effectively admits is a recurring line when revenue earned in a related party transactions is excluded from the calculation of variable profit because it is not conducted at arm's length do the expenses associated with that revenue have to be excluded to the settlement agreement basic principles of accounting in economics in a common sense all point to the same conclusion these expenses must be excluded and here the failure to exclude those associated expenses had a significant impact on the calculation of the claimants award increasing it by about one point four million dollars i subset of claimants and b p i think that maybe elevates the formality of the process a little bit more but i think the second question that you ask is really the more important of the two because b p is position is that policy three policy was responding to a particular identified and we can look at it confirmed and it was only addressing that which are they that sorry i understand i didn't mean to suggest that's not an important question i  going these policies are were promulgated during the administration of the selling program sometimes in response to issues that had arisen sometimes just to address and provide guidance to the accountants who are in the ministry ting the program with respect to policy three twenty eight version two i'm not aware that there was a specific issue that drove it as relates to related party revenue three twenty eight has about eight categories of types of revenue that it addresses and it states that those categories of revenue generally would be excluded  calculations where they are not it arm's length and it directs of course the settlement program where appropriate to investigate both the expenses and the revenues to try and figure out if those various categories are arm's length narrowly won and you also i think are arguing another way to read it is if you talk about one thing that has to be excluded and necessarily related to figures to that calculation it can be excluded as well  your position is the whole transaction has to go who item whatever it might be it's not necessarily always know as it is not always necessarily a purchase and sale you're exactly right judge southwick and a couple of points on that in the categories of of types of revenue that are identified in policy three twenty eight as if there are about eight different categories and it's a non exhaustive list a number of those categories are ones that don't necessarily have expenses associated with them in the scene the way that you have it here in that respect that's sort of what makes this a very easy case is that you have cost of goods sold that are directly associated with this revenue you have a car dealership that goes out in the buy vehicles in an arms in an arm's length transaction say they're buying the ickle from an that's an expense on their balance sheet that part of the transaction however has no impact on variable profit all you've done is you've converted cash and you turn it into inventory now they go and sell that inventory in a related party transactions they sell it to two entities so now what you've done is again you had no impact on variable profits and it's an out cost transaction you've now converted that same amount of inventory back into cash well what happened here is that in calculating variable profit they excluded the revenue that the claim of god in that transaction and so what you're left with is this hole in its balance sheet it no longer has the inventory because it sold out to this related party but the sentiment program has said well we're not to include that revenue because it's not part of the related party transaction so what you're left with is this fiction it is a pure fiction showing that the claimant had a greed or decrease in variable profit because you're only looking at expenses and you've blacked out the revenues so the settlement program wasn't calculating variable profit at all i don't know what you would call it in the claim that really offers very little substantive defense of the accounting behind this and there really is not variable profit is revenue minus expenses and all that they've done here is accounted for the expenses that's not a calculation of variable profit to get back to three twenty eight for a second and the discretionary review decision that judge southwick mentioned one point about that is that that was these where the he was focused on whether or not the expenses themselves were part of the related party transactions and judge barbie a said policy three twenty eight is just a revenue policy it has nothing to do with with expenses and one of the and i think what the mistake that the appeal panel made here was to likewise suggest that the outcome would have been different if the expenses had been part of a related party transactions and that's an argument that the cl also makes however that is a complete red herrings here it doesn't matter whether or not the expense is part of an arm's length or a non arm's length transaction the key is that there's got to be symmetry in the treatment of the revenue and the expenses associated with that revenue that's not what happened here and that's why we accept your argument we still have to go argument about perhaps to here one is he has reviewed this arguably he in the decision in two thousand and eighteen and he says he was doing it to resolve conflicting decision by appeals panel as you may have some sort of i mean response you already gave says that his it does not need to take review except in unusual where circumstances you know the labels been allotted whatever the categories are we also have the baseball rules where you offered zero dollars and i don't know where your calculation of if you take out the expenses and revenue on these insider are closely related matter what you think you still