the morning honors may please the court i'm a louis moistly on behalf of plaintiff appellant p s i'm holding corp and like to reserve five minutes for rebuttal this case concerns p s m's efforts to be made whole in restitution after an erroneous judgment was overturned on appeal in the face of defendants mostly unsuccessful efforts to exploit the district court's mistakes as an opportunity to and justly enrich themselves at peterson's expense p s m respectfully request that this court reversed three discreet aspects of the district court's decisions first the district court misapplied versus restitution law in refusing to finish unwinding a parental guarantee among the parties second the district court misinterpreted pre judgment interest law when she retracted her interest award to both parties and finally the district court misapplied attorneys fees law by entitling the defendants prevailing party attorneys fees for their largely unsuccessful post appeal that a geisha in and effectively for their attorneys fees and these instant appeals and friendly proceedings on remand this court has an opportunity really a responsibility to correct these mistakes and to effect complete restitution among the parties and to provide much needed guidance on the novel issues raised in these appeals that really haven't been addressed in much detail since the stockton theatres case from the one nine hundred fifty s unless the panel prefers a particular order on these issues  topic and the district court to her credit pointed to reinsurance expert to help her understand these issues but the issue here quite simple i'll start with explaining exactly what the quarter share agreement i s m entered into a parental guaranteed where it agreed to pay for all of the losses ninety percent of all of the losses from the beginning of time up until it returned business alliance to defend and so what what this really is called the reinsurance agreement where p s m assumes that a percent of the losses for losses that come in through the door for accidents or occurrences that happen for policies that existed from the beginning of time up until two thousand and eleven if you think about this as a house p s m was a family that purchased a house to specifically perform on an on a contract paid the purchase price that the house and personally guaranteed a mortgage that sat on that house and you made the payments and did so because it was worried that the bank may take negative action if the mortgage wasn't  paid or there might be a foreclosure and after the judgment was overturned p s m returned the house but is still stuck with the the guarantee without the benefit of having the collateral that is the house or even the equity in the house here is the judge's mistake the judge six actually quite simple because you q s a was not permanent it could never have qualified to be a capital improvement and so that when the court decided that the quota share vehement was a capital improvement because it was not a reasonable expense it missed the predicate to get to that analysis to figure out who bears the costs if anyone you first have to figure out if it's permanent you have to figure figure out if it's a shame your furnace in a house or tiles on a wall that you cannot take out and because the judge skips that predicate analysis it made a mistake when it then decided it was a capital improvement that usa all of the evidence uncontroverted from the judges reinsurance ex where which aligned one hundred percent with position from the beginning of the case was that the quarter share could be unwound any could be unwind down very easily in fact had already  parent making a deal to preserve its subsidiary i mean what both sides believe that that was going to be the relationship no actually it wasn't a mistake in fact this was actually done when  it may have been at the time i suppose i should be i think you know part of this where but they assumed they were making an agreement between a parent and a subsidiary that's right where in fact it turned out it was not apparent way to think about this that's right  that was considered by the distributor the issue was before the court the issue isn't discussed in the judge's opinion so we made very clear to the court that this is what we thought we were doing by entering into this parental guarantee and it was for a sub and so when we gave back the company and started to unwind the q s a it was essentially the mistake is not all of the q s a was unwound and we made that point reversed on appeal there we are are we factor that in there was and there was in the other agreements that we entered into as well we made the determination in the agreement very simple to accomplish and that's why it was very simple to accomplish for just one signature for the future period from two thousand and eleven when we return the company up until the end we made it very easy could be terminated for any reason at all and so what you do is you sign one piece of paper and then that's the end of the agreement i've been issue and all you have to do is the actual mechanics of giving monies back and forth between the entities so we thought about that and and we're clear to put that kind of language in the agreement to make sure that we could have factors that factor into the district court's this record in addressing district court focused or analysis exclusively on whether it was a reasonable expense for which p s m could be opening brief the blue briefs rounds is north of six million dollars is the cost to us which is the amount that we've had to pay out on the contract if we unwind the contract it when when all the money's go back and forth and ends up being an amount that the defendants have to bear when it's an amount they would have borne anyway for those policies going backwards and there is already third party reinsurance to address those amounts for from their i'd like to know i'm only on this i just have one small