Case: 18-30644    Document: 00514905695     Page: 1   Date Filed: 04/08/2019




        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT     United States Court of Appeals
                                                    Fifth Circuit

                                                                          FILED
                                                                        April 8, 2019
                                  No. 18-30644
                                                                       Lyle W. Cayce
                                                                            Clerk
BP EXPLORATION & PRODUCTION, INCORPORATED; BP AMERICA
PRODUCTION COMPANY; BP, P.L.C.,

             Requesting Parties – Appellants,

v.

CLAIMANT ID 100166533,

             Objecting Party – Appellee.




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


Before STEWART, Chief Judge, and DAVIS and ELROD, Circuit Judges.
JENNIFER WALKER ELROD, Circuit Judge:
      This Deepwater Horizon case involves the fixed vs. variable cost issue
that has arisen frequently in appeals of claims submitted pursuant to BP’s
Economic and Property Damages Settlement Agreement (Settlement
Agreement). Because the reviews conducted by the Claims Administrator and
Appeal Panel were consistent with our recent decision in Texas Gulf Seafood,
and because BP’s arguments regarding the substantive accuracy of the “fixed”
classification only raise the correctness of a fact-dependent decision in a single
claimant’s case, we AFFIRM the district court’s judgment.
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                                       No. 18-30644
                                              I.
       The claimant here, Ordes Services LLC (Ordes), is an electrical
contractor that provides installation, maintenance, and repair services in
southeast Louisiana. Ordes submitted a claim pursuant to the Settlement
Agreement in March 2013. Relevant here, in the profit-and-loss statements
Ordes submitted with its claim, Ordes recorded an expense labeled
“Management Fee.”             The Claims Administrator requested additional
information about this expense during the processing of Ordes’s claim.
       In October 2017, the Claims Administrator determined that Ordes was
entitled to $2.1 million under the Settlement Agreement. In calculating the
award, the Claims Administrator classified Ordes’s Management Fee as a
“fixed” cost rather than a “variable” cost under the Settlement Agreement. 1 BP
appealed to a three-member Appeal Panel, challenging the Claims
Administrator’s treatment of the Management Fee.                       The Appeal Panel
concluded that the Claims Administrator had properly categorized the expense
as fixed and affirmed Ordes’s award. The district court denied BP’s request
for discretionary review.




       1We explained the significance of the fixed vs. variable cost classification in Texas
Gulf Seafood:

    Variable Profit is central to calculating damages in a [Business Economic Loss]
    Claim. Step 1 Compensation is determined by calculating “the difference in Variable
    Profit between the 2010 Compensation Period selected by the claimant and the
    Variable Profit over the comparable months of the Benchmark Period.” Variable
    Profit, in turn, is defined as the sum of monthly revenue over the Benchmark Period
    minus variable costs identified in Exhibit 4D, among others. Thus, whether a cost is
    defined as “variable” (and factored into Variable Profit calculations) or “fixed” (and
    excluded from such calculations) can significantly alter the size of an award.

       BP Expl. & Prod., Inc. v. Claimant ID 100094497 (Texas Gulf Seafood), 

,
799 (5th Cir. 2018). Exhibit 4D to the Settlement Agreement, which contains a list of
expenses the parties have designated as either fixed or variable, lists “Fees” as a fixed cost.
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                                  No. 18-30644
                                        II.
      This court reviews the district court’s denial of discretionary review for
an abuse of discretion. Holmes Motors, Inc. v. BP Expl. & Prod., Inc., 

, 315 (5th Cir. 2016). The district court abuses its discretion if the decision
it declined to review “actually contradicted or misapplied the Settlement
Agreement, or had the clear potential to contradict or misapply the Settlement
Agreement.” 

re Deepwater Horizon, 641 F. App’x 405, 409–10
(5th Cir. 2016)). It is also an abuse of discretion to deny a request for review
that “raises a recurring issue on which the Appeal Panels are split if ‘the
resolution of the question will substantially impact the administration of the
Agreement.’” BP Expl. & Prod., Inc. v. Claimant ID 100094497 (Texas Gulf
Seafood), 

, 800 (5th Cir. 2018) (quoting Claimant ID 100212278 v.
BP Expl. & Prod., Inc., 

, 410 (5th Cir. 2017)). In contrast, the
district court does not abuse its discretion if it denies a request for review that
“involve[s] no pressing question of how the Settlement Agreement should be
interpreted and implemented, but simply raise[s] the correctness of a
discretionary administrative decision in the facts of a single claimant’s case.”

original) (quoting Claimant ID 

).
                                       III.
      On appeal, BP contends that the district court’s denial of discretionary
review was an abuse of discretion for two reasons: (1) the district court failed
to resolve an Appeal Panel split regarding the proper approach to classifying
fixed vs. variable expenses; and (2) classifying the Management Fee as “fixed”
was substantively incorrect.
                                        A.
      We recently resolved the Appeal Panel split that BP complains of in our
decision in Texas Gulf Seafood. There, we set out the proper approach for


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                                 No. 18-30644
Claims Administrators and Appeal Panels in classifying fixed vs. variable costs
under the Settlement Agreement:
      [T]his court holds that the Settlement Agreement requires claims
      administrators to use their independent judgment and classify
      expenses as “fixed” or “variable” according to their substantive
      nature, rather than rational basis review of the claimants’ own
      descriptions. Appeal Panels, too, are bound by the substantive
      nature of the expense claims under the Settlement Agreement
      rather than the claimants’ inaccurate characterizations.

