Lake Eugenie Land & Development, Inc. v. BP Exploration & Production, Inc.
732 F.3d 326
| 5th Cir. | 2013Background
- The Deepwater Horizon spill (Apr. 20, 2010) spawned a class settlement (final approval Dec. 21, 2012) establishing a court-supervised claims program administered by a Claims Administrator to compensate Business Economic Loss (BEL) claimants under Exhibit 4 (4A–4C).
- Exhibit 4C defines Variable Profit as: (1) sum monthly revenue over the period, then (2) subtract the corresponding variable expenses over the same time period; claimants choose Compensation and Benchmark periods.
- BP objected that the Administrator and Class Counsel were treating "revenue" and "expenses" on a cash-basis (cash receipts/disbursements) rather than by matching revenues to the expenses that produced them (accrual principles), producing inflated or fictitious awards.
- Administrator issued a Policy Announcement (Jan. 15, 2013) generally treating revenues and expenses as recorded (not reallocating periods) but reserving adjustment rights for errors or inconsistent accounting; the district court affirmed (Mar. 5, 2013).
- BP sued the Administrator for breach of contract and sought a preliminary injunction to stop payments under the district court’s interpretation; the district court dismissed the breach claim and denied injunctive relief. BP appealed.
Issues
| Issue | Plaintiff's Argument (BP) | Defendant's Argument (Administrator/Class Counsel) | Held |
|---|---|---|---|
| Proper meaning of "revenue", "expenses", and "corresponding" in Exhibit 4C (matching vs. cash basis) | Exhibit 4C requires accrual-style matching: expenses must be matched to the revenues they produced; cash-basis treatment permits artificial results. | The settlement allows processing based on claimants' contemporaneous records; Administrator will typically use revenues/expenses as recorded and not reallocate by period. | Exhibit 4C is ambiguous as to whether unmatched cash-basis claims must be converted/matched; remanded for factual development. District court’s cash-only interpretation reversed in part. |
| Treatment of accrual-basis claims | Accrual records should be matched; cannot be ignored or converted to cash treatment. | Administrator/ Class Counsel asserted he processes claims as presented; did not convert matched accrual records to cash. | Court requires assurance on remand that accrual-basis matched records are not being ignored; remand to clarify Administrator’s practices. |
| Meaning of "comparable" months (whether it means comparable activity months or same calendar months) | BP: "comparable" should mean months with comparable business activity (to avoid distortions). | Administrator/Class Counsel/district court: "comparable" naturally refers to same calendar months in Benchmark and Compensation periods. | Court affirms district court: "comparable" means same calendar months; BP’s alternative unsupported. |
| Whether settlement improperly permits payments to claimants with no colorable legal claim (Article III/Rule 23 concerns) | Inclusion/processing under cash interpretation enables awards to claimants with no causal injury or colorable claim; that would violate Article III and Rule 23 and make settlement unlawful. | Administrator/Class Counsel: settlement and class approval addressed causation and eligibility; broad settlement needed for global resolution; BP acquiesced during negotiations. | Majority warns such inclusion would be unlawful and relevant to interpretation; but declines to resolve certification/Rule 23 constitutional issues now — remand focuses on Exhibit 4C interpretation and ensuring invalid claims are not paid during appeal (narrow stay). |
Key Cases Cited
- Waterfowl L.L.C. v. United States, 473 F.3d 135 (5th Cir.) (standard: de novo review for contract/settlement interpretation)
- Janvey v. Alguire, 647 F.3d 585 (5th Cir.) (standard of review for preliminary injunction: factual findings clearly erroneous; legal conclusions reviewed broadly)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (standing requires concrete injury and traceability)
- Richardson v. United States, 468 U.S. 317 (definition of "colorable claim")
- Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (settlement-class certification constrained by Article III and Rules Enabling Act)
- Sullivan v. DB Invs., Inc., 667 F.3d 273 (3d Cir. en banc) (debate over class inclusion of claimants with doubtful legal claims; discussion of limits of Rule 23 in settlement context)
- Rufo v. Inmates of Suffolk Cnty. Jail, 502 U.S. 367 (consent-decree modification: heavy burden to show changed circumstances)
- United States v. Armour & Co., 402 U.S. 673 (consent decrees interpreted within their four corners; courts should not rewrite terms)