other for him to to mention and just so we're clear in terms of just deciding whether this was necessary or not but i just want to make the point had pearson not enforce the judgment at all and just allowed the company perhaps to fall go out of business in light of what was going on in the economy and so on and so forth different is we have no recourse against anyone and so p s n when it step down was preserving value for everyone and now the effect of the district court's error is that p s m is being punished for actually preserving value for everyone here but what were your  that will fix the problem that is our resolution that will return the parties to their status quo ante positions as restitution is supposed to do it doesn't contemplate the payment of any money or anything though there will of money so the payments will go back and forth and so what will end up happening after we give back what ever reserves that we received and they pay us back for the losses that we've we've paid i think it will end up being a payment from the other side to us when we started doing this when three of we done the credits and debits we actually would have had to pay them a song to completely on why and that's what it just as a result of the passage of time and the explosion of losses since this case started in incepted it has been it has reversed fortunes of reverse of speed but it's something that would have happened anyway quickly on if unless the panel has any more questions on this issue i mean i want to move down to prejudge an interest in attorneys really quickly ellen prejudgment interest the issue here is that the judge you know two thousand and ten order as well as her two thousand and thirteen orders awarded the party's pre judgment interest on some fixed amounts that they were due rightfully due and ordered the parties to go back  california law is crystal clear on this point that prejudgment interest is available when the amounts are certain that's the no california civil code to be thirty to eighty seven as the evanston case from this this circuit that's cussler if it's undisputed law the district court then misapplied the texas partly from an incorrect notion the defense provided that it was the difficult wasn't allowed to calculate interest when an accounting had been performed that was in error and eighty eight she said chesapeake mirror and so on and says the in this is for the for the principle that prejudgment interest isn't available when an accounting has been performed and then she d the possibility of pre judgement interest in an accounting action equity demand such an award what that doesn't say that you know i can't calculate it with you know i'm not permitted to without accounting that's what you said no then she didn't she issue here were easy to type and there were certain at all times and the courts read retraction of the pre judgment interest award because the numbers were certain it was an error on attorney's fees just to be was paid all of defendants attorney's fees for the litigation litigating the underlying action to enforce the contract over two point six million dollars and so there was a natural daimler cation point back in these the mistake here is is twofold the first is that the district court when she determined that sixty five point zero four all fees were not available because california civil code seven hundred seventeen fees because you are you are you have to have brought your motion under sixty five point zero four which is what defendants did it was just late and the court's decision then to go down and analyze seventeen seventeen claims was in error and then even if the court could reach seven hundred seventeen fees argument is that seven hundred seventeen doesn't apply for the reasons that are stated in in our papers namely that these were fresh really cause of action for toward these claims they weren't successful there's a double counting of victories and the judge's decision ignores the fact that this has to be a mutual remedy and so if p s m itself was successful on those claims it would be entitled to its fees but now instead we're in a situation where even if we do succeed the only issue would be defendant's fees and how believe ought to moot the issues of rescission and prejudgment interest entirely and that's the threshold question of whether a judgment creditor like p s out there goes out and seizes an asset pending appeal and then has to return the asset and as obligated to repay and discords any profits can come out ahead as part of that profits analysis and we are advocating a simple common sense rule that when the issue of profits is analyzed the seizing ad your honor in situations where a judgment creditor seizes an asset and loses money operating that asset it's not going to be possible to make all parties whole there won't be enough money to go  m for having seized our asset is to make us come out behind and what i thought in a different argument from the argument you started with is that they can come out here and they're not coming out ahead if they get the one point one million or whatever it is right say is this your honor if an asset that seized is operated profitably then there's going to be enough money to make everybody whole and the judgment debtor can get the overage can get the excess profits that would be the fairest solution but that cannot happen when the asset is not operated profitably and that instance there isn't enough money to go around and as the restatements of restitution explain the judgment creditor who seized those assets took a risk they can diminish the profits to maybe even to the point of zero which is what we think ought to happen they are different argument that the thing the issue and commodity your honor our our position is that under these restatements of restitution we're responsible for or i should say we can recover any benefit we conferred on p s m and any award of profits to which we are