i would like to reserve five minutes or four minutes for rebuttal the two iranian orders by the magistrate judge below purportedly enforcing a confidential settlement agreement between the parties elevate a judgment against name at and was frank what is this to feel like the judgment is that reference is usually a separate document which is an agreement between the parties what does that reference well there there was no stipulated genuine forcible contractual provision well pursued to a settlement agreement which the court supervises it oftentimes there's an ex parte procedure if they're in the event of a default and that didn't happen here so you think the court can have an x party hearing to determine whether there's a default know if the parties agree to it it's a cut it's a contract settlement agreement is a contract so so you wrote this language in here and the parties agreed to it but there was no stipulated judgment prepared is th correct correct your honor so so did the parties intend to have a simulated judgment prepared as an attachment to the agreement or or what did this language mean given that there was no stipulated judgment capitalize well my understanding if there was a default our clients just refused to pay for no good reason that the plan to the could go next party and say ok well actually now the stipulated judgement so so if i just read this as in the event of a default on payment of  paragraph twenty one that seems to support what you're saying because it says except the ex party proceeding to obtain the judgement caused by the company's breach for unpaid balance everything else is arbitrated so that language in twenty one relates back to the language we were just discussing in one day right the exception is for a default ok and in the event of a default except the x party proceeding to obtain the judgement caused by the company's breach for unpaid balance of every fors to the in the event of default so what the parties agreed to was to carve out of arbitration payment failure to pay is my understanding was correct that you have you've left and for some of the agreement to the court you say default you can enter a judgment if there's a default and now you're quarreling about whether there is a default and i understand your position on arbitration but isn't it reasonable for the court to say look i get to have an excuse so so there was a non payment which is undisputed to the of you was correct and then you had that you had an excuse for nonpayment is that's how i understood the argument honor the central argument is that this is a settlement agreement is a contract like any other contract there is an implied obligation of good faith and fair dealing that requires cooperation that requires good faith that that your contractual argument which would start with were we all agree you didn't pay them they contend that's a default you contend it's not a default correct right who wyden and you have an agreement that says in the event of a default the district court can enter a judgment for the eight amounts why doesn't that leave the power to determine whether there's a default with the district judge rather than an arbitrator well i would agree your honor that the district court presented with with that could decide was there a failure was there to fault a payment and so that  are asserting a default they're saying we never got the money you're saying you're right you didn't get the money but we're not in default because you had obligations towards us that's the nature of the dispute we're not going to resolve that dispute today the question is who was the appropriate person to decide that was it the district judge of the arbitrator well i mean the district court when it was presented with these facts these facts in this case which is not a failure to pay it's a good faith attempt for a year to to say well they claim default there's a stipulated procedure for that and you don't have an excuse and therefore i'm going to use the stipulated procedure well they're reads out of the contract multiple provisions including the arbitration reason if they went and said we haven't been paid anything and there's a default the district court could enter judgment where the evidence shows that for a year we've been trying to comply to pay we paid the attorney what happened here is the attorney got his money and then disappeared for six months the settlement was in july of two thousand and twelve july sixth he finally sent his w nine in december of two thousand and twelve we asked for the employees and again i don't think maybe i'm wrong maybe my colleagues will correct me i don't think we're here to decide whether or not you complied with the contract or they didn't comply with the contract i don't i think the issue in front of us is as you phrase it is whether or not this should have been sent to arbitration and you may have great arguments you may be these may be dead bang winners but on that doesn't help me in determining where it should go well that's one of the arguments is when there's disputed facts that's why you have arbitration you go to arbitration if it's a clear default or a j decided it or whether the the district court decided it it was wrong for multiple reasons first of all again just the chronology is important here july sixth two thousand and twelve we settle the case we bargain for confidentiality we i represent a small indian restaurant called bob in currys it's not hurst and young down in santa clara they're worried about employees and former employees come out of the woodwork bargain for confidentiality bargain for mandatory arbitration of any disputes other than the default and payment and condition requirement that pay well see the settlement agreement references multiple times it's subject to tax withholding that's what the new so if went to his recess costco's cases where there's a judgement based on a jury verdict or a settlement we have to withhold under federal law so they have to cooperate with us so that we can properly withhold we get as w nine another six months goes by i'm asking for your client's tax id numbers we even told them there's an i ten process if they're undocumented that can be done we are not going to violate federal law by just paying under threat of a motion and we can ask you a different question you're entitled just to say you know to be this you want to pay that's what you say they want to they want to get the money know some way to work things out well you went through mediation in the district court and it didn't work but this strikes me as an incredibly case of sort of calls out for the parties to sit down and work it out you put the money you put a bond so you're not looking not to pay all may want to do is get the money right and the only question is how can that be done complying with with whatever the i r s requires right can't that be worked out well