Opinion ID: 2799729
Heading Depth: 1
Heading Rank: 5

Heading: district court’s decision to categorically

Text: PRECLUDE CERTAIN CASES FROM ITS REVIEW We next consider the question of whether the district court erred in including provisions in the Final Rules that prevent judicial review of several categories of cases. As noted above, Final Rules 16 and 19 preclude certain categories of cases from review by the district court. Specifically, requests for review and objections thereto for cases involving the Non-Profit Policy, Alternative Causation Issue, or Matching Policy are not submitted to the district court. Final Rules 16 and 19 provide that “the processing of claims will not be suspended in such cases unless there is a further order” by the district court. BP objects to Final Rules 16 and 19 on three grounds: (1) that these rules jeopardize BP’s right to request judicial review of awards, (2) that the rules encumber the ability to appeal to this court, and (3) that the rules “wrongly insulate from review awards predicated on policy announcements that have been repudiated or not yet fully reviewed by this Court.” We review the district court’s decision to preclude these cases from review—as part of its decision to adopt the Final Rules—for abuse of discretion since it was decided as part of its duties to manage the Settlement Program. See Mullen, 186 F.3d at 624. A decision premised on an error of law constitutes an abuse of discretion. See Jethroe v. Omnova Solutions, Inc., 412 F.3d 598, 600 (5th Cir. 2005). As to the first objection, we do not agree with BP’s contention that the Final Rules improperly strip BP of its right to request judicial review of awards. Despite our holding above that there is a right to appellate review by this court of district court decisions regarding individual claims under the Settlement Agreement, this does not necessarily translate into the right of a party to obtain the district court’s review of claim determinations. Under § 18.1 of the Settlement Agreement, parties may request review by the district court 19 Case: 13-30843 Document: 00513036264 Page: 20 Date Filed: 05/08/2015 No. 13-30843 to settle “[a]ny disputes or controversies arising out of or related to the interpretation, enforcement or implementation of the Agreement.” However, it is clear from § 6.6 that “[t]he Court maintains the discretionary right to review any Appeal determination,” which is not a right for the parties to be granted such review. We recognize that categorically precluding certain cases may frustrate the right to seek review in that an appealing party will know before filing a request for review that the district court will not grant review over the claim determination. However, we seek to preserve the district court’s discretion under the Settlement Agreement—as agreed to by the parties—to decide which cases to review. We do not intend any part of this opinion to turn the district court’s discretionary review into a mandatory review. To do so would frustrate the clear purpose of the Settlement Agreement to curtail litigation. With respect to its second contention, BP argues that the Rules “preclude the parties from requesting relief from the district court, and thus from receiving any claim-specific order—docketed or not.” Our holding above with respect to the docketing provisions addresses this objection. When the Rules are modified in accordance with this opinion so that requests for district court review are docketed, we expect the district court’s decisions to grant or deny review to also be docketed. The parties will then receive a docketed claimspecific order and their ability to appeal to this court will be preserved. To address BP’s third contention, we consider developments to the three policies subsequent to the May 20 Order, which BP contends undermines the Rules’ limitations on seeking review of awards involving the three policies. A. Categorical Preclusion of Cases Involving the Matching Policy BP’s objection to the preclusion from judicial review of cases involving the Matching Policy is that the Final Rules have not been modified to reflect 20 Case: 13-30843 Document: 00513036264 Page: 21 Date Filed: 05/08/2015 No. 13-30843 the recent developments regarding the Matching Policy—namely, that the policy was set aside in Deepwater Horizon I, and has since been effectively superseded by a new policy approved by the district court. Recent developments regarding the Matching Policy muddy the waters for our review. We briefly summarize those recent developments. In Deepwater Horizon I, this court set aside the Matching Policy 11 and remanded to the district court for further proceedings on the basis that the district court’s interpretation of Exhibit 4C 12 of the Settlement Agreement was in need of further consideration. 732 F.3d at 339. Shortly after that ruling, per the order to issue a “narrowly-tailored” preliminary injunction, id. at 346, the district court ordered the Claims Administrator “to immediately suspend the issuance of any final determination notices or any payments with respect to those [business economic loss (“BEL”)] claims in which the Claims Administrator determines that the matching of revenues and expenses is an 11 In the Matching Policy, the Claims Administrator stated that, for both calculation of Variable Profit and purposes of causation, he would “typically consider both revenues and expenses in the periods in which those revenues and expenses were recorded at the time,” and would “not typically re-allocate such revenues or expenses to different periods,” but would “however, reserve the right to adjust the financial statements in certain circumstances, including but not limited to, inconsistent basis of accounting between benchmark and compensation periods, errors in previously recorded transactions and flawed or inconsistent treatment of accounting estimates.” Deepwater Horizon I, 732 F.3d at 330-31. 