Because the Appeal Panel relied on the claimant’s “rational basis”
for classifying the disputed expense as fixed rather than conducting an
independent review, we vacated the claimant’s award and remanded the case
for reclassification of the expense. 

      In a subsequent unpublished case, we applied Texas Gulf Seafood’s
holdings to a set of facts similar to this case: the Claims Administrator and
Appeal Panel classified an expense the claimant labeled “Management Fee” as
fixed rather than variable, and the district court denied BP’s request for
discretionary review. BP Expl. & Prod., Inc. v. Claimant ID 100185315, 

, at *1 (5th Cir. Feb. 8, 2019). On appeal, we vacated the claimant’s
award because the Appeal Panel “did not address the substantive nature of the
expense” and instead found that the Management Fee was a fixed expense
because Exhibit 4D lists “fees” as a fixed cost. 

Consequently, because
the Appeal Panel improperly “focus[ed] on the label given to the expense,” we
remanded for proper classification. 

      BP contends that, given the factual similarity, our decision in Claimant
ID 100185315 controls here.       We disagree.     While the expense at issue
resembles the disputed expense in that case, the Claims Administrator and
Appeal Panel here engaged in the kind of independent, substantive analyses
that Texas Gulf Seafood requires.


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                                 No. 18-30644
      Beginning with the Claims Administrator, it included the following
calculation note with its documentation in support of Ordes’s award:
      DWH Accountant further noted the Claimant recorded expenses to
      account ‘Management Fee Expense’. Per the Claimant’s attorney,
      the Claimant is in contract with Ordes Electric, Inc. Ordes
      Electric, Inc. provides management services to the Claimant,
      including providing office and warehouse space, insurance
      coverage, office personnel, equipment, supplies, utilities,
      telephone services, etc. The expense is calculated based on sales of
      the combined companies (Ordes Services, LLC and Ordes Electric,
      Inc.), and the Claimant pays the percentage portion of the
      management service expenses equal to its portion of the combined
      sales . . . . There are no shared revenues between the
      companies . . . . As such, DWH Accountant classified the account
      as ‘Fees – Fixed’.

The Claims Administrator therefore expressly considered the substantive
nature of the Management Fee: it examined the types of costs included as well
as the fact that the amount is calculated based on Ordes’s sales. Significantly,
the Claims Administrator did not merely defer to Ordes’s label for the expense,
nor did it rely only on whether that label was listed as a fixed cost in Exhibit
4D of the Settlement Agreement.            This demonstrates an exercise of
independent judgment on the part of the Claims Administrator consistent with
Texas Gulf Seafood.
      In its decision affirming the Claims Administrator’s award, the Appeal
Panel stated the following:
      This Appeal Panel has conducted a de novo review of the record in
      this matter. That review and the nature of the charges included
      in the “Management Fee Expense” account (See Exhibit 4D[] of the
      Settlement Agreement[)] compel this Appeal Panel to unanimously
      conclude that the [Settlement Program]’s professional staff
      properly categorized the expense as fixed.

Thus, the Appeal Panel did not defer to the claimant’s “Management Fee” label
as prohibited by Texas Gulf Seafood—instead, it conducted its own de novo

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                                   No. 18-30644
review of the expense classification. Importantly, the Appeal Panel specifically
stated that it had considered “the nature of the charges included” in the
Management Fee before concluding that it was properly categorized as fixed.
It did not, as in Claimant ID 100185315, affirm the “fixed” classification merely
because “fees” are listed as fixed on Exhibit 4D. Accordingly, the Appeal
Panel’s decision comports with Texas Gulf Seafood as well, so the district court
did not abuse its discretion in denying discretionary review.
                                         B.
        BP separately asserts that classification of the Management Fee as
“fixed” was substantively incorrect and that this error alone warranted
discretionary review. Because the Management Fee fluctuates depending on
Ordes’s sales, the argument goes, it should properly be classified as a “variable”
cost under the definition set out in Texas Gulf Seafood. 

n.2.
        Even if BP is correct that Ordes’s Management Fee is a variable cost, an
inaccurate expense classification “simply raise[s] the correctness of a
discretionary administrative decision in the facts of a single claimant’s case.”

(alteration in original); see also Claimant ID 100250022 v. BP Expl.
& Prod., Inc., 

, 170 (5th Cir. 2017) (“In reaching our decision that
the district court did not abuse its discretion in denying discretionary
review . . . , we need not examine whether the [Settlement Program] was
actually correct . . . .”). Therefore, the district court did not err in declining to
grant discretionary review to determine whether the Claims Administrator
and Appeal Panel accurately classified the Management Fee expense.
                                        IV.
        Because BP has not identified any issue requiring discretionary review
in this case, we AFFIRM the judgment of the district court.


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