Legal Case Summary

Good afternoon everyone. The first case is TransTech Industries. This case started off as a circle action in 1990. Is that correct? A case started off in 1990 as a circle action. That's correct, Judge. So that would be 1331 jurisdiction, federal question. But this case relates to an agreement, a lawsuit between TransTech and SCA. And that is a federal question. Well, the agreement is actually now a growth of several different lawsuits. One of which is the federal lawsuit that you refer to. But whether arbitration applies or doesn't apply in central, whether the arbitrator did something that would allow the arbitration award to be overturned, but it relates to a contract, a settlement agreement, if you will, between SCA and TransTech. Is that correct? That is correct. That's not federal question. Well, so you have the diversity, right? Well, any of it self, you're right, it's not the contract itself, and its construction is not a federal question, but it was a settlement of a several different lawsuits, one of which included the lawsuit that you have referred to. But does that make any, that doesn't give you a federal question? In other words, you and I can settle something, we have dispute about something that may, once upon a time, have dealt with a federal law. But our contract would be subject to some state law that we would pick. Except in this regard, you're on the settlement was regarded by the district court when we approached the district court as an outgrowth of that continuing lawsuit. You even know that lawsuit was put into an inactive status. It still retains, it still does retain that document number. Why did you follow under that old docket number? It was a motion to enforce a settlement of that lawsuit, and portions of that lawsuit, and settles other portions as well. That's settled in the claim list. If you had gone under that old docket number, the question that Judge Ambro has is asking, probably wouldn't be out there. I'm sorry, the thing. You followed a new suit, did you not? Well, we followed a new suit and state court. Actually, we didn't, the our adversaries did. Your adversaries did, too

. Which was then dismissed, because all parties agreed that we would proceed by way of motion in the existing federal lawsuit. All right. And it was accepted by the federal district judge on that basis, because it did result the issues that had been... But it was given a new number. That is correct. Okay. But then you're suing on an agreement, and you started, they filed and state court, so you removed the federal court? Nobody did not remember. They simply, we filed our motion in federal court, and it was accepted in federal court by the district judge on that basis. The suit that had been initiated in the state court was dismissed by agreement between the parties. But even if you tried to do that, I mean, I guess I'm analogizing from some pre-core cases, like a Conan and others, which just says, if you and I have a dispute, and we have a settlement agreement, and then we get rid of the... We tell the judge, okay, the case is over, and then I, as a result of that settlement agreement, I somehow violated it. I think the Supreme Court and the Cunters says you have to file... You have to file against me a new suit. You can't just go into the court and say, reopen the old case. So I think it sounds real like he gives it right. Failed here by giving it a new number. So my question is, how do you have..

. how do we have jurisdiction? Although not, wait, because it was not asked to be filed, as we're going to begin, just as a motion by the federal district judge, you do have the issues under the FAA, which are being addressed. In addition to it, I'm not absolutely certain about this on the top of my head, but trans-stack, and I would have to be careful about this, because I think the trans-stack and certain others of the plaintiffs and in our action here are Delaware corporations, and that SEA is not. I'm not absolutely certain about that. So they're both Delaware corporations? I'm not sure if they are on judge. I thought they both were once there, doing principal place of business in different states, but 1332, I think says that you are, in fact, don't solve where you have organized and where you have your principal place of business, so you could try to get it either way, but if you've got two Delaware corporations, if that's correct, then you've got a diversity problem. No, I understand. I do not recall the state of incorporation of either trans-stack or field crest, or Kenbach, which are the other named parties. I can't get a definitive answer to that as to whether they are or not diverse, but we did, again, file an as a motion pursuant to settlement of the preexisting suit, and it was received as a motion by the federal district, according to the issued jurisdiction, for that it was not raised, but I might understand your reasoning now, and the best answer I have is... Yeah, I mean, similar to that we have to be sure we have, but maybe, as I said, you could try to vote your head on the Federal Arbitration Act. That's what I just have. Yeah, that's what I've just referred to as saying that that's the question jurisdiction, but it seems to me that the dispute here is over a settlement here. That's why you've come back to it. Well, the dispute is over a settlement agreement, but it seems to vacate an arbitrary decision, which was rendered in accordance, ostensibly, with the FAA. So I think we'll be looking at it in that respect. It does present a federal question, as could the application of the FFA to what this auditor did in particular? We are not actually assuming to enforce or not enforce a contract. We are... We, as soon as was filed, but an action of motion was filed to confirm the auditor's award, we responded with our motion to vacate it. So the issue was not a suit on a contract, but the issue was confirmation or affirmation of the perpetrators' award. And I think that would constitute a sufficient federal question to give us jurisdiction. Very good. If we

... We'll discuss this matter, and if we decide we need further briefing, we will let you know. Let's... We'll start you off at the beginning. We'll put 12 minutes back on, please. Thank you, Your Honor. Good. I know for... There are a lot of issues here, at least for myself, the funk-tissed of Fissio issue, I think, is the most interesting to me. I just want to make sure that you hit that, and the fact that it may be your strongest argument of all the ones that you've raised. I won't do just that, Your Honor. I think we have a pretty good idea of the facts in this case. With regard to the front-end of the Fissio situation, Your Honor, we can tell that there's a thread of fundamental and trans-competitors regarding the scope of the arbitrage of the assignment. And then we wrote the agreement and dispensed as ungrown of justice throughout the other issues that we raised, the inclusion of the insolvenist and sort of the inclusion of the cancel of the coverage. But it's most apparent in the calculation of the tax deduction. When you rendered his first decision, it was very clear that... But how is that exceeding his power? That's what Fissio's about, right? Well, he doesn't exceed his power, Your Honor, until he renders the second decision. When he renders the first decision, it is very clear that in that paragraph in his first decision that he concluded in lightfully said that this was to be a calculated tax liability, and was not going to be based on actual payments or actual settlements

