ownership of consolidated tax refunds in our view the answer to that question is straightforward courts should apply state law that's the body of law that virtually always governs property rights disputes in our federal system and here the political branches  displaced that traditional area of state power either by statute or by federal regulation the f d i c takes a different approach although exactly what that approach is has changed somewhat over the course of this litigation in the lower courts the f d i c advocated a rule federal common law known as the bob richards rule which holds that ownership of a tax refunds presumptively resides with the subsidiary whose losses gave rise to that refund that's the rule the f d i c has advocated for decades and that's the rule the th circuit applied below but in this court the government has abandoned any defense of the bob richards rule and as our opening brief explains that rule fails every test this court has established for the creation of federal common law and contravenes the tax laws themselves instead the government advocates a brand new rule one that it's never pressed in the lower courts and that's to our knowledge no court has ever adopted but this rule suffers from an even more basic flaw than bob richards itself it simply assumes the answer to the very ownership question at issue the government's argument starts from the premise that where a parent has agreed to pay its subsidiary the amount of the tax refund the subsidiary has been vested with quote ultimate in title meant to the refund itself that assumption serves as the load bearing pillar of the government's entire argument yet it has no basis in state law the government disclaims any argument it's grounded in federal law and it can't even find footing in the in the th circuit's nine hundred and seventy three bob richards decision starting with state law it's simply not the case that were apparently agreed to pay its subsidiary the amount of a refund the subsidiary necessarily has any property rights in the refunds itself rather there are two possible ways of characterizing that payment obligation which have  circuit on the other hand it pinion is shot through with quotes from the contract and with the th circuit said it was examining the party's agreement to determine whether the parent or s quote clearly applies to this case and provides the general framework we must apply in resolving the parties dispute it then went on to say that what bob richards requires is that the written terms of the contract unambiguously deviates from the bob richards rule so if it understood bob richards it's established a clear statement rule which is the understanding that the lower courts generally have a bob richards and that the f d i c itself has advocated for decades and then when the court went on to analyze the agreement it didn't apply the ordinary rules of state agency a lot of harm and whether an agency relationship had been created here it did what it said it was going to do which is just look at the bare words of the agreement and see if they on ambiguously departed from the bob richard because she didn't have to point to something so blurry it's in the opinion that do that i i read the opinion you're right it said bob richards sets have to rule but the st step of bob richardson is does the contract tell us who has interim ownership that's how i read the opinion the state law trump a contract allocation of that would state local who any further would it change that state state law would not deem that sufficient to create an agency that's what the fights about whether state law require something in addition to that well the the overarching fight is as to whether courts should apply the i don't know no i don't want an overarching fight i want to know what state does state law say that state law trumps contract agreement it doesn't say that it trumps the contract agreement about it so it doesn't say that does it say we don't look to the contract to see who to establish if it does so err in looking at the contract should to churman whether the parties consented to an agency relationship the th circuit area because it understates agency law under the ordinary rules of state agency all of which the th circuit didn't cite or even purports to apply the prerequisites for a stop wishing agency relationship are to are that the agents must be vested with both loyalty and control to the principal by the principal the principal must one read a contract but it did own up how does one read a contract ok they say here's what we'll do we'll look at the agreement taking into account colorado case law and decide whether it on ambiguously says how tax refunds are to be handled then the next few pages they do that then at the end they say you know it's ambiguous but there's a rule right written down here that says in the case of ambiguity you decided in favor of the bank the subsidiary and so we decided in favor of the bank and we conclude since it must be construed in favor of the bank and the f b i see the agreement must be read as creating only an agency relation between the parent and the bank ok i read that i thought unless there's some colorado law that says that that doesn't create an agency they've said under colorado law it creates an agency and there i we discussed the requirements in colorado law starting on page three and do you say and in fact even though they said taking into account colorado law we think this creates an agency relation even though they said that that was wrong as a matter of colorado law yes that's it that's precisely what we say though they don't allow and they've made a mistake of