entitled can be diminished by their expenses but if they are dipped but if their expenses are greater than the revenues then there was no benefit conferred we get nothing that's the end of the do the deal they made if i understand your honor's question the answer is no because that agreement was terminated in two thousand and eleven after the company was returned to my clients so they still have some obligations under the under under the quota system agreement they are to the extent there are any ancient losses that are still being paid they are responsible for ninety percent of those but they took in ninety percent of the premium dollars in order to pay those so  there's already been a fair and equitable treatment there and the district court recognized that the district court's decision was that this new reinsurance agreement that was foisted on b a i see by p s m was not a necessity it was a centrally a luxury there was in place at the time of the seizure of fully adequate reinsurance program b i see already had a multifaceted reinsurance program p s i'm allowed fortunes of that to lapse or to cancel it and then they imposed this new upgraded quota share agreement this reinsurance agreement and the district court found and it's a fact finder and title deference on this point but that was not necessary it was it was an improvement and improvements don't have to be permanent they don't time period that this reinsurance agreement was in force it provided the the you know the safe harbor the the spread of or dissipation of risk that any reinsurance agreement provides that agreement was cancelled in january tw and a letter signed both for p s m and b i see by people on that side so that agreement is now over it's hasn't been partly unwound it shouldn't be any further unwound going to really understood is when quite the opposite insidiously sort of this is that us of everything well they had p s emcees to be a i c they sort of took it apart the integrated it into their operations they fired most of the employees they put a new software program in place it became a very different entity and then they turned over the shares to us we with an operating system that we couldn't even use to access our own data and they claim they lost money while they were operating it so they seized a profitable company and they returned an unprofitable one that was a shadow of itself it was very unfair and our point is that legally it's not permissible in this circumstance for p s and the seizing entity to obtain an affirmative award in its favor that's the one point one million the we can recover a zero if their expenses were greater than their revenues that's fine we'll live with that but they can't come out ahead by getting affirmative relief in their favor and if you accept that core premise then you don't  equitable kind of proceeding your honor is correct that there is no california case that's confronted precisely this scenario and i think i would say two things about that first to the extent that they are the ones defending this award in their favor i think the lack of case law it really cuts against them not for them but second the way we interpret the restatements of restitution shows the way this should occur you can diminish an award of profits right we were the only party entitled to seek profits we moved for profits if the expenses were that the district court adopted the analysis from section seventy four of the first restatement of restitution all parties have agreed on that analysis there's no dispute about that legal rule apply here i'm sorry you're going to go on what i want to add is that the stockton theatres case from it which is i think the leading case in california from one nine hundred fifty two is also very helpful because what that says is you don't just run an accounting and whoever comes out ahead is better the focus is on making the judgment debtors that's us whole we quoted that a key sentence on page six of our great reply brief but i want to just read that one sentence if i may the fundamental purpose of the court in responding to the demand for restitution was to do equal and exact justice insofar as they could be done to the corporation which by judicial air had been deprived of its property that's us so the fundamental purpose of this is to make sure that justice is done to i guess that's one way of looking at it there were a lot of large sums that were netted out to the one point one but there was a receivable a seven hundred thousand dollar civil if that's what your honor if you want to well receivable is an asset it's not a loan m claims to have assumed that loan when they acquired via cd but there really isn't evidence of that that what happened was b a i see loaned money to national farm with seven hundred thousand dollars so that national union could prosecute the appeal to this court in which they want to obtain a reversal of the judgment and to cover other expenses and p s m took the position that when they took over b a i see vey assumed that seven hundred thousand dollar asset even though the reflect that and of course that's another problem here is that you have p s m reporting to the california apartment insurance that b i see is making money they reported to the state of florida is that he was being operated profitably and then when it comes time for the accounting on the restitution process they change their tune and suddenly be i see is losing money and they should be compensated and made whole for the losses they suffered and that creates a terrible incentive structure because it means a seizing judgment recently aggressive behaviors in operating the assets that have been seized secure in the knowledge that they'll just be made whole and their losses will be paid for in the event they have to give the company back that's a dreadful incentive to impose and that's why as we say it may be if an asset is not operated profitably that there can be no award of profits