. Was it clear, though? Wasn't it ambiguous? The way that he didn't he rendered his opinion in an ambiguous way? I don't believe so, Your Honor. I think that it was very clear that he understood and acknowledged and so stated in his decision that it is a calculated tax liability. And when he did that, he included the calculation. The taxes would go back to that paragraph 5.1. They, their three components that are to be calculated and applied. What he did, however, was once he received that tax for a pair of certificate, and I will note that he did when he rendered his first decision for the legend at the bottom, which said that he was obtaining jurisdiction, but he was obtaining jurisdiction for the sole purpose of receiving that tax for a pair of certificate in accordance with his first decision. We did just that, but when we did that, it was clear that there was going to be no payment to SCA, and that disturbed him, and with nothing further, then he changed his decision. How do we know that it's a reversal? We know by simply looking at the language of the two paragraphs, one paragraph states that it is to be a calculated tax liability. The second decision says that it is not to be a calculated tax liability, that it is to be the actual tax. The first one says that it is not to be a payment or a settlement with the internal revenue service, and the second one says that's exactly what it's supposed to be. There is to be a payment. Now with regard to that first decision, that first decision also paid attention to the clear language of 5.1b in the settlement agreement. Well, was it clear because the section starts off the sum of x, the amount paid or owed for income tax purposes? I mean, now... That's going to be actual tax? It's going to be actual tax, and so on. If you were to stop right there, I would agree. That means that we ignore the risk of that paragraph from... The shall be computed language. I'm sorry, the shall be computed in language. The shall be computed language, in addition to that, the calculation in it was to be a calculated tax liability, was to be on account of adjustments in our reading for a line standout

. On account of adjustments to the taxable income of trans-text consolidated group, then all that had occurred for the years from 1981 to 1992. In each one of those years, the IRS would ultimately determine what additions there ought to be to the income of trans-stack for that particular year. What this calculation was supposed to do was to calculate the tax associated with the adjustment to income. That's exactly what the language says, and that's what he was telling us to do to do a calculated tax liability. In addition, 5.1 B towards the end of it tells us how it is that we ought to calculate not just the two gross up figures. That's the y in the z, but to calculate x, which is the tax. And what that says is the federal and state tax rates utilized to determine x, not just y and z, but x, y and z, shall be computed at the highest marginal federal rate and the Jersey State income. In addition, tax rate in effect for the taxable year in which the recoveries are included in the taxable income of trans-text consolidated group. Now, what that meant was that you were to identify the increase in income and then calculate the tax associated with that increase in income for each one of those years. But to utilize the maximum federal rate in effect in a different year in the year in which the recoveries were received in 2002. Now, his first agreement, or rather his first decision, tells us to do exactly that and that is what we did. When he receives it and sees that there is to be no agreement made, then he changes it completely. Now, he says that the state of the state objected that time to the finding of the prepared certificate. Yes, they did. You're under the same object. It doesn't, if the FSCA objected, can't you clearly infer from that objection that the arbitrator still had jurisdiction and that the front is official argument didn't lie? I don't believe so. You're honor for another reason. One of which is the only objection that they made was to the result. There was nothing put before the arbitrator, which would change the interpretation of the 9.1 b. The only thing that they could forward was that there have been certain actual tax determinations made by the internal revenue service. And they said, how fair can this be? Because now we're going to have a very large tax liability calculated, which is substantially an excess of the actual tax that's going to be paid. That statement is true, but that does not change the operation of 5.1 b

. The force has changed the intent that the parties have when they get into it. In fact, he had said, this is what I think this means in his statement and his first decision. Tell me what you think. We've been in a different circumstance. He did not do that. He said, I understand that this is a calculated tax liability. The other element of this is that this says that the taxes to be applied on the adjustment to income. Now, what it doesn't mean is it doesn't mean that it's supposed to be a debt of money, the actual tax to be paid. Because the actual tax to be paid will consider not just the increase in the income, but the deductions to be made to that by net operating loss carrying forwards, by investment tax credits, all of which Triestec had available to them. But they always regarded those things as their assets, and that SDA should not improve its situation by being able to avail themselves of those income tax credits. When he made his first decision, it was crystal clear that he was determining that it was a calculated tax liability. When he says, I'm going to now define X in the second. One, and he says, X is now the actual tax payment. That is not a clarification. One of the ways that you could determine whether it was a clarification or not is to ask yourself, can I implement the second decision and have it remain consistent with the first decision? Well, we had to do because we gave it to our tax preparer and said, this is what the judge said to do, and the tax preparer rightly responded by saying, I can't do that. But the first decision was based on the first preparer's certificate, correct? I mean, that was what you in less was the deduct for taxes. The first decision was based on... On October of 2002, was that the first decision? That's correct. And so you were basing on the preparer's certificate saying what there were about $6 million of tax liabilities, that correct? No, it was $9 million with the decision. I'm sorry, that's not correct. That was fair. There was $2.9 million with the tax liability, and there was $10 million with the interest that accrued on that