colorado law i guess there is a group that could answer that question and they're not sitting in front of you but are sitting in denver yes your honor but the issue here is not simply that it made a mistake of colorado laws that it didn't even purports to be applying the right body of colorado law it said that it needed unambiguous evidence in the written terms of the agreement it doesn't cite any colorado case us the agency and it's the word control which is the clear prerequisite for agency in colorado doesn't appear once in its opinion so its entire mode of analysis was dictated by what it understood to be the federal common law rule which was a clear statement is it enough then for us to say in your view that the bob richards rule is not good law and then to send it back i think that that's all we would say but richard's federal common law we don't do that that's not a good rule that's all we're going to say about the senate back because justice prior says and you can look at state law without any thumb on the scale provided by the bob richards rule i think that's essentially correct your honor the one amendment i'd make to that is i think the court should clarify that in conducting determining whether an agency or trust relationship exists courts should apply the ordinary rules of state agency or trust role not varied in any way because of the fact that a consolidated tax refund is available here and i think that guidance is quite important because if one looks at the lower court cases even that's declined to apply the bob richards rule there appears to be some confusion in the lower courts as to whether that they should conduct a different analysis for example the eleven circuits that bank decision although it reject richards it still doesn't purport to apply normal ga agency a lot does it just looked at the plaintiff words of the agreement according to some undefined i guess the other thing we'd have to say as well is that the i r s regs don't speak to this question ye the she's new argument and i think the as she is new argument it all hinges on the on the notion that when a payment is a payment obligation from parent to sub in title meant to the refund has been vested in the sub because what they say repeatedly throughout the correct and that has to be right because there's nothing in the federal tax regulations let alone the internal revenue code that expresses any interest or concern with how ownership rights are allocated within an affiliated group or simply silence on that question and the government makes much of the word agents in the tax regulations but that doesn't get them where they need to go for at least two reasons one is that that word has universally been understood by the government itself and by every lower courts as just a procedural designation that identifies the parent as the sole member of the group authorized to communicate with the i r s not as vesting it with the obligations of a common law agent and in any event nd even if it did carry some of its common law baggage all the regulations say is that the parent is agent for the group as a whole the affiliated group of which the parent itself is a member so it doesn't tell you who within the group actually gets the refund you need to look to the parties agreement as interpreted under state law to answer that question and so that just says we say no comment bar richard true but if we read this opinion and don't think that they applied the bob richards rule to the interim ownership question which is what's at issue here  you're just claiming a misapplication of colorado law i don't i i will last the solicitor general whether they stand by they seem even under their tests to create a common law rule under the two progs so our last of whether creating any kind of federal common law is right or not and they can answer that question but i don't know how i get to it when they haven't briefed that question and i don't know how i get to it if i assume that what the the circuit did was what i said which was to look to the contract to see if it created an agency or debtor creditor situation and i read an opinion that says when you look to the contract that's what you do and you apply just general state agency debt or creditor law i think that's exactly what the opinion should say your honor and i just i make a few points so we don't need to reach bob richards is what i keep saying but the few points are on a st i think the government's failure to defend bob richards can't be a reason not to reach that question that's the line question presented we meet at the serial testing before we reach questions that are not implicated by the issues before us well i do think the issue is implicated i would just take the th circuit out its word that it said bob richards clearly applies t clear statement because in ten pages of contract analysis it says some provisions do this and then on the other hand some provisions do that and then in the end we're relying on a default provision in the contract itself so that's nobody's idea of a clear statement so it doesn't seem as though that's what they were doing when they actually sat down to do the work of the opinion i do think it was justice kagan in two ways one i think that the fact that they invoked the rule of construction in the contract was their way of determining at the contracted on ambiguously address the question as a whole that they thought the provisions were cut in both ways but then the contract itself resolved that ambiguity clearly and moreover the the the way that bob richards was doing the work was in what question the court was looking at the contracts to answer it was just