going to do is the right amount we've got all of that in play that goes far beyond just here and what this court has said and i think the clears and capsule ation of it is in the homes case is that there really are two categories of cases where discretionary review is required one is where you have a split in the appeal panels and the second is where you have a substantial misapplication of the settlement agreement and in fact holds even goes on to say it doesn't have to be an actual misapplication it's even just the potential for in this application here this is one of if not the clearest misapplications that i think i've seen in terms of an appeal panel decision that is just it is in contestable that the settlement program was wrong in how the part in the policy that it took to calculating variable profit so to your question is what if anything do we do about that but we're certainly at a point in the process for the deepwater horizon settlement where we are nearing the end of the universe of claims is of course relatively limited at this point but the question is for those claims that do remain are we going to ensure that we get an accurate and a proper calculation of variable profit the the this issue of whether or not you are going to account properly for expenses in a related party transaction this is not a simple one off the the fact pattern of claimants who have related party sales is incredibly common this comes up all the time and so the question then as i said is are we going to take steps to make sure that this is resolved properly as these final claims are getting resolved at the various different levels in blippy history of this flu the policy date i don't remember now three twenty eight there are related party claimed to be resolved before that and since them here we are nearing the end i hear that from time to time near the end perhaps this is it this has been going on for years and why do we need to address it now well i think this case more so than others i think presents a very clean and clear and and easy question there are no factual disputes apple no one's disputing the amount of revenue  issue no one's disputing whether or not the revenue was earned in a related party transactions nobody's disputing that there are expenses that are directly associated with this revenue it is as clean a question of interpretation of the settlement agreement as you have and i guess the question is whether we want to take steps to make sure that it is properly resolved not just for this one clean and where it did have a significant impact but also for those claimants that do remain and what's notable here is that the claimant it mitts in their briefing that this is the position we're advocating the gun kicks as hard as it shoots there are going to be instances where this policy that the interpretation we're advocating is going to work against b p and it's going to be favorable for claimants we're advocating a b p neutral approach to this we're saying let's just get it right so are you advocating sort of a fit one and fit two now clear evidence that there's this split but yet you urged the importance of variable profit or unit factors in saying well you know here's a third level of when the fifth circuit say it's called an abuse of discretion for the district court to exercise its discretion to review these because you get this i mean i've stated it that well but of you know i understand and i apologize if i was unclear our position is that we think that this it's very clearly we in the second category of a substantial misapplication no one knew that that was what your main urging was but you know  just i'll just throw it out there thank you to say well you know because it gets kind of hard as he says we get a lot of these cases and all of that and you know soumik some others of these have come around and we get back to leave saying ok the district court has discretion within which to determine whether you know to review these and so or saying it's really discretion then you know when are we going to go to flag so to speak  discretionary and i think the factors that warrant a holding that it was an abuse of discretion here as i said number one is the absence of any factual disputes number two as such do as you pointed out the importance of variable profit here i agree with you i do think that is a key part of it and one of the things that this court has looked to determining whether or not the denial of discretionary review is itself an abuse of discretion is the issue and so i would go back most recently to this court's decision in the texas school seafood case from back in november and you're familiar with that we might hear about yeah well well but this court characterized the issue there as one that goes to the couper of the settlement agreement and the core of the implementation and just as the classification of expenses as fixed versus variable is core suit two is the determination of what is variable profit arguably variable profit is even more important because it is the fund mental basis for step one compensation i think the last point your honor that this court has looked to in determining whether or not judge bar being abuses its discretion in denying review is whether or not the the clean is truly a one off in other words does it relate to some sort of idiosyncratic business model something like that and that's not what you have here the fact pattern if you think about all of the companies out there that are in the deepwater horizon selman zone the parent companies with subsidiaries affiliates private companies that have l l c's all these sorts of companies are constantly engaging in commerce with one another generating all of and this court said essentially nice try that this is not a question of broad significance this relates only to your specific business model that's