good morning counsel if you are reserving time for rebuttal please let us know at the beginning and by agreement every each side has had minutes in that case and you may be  damn record scott mcdonald appearing on behalf of the a t s entities which i may occasionally refer to as a s in the singular but should be deemed to include both the same with respect to references to the purchase agreements in the the subject consulting agreements and the most a court has a different preference and i was going to keep your voice up just a little sure your honor absolutely thank you unless the court has a different proffer once i was going to proceed fees but st must make a demand and that they have demand cannot be made until the conclusion of this case so the district court started off down the right path recognizing is required by case  the st consideration is whether or not the taxpayer in this case mr retard has a property interest which is decided with reference to state law and in this case eight yes admits that there is no case law  and other than a fleeting reference to the consulting agreements failed to consider the some paramount language contained within those consulting claimants which also of course address so in that respect it  position is that this the district court's analysis under state law governing the interpretation of contracts was incomplete before it gets to the  which is the nd step incomplete because i didn't read it you didn't properly address the consulting agreements before discuss the consulting agreements they just require also misinterpreted the asset purchase agreements themselves in the provisions set forth in the asset purchase agreement before it can offset its attorney's fees against anything any any sums owed to the taxpayer mr or timed out but i'm not sure why that's wrong and i i guess i have two questions why is that wrong and why didn't you make a demand excellent question and the demand may have been made but it's not a matter of record all right well that's your responsibility provision right yes that is a correct interpretation and correct reading of sentence one dollar but if we dissect that entire paragraph there's really three operative provisions sentence one does contain the demand language and it covers any litigation claims proceedings expensive losses that we all agree as you pointed out there's not a demand in the record there's not a demand in the record ok so what is this next what are you saying is language does not contain any demand language number one and number two that this completely fails to address in the consulting agreement you're saying we don't read it in context so explain to me how this would operate in practice because i'm not sure i follow you so you don't have to make a demand if you want to offset it you only have to make a demand otherwise so yes your honor in fact the demand language is subject to varying interpretations clearly the district court interpreted the demand language and the i r s has taken the position that that word to me and imposes a condition upon a s e s admits a slightly different interpreted will completely different interpretation that they had me and language actually imposes a condition upon return to it means when we ask for the money you pay on demand but pay no man languaging contract this usually it says will pay produce or on demand so that to me implies he doesn't happen pay unless you make a demand but the offset language does not contain the demand language ok so go ahead and explain so what you're saying is that you can demand a provision is completely irrelevant that you're reading it out of the contract but not quite so so what i'm going to get into momentarily is the consulting agreement itself which really primes this language so the courts i certainly think i have to read in additional green men to understand the is if the court will allow i will continue with the court the district court's misinterpretations of the asset purchase agreement and we'll come back to number one when i address the consulting agreements if that's a fair crack at issue number two is indemnification until the conclusion of this case if the district court is correct then the ship will have sailed the two hundred and sixty dollars some one thousand dollars it's already impounded with the district court in michigan will been released to the i r s and we will never have a chance to get their money back so the there really is no reason that my client can't make the demand now there's no reason that he needs to make the demand after the conclusion of the case as a district court ruled again no l provision into the contract itself if the only condition is that a t s makes a demand why can't it demand but attorneys fees that have occurred in the past including both the state court litigation brought by the occur in which was resolved in summary disposition with this case of course now i got twenty seconds left so the consulting agreements a paramount importance never addressed the offset provision the right of the consulting agreement does instance so with the discovery your consulting agreement defines expenses right and so and it includes trying to find a specific language but it says direct expanses and then includes this language about we used to employees which are the customer accounts that's right because a yes is a p t o which is a professional employment organization right as customer accounts are really employers but is retired or customer you know he's the former owner right so how do you get to deduct his expenses the expenses the legal expenses were incurred in defending my client's very ownership of the of the room customer accounts and employees that were that were purchased those aren't attributable to any individual at least employee and isn't that the way the language reads america is as to be attributable to right agreed however is attributable actually to all the employees collectively not any individual employee attributable to least employees is the way the language or even you just explained at least employees where your customer employees ireton does not a customer correct the returned in and the sellers incurred the tax liability the payroll tax liability that led to these cases in the st instance and for a ton those litigation the state court case and in fact this case after a very intervene to make many of the same claims challenges my clients very ownership and right contractual rights with respect to those employees and i can't imagine anything that's more direct