ID 100197593 v. BP Exploration & Production, Inc., 666 F. App'x 358

Background

Three franchisors sought lost royalty fees from the Deepwater Horizon Settlement Program, claiming losses due to franchisees’ reduced business in the Gulf Coast.
The Settlement Agreement defined class membership by four categories; relevant here are Section 1.2.1 (entities owning/operating/leasing a physical facility in the Gulf) and Section 1.2.2 (service businesses with one or more full-time employees, "including owner-operators," physically present in the Gulf).
The Settlement Program denied the franchisors’ claims under Section 1.2.1 (no qualifying "Facility"); the claimants instead relied on Section 1.2.2, arguing franchisors qualify if their franchisees (as owner-operators) worked in the Gulf.
The Appeal Panel and the district court rejected the franchisors’ Section 1.2.2 theory; the district court affirmed the Appeal Panel and consolidated identical claims for review.
On appeal to the Fifth Circuit, the court reviewed the contract-interpretation issue de novo and affirmed, holding franchisees’ separate, legally independent status prevents a franchisor outside the Gulf from satisfying the Settlement Agreement’s geographic-presence requirement.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether franchisors outside the Gulf qualify under §1.2.2 by virtue of franchisees operating in the Gulf	Franchisors argued §1.2.2 includes service businesses that have owner-operators (i.e., franchisees) in the Gulf, so franchisor membership need not be tied to the franchisor’s physical presence	BP argued §1.2.2 requires employees/owner-operators to be part of the service business itself; franchisees are legally independent and cannot confer geographic presence on franchisors	Held: §1.2.2 cannot be read to allow franchisors outside the Gulf to join the class based on independent franchisees’ presence; geographic requirement requires the persons to be part of the claimant entity
Proper interpretation of "including owner-operators" in §1.2.2	Claimants read "including owner-operators" as capturing franchise relationships where owner-operators are not employees of the franchisor	BP and the Appeal Panel read "including" as identifying a subset within the business’s own workforce (e.g., sole proprietor owner-operators)	Held: Court affirmed that the phrase requires owner-operators to be part of the claimant business; claimant reading is foreclosed by the Agreement and related provisions
Whether other Settlement Agreement provisions (e.g., Exhibit 5, Facility definition) permit franchisors to recover via franchisees	Claimants argued other provisions do not preclude their §1.2.2 reading	BP pointed to Exhibit 5 and the Facility definition and policies treating franchise locations as not franchisor facilities when franchisor does not own/lease the property	Held: These provisions and Final Policy contradict claimants’ interpretation and support excluding franchisors who lack Gulf facilities
Whether appellate court should consider a new argument that one franchisor owns a non-franchised Gulf location (Eligibility Notice) raised for first time on appeal	Claimants argued an Eligibility Notice issued after district-court decision proves class membership under §1.2.1 and entitles recovery of royalties	BP and lower tribunals never ruled on this theory; the consolidated proceedings stipulated identical issues focusing on §1.2.2	Held: Court refused to consider the new argument raised first on appeal and denied judicial-notice/supplemental-record requests

Key Cases Cited

In re Deepwater Horizon, 739 F.3d 790 (5th Cir.) (prior appellate decisions interpreting settlement framework)
In re Deepwater Horizon, 785 F.3d 1003 (5th Cir. 2015) (standard for review of legal questions in settlement interpretation)
United States v. Delgado-Nuñez, 295 F.3d 494 (5th Cir. 2002) (standard-of-review discussion)
New Hampshire v. Maine, 532 U.S. 743 (2001) (judicial estoppel elements)
Gabarick v. Laurin Mar. (Am.) Inc., 753 F.3d 550 (5th Cir. 2014) (judicial estoppel requirement that prior position convinced a court)
Bayou Liberty Ass’n, Inc. v. U.S. Army Corps of Eng’rs, 217 F.3d 393 (5th Cir. 2000) (rule against considering issues raised first on appeal)