. But I ask you a question more precisely, Your Honor. You indicated that his decision was based on the tax preparer's certificate, exactly the other way around. His decision was based on all the submission that he made to him and his reading. But the tax preparer's certificate was $1, up then, correct? No. When he looked at what the order of the submission's to him, any agreement had he decided that this is to be a calculated tax liability and not based on the actual payments and settlements with the eternal revenue service. Then the tax preparer submitted his certificate based on that ruling. But the first tax preparer's certificate was dated what? I think he's a Phoenix 129 or something like that. Well, I thought it was life's 6.7 million, but what was the date of that? 6.7. And the March. March of 02, right? So the decision comes out and among the things he took into account, then giving his first decision was October of 02. And then you come out in December of 02 and saying in effect, the first tax preparer's certificate was incorrect. The 6.7 should now be something like 16, 16, 6, all 16, 7. Not precisely. Let me be more precise in my response. When I say the first tax preparer's certificate, I'm referring to the one that was generated after he rendered his decision. That's why I've been referring to that. And those figures are different. Tax preparers' certificates had been prepared and submitted before that, and they contained errors. And we have admitted that they were contained, that they contained errors. What we did, however, is we submitted, not just the tax preparer's certificate, that had been submitted. We submitted all of the information with regard to what power were at 5.1 be meant

. And then he made his decision as to what 5.1 be meant. Not based on the right side. That's the public. Yeah, not based on the buttons, tax certificate, instead of the prepared. But on the evidence from the drafts and from all the arguments of counsel, et cetera. And when he made that decision, it was not based on what I had been submitted. Actually, something was submitted as you indicated, along back in 2002. That we indicated was in error, and was not coming back. That's like, according to, if I, I'm looking at appendix 129 for the first one, and appendix 753 for the second one, it shows there's about a $10 million difference between the first and the second preparer's certificate, that you're claiming as a deduction for tax liabilities. What in the world happened? I realize you're saying it's tax-loss carry-formers that weren't taken into account. But in no look at too good. Well, you're on an addition to which we all had the entire amount in there, in terms of calculating everything. We had all the destructive, we did not have the entire amount. We had the other deductions, and we're done in accordance with what we perceive will require by the agreement. But to make my point to clear up this controversy, the decision that was made by the judge was not one which would align on those previously fine tax preparer's certificates. By the arbitrator by the judge. By the arbitrator, excuse me, excuse me. The arbitrator made his decision about what was required in 5.1. That was the first decision, the second decision to part in dramatically from that understanding. The provision that I just mentioned has to help us to be calculated. And it also went out of the agreement to the intent that this was to be a calculated tax liability. Let's go back, as I understand it, after the decision on November 20th, 2002, the trans-text submitted a letter to the arbitrator saying that the status of your tax liability was yet to be determined. Then there was information that there was going to be a federal audit, and at least in one state it was not yet determined

. So things were in flux at that point. There wasn't a fixed figure at that point. That was correct, Your Honor. We were further directed to submit our tax preparer's certificate, which we did, in accordance with this decision. That's after. That's after the arbitrator issued his decision. That is correct. He issues his decision based on what was in private. When he departed, not only did he violate Fuctus Eficio because it is an absolute reversal of his decision. Mr. Anders, just on that point, why wasn't it appropriate for him to insert the language that he retains jurisdiction over his matter pending its final resolution? Did you object to that? No, no. If you didn't object to that, that was clearly included in his first decision. Why doesn't that mean that this case is still open before him in the Fuctus Eficio argument that you've posited here just as a law? Because the only reason that he retained that jurisdiction was to ensure that he received a tax preparer's certificate he couldn't. Well, that's what you're saying, but it doesn't say that here. Well, Your Honor, it could be the only reason for it because he was not anticipating taking any more testimony. He was taking anticipating that he was going to receive a tax preparer's certificate that was going to be submitted to in accordance with his ruling. And once he received that, if we final it through, then he can render his final award. He can't render his final award until he regains that certificate. That was the only reason for it. There's nothing to put in another way in that statement where he retains jurisdiction indicating that he is going to entertain further argument as to how he should make his decision. It's just to receive the tax preparer's certificate to implement his decision. Let's hear from Mistone and we'll have you back from your battle with Australia. Thank you. Mistone will give you an additional 10 minutes if you would like it. Thank you