not what we have here and for all these reasons your honour's we w about how to react in the ceiling of the case i think the answer to that and i didn't have specific authority that that's what happened i think the identity of the climate is is not does not need to be sealed i think the concerns involves whatever numbers might be thrown around in the decision effect in the award including potentially the war yeah i again this was not something that i discussed coming in here but may want to follow up on that yes and and what you can say it to be happy to do that your honor course a sort of struggling with where to begin because there are only a point for the just for both sides is just what last week we just last week the in bank starting point from our perspective is to look at what judge barbier has been instructed to do i mean your job is to decide to judge bar b a abuse his discretion and so i want to point out that we're not talking about a a standard litigation we're talking about the implementation of a private agreement according to procedures that the parties have themselves designed and one of those  part of that process is what we've labeled in our brief the discretionary review rules there are rules that the parties have given judge parker as to his exercise of discretion on this issue discretionary review if you look at rule for makes it clear that the court has a very limited role in all of this process and that discretionary review is reserved for extraordinary from rule four as part of its discussion of the standard of review so we start from the lessons that judge bartley has been told he only needs to get involved in exceptional cases and so the question is for this court did is this case so exceptional they judge barmy could not refuse to review it is this a case that he did as he had no discretion to decline review so i want to point out a few things about the claim as it got to judge harvey first of all the claims administrator employees accounting profession the accounting professionals of the claims administrator investigated this issue thoroughly there were exchanges and this is in the record there were exchanges back and forth between the claims and illustrators accountants and the claima on this very issue and documents were submitted and the accounting professionals with the claims administrator reviewed the issue thoroughly and determined that these revenue should be excluded economic sense of this yeah well here's what i can explain i'm not an accountant this is an accounting is now the professional accountants employed by the claims of minutes minutes traitor have determined that in the context of related party transactions these types of things are treated differently than an arm's length transaction so and it may be less than a list of a lot of them are not the thought of by an seo situations and indeed revenue may be the only thing i'm sure and proceeds interesting come gains or losses from sale of assets ok that would be an example but some of this would be it seems to me perfectly understandable that all you would exclude is revenues because you don't have associated expenses necessarily but on related party transactions and particularly for your current they very much are related party expenses and i mean  revenues so how can it make any economic sense to exclude one and not the other and and then you're standing there as a non accountant i just want your best effort to explain it well what what i would say is you're talking now not about just this one claimant but about another two companies in the same family of company so economically from an accounting standpoint you're not just dealing with the claim of this claimant but also in the related companies they make a claim if they made a claim and maybe they did and i think they made claims and i think they were denied maybe because of the flipside of this revenue expense issue about it but what i would say is it's an accounting issue it's very technical concannon issue and so the question is it in believe me it's not just policy three twenty yet because again the accountants employed by the claims administrator reviewed this claim thoroughly mean if you look at the record the record is thirteen vaucluse long forty to one hundred pages  entirely so they get this claim and then the appeal panel took a day novia of this crime so it was very thoroughly vetted by the county professionals before it got to judge to review this technical accounting issues involving related party transactions which had been thoroughly vetted by professional accountants employed by the claims in the straighter and subject to  review and was it his job to substitute his judgment for the judgment of the accountants on an accounting issue that was guided by and determined by a policy that the parties b p included had a hand in fashion so when you think of how broad his discretion is in you you frame it that way there's no way you can say the judge bar me had to review this case now the point the church southwick you were moving to was we'd say it all comes out in the wash that's not exactly the way we put it but if you look at the settlement agreement the real essence of the settlement agreement is a comparison that you are comparing priests bill profit with postville profit that is the essence of the settlement agreement and that the issue is are you using the same methodology to determine profit before the spill and after the spill so that you know as long as you're comparing apples to apples you're going to get an accurate reading  the same era is being made in both sets of calculations it's still a problem it's one thing for b p not ultimately to suffering a loss because sometimes i'll be benefited sometimes not that's not a good way to run a claim system but secondarily your client may be benefited this time but the next