June 11, 2017: See UPDATE.
April 2, 2015: Earlier this week Judge Barbier denied Class Counsel’s long pending Motion to Reconsider Policy 495: Matching of Revenue and Expenses. Class Counsel had sought to limit the application of the policy to cash basis claims, as Judge Barbier, the 5th Circuit and BP had indicated that matching was largely a problem found in claims supported by cash P&Ls, not accrual. The motion also asked Judge Barbier to reduce the number of specialized loss compensation formulas to one, the Annual Variable Margin (AVM) model.
While the denial of the Motion to Reconsider is disappointing, it does nothing to change the fact that Policy 495 requires Claims Administration accounting vendors to exercise their professional judgment in order to determine if a P&L is insufficiently matched. Relying solely on the seven volatility screens is not permitted under the very precise terms of Policy 495. The screens are simply a tool to silo certain claims for the required “further matching analysis.” It is during this further analysis that professional judgment must be brought to bear, as many perfectly matched accrual P&Ls will be flagged by the overly inclusive screens. Finally, in close cases or where ambiguities arise, the decision regarding matching must be made in favor of the claimant.
If the accounting vendors apply their professional judgment, then according to BP, “many” accrual P&Ls will be deemed sufficiently matched at the outset, even if they trip one or more of the seven screens. Indeed, Judge Clement of the 5th Circuit Court of Appeals said that the “vast majority” of accrual basis BP claims are inherently matched.
Finally, if an accounting vendor deems a P&L insufficiently matched, she must defend and document her position by citing something more than a simple trigger event. If the occurrence of one or more triggers was to be determinative of an insufficiently matched P&L, then the Claims Administration could have simply employed robots for the job.