. May I please the court get out your new Your Honors and when it's done for the FLE. I would like to just clarify one thing in connection with this whole notion of how the First Award dealt with the tax liability issue. And I think we've dealt with it in our brief. But if you look at the first submission of trans to the arbitrator, it frames the contentions that are supposedly before the arbitrator in very specific ways. It purports to say that the contentions as they frame them are SIA's contentions, but in fact they're not. If you look at the fifth contention that they put in their initial submission, it talks about grossing up the amounts used to pay the tax liability. It doesn't talk about grossing up X. It talks about grossing up Y and Z. And when the arbitrator issued his first award, he addressed each of those contensions as they were framed by trans tech, including number five. He dealt with that contention under the understanding that it dealt only with Y and Z, not X. And if you look at the contensions as they're raised by a trans tech in their initial submission, it's clear that they didn't mean it to include any consideration of X. It's clear that they meant that it was only having to deal with Y and Z. So I think you have to go back to the original submission in order to understand the full import of Judge Gaffney's original award. Secondly, I'd like to make the point that the arbitrator did in fact have the initial preparer certificate from March of 2002 before him when he made his decision. It was attached as an exhibit to one of trans tech's submissions, I believe it was its initial submission. And also, I think you need to look at the fact that trans tech itself made the statement that its tax liability defined as X in the agreement was fixed and final, as said in the initial preparer certificate. If it was fixed and final, that statement is completely inconsistent with the position that trans tech is taking now that X is some arbitrary amount that is artificially inflated. It's an amount that trans tech will never have to pay and will never owe. So trans tech itself admitted that X was fixed and final. And you will also know that the position that trans tech is taking now was taken only after the original award was entered. Before that time, it never took the position that X was anything other than the amount that trans tech would pay or owe as it's defined in the agreement. What they later said is they misconculated and they should have taken the account tax loss carry forward that they initially did not take into account. Well, what they did say also is that they thought they were going to win on the Kim Sol issue and on the attorney's piece issue. So it wasn't necessary to be particularly precise with respect to the tax liability. Which is why they are occupant by the same one. You placed, they made their bets so they get the line. That's it. Correct. Unless you have additional questions about the tax liability issue, I'd like to move on or address any other questions you have about that. Well, why don't you address more specifically whether the arbitrator impermissibly changed his opinion? I realize you've outlined the reasons why, why not. But there were other arguments that were made in that respect as well. Yes. Well, as I stated, the arbitrator was addressing contention 5, contention 5.0 of Y and Z0x. Therefore, the first award only dealt with Y and Z0. It was not an alteration of the original award. By no means. By no means. The first award had nothing to do with the EX to not deal with all with EX. And I think under those circumstances, a subsequent decision is not subject to the fund-disappointing of the doctorate. It's a clarification or a decision on an issue that was not addressed in the original award. How do you interpret the retained jurisdiction clause? Well, when the arbitrator issued its initial award, it of course did not have the benefit of the revised preparatory certificate. It didn't have the numbers that would need in order to make a final decision on what the award would be. It needed those numbers in order to determine that the SCA was entitled to a specific payment. I think at the very least it retained the retained jurisdiction for that reason. But Judge Gaffner being an experienced arbitrator maybe believed also that he needed to retain jurisdiction and even that there were questions about the award. As in fact, there were. Did anybody challenge the initial retention of jurisdiction? We certainly didn't and I don't recall the transtec did either. Just go ahead and yes you have a few plenty of time so you can use all or part of it. Just dwelling for a minute further on the tax payment issue

. You placed, they made their bets so they get the line. That's it. Correct. Unless you have additional questions about the tax liability issue, I'd like to move on or address any other questions you have about that. Well, why don't you address more specifically whether the arbitrator impermissibly changed his opinion? I realize you've outlined the reasons why, why not. But there were other arguments that were made in that respect as well. Yes. Well, as I stated, the arbitrator was addressing contention 5, contention 5.0 of Y and Z0x. Therefore, the first award only dealt with Y and Z0. It was not an alteration of the original award. By no means. By no means. The first award had nothing to do with the EX to not deal with all with EX. And I think under those circumstances, a subsequent decision is not subject to the fund-disappointing of the doctorate. It's a clarification or a decision on an issue that was not addressed in the original award. How do you interpret the retained jurisdiction clause? Well, when the arbitrator issued its initial award, it of course did not have the benefit of the revised preparatory certificate. It didn't have the numbers that would need in order to make a final decision on what the award would be. It needed those numbers in order to determine that the SCA was entitled to a specific payment. I think at the very least it retained the retained jurisdiction for that reason. But Judge Gaffner being an experienced arbitrator maybe believed also that he needed to retain jurisdiction and even that there were questions about the award. As in fact, there were. Did anybody challenge the initial retention of jurisdiction? We certainly didn't and I don't recall the transtec did either. Just go ahead and yes you have a few plenty of time so you can use all or part of it. Just dwelling for a minute further on the tax payment issue. We've cited in our brief many, many instances in which transtec itself referred to Y and Z with reference to quote the amount of the recoveries utilized for the payment of X. And Y and Z could not be the amount of the recoveries utilized for the payment of X unless you define X as the amount paid or owed. Transstec would never see to gross open amount that they never paid. And I think that the language of the agreement as well as its representations in the SEC statements and its correspondence and even in its arbitration filings certainly confirms that. And I could just refer to the. The filing the transtec made. I believe it was its initial final. And this is at the pages eight or five and eight or six of the appendix. Transstec says a payment was to be made to waste management out of the insurance proceeds. But only after transtec received appropriate deductions for the attorneys fees and calculated amounts to protect it from its anticipated tax liabilities. And we think that the only way you can interpret that interpret the phrase anticipated tax liabilities is to interpret it as the amount that transtec would expect to pay or owe. And further. But I guess what they're saying is that what they actually paid took into account tax lost carry forwards that weren't really attributable to this particular transaction. Is that right? Well, the whole notion of the carry of the lost carryovers goes into what the actual tax liability was for those years. I mean, they the tax court considered the lost carryovers in determining what the liability was for those specific years. I mean, the fact that it was a plot right or actively doesn't change the fact that it went to determine what the tax liability for each particular year was. What about the legal fees issue? Didn't the arbitrator select the wrong legal fees for purposes of net recoveries? You mean by applying the revised agreement as a question of the retainer? What language in the settlement agreement gave them the right to look at anything else other than what was paid and what was part of the contingent fee agreement with the name law firm? Well, the agreement itself refers to attorneys fees that are paid or payable to the lawyers. It doesn't say might be paid or would be paid or will be paid. It's a paid or payable. When the agreement was revised, the retainer agreement had no force in effect. And nothing would be payable under the retainer agreement once the one set of agreement was revised. And I think the arbitrator saw that and determined that the only way he could rationally... Was the agreement specifically revised with signatures by all parties or did you just merely change the retainer agreement by changing law firms? Transite merely changed the retainer agreement without any notice to SCA