that would be incurred with respect to them ok your time is up any further question doesn't thank you counsel thank you to the critical issues that i think this courtship needs to consider the district court was asked to look at who own the assets associated with the  security interest that my client had the magistrate judge in this case was very saying in clear that that was an open issue and therefore there was a genuine issue of material fact as to who own these customer accounts or i think the confusion came in with regard to the district court is the district court was looking at ultimately the end result of the consulting fees that bat are now  being held by the corps our position all along is my client had a st senior security interest in the in the assets of what is called p p m s g also known as people plus an apex ad the state court below didn't make a ruling on that issue the parties here have talked much about that with regard to raise judicata collateral stop provided four different pieces of evidence now i understand what they provided so they provide four pieces of evidence yes what evidence was presented against that the evidence that was presented against that was the final number one  that the directional oni's all files assumed name certificates with the state of michigan doing business as people plus people plus is the management company affiliated with apex been my client had a st lien position on people plus an apex admin none of the directional entities filed any annual report and none were in good standing with the state of michigan the last filing that they made was a resignation of their respective resident agents one of the directional entities south was administratively dissolved by the florida state department of state on september th twenty eight so i understand all that you mean seems to go to and i distinguish these arguments he should tell me where i'm wrong i understand you have two arguments you're raising one being the directional and t s did not own this correct and the nd being the directional entities are a sham and what you've pointed to seems to go to the sham proposition and not who on the customer list so soon for the sake of my hypothetical that the directional and to tease are legitimate company is there any evidence showing that if you have these two legitimate companies evidence tying that customer list to a yes a pax the it's i'm in an unfortunate position of having to prove a negative your honor right did you submit any customers so to speak would have been the contracts themselves if there was a contract that specifically said this customer is doing business with apex admin or p p m misty versus this customer is doing business with one of the directional images but is there such a contract and all that but that's my point didn't you take depositions we took that we took depositions your honor and we tried to provide that deposition testimony in our supplemental brief which is another part of our we can we can get to that in a minute but is there any evidence you presented it in a timely fashion that pre supposes the last issue i recognize to the  b s apacs and not the directional entities own the customer list yes i think the evidence that we presented is there was a number one no contract between the directional entities and these customers and number two that doesn't prove who owned it in other words you don't have to have a contract to buy something if i go and buy something i don't have to have a contract while there is a written contract well there's only there's only two possibilities here i got a written contract or an oral contract we won't get into the statute of frauds for a minute because we didn't make that argument but nobody is suggesting and it was never raise again you asked what evidence was given the directional and all file the soon names are to fit with the state of michigan doing business as people plus and that was submitted timely so if the directional entities are all doing businesses people plus people plus is the one the doing business with the customers so that's that evidence was submitted timely and that's who was doing business when when the people plus are apex admin and held itself out as a p o it was holding itself out to these customers as as people plus or apex admin it was not holding itself out as one of these directional entities which i've already gone into or were dissolved i should also not the consultant john or i think we're confusing two different transactions mr mcdonald was referring to after the sale to mr otto they plaintiffs then he got some real consulting and the directional maybe's for that matter ask me about financial information where is the money floaty you have a lien against the directional entity we have a lien against directional entries but it was a later time no that wasn't the issue your honor issue with the directional entities which gets us back to the assets is my client had a st lien position on that directional and it beez but did not have a lien on the assets of the directional entities so the underlying the state court ruled yes you're st in line yes you have a st position but you don't have a lien on the assets so here we are today talking about who owned the assets and that was a central issue that the district court needed to make a ruling on the evidence was in support in the last the last thing i'd like to see my time time is up but you asked me a question about the financial records in the banking records and we did submit timely that all banking was done through apex admins account at citizens bank all the money went to citizens in addition mr  ma'am please the court jeff kline mr united states we submitted this appeal presents three main issues st how to calculate the consulting fees under the consultant agreements nd relative to those fees as between the government's fees are calculated as a percentage of gross profits specifically defined not in the generic sense of revenue minus expenses but specifically to be revenue minus taxes and minus direct expenses attributable to the employees at least the customer accounts the most natural for reading of this phrase expenses attributable to the employee's least operational expenses linked to the employee's wages paid to employees supplies used by parties to this contract modified that with limiting additive direct not to any expenses attributable to the employees least but direct such expenses is further reinforced by comparing this very carefully circumscribe language direct expenses