traffic light system that you may be familiar with but remind you the yellow light means you have two minutes left in your argument when the road like comes on we ask you to conclude unless you're in three in the course of questions we also very much id number mr jones it's why it's mr is has mr clark ever been confirmed but believe he has not been confirmed his nomination as far as i know remains  discretion by denying review in this case for two reasons first appeal panels are split on the proper methodology for classifying claimants as expenses as either fixed or variable the two distinct approaches followed by different appeal panels have led to inconsistent results and absent this court's intervention this issue will continue to recur with many other claimants involving millions of dollars in total and will lead to further inconsistent results isn't that a lot of fact based questions are issues that have to be decided and working out the terms of the settlement agreement mean we are dealing with the government agreement and we have a procedure for doing that and each level it's pretty much fact based so i'm not so purely legal issue it is a legal issue of under the settlement agreements terms what is the proper methodology not the proper outcome based on the facts of any case but what is the proper methodology for the settlement program to classify a claim these expenses as either fixed or variable x and legal question some appeal panels well but each business is different i mean here we're dealing with  middleman and i just i just think it's very fact driven and that we've got terminology and now we've got this exhibit for day that describes what's fixed and what's verbal but when you get down to it b p agreed on a settlement agreement and now these initial round is worked out and then they've got an appeals panel to look at it it's just it's a settlement honor in any given case the question of whether a particular expense is in fact fixed or variable will be a fact question but but the overriding question in the question that's presented in this appeal is at a higher level and it's a legal question what is the methodology for determining whether the of expense is fixed or variable or should the settlement program in the settlement program accountants exercise independent judgment to evaluate the true underlying nature of the expense to classify it in accordance with economic reality as either fixed or variable or alternatively suggesting in this case it's just a question of matching up the word supplies on a claimant's paean else with the word supplies on exhibit for day we wouldn't need pricewaterhouse coopers accountants  small army of pricewaterhouse coopers accountants undertaking this process were were the claimants approach the correct one this court has in fact heard saw several cases that involve interpretation of the terms of the settlement the court's decision reflect that the approach to calculating compensation awards under this settlement agreement should accord with economic reality it should not be based on  economic reality the economic reality in real in real life you look at real life you're just you're just dealing in some mannix here coun spreadsheet that listed every single expense indicating what it was for who the vendor was like a lot all or none of them were the styrofoam boxes that they put the shrimp in to deliver it to wherever that was going right yes that's exactly what i said classic variable expense because it depends on the amount of shrimp and the amount of destination when did they purchase the boxes this i don't recall offhand whether the spreadsheet lists the dates that would make a difference wouldn't it if each year they said you know we're going to purchase a million dollars worth of styrofoam boxes and we use what we what we need i mean i as i recall there are some incidents here where one problem the appeals council had was well their own you're doing are a cash basis and they're on an accrual basis or that it's on the other just it's it gets real murky and it's way way down deep that the district court didn't feel needed review by the district judge and it's discretionary review by that if discretion is going to mean anything it's discretionary review respectfully your honor i don't think shrimp is a variable expense and there's no there's no dispute about that in this case that there is no factual dispute about that that their basic argument is that there were some of those things setter apparently under this agreement maybe that some of these variable items may be classified as fix try i mean it's not just that they have the right to unilaterally right to classify him it's also that there was some kind of division that was possible this is an essential a central part of the calculation of every compensation award under this business economic loss framework exhibit four d in turn reflects the parties is a agreement on a baseline a common understanding of types of expenses that are fixed and types of expenses that are variable it's a very reasonable list that i think any one who studied economics any accountant could could follow but nothing in exhibit it the settlement program and its its accountants its highly qualified trained expert accountants from pricewaterhouse should exercise independent judgment to evaluate what the claimants expenses actually are and whether they are in fact in reality in economic reality fixed or variable if the settlement program should not do what the appeal panel ruled in this case and what the claimant has added t sorry on the page before that it says exhibit forty that's attachment a to exhibit for david a is a pretty definitive list fix some variable cost if it is and if you look under variable