. We've cited in our brief many, many instances in which transtec itself referred to Y and Z with reference to quote the amount of the recoveries utilized for the payment of X. And Y and Z could not be the amount of the recoveries utilized for the payment of X unless you define X as the amount paid or owed. Transstec would never see to gross open amount that they never paid. And I think that the language of the agreement as well as its representations in the SEC statements and its correspondence and even in its arbitration filings certainly confirms that. And I could just refer to the. The filing the transtec made. I believe it was its initial final. And this is at the pages eight or five and eight or six of the appendix. Transstec says a payment was to be made to waste management out of the insurance proceeds. But only after transtec received appropriate deductions for the attorneys fees and calculated amounts to protect it from its anticipated tax liabilities. And we think that the only way you can interpret that interpret the phrase anticipated tax liabilities is to interpret it as the amount that transtec would expect to pay or owe. And further. But I guess what they're saying is that what they actually paid took into account tax lost carry forwards that weren't really attributable to this particular transaction. Is that right? Well, the whole notion of the carry of the lost carryovers goes into what the actual tax liability was for those years. I mean, they the tax court considered the lost carryovers in determining what the liability was for those specific years. I mean, the fact that it was a plot right or actively doesn't change the fact that it went to determine what the tax liability for each particular year was. What about the legal fees issue? Didn't the arbitrator select the wrong legal fees for purposes of net recoveries? You mean by applying the revised agreement as a question of the retainer? What language in the settlement agreement gave them the right to look at anything else other than what was paid and what was part of the contingent fee agreement with the name law firm? Well, the agreement itself refers to attorneys fees that are paid or payable to the lawyers. It doesn't say might be paid or would be paid or will be paid. It's a paid or payable. When the agreement was revised, the retainer agreement had no force in effect. And nothing would be payable under the retainer agreement once the one set of agreement was revised. And I think the arbitrator saw that and determined that the only way he could rationally... Was the agreement specifically revised with signatures by all parties or did you just merely change the retainer agreement by changing law firms? Transite merely changed the retainer agreement without any notice to SCA. So they just changed the... All right. So you didn't sign off on that? Oh no, not at all. All right. So in effect, the settlement agreement would not have been revised without your specific sent to that revision. That's correct, but your honor, you have to look at the fact that the revised agreement wasn't merely a revised agreement as to how transsex lawyers would be paid for the coverage litigation. It was a wholesale revision that not only paid the lawyers for the coverage litigation, but it paid them for the arbitration and other litigation. And that wasn't a member of the deal. The deal was that transsex lawyers would be paid for the work they did in connection with the coverage litigation, nothing else. And the so-called revised agreement changed the whole landscape on that. That's he had never agreed to allow the deduction for other fees. In the final analysis, does it make any difference? What number the arbitrator used for legal fees? Yes, I think the swing is some 3.3 million versus 1.5 million. Yeah, but either way, don't you... Doesn't the number still come in over 4.667? Well, it depends. The denominator can't be any more than the amount stated. No, that's correct, but it depends on how the arbitrator dealt with the other variables such as the test. But my point is in the final.

. So they just changed the... All right. So you didn't sign off on that? Oh no, not at all. All right. So in effect, the settlement agreement would not have been revised without your specific sent to that revision. That's correct, but your honor, you have to look at the fact that the revised agreement wasn't merely a revised agreement as to how transsex lawyers would be paid for the coverage litigation. It was a wholesale revision that not only paid the lawyers for the coverage litigation, but it paid them for the arbitration and other litigation. And that wasn't a member of the deal. The deal was that transsex lawyers would be paid for the work they did in connection with the coverage litigation, nothing else. And the so-called revised agreement changed the whole landscape on that. That's he had never agreed to allow the deduction for other fees. In the final analysis, does it make any difference? What number the arbitrator used for legal fees? Yes, I think the swing is some 3.3 million versus 1.5 million. Yeah, but either way, don't you... Doesn't the number still come in over 4.667? Well, it depends. The denominator can't be any more than the amount stated. No, that's correct, but it depends on how the arbitrator dealt with the other variables such as the test. But my point is in the final... The numerator is 4.667 or net recovery. 4.66 or net recovery, whichever is less. And net recovery is no matter what the legal fee was, would have been an excess of 4.6 million. So it regardless of what the arbitrator found, it didn't make any difference on the numerator. I haven't done the math, but again, I think it does depend on what the tax liability is. If it doesn't, then you're right. That's right. If it doesn't, I did. That is my point. With respect to the argument that the so-called cancel recovery should be excluded from the total recoveries before cash. I think the agreement is clear that all recoveries are considered. And there's no netting out of cancel. The absence of any mention of the cancel site in the Sullivan-Gremen itself is irrelevant. We weren't settling the cancel litigation. You're settling the Kenvuck litigation. And there's no reason to take the position that the parties couldn't have considered applying the entire pool of recoveries to the SIA. The SIA never agreed to an arbitrary allocation that was dependent on some internal insurance company have formed. That was never considered. And there's not a shred of evidence in a record that shows the SIA agreed to an unspecified, undetermined, and arbitrary allocation. The only times that the parties considered making a split between Kenvuck and Kenvuck were in dress where they specified the exact percentage that would be allocated to Kenvuck. It wasn't left up to the insurance companies