you know you can and you're making you're going down with the district court judge here which is this is small potatoes why are we even here on this appeal the answer is that we there is a way to resolve this that's why there's an arbitration provision mandatory arbitration once  question is that we have circuit mediators with a heavy assistance to get in getting a global settlement because they can also bring in they can deal with parties which seems to be part of your concern as well well we tried that i mean we tried it with it with  judge cousins who settled the original case the problem is once the court then awards attorneys fees on top of that through no fault of our own we didn't create this problem of reporting false information to the government we were trying to pay now there's attorney's fees wagon the wagon the deal whacking the dog's tail and that's what we have here i mean i'm not going to get into confidential mediation discussions for but there are impediments i mean we are here because absolutely your honor that should have happened there was even a post hearing on the attorney's fees where we volunteered to go to mediation but by then the agreements in force not only that my client has to pay attorney's fees on top of it and through no fault of their own i mean this  the life of me i don't understand you settle a case just give us your information we pay for the checks six months goes by before we get the attorneys think tourney's w nine and then oh he's been paid so he forgets about his clients for another six months then i get an e mail and i just want to read it it's it's in the excerpt of record of two thirty seven i suggested if there because he conceded they were not properly documented invalid social security numbers he says first line unable to obtain the by w seven that's the process that has been created by the i r s for undocumented workers to report and pay taxes and then he says there is a way in taking withholdings under these circumstances if you want me to spend attorney time researching it at your client's cost and tell you my research and my reply brief i can do that too and then he demands a five thousand dollars payment the implied covenant of good faith and fair dealing implicit in this agreement is we're going to comply with federal law  the case in the trial court we would have resolved it's in a fifteen minute phone call but my client is penalized by an inexplicable delay and cooperating to have the necessary means to effect to eat the party settlement agreement it's as simple as that it's a waste of time money you know i'm not going to disagree with that but we are where we are as a result of the district court's order and what the district court ignored here is it's not just a simple default we were attempting multiple emails you know over a year we want to quote we want to pay it we've got the money we want to pay it please help us and instead we get a threat you know six months goes by and i don't hear from him and then it's i'm going to file a motion on monday and here's all you if you pay me five thousand dollars i do some research for you on the tax law and send the tax codes and then they're and they're now on appeal they said they've done new research that doesn't answer the question my client should not have to risk a tax audit and penalties and interest when they five minutes in case the court has any specific questions asked of him i'd like to start by trying to answer judge a good as question about the ex parte and this is i thought about it when i was sitting there ex parte it does not mean cited the abuse of discretion standard to enforce settlement agreements there was a reversal because the judge did not grant yeah but i'm still trying to understand how this mechanically works this is where and when there's a default the judge will enter stipulated judgment right right there wasn't a stipulated judgment that there wasn't and here now we're dealing with waiver issues that weren't brought up and i'm not talking you know i know but i'm just trying to figure out mechanically how it works in the act and they can test the fault current say we did not default so under that circumstance why doesn't it go to arbitration arbitrations everything except this ex parte and every other than this x part of the entry of judgment goes to arbitration we didn't have an x party entry of judgment and you agree because there wasn't a stipulated judgment why doesn't this is you going are between let me answer your question and then back up to answer question this is a diff their issue is a defense to contractual formation now there is a defense to a contractual formation or an affirmative defense of the the breach of good faith these are contractual defenses so to answer question is default goes to the district judge everything else goes to arbitration had they been arguing a cross claim or a counter claim to the default well that is the truly we're in federal court don't cross claim i don't think but what they said was we're we're not in default we've we've we're ready willing and able to pay but we can't do so until you comply with your contractual obligation to give us enough information to be able to deal with the i r s their argument may be good bad or indifferent let's wait for second to get to that why is that why is that why is the ability to determine that argument encompassed in a perfect procedure that c party entry of judgment because of the second i don't believe it's paragraph twenty one where it flushes it out where it says except for the ex parte a procedure and i guess write a separate exporting procedure everything else goes to the arbit ila shall be intitled to a judgment for the unpaid balance plaintiffs may have high ex parte for entry of the judgment and so the proceeding with that was carved out of arbitration so what was your understanding of carve out was the enforcement of the payment provisions are reserved to the district court everything else goes to is but the car that is the x party proceeding and you i think we all agree there was no ex parte the proceeding here correct it was so if that's all that's carved out aren't all the other disputes to be resolved by the notice motion right and it's not an ex party entry of judgment and therefore if it's not that aren't all of the proceedings and for the arbitrator and the interpretation of a contract is reduced to no avail so i think this panel can look at the contract i  into what was reserved to the district court the district court granted a hearing actually asked counsel about whether there was a anything in writing to provide the social security numbers or not so so what you position on the on the merits of the dispute or use your position your entitle to be paid without providing any identifying information it except for the back up withholding so the this argument when you know the answer is