterpreting the settlement agreement could be devastating to many claimants who are unable to translate or r econstruct their cash- b a s i s d a t a into revenue matched to the
expenses that generated it under BP’s proposed conversion and ultra matching requirements. Moreover, forced conversion of all cash-basis data into accrualbasis data would discriminate against t he remaining c ash-basis claimants by either thwarting their claims entirely o r t r e a ti n g th e ir claims less f avorably than the cash-basis claims already resolved. The plain wording of the settlement a greement r ead as a whole and with all of its supporting documents permits claimants to support their businesseconomic-loss claims u sing t heir o wn b usiness records a nd does not require that these records be kept in a ny part i cular form. In fact, BP, jointly with class

c o u n sel, told the district court that “ [t]he documents required to suppo r t Business Economic loss claims

. . . are the documents that businesses ei t her keep in the ordinary course or that may readily be p repared from a business’s books and records.” R. 8558 (jointly p r oposed findings of fact and conclusions of law filed in t he district court by BP a n d class counsel in support of final approval); see also I

n re Oil Spill by Oil Rig Deepwater Horizon in Gulf of Mexico,

on April 20, 2010 , 910 F. S upp. 2d 8 91, 904 (E.D. La. 2012) (same) (finalapproval order); CPA Societies’ Amicus Br. at 1-14. This is the way the district court interpreted t he settlement agreement and consent decree in i ts March 5, 2013 order upholding the Administrator’s rejection of BP’s attempt t o modify the

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parties’ agreement or change the Administrator’s interpretation o f it. R

. 12550 (“[T]he documentation provisions contained within Exhibit 4A make it c l ear that the Program’s analysis is t o be based on revenue an d e x p e n s e s during the relevant periods c hosen b y t he claimant, as reflected in h istoric a l b usiness records

. . . . E xhibit 4A does not require t h a t a c c o u n t i n g occur on an ‘accrual’ basis, as opposed to a ‘cash’ basis.”) (emphasis added). In other words, a claimant may support its c laim with data recorded using cash-basis accounting if it has con s i s t e n t l y used that method in the ordinary course of its b usiness. 8 Further, the claimant may use r ecords kept usin g accrual-basis accounting if t h a t is w hat it has consistently applied in the ordinary course o f its business. Likewise, the settlement does not instruct the Adminis t r a t o r to refrain from accepting and relying on c laims supported by a claimant’s own business records, whether cash basis or accrual basis, so long as the claimant’s books have been consistently kept on the s a m e m ethod and in the ordinary course o f business. Most important, the settlement nowhere instructs the Administrator to restate

or convert a claimant’s claim submitted using cash-b a s i s a c counting data into accrual-basis a ccounting data, showing revenue o nly in the months in which it

was e arned, and m atching the monthly earned revenue with the expenses that generated it, regardless of when the expenses were m ade or incurred. 9 Simply

8 F or that m atter, the f ed eral governm ent accep ts , f or tax purp os es , s ubm is s ions
s up p orted us ing a bus ines s ’s d ata record ed us ing cas h- ba s i s a ccounting s o long as s uch
accoun t ing has cons is tently been us ed in the ord inary cours e of bus ines s . See 26 U

. S. C. § 446( a) ( “Taxable incom e s hall be com p uted und er the m ethod of acc o u n t i n g o n the bas is of
w hich the taxp ayer regularly com p utes his incom e in k eep ing his book s . ”)

.

9 The Ap ril 18, 2012 vers ion of the s ettlem ent contained a requirem ent that accounting p rof es s ionals s eek ing reim burs em ent f or their s ervices cer tif y that they s ubm itted their reim burs em ent re q ues t “in com p liance w ith generally accep ted accounting p rincip les ” ( “GAAP”) , a requirem ent w hich w as s ubs equently rem oved from the M ay, 2 2012 vers ion that 57 Case: 13-30315 Document: 00512430729 Page: 57 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