12 Exhibit 4C, which sets the compensation framework for business economic loss (“BEL”) claims, lays out the calculation of variable profit for purposes of calculating compensation: (1) “Sum the monthly revenue over the period,” then (2) “Subtract the corresponding variable expenses from revenue over the same time period.” Agreement, Exhibit 4C. The interpretation issue arose from the difference in accounting methods used by claimants. Accrual-basis claimants recognize revenue “when the entity becomes entitled to receive payment, as opposed to when the payment is actually received,” which “is sometimes referred to as ‘matching’ revenues and expenses.” 732 F.3d at 333. Cash-basis claimants, on the other hand, “recognize revenue when cash from a given transaction is received and expenses when cash is paid.” Id. 21 Case: 13-30843 Document: 00513036264 Page: 22 Date Filed: 05/08/2015 No. 13-30843 issue.” In re Deepwater Horizon, MDL No. 2179, 2013 WL 5495266, at  (E.D. La. Oct. 3, 2013). Following further input from the parties, the district court ordered the Claims Administrator and Settlement Program to continue to process and pay BEL claims presented on the basis of matched, accrual-basis records. See Order 4, In re Deepwater Horizon, MDL 2179 (E.D. La. Oct. 18, 2013), ECF No. 11697. As for other BEL claims, the district court ordered the continued temporary suspension of final determination notices and payments “unless the Claims Administrator determines that the matching of revenues and expenses is not an issue with respect to any such claim.” Id. at 5. 13 After revisiting the issue of whether the Claims Administrator correctly interpreted the Settlement Agreement in the calculation of variable profit, the district court found that “the provision [in Exhibit 4C] for subtracting corresponding variable expenses requires that revenue must be matched with the variable expenses incurred by a claimant in conducting its business, and that does not necessarily coincide with when revenue and variable expenses are recorded.” Order 5, In re Deepwater Horizon, MDL 2179 (E.D. La. Dec. 24, 2013), ECF No. 12055. On this basis, the court reversed its earlier ruling affirming the Matching Policy and remanded to the Claims Administrator “with instructions to adopt and implement an appropriate protocol or policy for handling BEL claims in which the claimant’s financial records do not match 13 The preliminary injunction was eventually extended to stay other BEL claims, including those involving the Alternative Causation and Non-Profit Policies. See Order 2, In re Deepwater Horizon, MDL 2179 (E.D. La. Dec. 5, 2013) ECF No. 11928 (amending the preliminary injunction and instructing the Claims Administrator to “continue to accept BEL claims and process said claims, but [to] temporarily suspend the issuance of final determination notices and payments of BEL claims, pending resolution of the BEL issues that are the subject of the pending remand [of Deepwater Horizon I]”). Class Counsel point out the extent of the stay, seemingly in response to BP’s argument that Final Rules 16 and 19 wrongly enforce policies, but the stay has no bearing on whether it was an abuse of discretion for the district court to adopt Final Rules that allow for the categorical preclusion of cases involving the policies from its review. 22 Case: 13-30843 Document: 00513036264 Page: 23 Date Filed: 05/08/2015 No. 13-30843 revenue with corresponding variable expenses.” Id. No party appealed this instruction. On May 28, 2014, the district court dissolved the injunction involving BEL claims and ordered that a new policy—the Claims Administrator’s Policy 495 (“Business Economic Loss Claims: Matching of Revenue and Expenses”)— “be applied to all BEL Claims currently in the claims process at any point short of final payment.” Order 2, In re Deepwater Horizon, MDL 2179 (E.D. La. May 28, 2014), ECF No. 12948. On June 27, 2014, in an order clarifying the application of this new policy, the district court held, inter alia, that a determination by the Appeals Coordinator in “appeals when the issue of matching is contested” under Policy 495 would be “final and non-appealable.” Order 2, In re Deepwater Horizon, MDL 2179 (E.D. La. June 27, 2014), ECF No. 13076. This seems to bring Policy 495 in line with Final Rules 16 and 19— by categorically precluding these cases from district court review. In light of the recent developments highlighted above, we are unable to decide whether the district court’s decision to categorically preclude review of cases involving the Matching Policy constituted an abuse of discretion. On remand, the district court should reconsider its decision to categorically preclude these cases from its review. In doing so, the district court should consider what effect, if any, the Final Rules have on cases involving Policy 495. In the event the court is of the view that these cases should be categorically precluded from review, the court should provide a rationale for such a finding. B. Categorical Preclusion of Cases Involving the Alternative Causation Issue With respect to the preclusion of cases involving the Alternative Causation Policy 14 from judicial review, BP