yes yes and this argument vs cosco case when i did some research i saw a lot of federal cases where i would call them the kind of the tax evader cases where different individuals sue whether the i r s or their employer for taking backup withholdings there's two cases one way so we can get you some i want to be clear your position is they just don't have to take out the appropriate amounts and send them to the i r s or do the appropriate authorities but they they want the money in a way that they can distribute it your market including to social security and obviously homeland security has their own public policy to criminalize employers who hire undocumented workers and to control immigration so with respect to the i r s what an employer has to do is take the maximum backup withholdings send it to the i r s and then it's the burden on the on the employee to get a refund so here and you would end you cite what statute for that prop and the twenty six u s c eight thirty four zero six and it's also twenty six c f r section you know those don't say that it's your obligation to keep at the maximum withholding do they also say that you need not seek from the employee identifying information no they they require you to seek it and yeah and that's what that's what your opponents saying when required by federal law to seek it and you won't give it to me but i deploy or an individual has the right to refuse it the consequence is you get the maximum amount deducted and the stat you take it from your reading of the statute as opposed to what it says correct nothing in the statute this is you have a right to not give it no it's a consequence you don't have a right to not give it but there's a consequence in not giving it which is the max amount is with withheld and then you have the which i suppose that the employer will give it to you would be a good cause good correct and it would be a much different case if the the defendants had paid sixty percent of the funds sent the other four to the taxing authorities in this case is the i r s and then said we complied and then we had filed a breach of the payment be a much different case because at that point they complied this is this is a non payment not how they segregate it so i understand that i mean they were an employee employer relationship so the employer was not didn't why didn't the employer have their information during the employment relationship the they would be required by law to have it there's nothing in the record as to to that but what is in the record are e mails and i believe they were starting in december of two thousand and twelve  motion was filed in august of two thousand and thirteen where the defendant said we are going to verify social security numbers and i think that's where so the bogey man of so i think appears from the record that they had social security numbers given to the employer and they were ask her five them and they couldn't do it right and i and i queried as to why they at that point they were verifying them but again my turns it turns out on this record that they're not the real some security numbers right that's correct and and the workers exercised their choice to not provide them and their the medicine they had to take for that would be the forty percent or the the higher withholdings let me ask you this about the you know we have the arbitration clause what is in me what does a governing i mean i see apart from payment policy or promises of confidentiality in an disparagement correct   judge great vault did note this in his order in that argument it also reserved indemnification from the employer so if uncle sam went after the defendants under the arbitration agreement they would have a right to sue paid that's that was that was their goal in the litigation their goal the goal for defendants in that litigation was to buy their piece and have a arbitration for any of the the ramifications that may have come  ok now we do we don't have any questions for him you a couple of points occurred to me when i sat down that you know even if there was a stipulated judgment so if went to case very recent case two thousand and fifteen and june court of appeal here said you still have to withhold so what if there's a judgment we're still not going to pay we need to verify their tax but you're withholding their wages when they were working for your client's right right it turns out they gave us fake i d s and employers between a rock and a hard place if it presents if the employee presents face or applicant facially valid documents we have to accept them and if you inquire further you get sued for national origin discrimination violation as a right and you just paid to the same accounts that you've been paying to up till now well when you when you had you'd been the only thing for these guys federal law says once you know you can't you can't you can't knowingly employ an undocumented worker once we know we accepted their i d s as valid we paid them under what we now find out is a fake social security number and i mean this is becoming kind of complicated all we want to do is make the payments and comply with supreme federal law the tax tax obligation this argument about you know putting in all zeros and just withholding the maximum first of all i mean if mr morgan and i had cooperated as the agreement required and made this in the truck before making a motion it would have been done but this is brace for the first time on appeal and the opposition we've addressed it in our reply it's not as simple as what's been suggested here there are reasonable cause standards there are the exceptions require due diligence by the employer you have to make annual solicitations for the information it's not so simple as just withhold the max and the point is under this agreement implied covenant of good faith and fair dealing goes both ways you can't just sit back for six months and say ok here's my w nine ok i've been paid you know wait another six months threaten me with a motion you know and you've got to pay five thousand dollars even if you want to settle it when it's through no fault of ours we're trying to comply this implied covenant of good faith and be requires cooperation and good faith and that didn't happen here and that's why they also misled in defense of magistrate judge great wall they say in their reply brief is when they submitted this he agent and identified told me just enter all dear us they misled the court we did have an opportunity to brief that because it was presented for the first time on the reply brief below and now we have an opposition we have a new argument in the opposition an appeal if we had sat down as the agreement required to work this out we wouldn't been here my client would be on the hook not only for the settlement amount which they agreed to but now also attorney's fees which judge great well was misled below into ordering