stated, n one of the terms, conditions, and qualificati o n s t h a t BP proposes and argues for are stated or contained within the f our corners of the consent decree and settlement agreement. For t h e se r easons, I respectfully c o nclude that the majority has unintentionally fallen into legal error by not r ecognizing t hat the f our-corners rule of Armour and o ther teachings by the S upreme Court r e q u i r e t hat the district court’s consent decree containing the settlement agreement be interpreted as written; that this appellate court may n ot a dd to or s ubtract from the district court’s consent decree; that likewise w e must not strain the decree’s precise terms or impose other terms in an attempt to reconcile the decree with

our own conception o f its purpose; and that the district court’s interpretation of i t s own consent decree was correct and should be affirmed. See Arm o u r , 4 0 2 U.S. at 682; see also United States v. Atl. R ef. Co. , 360 U.S. 19, 23 (1959); Hughes

v. United States , 342 U.S. 353, 357 (1952); Walker v. U.S. Dep’t of H ous. & Urban Dev. , 912 F.2d 819, 825 (5th Cir. 1990) (“Nor a re courts at liberty to redraft the obligations commanded by the decree absent consent of the parties.”). II. I respectfully disagree with the majority’s r e v e r s a l of the di strict court’s decision and its remand of the case to the district court to determine w hether the Administrator has been converting claims submitted with accrual-method accounting data into cash-method supported claims a nd processing them on that basis. The majority i tself concedes that this scenario is “unlikely” and that BP

w as ap proved b y the d is trict court. Com p a re R. 2445 (Ap ril 18, 2012 vers ion) , w i th R. 3955 (M ay 2, 2012 v ers ion)

. BP k new how to ins is t that claim s abid e by GAAP but f ailed to d o s o, s ugges ting that it und ers tood that claim s could be s ubm itted bas ed on d ocum ents p r ep ared
us ing cas h- m ethod accounting. See CPA Societies ’ Am icus Br. at 6. 58 Case: 13-30315 Document: 00512430729 Page: 58 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

has not explicitly asserted this. Ante , a t 15. That BP has not so a rgued in these appeals makes t he majority’s sua sponte raising of the issue highly irregular and contrary to our normal rule of addressing on appeal only the issues raised and argued b y the appellant. Furthermore, careful inspection of the r e c ord in this

case demonstrates that the majority’s intuited scenario is n ot just unlikely; the record demonstrates that it is plainly not the case. Neither B P nor c l a ss counsel has ever questioned whether the Administrator was properly applying Exhibit 4C’s compensation requirements to use claimants’ accrual-method accounting data to calculate and pay businesseconomic-loss c l a i m s. On December 5, 2012, BP expressed concern to the Administrator that he was o vercompensating c l aimants by using their cashmethod data in his calculations. On December 11, 2012, BP sent a f o l l o w - u p email t o the Administrator’s s pecial counsel asking, if f inancial data submitted by a claimant does not accurately assign revenue to t he months in which it was earned, what steps w ould the Administrator take to obtain financial data that accurately reflect the earning of revenue by month. R. 18372. On December 16, 2012, class counsel responded b y asking the Administrator to i s s ue a policy statement providing that, “ [w]hen a business keeps its b o oks on a cash basis,

revenue is earned during the month of receipt, irrespective of when the contract

was entered or services w ere performed.” R. 18381. On J a n u a r y 8 or 9, 2013, BP demanded that the Administrator revise his interpretation of the Exhibit 4C formula so as to r equire him to convert the books o f all claimant s using cashbasis accounting to a ccrual-basis accounting or to modify the formula to do so for construction, f

a r m ing, and professional-services firms using cash-method accounting. The A dministrator’s refusal t o do so and his January 15, 2013 policy

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statement, stating that he “will typically consider both revenues and expenses in the periods in which those revenues and expenses were recorded at the time” and that he lacked authority to change the settlement agreement by carving out exceptions for certain categories of claimants, led directly t o BP’s a ppeal to the d istrict c ourt to reverse the Administrator’s decision. Thus, nothing in t he communications between the parties and the Administrator indicates that their dispute involved the conversion of accrual-based accounting data to cash-based accounting data. T he district court affirmed the d ecision of the Administrator rejecting BP’s demand that the Administrator e ither (a) interpret the settlement agreement to require the conversion of all claimants’ cash-method accounting data to a particular kind of accrual-met hod data prior to calculating the claimants’ business e c onomic loss or (b) modify the s ettlement agreement in that
way w ith respect to construction, farming, p rofessional-services claims based on cash-method accounting data. Consequently , th e m a