costs it lists consumable goods it also lists says c o g s a variable that's costs of goods sold variable these will be extremely commonplace routine terms used by any accountant or economist this is incredibly straightforward again there is no dispute in this case about whether the expenses we're talking about the bags the boxes the carbon dioxide that you used to freeze the shrimp is a variable expense it would qualify as consumable goods as well as coggs cost of goods sold variable this is words if you were if they were filing a tax return they could not capitalize you don't need any bags or boxes or labels you don't need any carbon dioxide to freeze trim if you don't have any shrimp by contrast if you have a lot of shrimp if you have more shrimp you're going to need more bags boxes labels the question i had about your argument was why we need to rule on whether the district court of its question or not because as i understand it what we're being at least my interpretations what we're being asked to interpret the application of the plan here in court is done it in the past whether we agree or disagree with you the district court did we still have to interpret the plan yes yes your honor i think that the court should interpret the settlement agreement can interpret the settlement agreement and i'm i'm a little less clear on whether we ought to say try to identify any standards for when a district court should intervene or not because there may be the fact that appeals panels disagree might or might not you know require the district court intervention so this court and in the previous decisions has held that under this settlement agreement the district court show it is eight forty eight fed third for a seven pin state score ten and it says that the district court can abuse its discretion if a case quote raises a  that was central to the outcome here right away it's fixed cost and supplies are listed in six calls and i suppose you could make the same argument where we don't know how much supplies are going to use each month so that's variable i mean somebody all agreed list a fixed cost suddenly program said that talismanic words approach would not accord with reality and wouldn't accord with the reality of what these expenses are they are variables and they should be classified as variable so that this claim is compensation split on the issue of how to review the categorization of supply expense under the settlement agreement and to the appeal panel did not misapply the settlement agreement by making a factual determination th texas gulf supply expenses best conform to fix supply expense rather than variable cost of goods sold it's important to remember in this standard  review of the decor district courts discretion that this is not a mandatory review it's not feasible for the district court to act as the arbiter of every case it's only should be conducted in rare in excess of exceptional circumstances the appeal panels are not split on the issue of how to categorize quiet spirits and what's interesting is what we did not hear about is there is an exact a wrecked  how is the subjects expands what what exactly are you saying are the supplies that are fixed expenses so judge get these are fixed expenses because these are expenses that are purchased by the company they are tell me what they are you you you you it mean in supplies welding supplies hardware office supplies those types of things they were provided to the claims administrator the shrimp or so the shrimp or who's main i mean this middleman his main business is to package ship shrimp and you're saying that the overwhelming amount of fixed costs in this business consists of paper for his fax machine and cleaning supplies i don't know what you weld when you're just taking shrimp off the boat and package  that's kind of two questions that you have there you go on first but the majority of the expenses in this case were not fixed supply expenses that was just a small part and what happened was the claims in men a straight or asked for clarification as to what those were they were provided with the spread sheet that went through by vendor and by type of what all those expenses were the claims administrator said w look like consumables so we're going to change them under policy three sixty one version five which is the directive that they have in this so there's no come back to that but we're going to change them to variable consumables in the appeal it was pointed out based upon an analysis on that spread sheet and just let me interrupt one little bit because the administrators are offered a fifty split on this would have been affected by the be originally it was fifty fifty and then it when we had all two variables ok and so in the appeal  the appeal it was pointed out to the appeal panel that in analysis of all the spinners and all those things in certain years it was thirty percent and other years it was forty five percent these consumable but that the majority of the supply expense were the fixed items the cleaning expenses the that's what your client took the position yes ok and the appeal panel reviewed that information to know and maybe did the factual determination that based upon the information and front of the claim to mina straight or that those categories of expenses best fit the category of supply expense the other thing he looked at too was contemporaneously long before the settlement ever happened texas gulf listed those expenses on their p supply expenses and they did ducted them from their taxes s but again you save the well anything you use in your business can be deducted it's a business expense that's irrelevant the difference is whether it is considered a fixed cost which is sort of analogous to