.. The numerator is 4.667 or net recovery. 4.66 or net recovery, whichever is less. And net recovery is no matter what the legal fee was, would have been an excess of 4.6 million. So it regardless of what the arbitrator found, it didn't make any difference on the numerator. I haven't done the math, but again, I think it does depend on what the tax liability is. If it doesn't, then you're right. That's right. If it doesn't, I did. That is my point. With respect to the argument that the so-called cancel recovery should be excluded from the total recoveries before cash. I think the agreement is clear that all recoveries are considered. And there's no netting out of cancel. The absence of any mention of the cancel site in the Sullivan-Gremen itself is irrelevant. We weren't settling the cancel litigation. You're settling the Kenvuck litigation. And there's no reason to take the position that the parties couldn't have considered applying the entire pool of recoveries to the SIA. The SIA never agreed to an arbitrary allocation that was dependent on some internal insurance company have formed. That was never considered. And there's not a shred of evidence in a record that shows the SIA agreed to an unspecified, undetermined, and arbitrary allocation. The only times that the parties considered making a split between Kenvuck and Kenvuck were in dress where they specified the exact percentage that would be allocated to Kenvuck. It wasn't left up to the insurance companies. And even in those situations, the maximum amount that would be allocated to Kenvuck was 10%, not 50%, as transitive ones this court to believe today. But your main argument is to play language as all recoveries. It's not qualified. It's not qualified. No, I think that's the main argument. And that's the best argument. With respect to the insolvent issue, I confess I don't understand their argument because even in their own prepared certificates and every single one, insolvent recoveries were included in the calculation of the recoveries. Proceeds relating to. Insolvent. Yeah, the, you claim the significant language is relating to. Related to. That's correct. But even aside from that, transdick itself included recoveries from insolvent's in as prepare certificates. So I don't understand how they can make the argument that insolvent recoveries should be excluded when their own certificates include recoveries from insolvent's. And in particular, I'm talking about the recoveries from. For state and international, which appears at the very top of each, each version of the certificate. Those amounts were added to the total recoveries. They were added to the recovery from the settlement, from the Lloyds. So I don't see how they can say that recovery should be insolvent, recovery should be excluded. As we turn to one second to the, to the Kempsel thing site. If, if SEA, as I understand it, wasn't involved with the Kempsel site. Correct? That's correct. So why should SEA, we, I guess the argument would be why should SEA receive any recoveries, any proceeds from the insurance action as to the Kempsel site when you were involved with it from day, at any time from the beginning to, to the end. The, the answer to that, I think, Dr. Jambro, is that trans tech took the position that it had very little in the way of assets to pay anything by way of settlement to SEA

. And even in those situations, the maximum amount that would be allocated to Kenvuck was 10%, not 50%, as transitive ones this court to believe today. But your main argument is to play language as all recoveries. It's not qualified. It's not qualified. No, I think that's the main argument. And that's the best argument. With respect to the insolvent issue, I confess I don't understand their argument because even in their own prepared certificates and every single one, insolvent recoveries were included in the calculation of the recoveries. Proceeds relating to. Insolvent. Yeah, the, you claim the significant language is relating to. Related to. That's correct. But even aside from that, transdick itself included recoveries from insolvent's in as prepare certificates. So I don't understand how they can make the argument that insolvent recoveries should be excluded when their own certificates include recoveries from insolvent's. And in particular, I'm talking about the recoveries from. For state and international, which appears at the very top of each, each version of the certificate. Those amounts were added to the total recoveries. They were added to the recovery from the settlement, from the Lloyds. So I don't see how they can say that recovery should be insolvent, recovery should be excluded. As we turn to one second to the, to the Kempsel thing site. If, if SEA, as I understand it, wasn't involved with the Kempsel site. Correct? That's correct. So why should SEA, we, I guess the argument would be why should SEA receive any recoveries, any proceeds from the insurance action as to the Kempsel site when you were involved with it from day, at any time from the beginning to, to the end. The, the answer to that, I think, Dr. Jambro, is that trans tech took the position that it had very little in the way of assets to pay anything by way of settlement to SEA. It had a chunk of money that it expected to get from the insurance coverage litigation. Once that money became trans tech's property, when the insurance litigation settled, what difference does it make as to the source of that money? It was, it was a source of money with which they could pay SEA. So you're saying, for you coming in to take over the responsibility with respect to clean up of a, a, a, a, a, a, a, a, a, a, a, you were going to get any insurance proceeds whatsoever, and that was the deal. And it, whether it be with Kempsel or Kempuck or anything else. From that particular case, which happened to involve what sites can, can, can broken Kempsel. Was there anything that was put into evidence at all as my way of attorney understandings as to what all recoveries met that there was to be a division or no division between the two sites? Yes, absolutely. I mean, not only does the agreement excel itself make no reference to the agreement. Right. Bleeding up to the agreement. In other words, word their discussions as to what all recoveries would mean, or when you were drafting this particular provision of the Son of the Agreement. You're saying that the plain language says all recoveries. That's correct. They're saying it doesn't, is there anything that was between the parties beforehand that would indicate one way or the other? Yes. In, I believe it was the fall of 97, a draft was exchanged between the parties that did away with any allocation between Kempsel and Kempuck. And just said that S.E.A. would take 70%, 75% of recoveries. And more of the point, there was no mention at all that Kempsel, after that point, that Kempsel would have to be excluded from the recoveries. Trans-dex-on, as you see, filings made no distinction between Kempsel and Kempuck recoveries. And it seems to me that it was important to them to make that distinction they would have made it in their public disclosures. But nothing was mentioned about that. I would like to just touch for a minute on this argument that the arbitration was fundamentally unfair. I don't think there's any dispute that the parties agreed at the outset to the procedure that the arbitrator was supposed to apply here. And that was that he was to consider documentary submissions