j o rity’ s n o ti o n th a t A d m i nistrator h as ever c onverted
any claimant’s accrual-method accounting data to cash-method d ata has no support in t h e r e c ord or the briefs in t h is c ase. The majority’s precipitous reversal of the district c o u rt ’ s j u d g m e nt a n d r e m a n d f o r unnecessary proceedings is erroneous and quite unfortunate for everyone concerned in this case. I II. A. I now turn to the discussion in the majority opinion of so-called “fictitious” claims (part II of the opinion), which is now supported b y t he vote o f one judge. Like Judge Southwick, I do not join t his section of the opinion and I respectfully dissent from it as well. Thes e appeals a rise from a dispute regarding BP’s

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proposed modification or reinterpretation of the settlement agreement’s text; a separat e a ppeal a ddressing the district court’s certification of this class action and acceptance of the settlement agreement has been docketed and calendared for oral argument o n November 4, 2 013 before a di fferent panel of judges. See In re Deepwater Horizon Appeals of t he Economic a n d Pr operty Damage Class Action Settlement , No. 12-31155 (5th Cir. filed Nov. 1 9, 2012). The p arties have not argued those certification and acceptance issues to this panel, and we may not properly decide them or pronounce upon them. Judge C l e ment b egins her discussion by expressing concern regarding whether the plaintiff class m embers have “colorable legal claims” which she defines a s an “[ability] to plead” the elements of a c l aim. See a n te , at 26; see also ante , at 29 (stating that a claim is “colorable” if the plaintiff “can allege standing and t he e lements necessary to state a claim on which relief can be granted”). I do not u nderstand what that concern has to do w ith t his c ase. Here, the district court held, in an opinion to w hich Judge Clement makes no reference, that “the class representatives— like all class members—allege economic and/or property damage s temming directly from the Deepwater Horizon spill.” In re Oil Spill by Oil Rig Deepwater Horizon in Gulf of Mexico, on April 20, 2 010 , 910 F. Supp. 2d at 915 (emphasis a dded). And the district court went on to say that, under the class definitions, “persons with marginal or potentially worthless claims

. . . [are] excluded.” Id

. at 9 17; see also id

. at 9 17 (stating that the “class in t h i s c a s e consists exclusively of individuals and businesses that have already s u f f ered economic loss”). Nobody has a ppealed from this finding that the class m embers here allege losses stemming directly from BP’s conduct. Judge Clement’s dicta are divorced from the facts and issues in this case.

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T u rning, very briefly, to Judge Clement’s legal pronouncements, I m u s t say that I r espectfully disagree with her statement that a court cannot allow a

s i ngle person lacking a “colorable claim” a gainst a class-action defendant t o

recover c ompensation in a cl a s s - a ction s ettlement b ecause to d o so would “ignore[] the standing requirement of Article I II and create[] a substantive right where none existed before.” Ante, at 27-28. T his analysis confuses the relevant leg a l p r i n c i p les, is not supported by any law from our circuit or others, and would cause our circuit to split with at least three o f our sister circuits i f it were bindi n g
. F i r st, although Judge Clement leans heavily on a dissenting opinion in t h e T hird Circuit’s Sullivan case, t hat dissent was joined by o nly a single other j udge and its analysis was s quarely rejected by the seven-judge majority. See Sullivan v. DB Invs., Inc. , 667 F.3d 273, 305 (3d Cir. 2011) (en banc); see also Rodriguez v. Nat’l City Bank , No. 11-8079, 2013 WL 4046385, at * 4 ( 3d Cir. Aug. 12, 2013) (Jordan, J.) (“ S ullivan instructed that assessing whether individual class members have viable claims is inappropriate in the context of reviewing a proposed settlement class.”). Second, a lthough J udge Clement cites a decadesold Seventh Circuit decision, see ante , at 2 8, a more rece n t d e c i sion from that circuit rejects her analysis in no uncertain terms: [The class-action defendant] argues that before certifying a c l ass t h e district judge w as required to determine which c l ass members had suffered d amages. But putting the cart before the h orse in that way would vitiate the economies of class action procedure; i n effect t h e trial w ould pre c e d e the certification. I t is true that injury is a prerequisite to standing. But as long as one member of a certified cla s s has a plausible claim to have s uffered damages, t h e requirement of standing is satisfied.