to judgment debtors but it doesn't follow from that that the judgment creditor gets an award in its favor that cannot be now i want to respond to briefly to a number of the points that my friend made about reinsurance in case the court gets to those issues there there's no issue of mutual mistake or apparent subsidiary confusion here the only question is whether this agreement that was entered into ought to be rescinded and you don't get to rescind contracts willy nilly there has to be a good reason california even has a statute that we've cited in our alternate ground for a firm and well i put the parties back in the same position they were i mean why couldn't the court unwind it is a matter of equity well your honor it would only reach the point of unwinding the reinsurance agreement if it believed that it was a necessary expense rather than earlier there was no mutual mistake and they're not relying on it they never argue that in the district court they haven't argued in a their appellate briefs inferi i suppose if it had been litigated maybe they could have come up with some mutual mistake ruling that issues not in these appeal that's not in th case they have never articulated any basis rescission other than we have cold feet we have regrets we wish we hadn't done this but that's the whole point you take the risk when you're a judgment creditor and you go out and you sees a company a significant asset in the midst of a more than colorable appeal you take the risk and one of the risks you take is that you may live to regret improvements like quarter share agreements i mean in general i don't really understand what was going  this agreement around or nothing was on wound the agreement was terminated it had a provision in it that the agreement could be terminated and at the time when the company was finally returned to my clients or shortly thereafter there was a new letter agreement th terminated the quota share agreement it's done there's nothing has been unwound they are seeking now john wanted what he would like apparently is to go back to the district court where we've been for more than a decade and spend even more time trying to figure out how to unwind premium dollars that were shared in risk portions they're still but they're still on the hook right for the old for the old pop premiums there's the record doesn't disclose exactly what they think they're on the hook for at this point but what i can tell you as a matter of basic common sense insurance law is that whatever losses they may be on the hook for they've been paid for in premium dollars right as an insurer you pay your losses you pay claims with the premiums you get they've kept they kept those ninety cents of every dollar pre two thousand and eleven period they want to go back and undo all of those transactions as complicated as that will be that will take i assume months if not years of further litigation in the district court and it would by their own account apparently if  you believe them result in another six or seven million dollars being paid to them all because our company was seized bending an appeal that we won i mean that's the sort of the reverse of equity if you ask me let me see if you were it's about attorneys fees before i  rest we were entitled to the attorney's fees that the district court awarded because we were the prevailing party in an action on a contract and under california law that's that's what you need there was a statute that was invoked in the district court that doesn't apply it's a statute whereby you get attorney's fees for enforcing a judgment we didn't incur fees enforcing a judgment although the fees we were paid for were fees for work done before the entry of judgment and so the c that my friend has relied on in the statute sixty five point zero four zero that just doesn't apply were in the regular seventeen seventeen analysis we prevailed in an action on a contract the anchor pacifica case that all parties briefed in the district court and to dischord essentially the same scenario party goes back and gets attorneys fees for the rest of to sion component of a proceeding before the final judgment is entered and so we're entitled to those fees and if you accept our core position that p s m cannot come out with an affirmative award in the restitution or the accounting procedures then we would ask that you also allow us to recover our full fees even more than the destroyed award unless there further questions thank you me please the court quickly judged that she was absolutely right this isn't a come out ahead situation p s m was getting reimbursed for a mouth that hadn't been recalled when the company was returned and so we're we're bringing the parties back to square one so to speak and judge perez is right there isn't a case in california that does what defendants wants you to do here with respect to their bills and i will venture to say there isn't a case in the land  door that p s m received here some also had the benefit of controlling something called the policyholder surplus which is monies that are set aside to the extent that losses exceed the premiums you can dig into this other fund and fund those losses once you gave the company back the company received to back the surplus and so the q s a part that has been unwound is future premiums after two thousand and eleven that are written on the company from two down them to the end of time what's still in place and they're still billing us for for these losses are losses from the beginning of time to two thousand two thousand and eleven that six million spread  extent to which the premiums are too short and we have no surplus with which to find the spread here this q s a was to mitigate the company's loss of the company was in freefall at the time it wasn't  gned to profit p s m in any way it was a parental guarantee it was a bad business deal but you do it for a sub if you're a parent quickly on the seven hundred thousand dollars