your client wanted to be reimbursed forty some thousand dollars from mr levy and then they changed it to seventy some thousand dollars is it possible that the persons who were doing this were actually looking at the two thousand and five the usual way they were doing things in terms of taxes they pay them and then asked for reimbursement and that in reality the the amount that we should be talking about here today is the forty thousand amount no your honor the forty case we're talking about consideration pay for a single sale over a billion dollars in assets real stuff shopping center transfer the profits earned in the first hundred eighteen days of two thousand and five were negative as shown on the k ones or is or relative tax forms sense to each limited partner so they got the benefit of the losses there were no profits earned however let's keep this in mind the record i clear that the profits the twenty three dollars and fifty cents per unit included the profits that expected to be earned that was a negotiated number in fact that the record there is a particular provision that's that specifically says and i'll give you the record say at three thirty five j a three thirty five three thirty six that says the extent any dollar comes out before april eighteenth two thousand and five by way of profit distribution shall be deduct you have the right when you paid out the consideration a person got the consideration to withhold the taxes that that person correct we had not quite under the delaware you didn't have the right to do that though we did but it was different way the limited partnership of delaware that we turn to the great state of delaware the delaware limited partnership back vested complete in absolute shall discretion a general partner to pay the withholding taxes to the states as required by the states at around closing there after they did the calculations my question is you had the right it's yes or no you had the right to withhold the taxes at the time the consideration was paid in this case on april twenty first is that this is the surviving entity and after you change your ownership file your papers that's the surviving end of the and once in what legal sense has that entity an independent jurors  terminated under section seven away the internal revenue code looks at it differently than delaware limited partnership law you are absolutely correct as a matter entity law why use a federal tax provision to sort of state tax liability because that is the that is the origin of the state tax liability let's run through that real quickly the number the comes out on this transaction of twenty three fifty unit is the baseline number we understand that we're going to ask you and that specific proof do you have you do you this your honor here's why i agree with you and that's why i did the district court to a large extent section ten point four the limited partnership agreement is a slam dunk date over case done that is ten point four gives absolute discretion to the general partner to pay this transaction fee and the taxes as it deems fit section seven point seven of a limited partnership agreement as this court is well aware from the strauss case and chancery just a year ago were that were delaware law interpreted sense again not because of our argument respectfully it is because a defense is that these things were timed in such a way that the consideration the million eight i received in consideration i got as a gift use repeatedly the language in your briefs that there's an old cream on in a new claim therefore that there couldn't be a tax liability the rose after the merger because the entity ceased to exist but you've acknowledged here today is it if you're compelled to on this record that cramer existed throughout although the ownership chain so if the parties are entitled sophisticated business people are entitled to map out how they want the pacs liabilities to fall what is it about the federal tax code seven a way that you think it's just the say well those sophisticated x people they couldn't possibly to understand the other side making this there's twenty three fifty per unit and that's so what we negotiated for and had we understood that the other side of this deal was going to be saying plus we're going to pay all the taxes we would have bargain for more but we didn't we bargained for twenty three per unit and the tax liability was going to fall where it was going to fall and we have the current call which was on the on their partnership so isn't the fact that that agreement is silent on that something that works against your client mr kearney your honor their big boys right they did they got together there and i'm doing a multibillion dollar deal they didn't specify he taxes are still on you why should we read that into the dock because parties aren't compelled respectfully to put in their document who the pace of taxes the tax law comes in retrospective leigh and looks at it and says on four o two pm on april eighteenth that partnership as a matter of law tax law could not have meant for this to be the result now you're specially right let me let me address that the issue is not whether we meant anything delaware law controlling here bars parole evidence all these thoughts but more specifically let's go right at the issue you're because you're either they're claiming i bring it in their claiming that the money consideration was paid the twenty three fifty a share was paid  go in and collect the taxes it pays it forward is a low that's our case the defense in the case was your honor we were part of that agreement because we got paid for eighteen and i'm saying wait a second this is current this is cards fancy food all over again  assume for the moment your right there is taxable event on the effective date of april eighteenth and let's assume for the moment it affects le the two thousand partnership agreement was in effect you're saying but the question is is that is mr levy still a partner the partnership agreements in effect the entity still exists that