. It had a chunk of money that it expected to get from the insurance coverage litigation. Once that money became trans tech's property, when the insurance litigation settled, what difference does it make as to the source of that money? It was, it was a source of money with which they could pay SEA. So you're saying, for you coming in to take over the responsibility with respect to clean up of a, a, a, a, a, a, a, a, a, a, a, you were going to get any insurance proceeds whatsoever, and that was the deal. And it, whether it be with Kempsel or Kempuck or anything else. From that particular case, which happened to involve what sites can, can, can broken Kempsel. Was there anything that was put into evidence at all as my way of attorney understandings as to what all recoveries met that there was to be a division or no division between the two sites? Yes, absolutely. I mean, not only does the agreement excel itself make no reference to the agreement. Right. Bleeding up to the agreement. In other words, word their discussions as to what all recoveries would mean, or when you were drafting this particular provision of the Son of the Agreement. You're saying that the plain language says all recoveries. That's correct. They're saying it doesn't, is there anything that was between the parties beforehand that would indicate one way or the other? Yes. In, I believe it was the fall of 97, a draft was exchanged between the parties that did away with any allocation between Kempsel and Kempuck. And just said that S.E.A. would take 70%, 75% of recoveries. And more of the point, there was no mention at all that Kempsel, after that point, that Kempsel would have to be excluded from the recoveries. Trans-dex-on, as you see, filings made no distinction between Kempsel and Kempuck recoveries. And it seems to me that it was important to them to make that distinction they would have made it in their public disclosures. But nothing was mentioned about that. I would like to just touch for a minute on this argument that the arbitration was fundamentally unfair. I don't think there's any dispute that the parties agreed at the outset to the procedure that the arbitrator was supposed to apply here. And that was that he was to consider documentary submissions. And if he felt that there was a factual dispute, then it would be his decision to determine what he needed to testimony. No one disputes that that was the procedure. Trans-dex-on, and S.E.A. submitted, I think, 17 or 18 papers briefs to this arbitrator. There were 75 exhibits. There were several oral arguments. At no point the Trans-dex ever say, I want to put on so-and-so to testify about the particular issue that was never said. And in all its subsequent filings after the award was entered, it's never told anybody what it wanted to put in. And that it wasn't allowed to put in. We don't know what evidence they wanted to put in. We don't know what witness they wanted to present. It was never mentioned. They just say, oh, well, we did not have the opportunity. But there's no evidence that Judge Gaffney refused in the opportunity. And there's no evidence that they ever even requested the opportunity. So I think that's a completely liquid argument. Finally, with respect to the argument that Judge Gaffney didn't provide a written statement of reasons, I think the case law is clear that the arbitrator doesn't have to do that unless the parties agree in their contract that he should, which they did not do here. So it would have been nice, I guess, for Trans-dex to have a written statement of reasons. It would have given them more inquisitive for the appellate bill. But the parties didn't agree to that. So I don't think that this court can say that a written statement of reasons was required and who provide the parties contractual agreement. That would conclude my argument unless you have other questions. Anything else? Good