case because i maybe up two million dollars and i think if there's no economic sense to what is being done and i'm not seeing what it is yet and i must say i'm not a callan but i used to be able to add and subtract that if you take out only part of what would determine whether there's a profit or not take it only the expenses and leave the income or take out only income and leave the expenses you're not determining anything that i mean we've already been down this road and that's what troubles me about this and i don't think it's enough to say that it's an accounting questions and accountants have looked at it we have to get in some way yeah i do have a bit a bit to say first of all when you talk about the economic sense in a generic arm's length transaction i'm with you one hundred percent if you sell something you d ok we're not talking about a generic arm's length transaction the accountant the claims administrator has determined that related party transactions should be treated differently and that it does make sense because you're talking about two companies that effectively and i hate to use this analogy but two companies that put their money in the same pocket so why you want to look and they want to focus you just on this particular claim and there is a no other party that's affected by this in this case two other parties whose books are affected by this and the claims administrator as a professional and again i'm hunted down but it as a professional account has obviously come to the determination that that transaction is different than a generic arm's length transaction so there is economic sense and maybe the revenue is reported on the other other related parties books and an excuse that claim the other way i don't know i think i also want to address this notion that it has widespread application because there's no evidence to support that and i would encourage you to look closely at b p s request for a discretionary review because they're aware of the role that says you know discretionary review is only going to be granted in exceptional cases you would think in their request for a discretionary review they would try to point out why this is an exceptional case but you look at it there's nothing there and in particular on this specific issue they only cite one other appeal panel decision that even addressed the issue and that was from two thousand forty so now like you said that the current version of policy three twenty eight was issued in april two thousand and fourteen that's been around for five years if this is such an important issue that has such widespread made the determination and for the record this is discretionary court review number twenty to ninety three which apparently was in june of two thousand and eighteen he made the decision that it's not his role to substitute his judgment for that of the accountants on an accounting issue let me ask you about that because you've gone back to that a few times and abuse of discretion is a pretty wide berth on review whether it's this court ordered bar be a reviewing from the appeals panel but it seems like you're superimposing the expertise of the a so now we should since none of us or at least i don't thing out of certified public accountants we should be i'm not we should be deferential to them so it seems like right out of the box office a determination has been made and the a or multiple c p a s are involved then deal is done and i'm i don't think that's what the settlement agreement contemplates because it provides these levels of review if it were that simple seems like nothing whatever reach judge a or he could just say well the c p a speak it out then that's the end of it and do what the c p a say so i'm a little concerned that you're asking us to indulge in a cow and to treat this as purely an accounting issue of which we have no or little expertise as opposed to a legal issues in terms of misapplication of ok well let me let me unpack that a little bit to break down again this is not a standard litigation this is the implementation of an agreement between private parties who have established rules as to who's going to do it now i understand what you're saying but there are legal issues to come out of this right this court has been involved in the legal issues are cases removable is their right to appeal you know does federal law preempt state those are legal issues clearly those are appropriate for the court the professional accountants which let's face it the parties agree that those issues would be committed primarily to the claims administrator and his staff of professional accounts not the issue the question is does he have to and what kind of issues does he have to now be p d posits that this involves a misapplication settlement agree disasters what do sentiment agreements about and that's what this undermines that and that's though it seems to me that the issue that we would be facing i suspect you could put a group of accountants in a room and get a very spirited the other part is questionable because it's related and even of that and in that memo down of the head when a related party transactions or not have the same economic factors to them but it seems to me that it's a fairly straightforward point that i would like to think accountants could agree on it and i would say that we haven't remit here there's no indication that the entity accounts are reaching different decisions on us we have an agreement among thousand and fourteen if it was such a problematic issue why didn't i mean b p has a hand in crafting these policies and has a right i mean issued just a process question should be assuming in these scenarios where we send it back to you no sane and assume we are here i'm just saying we sent it back saying it was an abuses and in effect you should review this so it goes back to the court ok does