continues to exist there's no old and there's no new but what you have is a change of ownership as george has noted in that context three point eight he of the plan of merger permits central was to withhold from levy's merger consideration the payments he otherwise would have owed to the state taxing authorities perhaps because likely because of an internal glitch they did what they always had done in the past when they paid it and they asked for reimbursement and levy you're saying it's cute and says i'm no longer a partner i'm no longer live obliged under the partnership agreement the only obligation i have to reimburse you is under the plan a merger of three point eight b and you didn't follow the rules of three point the therefore you lose your honor i've suggested that is incorrect as a matter of law because the part of his obligation as a partner is attached at the moment of four zero two pm on april eighteenth he receive at that very moment under the terminations provisions that's when he gets to consider any actually get the money in the record he had to turn in any out of fed ex it in you should see the record of a twenty first of april three days later but but that's not that's not the issue here as your honor pointed out in c on your honor honors my name is brian watson and i'm here on behalf of the appellee mr urban levy want you want to address the assertion mr her he's made that as a matter of federal tax law money was receive your honor it's a very good question and i don't think mr attorney got a chance to really make that argument today but the argument which he makes in his brief and on which his entire argument relies upon an incorrect contention that th exchange of consideration here occurred the moment before or prior to what's been defined as o p a fact of time his entire argument relies upon that contention based upon his interpretation and application of seven away that argument is bellied by the plain language of the merger cream the merger agreement which is the governing document here specifically says that mr levy and the other former partners receive the consideration or the right to receive the consideration at opiate effective time it doesn't say mediately before it doesn't say prior to it says at opiate effective time and again if you look at mr attorneys brief in this matter and there's there's no question that's been stipulated to that that's what happened the reason mr attorney has had to argue or change his argument that under federal tax code it happened to be for o p s fact of time is because then they eight does not apply if all the states issue except federal tax filings in lieu of or a conjunction with state filings the reason that makes seven to eight obviously relevant well no and here's why and here's what the to court determined it's irrelevant seven a weight in federal tax code is irrelevant because the parties here as they're allowed to do contractually agreed to the to the definition of what they were going to treat as the taxable events and they agreed on the specific timing of that taxable event these parties to their agreed between them that the taxable event for all purposes for all income tax purposes was a combination of three mergers and those three mergers under the merger agreement were to occur at precise precise times this is therefore by definition that taxable event as agreed to by the parties could not occur until the final of are you asking me to which taxing authority those are net well you may be raising the question because there is an argument in our brief that we're not so sure there was a tax due i know i know  contention is if you look at the reality of this transaction under the economic realities tast which is why my opponent has cited relied upon that this was a sale of partnership interests that's all it was in which case do if they are do they would not they are not due to the state authorities so they are due to the federal authorities but remember i question to whom are taxes dumas if they are do i think stretched over ok i think at most they would be due to agreement agreed that if any taxes were incurred as a result of this transaction those taxes would be paid by the continuing partnership and by in effect the new partners which have been  relevant provision here is under section six point three of the merger agreement which is entitled tax treatment and that under that provision and i'm going to quote the parties here to sell treat the mergers a defined term for all income tax purposes as a taxable purchase of assets by acquire in exchange for the merger consideration and why the district court found this this provision to be most pertinent here is for a couple reasons six that's right and there's no dispute that the final of those three murders occurred at four eighteen pm therefore the the mergers the taxable event as agreed to by the parties was complete not not until four eighteen at which point all sides concede mr levy was no longer a partner and more importantly the partnership agreement under which crime upbringings this breach of contract claim had been replaced by a new partnership agreement even the argument that i was making to your opponent was that even if there is a taxable about and even if levy ost tax by virtue of ceasing to be a partner the only thing that binds levy is the plan of merger which says that the partnership has the right to take those out of money they pay him if they do not then wrap up we believe the district court got it right here because the district court correctly recognized that the contract in parties decided between them who was going to be that what was the title that isin not it and that's exactly right and the reason seven wait applies to the issue of whether or not a tax is incurred there's no question here that tax was incurred they paid it the question is whether or not these parties contractually did decided between them based upon the structure of the transaction and how walk well because there's a governing contract which addresses the parties