argues that the Final Rules should 14 The Alternative Causation Policy, released October 10, 2012, states as follows: 23 Case: 13-30843 Document: 00513036264 Page: 24 Date Filed: 05/08/2015 No. 13-30843 be modified to account for this court’s recent holding in In re Deepwater Horizon, 744 F.3d 370 (5th Cir. 2014), cert. denied, 135 S. Ct. 754 (2014) (“Deepwater Horizon III”). At issue in Deepwater Horizon III was whether the implementation of the Settlement Agreement was defective with respect to the Settlement Agreement’s causation framework. Id. at 374-75. Deepwater Horizon III arose from the remand of Deepwater Horizon I. On remand, after analyzing the Settlement Agreement and Alternative Causation Policy, the district court concluded that “the language of the Settlement Agreement did not require extrinsic inquiry into causation and that the Settlement Agreement had not violated Article III, Rule 23, or the Rules Enabling Act by eschewing the need for evidence of causation.” Id. at 374. After BP appealed this order, the Deepwater Horizon III majority found that “the parties explicitly contracted that traceability between the defendant’s conduct and a claimant’s injury would be satisfied at the proof stage, that is, in the submission of a claim, by a certification on the document that the claimant was injured by the Deepwater Horizon disaster.” Id. at 376. It thus concluded that “the Settlement Agreement does not require a claimant to submit evidence that the claim arose as a result of the oil spill,” id. at 376-77, and affirmed the district court’s order, id. at 378. The Settlement Agreement does not contemplate that the Claims Administrator will undertake additional analysis of causation issues beyond those criteria that are specifically set out in the Settlement Agreement. Both Class Counsel and BP have in response to the Claims Administrator’s inquiry confirmed that this is in fact a correct statement of their intent and of the terms of the Settlement Agreement. The Claims Administrator will thus compensate eligible Business Economic Loss and Individual Economic Loss claimants for all losses payable under the terms of the Economic Loss frameworks in the Settlement Agreement, without regard to whether such losses resulted or may have resulted from a cause other than the Deepwater Horizon oil spill provided such claimants have satisfied the specific causation requirements set out in the Settlement Agreement. 24 Case: 13-30843 Document: 00513036264 Page: 25 Date Filed: 05/08/2015 No. 13-30843 BP argues that the Final Rules should be modified to reflect the holding in Deepwater Horizon III that the Settlement Agreement contains a causalnexus requirement—that a class member’s injury be plausibly traceable to the oil spill—and that “implausible claims” that do not satisfy that requirement should be addressed as they arise. Rather than argue against the policy itself, 15 BP seems to argue that the Claims Administrator has refused to enforce the Settlement Agreement’s causal-nexus requirement due to a misapplication of the Alternative Causation Policy. However, this argument does not show how the district court’s decision to preclude from its review cases based on the Alternative Causation Policy is an abuse of discretion. Though BP does not raise this as part of its argument, the Alternative Causation Policy was also at issue in In re Deepwater Horizon, 739 F.3d 790 (5th Cir. 2014), cert. denied, 135 S. Ct. 754 (2014) (“Deepwater Horizon II”). In Deepwater Horizon II, BP appealed from the district court’s order certifying the class action and approving the settlement. Id. at 795. In its appeal, BP argued, inter alia, that the Matching Policy and Alternative Causation Issue “permit[ted] claimants without any actual injuries caused by the oil spill to participate in the class settlement and receive payments,” causing the Settlement Agreement to be in violation of Rule 23, the Rules Enabling Act, and Article III of the U.S. Constitution. Id. at 798. This court rejected this argument and held that the district court did not abuse its discretion in certifying the class and affirmed the class certification order. Id. at 821. Considering how Deepwater Horizon II and Deepwater Horizon III did nothing to nullify or call into question the Alternative Causation Policy, but 15 Indeed, as this court has previously observed, no party ever formally objected to the Policy Announcement, and the district court order that adopted the Policy Announcement was never independently appealed. In re Deepwater Horizon, 739 F.3d 790, 797 (5th Cir. 2014), cert. denied, 135 S. Ct. 754 (2014) (“Deepwater Horizon II”). 25 Case: 13-30843 Document: 00513036264 Page: 26 Date Filed: 05/08/2015 No. 13-30843 actually substantiated the policy, we find no error of law underlying the district court’s decision to preclude cases involving the Alternative Causation Policy from its discretionary review. We thus find no abuse of discretion here. C. Categorical Preclusion of Cases Involving the Non-Profit Policy BP appears to argue that we should vacate the Final Rules with respect to the Non-Profit Policy 16 because the policy was not yet definitively reviewed by this court at the time of the May 20 Order. We find no merit to this argument. The district court may adopt rules regarding the administration of a settlement agreement before the basis has been definitively reviewed by this court. BP provides no authority for a rule to the contrary. In any event, we uphold the Non-Profit Policy in the Non-Profit Appeals, 17 also decided today.