capitalizing depreciate versus a variable cost and you can monkey around with that division for iran's purposes correct and and but let me variable expenses that they that they did not did that this is just one small part well it's either worth a million and a half or two and a half million dollars to the settlement so that's not that small but you just i'm a little confused because he said a while ago the majority of expenses were not fixed supplies and that ties so in what you're classify in this small part that we're talking about they say that includes the bags the boxes the labels and the c o two is that correct or not it does it that supply expense category that was contemporary  does include the some years thirty one percent another year forty five percent consumables the remainder is fixed cost and the problem that you have here as the appeal panel is looking at this is they're looking at this in this baseball process they look at it to know though they make a factual determination of where these expenses lie and then they look at the two proposals from each company and in this case they found that the proposal by texas gov fit better was the best thing what happened was b p put zero as fix costs in their proposal they went all in like texas hold'em and now they've lost and the appeal panel can only remain in these and very specific instances and those are when there's a new document that comes board are when there is not enough information on the record to  best conformed to supply expenses well let me ask you a question is this we have five in the record excerpts notice of appeal panel decision december twenty second two thousand and sixteen is one we're dealing with can you i'm sorry can you give me the number again appeals to have five in the record excerpt and it's appeals panel decision december twenty second two thousand and sixteen is the second is that i can go get that there's a there's a number right here on the right side that tells you that identifies all of these and then i have age thirteen eighty four  monthly purchases and calculating the cost of goods sold and then it goes on blah blah blah claim in a seance the claimant accurately in this about half way down second page second paragraph claimant accurately asserts that the rationale of variable expenses being proportional to revenue has been found by countless past panel opinions not to be a valid consideration in re classification of an expense otherwise listed as fixed b p s response is essentially justify the program the that result by citing the same common law decision god forbid concerning variable expenses anyway so my what i took this language to mean is that we the appeals panel have a different view to a fixed and variable expenses them what accountants do than what is currently understand in business and elementary economics and perhaps what is  what is understood in this attachment that i would just i have a different reading of that your honor what my reading of what they're saying there is just because expenses go up and down with the revenue does not exactly mean that they are variable and what's important is in this case it's clear on the record that even though there are some boxes and and and wrappers in those amounts those expenses do not go up and down with revenue they don't track revenue at all and so that is really i frankly think all this language is very inaccurate from a but it also said that as long as there's a rational basis for putting it in the supplies category because in the supplies category and it's not where where does the administration of the program say the claimant's classification of these fixed versus variable is merely need satisfy a rational basis you know because this is in policy three sixty one version five and that's in the record three hundred nine point nine point one nine eighty five and what it says is that the claims administrator will treat expense as variable or fixed if they fall within one of apply the classification that best conforms to the homes classifications of best conforms it's a little different than rational basis well in this case the of our i never mind them in my accounting classes so i don't know that those are necessarily terms so you are in accountant also i passed the exam man i did thank you i quickly got sense and went to law school well but i mean you know normally bags boxes and so on would be i mean these things vary with the amount of shrimp with the amount of input and the amount of output of the company i would agree rectal i would agree with the court and i don't think there's any dispute about that but based upon the baseball process where it was all in or all out the majority of those costs were found to be long did b p negotiate this settlement agreement if you know i don't know the answer that would be something probably better directed toward a steering committee member and i was not a member of that but i know it was months so here is what i think the court should look at when they're looking at why the appeals panel made the decision that they did when they looked at this they were going through the baseball process i'm you lose me on baseball broke a that is so i don't know what texas hold'em you know so i mean with the baseball process ok texas hold'em is when you bet everything you have understand ok here this is very important the baseball process as they're going to the appeal they make an initial proposal and each other tries to settle and then they make a final each party makes a final propos literally called in the settlement agreement which is that point two four eight four it's literally called the baseball process and what that does is an with the limited ability to it where b p s number was in comparison