intent with regard to again the taxable event and as as a consequence who was going to pay that tax following the transaction if  have we agree with judge ambrose point that that provision gave kramer at the opportunity at the time of the transaction withhold i believe of course this isn't an issue but it would have been our contention had that happened that we would have tried to recover or we would have think of a situation in which there may have been some type of tax that could be passed on to the partners here but i can't think of one so i am does that make this a perk and also when you have the record you have a letter from your client saying that i'm just  giving the money back right i disagree i mean that i think are you going through the courts interference claim or i don't you know have to get on that ok and just make one final point it was it was raised at the very beginning of mr kerns argument i think it was raised by one of your honest questions factually what happened here the former partners and the new partners negotiated in a highly intense negotiation over a price the price was twenty three dollars and fifty cents it wasn't twenty three dollars and fifty cents and six months from now you can take some of that back because you think i owe you a tax know at the time they would pay it they had the right to take the taxes out at that point if there wasn't such tax if it was  an and the record would reflect all that the court didn't address this below because it found the presence there with the intent apparent unfaced but the only evidence of intent other than what's in the document is the testimony of our client who was very instrumental in the negotiation of this agreement and his testimony was this was never raised this issue of of the potential of former partners having to pay a state income tax six months down the road was not a was not discussed and it was certainly not his intent or expectation that he would be hit with a tax burden down the road so you want us to write in them that says that even under the riemann kramer who have with  event and the parties agreement that as a consequence of their agreement to treat that as a touchable event that the tax any taxes that were incurred were incurred after mr levy was no longer a partner but addressing mr  partnership agreement which is no longer in effect so they haven't made a claim for the partnership agreement as to whether it is not your honor not the partnership agreement under which mr levy and the other former partners were partners that first of agreement to look at two point six or six point two page three forty of the joint appendix it's halfway down that page it's a pretty big paragraph says immediately following the o p s effective time that's the first merger and prior to the right effective time that's the final merger the surviving o partnership shall amend and restate the surviving o p agreement in the form so there's a surviving partnership right there is a surviving partnership which is as you have correctly pointed out is pray not it was pretty much an instrument today however there's a new partnership agreement the partnership agreement under which they bring the claim against mr levy has been superseded by the i don't have the name in front of me but a a new partnership agreement which came out about as a result of six point two right all right thank you runners ok thank you very much kearney maybe you can start off is is there an unjust enrichment claim that you would have if you would otherwise lose either by judge bails analysis or by the analysis that i thought i noted we argue there would not be because we well it would seem actually i mean that the point under unjust enrichment it would seem that the defendant has to cause the plaintiff to act in a way that unjustly enriches the defend that that doesn't seem to have happened here oh certainly he did it to the credit on his tax returns he took at the took an absolute credit when jack was jew on april twenty first not to withhold the taxes that you believe were due from him that was optional your honor there's no mandate  that's been the understanding all along there's been no understand there's no talk about timing there it's to allow this to go forward let's just think of it in the floodgates context allowed us to go forward would mean yes parties can contract among themselves the fine who language it's in there but even assuming that this was was not a matter of what's what's the consequence of there being a provision in the document as jim rose without the gave an opportunity for your client to use it to decline to do i don't think there's any significance to it i don't think it has i think your honor it is superfluous we had the right to either pay it then or pay it later and seek reimbursement later i got a what was the if any how did seven only come into this suddenly as the argument you're on a raise for the first time after the stonewalling letter after all that that we really don't owe the money we received because we were not a limited partner we receive the money on april twenty first even though we were a limited partner at four o two so their argument was we're what's good for me to get cash sure remember the family here almost five point seven million dollars it's good for me to get cash but guess what for  the really the time became a timing argument internal revenue code current prime case after case in the third in the supreme court in the circuits have said for structure substance over form that's where you're going came from your honor it came in response so there are going to timing your pricing i mean or you know not your your argument hinges higher lee on the assertion that this happened that there was hacked that that occurred before or i mean that certainly what i've and it you'd be saying here today well it two to faults one is did the general partner act within its discretion under delaware limited partnership act and act in good faith yes ok quite the challenge of that is no because he did it illegally