Show Me Your Business Model: Fifth Circuit Court of Appeals Upholds Lower Court’s Discretionary Review Powers Under the Court Supervised Settlement Program

Show Me Your Business Model: Fifth Circuit Court of Appeals Upholds Lower Court’s Discretionary Review Powers Under the Court Supervised Settlement Program

By: Ainsley Davidson Fagan

 Holmes Motors, Inc. v. BP Expl. & Prod., No. 15-30860, 2016 U.S. App. LEXIS 12743 (5th Cir. July 11, 2016); Holmes Motors, Inc. v. BP Expl. & Prod., Inc., No. 15-30860, 2016 WL 3708172 (5th Cir. July 11, 2016)This dispute arose under the Court Supervised Settlement Program (“CSSP”), a program created to manage claims relating to the Deepwater Horizon Explosion with BP Exploration and Production, Incorporated (“BP”). Appellant, Holmes Motors, Inc. (“Holmes”), appeals the lower court’s declination to review the Claims Administrator’s reclassification of Holmes’ business from a “start-up business” to a general business.Holmes originally filed a claim with the CSSP regarding Holmes’ car dealership in Biloxi, Mississippi. To be a start-up business under the CSSP, a business must have started in the eighteen months prior to the explosion of the Deepwater Horizon in 2010. Holmes was founded in 1990, and incorporated in 1999 but began a new line of business within the eighteen-month period prior to the explosion. Holmes filed a request with the district court for discretionary review after unsuccessfully challenging CSSP’s internal process, through which the CSSP determined the appellant’s claim should be reclassified from a start-up business claim to a general business claim. The district court denied the request without opinion, and Holmes appealed.Holmes first argued that the district court erred in denying discretionary review because the reclassification of his business was an incorrect interpretation of the Settlement Agreement. Holmes argued that the meaning of a “business” is a “line of business”, not the business entity itself, citing his business model change from selling to leasing cars in early 2010. The court reasoned that this line of thought would result in any claimant’s business definition shifting solely because the business began a new line of work. The court ultimately rejected Holmes’ interpretation because the Settlement Agreement states that its interpretation is subject to General Maritime Law, which gives plain meaning to contractual language unless the wording is ambiguous. The Settlement Agreement states that business claimants refer to entities or self-employed natural persons. When the Settlement Agreement discusses the time bar on start-up business claims, the contract states that the “claimant” must have operated less than eighteen months. Thus, according to the court, the combination of these two statements defined a start-up business, under the Settlement Agreement, as a business entity with less than eighteen months operational time. Additionally, the court stated that even if it agreed with Holmes, it was not persuaded that the new line of business, while having different business models, was substantially different enough from the original line of business at incorporation.Second, Holmes argued procedurally that the district court abandoned its duty to review his request under its responsibility to “meaningfully supervise” the Settlement Agreement. Holmes insisted that the district court should use its power of review when legitimate issues about the understanding of the Settlement Agreement arise. The court stated that Holmes’ suggestion that the district court must review all claims is wrong as the parties to the Settlement Agreement agreed to discretionary right of review, and any assertion of a mandatory review is contradictory to the purpose of the Settlement Agreement.