The effects of the explosion from the Deepwater Horizon in the Gulf of Mexico on April 20, 2010 are still present today. The explosion killed 11 people and leaked 3.19 million barrels of oil into the Gulf of Mexico on the ocean floor 42 miles off the coast of Louisiana. It is likely that much of the oil spilled is still present in the Gulf today. As a result of the explosion and spill, a settlement agreement was made between BP and class action representatives that claimed damages from the disaster. The agreement included provisions for business economic-loss (BEL) claims for those companies that incurred damages resulting from the explosion and spill.
BP challenged (BEL) awards made to Wal-Mart stores, East, L.P. Its challenge was based on Walmart changing its accounting system one month after the explosion on the Deepwater Horizon. The accounting change affected the amount of Walmart’s BEL claims, which are based upon the difference between expenses before and after the disaster. BP contended that the change resulted in “artificially inflated award amounts.”
In June 2015, Walmart submitted BEL claims for each of its nine stores located along the Gulf Coast. BP questioned the validity of five of the claims. The United States Court of Appeals consolidated these claims in an appeal filed by BP. To facilitate reconciliation of the differences between the accounting systems, Walmart submitted supplemental documentation to the Claims Administrator for the claims in April 2017. After reviewing Walmart’s claims with PWC accountants, the Claims Administrator issued awards to Walmart in 2018 of over $17.4 million.
BP Appeal
BP appealed the Court Supervised Settlement Program (“CSSP”) awards. It argued the change in Walmart’s accounting system “made its profit and loss data for the pre-May 2010 period inconsistent with the subsequent period.” BP argued to the Appeal Panels that Walmart artificially inflated its awards by changing its accounting system. The change in accounting systems caused the pre-disaster period to appear more profitable compared to the later period following the Deepwater Horizon disaster.U.S. Court of Appeals Decision
The U.S. Court of Appeals was tasked with determining whether it should reverse the district court’s decision not to review a final award under the CSSP settlement program. The Court applied the abuse-of-discretion standard to the district court’s refusal to review the final award. In applying the standard, the Appeals Court considered whether the final award “actually contradicted or misapplied the Settlement Agreement or had the clear potential to contradict or misapply the Settlement agreement.”The Appeals Court noted the district court would not abuse its discretion if it denied a request for review that “involves no pressing question of how the Settlement Agreement should be interpreted and implemented,” but instead raised questions as to whether the discretionary administrative decision is correct or not.