do it gov seafood case in any of the scenarios homes of the rivers where our court says don't you know busa discretion you should approve so is inherent in there that it's not just barbie per se whose arrest them with the very probability probability or which is part of a you know send it back to the claims administrative or the c p a zo whomever is almost by definition the send it back to the going to minute just because of the nature of what's sent back whereas i get also or see that nap in the case my question was not meant to telegraph any answer just was a process and you know when you can ask but that's you've you know i think responded to me but a bit if i may just briefly it does raise a valid issue that if you are going to instruct that this process somehow be changed what about the claimants who have already been through this and perhaps these claims were denied because they say she worked against them do they get a do over because all of a sudden we're at the end of the process and the rules are changed or answer there would be no inherently an inherent problem with the fact that the settlements been around since two thousand and twelve here we are in two thousand nineteen and this is the first time you're being asked to take even consider exception with that we would ask that the depending on what the court were to say likely to be a with a hand back to the settlement program so b p is essentially asking this court to state a very clear rule a simple rule really that just says that if you exclude revenue because it is from a related party transactions not at arm's length that you would exclude the associated expenses and by pronouncing a rule like that that i don't think would really leave judge bar b a anything to do because he certainly is not going to crunch the numbers to figure out how that impacts the claimants claim here and that's why we think that it would then go from george r b a back down to the settlement program now on the issue of the accounting because a lot has been said by the claimants about how technical and complex this is if this is a technical accounting issue it must be the least technical accounting issue in the history of accounting after all of this time after all the submissions we have yet to see any explanation that provides a justification for the accounting and economics behind what happened here the best that they can claim it can come up with is for the first time an argument that need be something happened on the books of the related pardons that would cause what happened here to make accounting an economic sense well maybe something did happen off in the ether that none of us knows about but on the record before us we know that what happened here it makes n accounting sense the settlement program didn't calculate variable profit for the claimant it was clear as clear an error as i think we have seen in any of these cases now  in the june eighteenth decision and he stuck with it and i am loath to jump in the middle of something that allegedly has been looked at by people who are more aware or not good or great per se but others is who any middle ground here in any way to get an explanation of what in the world is going on that has ever been done before we are off the water all sorts of things but as in the program has ever been some direction for a better explanation of why you  doing it this way or just a little bit of explanation about the process so you know at the settlement program level in the initial claims to titian is being made and this process here took several years because the claimant received multiple incompleteness notices p is not involved in our process at all we have no input we're not communicating with the accountants or anything a final decision is made at that settlement program level and at that point b p can decide whether or not or the claimant can decide whether or not to appeal to the appeal panel the appeal panel i think this was maybe judge se question earlier the appeal panelists are not accountants they are i think via large lawyers they are reviewing these decisions they can and sometimes do send cases back down to the accountants for additional explanation so the notion that there are layers and layers and layers of accountants who are looking at every claim over and over and over again that's not what's happening that's not help this process works at the initial stage again b p is not involved we're not there saying to the accountants by the way if you exclude this revenue because it's from a related party transactions you also have to exclude the expenses we don't have the ability to do that it's not until we get to the appeal panel that we have the first opportunity to provide any input in the process i'm not aware of an instance where this court has rendered a decision that sent it back down just for an explanation but obviously there's no reason that you couldn't do that if that's what this court deemed was the appropriate resolution to i think you would have to ultimately go back down either to the appeal panel and then the appeal panel is presumably would ask who are additional or could ask her to chanel explanation from the settlement program itself but just on the issue of discretionary review your honor this is just like texas school seafood an issue that goes to the core of the settlement in justice in texas gulf seafood that this court found it appropriate to exercise it if it was their re instance where discretionary review was required in this case is new different variable profit is certainly far more important or at least as important to the administration an application of the agreement as the distinction between fixed and variable the other cases that we have heard this week in addition to the nunnally or so that said this can close the work of our panel for this week we will stand a jerk