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Kohen v. Pac. Inv. Mgmt. Co. LLC, 571 F.3d 672, 676 ( 7th Cir. 2009). And third, the a nalysis also conflicts w ith the Second C ircuit’s. See In re Am. Int’l G rp., Inc. Sec. Litig. , 689 F.3d 229, 243-44 (2d Cir. 2012). And, for the reasons explained at length in Sullivan , requiring a district court to ensure that every class-action settlement beneficiary has a “colorable”

c a use o f action against the defendant is unworkable i n p ractice. Should the district court require t hat every settlement beneficiary file a separate c o mplaint consisting of individual allegations and that B P file separate motions t o dismiss each of t he complaints? I d o not t hink it wise to mandate such an unwieldy and expensi v e u n d ertaking when the p arties s ettled precisely to avoid that sort of

co s t l y l i t i g a tion. See Fed. R. Civ. P. 1 (the c ivil procedure rules “should be construed and a dministered to se c ure the just, speedy, and inexpensive determination o f every action and proceeding”). N or do I see how it is required by existing law. 1 0 Lastly, Judge Clement’s t heory rests o n a false prem i s e : the i dea that
every i n dividual who benefits from a class-action settlement must or is deemed to have an independent cause of a ction against the class-action defendant. I d o not think that i s the case. In a simple non-class-action lawsuit between a single

1 0 I certainly d o not s ee how it is required by t h e law of s tand ing. It is hornbook law that, “[ i] n clas s action cas es , the s tand ing inquiry f ocus es on the clas s rep res entatives

. T he clas s rep res entatives m us t have ind ivid ual s tand ing in ord er to sue. . . . [ T] he rep res entative need not p rove that each m em ber of the clas s has s tand ing. ” W I LL IA M B. R U B E N ST E I N , N E W B E R G ON C L

A SS A C T I ON S § 2: 1 ( 5th ed

. ) ( collecting cas es in om itted footnotes ); see, e. g. , Kohen , 571 F. 3d at 676 ( “It is true that injury is a prerequis ite to s tand ing. But as long as one m em ber of a certif

ied clas s has a p laus ible claim to have s uf f ered d am ages , the requirem ent of s tand ing is satis f

ied

. ”) ; D enney v . D eutsche Ba nk A G , 443 F. 3d 253, 263 ( 2d Cir. 2006) ( “We d o not require that each m em ber of a clas s s ubm it evid ence of pers onal s tand ing. ”)

.

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plaintiff and a single defendant, I am not aware of any rule that would prohibit the litigants from reaching a settlement in which the defendant a grees to make payment n ot to the plaintiff he has a llegedly wronged but rather to, say, a favored charity instead. Should that happen, neither the law n or common sense presum e s that the charity has an independent cause of action against the defendant. See, e .g. , King v. Emp’rs Nat’l Ins. C o. , 928 F.2d 1438, 1442 (5th Cir. 1 9 9 1 ) ( di s c u s s i n g th ir d

- p a rty beneficiaries to settlement agreements). Th i s b a s i c principle seems n o less applicable in the class-action context and to apply with

no less force whether the settlement b enefits a charity, o ne or more specifically enumerated individuals or entities, or a c lass of individuals or entities as defined by w hatever characteristics the negotiating p arties choose. See id

. at 1442 (“In fact, there is no requirement that the third-party beneficiary even be specifically named in the contract.”); Montana v. United States , 124 F.3d 1269, 1273 (Fed. C i r . 1997) (“The intended b eneficiary need not be specifically o r individually identified in the contract, but must fall within a class clear l y intended to be b enefitted thereby.”). In s hort, whether a settlement a greement arises in t h e class-action context o r not, t h e r e seems to me no requirement that every beneficiary of the agreement h a v e a “colorable” c a use of a ction against the defendant. 1 1 A fundamental flaw in Judge Clemen t ’ s analysis is that i t conflates and fails to d i s tinguish between, on the one hand, the legal requirements for certifying a c lass , see a nte , at 27-28 (arguing that c o urts act u nlawfully “[b]y including claimants in the class definition that lack colorable claims”), and, on

