The 5th Circuit Court of Appeals issued a ruling on October 3rd on BP’s appeal regarding how certain types of accounting principles apply when utilizing the Settlement Program’s economic formulas for computing the “amount” of a client’s claim for losses.
Simply put, the 5th Circuit’s Order rules that Judge Barbier, the Claims Administrator, Plaintiffs’ counsel, and BP revisit and potentially agree on how to deal with certain cash accounting methodologies as we apply the formulas of the Settlement Program to certain business economic loss (BEL) claims moving forward. For now, the Claims Administrator will not be paying BEL claims that use cash accounting methodologies until that resolution is reached for the classes of BEL claims covered by the Order.
It is important to understand that this appeal only dealt with how certain BEL claim “amounts” are calculated. The 5th Circuit’s ruling in no way changes who qualifies, how causation is determined, and what initial documents are required to perform initial client intake. Right now, the only thing in flux is possibly changing is the calculation the amount of a client’s claim.
In our opinion, the Appellate Court is signaling that accrual accounting methods appear to be the fair way to identify lost profits tied to the spill. We anticipate that the parties involved will work to frame up a new cash accounting methodology to effectively value and compensate BEL claims in the coming months consistent with the guidance provided through the new ruling. How that is going to look will take time to shake out, so, for now, we wait and see.
The Program remains intact and operational under the Program’s terms. In fact, the only thing that has temporarily stopped is the payment of certain BEL claims as the District Court re-evaluates the accounting methodology used for those claims that are impacted by the Order.