to where texas gulshan number so when they went to ask for that class calculation then he looked at that  sol that it was similar to the calculation that texas gov had and use that to decide that was the one of the two choices that he was going to choose  to you to pick the one that was closest and best fit and that isn't policy three sixty one version five are just that the court does not need to clarify what the policy is the policy was negotiated it was very clearly laid out there is one maybe two outlier appeal panels that i've been able to locate during my review of all these appeal panel decisions on supply expanse one is just wrong all of that but one outlier canyon should not come to the district court to produced in appeal and sufficient evidence existed to support the texas gulf one that they were contemporaneously listed on their p n l's as a fixed supply exp to that they were that they were on their tax returns spics supply three day did not vary with the revenue and those amounts for that we're talking about for the unloading process and packing the shrimp those boxes and things were only thirty one percent in two thousand and ten and forty five percent in two thousand and nine and if this court doesn't have anything further thank you your honor you heard it straight from the claimants council he agreed with the court with judge jones is a statement that the expenses that we are talking about today are variable he agreed that they are variable he described them as consumables that should be the end of this case even if you don't feel comfortable making that accounting or economic judgment yourself even if you don't feel comfortable taking my word for it take his word for it both sides agree we are talking about a part of expenses that are variable expenses no one is here arguing that they are actually fixed expenses and the question is for purposes of calculating claimants confrontation award under the settlement should the pricewaterhouse coopers accountants classify them as variable which everyone agrees that they are or should the accountants ignore that they are in fact in reality variable and classify them as fixed i have two questions about that one is that there is indication here as he pointed out something about cleaning supplies or welding whatever that it do with the business could be part of the maintenance of the fixture equipment so that they are so there was enough discussion about what proportion of the would be the fix yes your honor and i am happy to tell that according to texas gulf seafood and this is in their appeal briefs it's in their lower courts their their submissions in this before the settlement program forty percent of the expenses in this category that was labeled supplies on there forty percent of those expenses are variable they are the bags the boxes the labels the c o two the other sixty percent they say are for other things and we're not here disputing that those can be deemed both so what we're trying about is the whole universe of the so called variable i mean the forty percent is the variable correct forty percent is the variable and my second question is what what if anything does this baseball process have to do with what we're reviewing i don't think that the baseball process needs to have anything to do with the or resolution of this case i will tell you what happened and why i don't think it makes any difference  the settlement program in the end there were sort of multiple layers of review in the end the settlement program deemed all of this category of expenses variable up at the appeal panel in the baseball process b p made a baseball offer that just followed the settlement programs determination texas gulf seafood they went all in they made a baseball offer that was based on all of these expenses one hundred percent of the supplies category being fixed even though we know that forty percent of them are variable the appeal panel agreed with texas gulf seafood that one hundred percent of these expenses should be deemed fixed regardless of the fact that forty percent of them are in fact variable and so the appeal panel adopted texas gulf seafood to baseball for if the correct sixty forty split had been used b p s baseball offer would have been closer to the correct award calculation and should have been selected and so for that reason alone i don't think that the baseball offer as the back and forth below should have anything to do with that i also don't think that that should citations and both briefs have citations about varying results by the peals panels so what are the decisions of appeals panels of fail fifteen four nineteen those are just three i have in my notes there are more they're all cited in our briefs in the section that describe the appeal panel split b p s third multi million dollar if it is a multimillion dollar issue that the depth of the difference in this case  load for first with the classification of those expenses is more than a million dollars this issue is recurring in multiple other appeals that are currently being briefed before this court additional appeals that are before judge bar discretionary review and yet additional cases beyond that that remain before the settlement program this is a highly recurring issue worth worth millions of dollars and you're honest if i may just my red light is on the finish very quickly so we are not asking you to decide whether any particular expense is fixed or variable we're not asking you to make any sort of accounting or economic judgment to classify expenses all we are asking you to do allow the price waterhouse coopers expert accountants to make those judgments on their own using their own expertise according to economic reality thank you you thank