1 1 This is not to s ay that the parties here intend ed to benef it third p arties lack ing viable caus es of action; rather, the p oint is that there is no legal reas on to inquire into w hether the
s ettlem ent benef

its p ers ons lack ing viable caus es of action. 64 Case: 13-30315 Document: 00512430729 Page: 64 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329

the other hand, those for approving and e nforcing a settlement agreement in the class-action context, s ee ante , at 31 (arguing t hat a class-action settlement “is unlawful” and cannot be approved if i t grants c ompensation to businesses “that had not sustained losses”), assuming w ithout e xplication that the f o rmer are coterminous with the latter. How e ver, the distinction should not be elided: whether or not i t is true that Rule 23 or another provision of law is violated by maintaining a class action including class members lacking “colorable” claims—one legal issue—it does not follow either way that the c ourt’s approval

or enforcement of a s ettlement that benefits persons without “colorable” claims violates any law—a distinct legal issue. See, e.g. , Denney v. Deutsche Bank AG, 443 F.3d 253, 268-76 (2d C ir. 2006) (addressing separately t he class certification and settlement approval issues); cf

. Messner v. Northshore Univ. HealthSystem , 669 F.3d 802, 8 24 (7th Cir. 2012) (“[The class-action defendant] a rgu[es] that the class for which certification is requested is fatally overbroad because i t c ontains members who could not have been harmed by any post-merger price increases

. . . . This [issue] is critical for class certification purposes .”) (emphasis added). Without embracing e i ther of Judge C lement’s propositions, because neither are presented to this panel for decision, any discussion of them will n ot b e furthered by conflating one for the other as she does here. B. BP twice sought a preliminary injunction from t he district court and was twice denied. The r e a f t e r , BP sought b oth a stay pending appeal and a preliminary injunction from this court, w hich were also denied. I see no reason to reverse any o f these d ecisions. The m ajority opinion, however, p u rports to

reverse the district court’s denial of a preliminary injunction and appears to

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“instruct the district court to expeditiously craft a narrowly-tailored injunction” that allows the claims of “those who experienced a ctual injury traceable to loss from the Deepwater Horizon accident” to proceed w h i l e s t aying the claims of “those who did not.” A nte , at 35-36. Because the majority opinion’s instruction to t he district court regarding the i njunction appears to be b ased on Judge C l e m e nt ’ s s e p a r a t e o p i ni o n c o n cerning class-action law, that instruction do e s n o t appear to be based on a majority vote o f t h i s p a nel. Moreover, for the same

reasons I discussed i n the foregoing sections of this opinion, t his appellate court may not modify the terms and conditions of the district court’s consent decree

or order the district court to do so; and t h is court cannot use material outside of the four corners o f the c onsent decree to reinterpret that decree. Consequently, it would be clear legal error for this c o urt to assume that it has jurisdiction and authority to impose on the Administrator t he requirement t hat, in addition to identifying a claimant as e l i g i b le and entitled to c ompensation for business economic loss under the consent decree encompa s sing the parties’ settlement

a g r eement, he must also find independently t h at the claimant is not one of “those w ho [did not] experience[] actual injury t raceable to loss from the Deepwater Horizon a ccident” before paying the claim. Such an injunction would be broader than the alleged purpose of the remand and tantamount to modifying the consent decree for t he benefit of one of the parties, BP, w ithout that party carry i n g i t s b urden to show a change in circumstances or law t hat w arrants changing the decree; or else to interpreting t he consent decree based on material or purposes not stated within the four corners of the consent decree.

66 Case: 13-30315 Document: 00512430729 Page: 66 Date Filed: 11/05/2013No. 13-30315 Cons. w/ 13-30329 CONCLUSION

For t h ese reasons, I c oncur in the majority’s affirmance of the district court’s dismissal of BP’s suit a gainst the Administrator for f ailure t o state a claim under Rule 12(b)(6) b ut I r espectfully dissent from the majority o pinion in all other respects.

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