. And if he felt that there was a factual dispute, then it would be his decision to determine what he needed to testimony. No one disputes that that was the procedure. Trans-dex-on, and S.E.A. submitted, I think, 17 or 18 papers briefs to this arbitrator. There were 75 exhibits. There were several oral arguments. At no point the Trans-dex ever say, I want to put on so-and-so to testify about the particular issue that was never said. And in all its subsequent filings after the award was entered, it's never told anybody what it wanted to put in. And that it wasn't allowed to put in. We don't know what evidence they wanted to put in. We don't know what witness they wanted to present. It was never mentioned. They just say, oh, well, we did not have the opportunity. But there's no evidence that Judge Gaffney refused in the opportunity. And there's no evidence that they ever even requested the opportunity. So I think that's a completely liquid argument. Finally, with respect to the argument that Judge Gaffney didn't provide a written statement of reasons, I think the case law is clear that the arbitrator doesn't have to do that unless the parties agree in their contract that he should, which they did not do here. So it would have been nice, I guess, for Trans-dex to have a written statement of reasons. It would have given them more inquisitive for the appellate bill. But the parties didn't agree to that. So I don't think that this court can say that a written statement of reasons was required and who provide the parties contractual agreement. That would conclude my argument unless you have other questions. Anything else? Good. Thank you very much. Mr. Anders? Thank you very much. Oh, man, just make one more. This is a technicality and it's of interest to the clerks. So I pay 18 of our briefs. Yeah, I want you to get on the way. I'll say. I pay 18 of our briefs. The reference to appendix 13 should be to appendix 913. 913. Yes. If I may or I want to correct a certain misstatements and inaccuracies that were in the argument my adversary, first she makes reference to insolvence. First state and international as being insolvence as being included in the calculations that were made first state and international are not insolvence. They were solvent insurance carriers that were included in the action were not insolvence. The other issue that I wanted to raise with regard to the insolvent issue is that both parties understood before the action was initiated. That the insolvent London market insurers had actually declared bankruptcy long before this agreement was entered into that declared bankruptcy in England in the scheme of arrangement in 1993. The parties understood that the available insurance coverage had been reduced by the amount of allocability each one of those insolvent London market insurers. In fact, London market insurers liability percent to a lawyer's policy is several not joint. But then why didn't your agreement say something other than all recoveries? You're right. When we said all recoveries, if I may, I will refer to a 154 which is a letter from Mark Lano, which then went to as representing transdecta Peter Kelly, who was representing SCA. The letter indicates the defendants in the coverage action which are not part of Lloyd's do not have the same economic issues as the London market defendants. In solency has reduced the excess coverage available from the London market. However, the remainder is more than sufficient. The parties entered into it

. Thank you very much. Mr. Anders? Thank you very much. Oh, man, just make one more. This is a technicality and it's of interest to the clerks. So I pay 18 of our briefs. Yeah, I want you to get on the way. I'll say. I pay 18 of our briefs. The reference to appendix 13 should be to appendix 913. 913. Yes. If I may or I want to correct a certain misstatements and inaccuracies that were in the argument my adversary, first she makes reference to insolvence. First state and international as being insolvence as being included in the calculations that were made first state and international are not insolvence. They were solvent insurance carriers that were included in the action were not insolvence. The other issue that I wanted to raise with regard to the insolvent issue is that both parties understood before the action was initiated. That the insolvent London market insurers had actually declared bankruptcy long before this agreement was entered into that declared bankruptcy in England in the scheme of arrangement in 1993. The parties understood that the available insurance coverage had been reduced by the amount of allocability each one of those insolvent London market insurers. In fact, London market insurers liability percent to a lawyer's policy is several not joint. But then why didn't your agreement say something other than all recoveries? You're right. When we said all recoveries, if I may, I will refer to a 154 which is a letter from Mark Lano, which then went to as representing transdecta Peter Kelly, who was representing SCA. The letter indicates the defendants in the coverage action which are not part of Lloyd's do not have the same economic issues as the London market defendants. In solency has reduced the excess coverage available from the London market. However, the remainder is more than sufficient. The parties entered into it. This argument you're making to us that was also made to the arbitrator. Yes, that is correct, that is an 815. So if the arbitrator then rules against you and even if we were to agree with you and disagree with the arbitrator under what guys can we come in and say that we can overturn it? I mean, it's really a very tough hill to climb to overturn an arbitrator's decision. The arbitrator, on our list, is a tough one and they are given significant power but that power has to be exercised within the confines of their assignment. The assignment he was very specific, they were too key was to construe and apply the agreement and not depart from it. Isn't that what he did? For the solvents he basically said that all recoveries are all my guess is all recoveries are all recoveries therefore there isn't any takeout for the insolvence now. Again, whether we agree or disagree, isn't that within his assignment? He focused on the relating to language. I guess maybe you're saying it's related to the New Jersey suit. You may have made that argument if I may want to answer the issues that were raised by the comments with regard to the tax liability. The suggestion was that we had not raised the issue to the arbitrator before we got the decision that X was a calculated payment that is incorrect. In our verdict we identified in A625 which is a September 3, 2002 submission to the arbitrator had page 654, A654, 27 of that. We indicate that this is why we see the phrase the federal and state tax weights, utilised to determine X, Y and Z shall be computed at the highest marginal rate. If we utilise or if we change the statement that he made to mean that there are actual payments used what happens is you take out a limiting nullified completely the phrase on account of the adjustments to income and the fact that you would calculated and the coins would then maximum rate. The second agreement would have you calculated in accordance or strike a tricolated on a different amount of utilising a different rate. In addition to which he came up with a new line which not found anywhere in the agreement which said that the interest was to stop a croon at a certain date. It's not in 5.1 dates, it's not worth a year. He just created that. Now it's the only instance in which he actually gave an explanation as to why he was doing that. What he did is he counted up as an afrugno to the award and he says in the fringot, that the traffic may continue to refuse to pay its tax which my cause that interest was to continue to accrue. And so to feed the climate of SCA, first the hypothetical is incredibly contrived but it demonstrates what we're trying to contain here. And that is that he put in his own personal random justice into this and departing from the agreement. That's what he's not allowed to do as an arbitrator. He's not allowed to change that decision and he was not allowed to change it in such a way that ran roughly just in the past. And so he was allowed to offer that agreement when you couple that with his refusal to give us any statement of reasons and explain how it is that he reached these conclusions

. That is sufficient to justify a vector. Thank you, Mr. Anders. Thank you very much, Mr. Anders. I guess it was very well argued that we will take the matter under advisement