attributable  employees at least with the much broader language that the party speaks contracts used in the purchase agreements in the indemnification clause there that in say direct expenses attributable to the employees least rather they talked about any loss damage liability or deficiency so can i ask you about a i'm not sure if you're moving on to the nd issue but can i ask you about that yes you started indicate so why did they have to wait until the end of the case to make a demand cannot be paid from funds that are impressed with a federal tax lien i think probably the best synthesis of this line supreme court case is contained in the seven dollars circuits decision in kampung you are on a bakery which also like this case deals with a contractual  and set off and what the th circuit said in following this line supreme court cases is that until a court makes an award of attorney's fees in a pleading plaintiff's claim for such attorneys fees remains in k and therefore cannot take priority over a duly recorded federal the fact that makes sense but then i'm not sure i follow why they have to wait till the end of the case to make claims in other words wallop why wouldn't we just interpret the contract in the contract says on demand and so they can make a claim it doesn't say at the end of the case you have to make a demand it seems to me they can make a demand at any point for any costs incurred that's correct the  could make a demand in any point and we don't dispute that there's a question as to whether they would have a quick claim for their attorneys fees before the court actually wanted such fees but you're correct that at any point prior to the litigation during the litigation today yesterday tomorrow and yes could make a demand for indemnification of what you're saying is it doesn't become kohut until the court orders but why is that what if i let's take this out of the context of litigation if i make a demand and the as to priority between  losses damages liabilities or deficiencies referencing back the losses damages liabilities or deficiencies in the st sentence of the indemnification provision why why doesn't it reference the broader profession because those costs are what can you do you have any questions and can you move on to the people plus point if you don't mind before your time runs out yes you are so as to the priority between the government's tax liens and security interest against apex a then we would submit that there is probative evidence in the record showing that the directional entities in the apex admin or some other company was in fact legal owner of the customer what about this point about people plus being the owner i don't think i'm not sure that a creasing position the people plus is the owner i think is taking the position that apex admin is the owner the parent of the direction right but i thought they were doing business as people plus doing business as an unassuming fictitious name  although that doesn't have any effect on legal title i mean this was recorded with the michigan secretary of state that they had they were doing business under a particular name that doesn't affect legal ownership of these customer accounts legal tug legal what if there is evidence their point is solely that there's evidence in the record from which a jury could conclude that people plus an attorney packs on to the cost of the us we don't think that there's any evidence of legal ownership by apex i mean or people plus we think that  at best this evidence suggests some kind of an alter ego nominee equitable ownership type of theory where there's an argument that these separate entity should be collapse that the parents in subsidiary should be collapsed into one another so why shouldn't that go to a jury t that's what the evidence that they're pointing to might support but they're not appealing in saying that the that the district court incorrectly decided that particular issue against them and even looking at that particular issue the then it's subsequently determine that there is an nominee or something along those lines when you collapse those two when you when you say the collection can proceed against the alter ego entity that does not displace the liens texans in that case that  the state court did find as follows open quote neither the language of the security agreements nor the u c c financing statement gave plaintiff a curry a security interest in the actual assets such as customer lists of the directional en close quote the court then one that's a finding the court then went on to rule occurring has no claim against those assets as a result well the currie has no claim against the assets in question it can't have a claim for fraudulent transfer as against the transferee who received those not they can be collected and or pleader action the plane of asked the court to imply a right of offset for attorney's fees due to some misconduct or misrepresentation made by one of the other parties in the case not true here   people plus an apex admin are our alter ego of the directional entities that's not our claim and that's why we didn't make it and that's why we didn't waive it our claim is apex admin owns the assets period and we've provided evidence to the district court to establish that such as the financial records in the banking records and the other things i mentioned secondly with regard to our complaint our counsel had indicated whether or not the state court had made a ruling with regard to ownership of the customer accounts again we acknowledge that the state court had made a ruling with regard to our security interest with regard to apex admin people clause and the directionally is not the assets but the district court or the state court did not reach the question of who owned those assets and the magistrate judge a very specific police said in his report recommendation that that was not reached so with regard to raise judicata collateral stop all those issues were not ruled on by the merits they were not raised also in the underlying arguments and one of the things that we mentioned in her reply brief is you can't raise new legal arguments on appeal and these raised you to collaterals stoppel arguments were not arguments that the district court ruled on there were some dicked related to that but there was no specific ruling by the district court on collateral stoppel or res judicata and they should not be raised now on appeal thank you very much very much thank you counsel the case will now be submitted thank you all for your arguments