looking at what the written terms of the agreement said not what colorado law actually requires for the creation of an agency relationship an analysis that even the government doesn't really defends because in their brief they themselves acknowledge that you create an agency relationship under colorado law you need to control these think a minimal level of control is sufficient but which i don't think it's correct but even they think the court would have needed to do more actual normal agency analysis so i think the mode of analysis was distorted by this notion that the only the words of the contract matter i cited others as the case we reach the question of federal common law i'm out of retirement i guess i tried to study it seems to have evaporated what is what why isn't it common sense to say look we're talking here about three bank subs and a parent and they get a tax refund and the reason they get the tax refund is because of the bank they're the ones that lost the money so mail them the money i r s and in case there's something odd about it there is an iris rule and the i r s rule says you know it says that that parent it says is an agent an agent for each member of the group and they describe it's the agents i e the parents obligation to collect the refund for the group and that's one of the matters subject to the agency so that's what the r s s so i am a naive judge who forgets his federal and i look at that and i say the i r s wants the money to go back to the bank the banks the one responsible for the refund they are the ones that lost the money and why should we go back to the bank unless the parties want something different and if they want something different all they have to do is tell us in the contract now i know must be a lot of law here that says don't do what seems to make sense but i'd like to know in case we reach that issue what is it yes your honor i think that intuition is undoubtedly what underway the th circuit's decision and it wasn't much more than its feeling as to fairness that the guy did it and i think there are two categories of flaws there one is just the absence of any positive legal basis for codifying that intuition into law there's nothing in the statute or the regs that says that it's the subsidiaries however sensible that could seem to a judge and that as you said is federal law one a one that means the courts can't create the rule themselves but the nd point is that even as to the sense of what's fair i think the analysis that the th circuit conducted was overly simplistic on a number of levels one is that the entire structure of the consolidated return regulations is to treat the affiliated group essentially as if it were a single entity and to merge its income in losses in ways that make it difficult and often contrary to the regulations to try to separate them out as attributable to one member or another for example intercompany transactions losses that are technically listed as one subsidiaries losses could really be due to conduct of other members of the group and more broadly the regulations don't are quite clear that payments of tax liability are entirely within this group's discretion to allocate so allocating refunds to particular member decouples who pays the tax liability from who gets the refund which is itself quite unfair and finally i think that's the notion that federal law is necessary to achieve what seems like a fair result is itself flawed in that state law contains all the protections that the bob richards rules purportedly designed to achieve state law contains numerous doctrines to prevent unjust enrichment there's constructive trust there's to do sherry duty and many states have essentially the bob richards rule as rules of their own common law in the f b i see the f b o p decision that both parties cite an illinois court applied illinois law which essentially has bob richards rule at the state level and so does oregon so i think that there was no unfairness created by the application of that normal body of law and states or the political branches of the ones and trusted with the authority to make these judgments as to fairness i do want to go back to this point as to what the th circuit below said it because i also think it's important to note that the government's principal reason for opposing certain this case was that purportedly bob richards didn't play a role in the search and below we respond to the search apply in the court granted the case nonetheless and i think the government's refusal to defend the bob richards rule isn't a reason to not reach the question i think that it's a sophisticated litigant it certainly shouldn't be encouraged for declining to answer what's clearly the question presented and and in addition there's many examples in this court in which a difficult if not impossible to defend legal rule comes up to the court of respondents just doesn't defend it i think justice alito as opinion and travel as casualty and surely co is a good example i think the government had every opportunity to defend this rule that was that was the question presented that's the question on which the court just gets put it another way then mr rice had the government come to us and said we no longer intend to defend the bob richards rule i think we probably wouldn't have thought twice about just we would said well then we need to appoint an amethyst i think it's a question as to why the government didn't do that in this case of it had no intention of defending the rule on which the court granted certs i also think it's notable that the government's brief ten attempt s to cram its new rule into the bob richards decision perhaps in recognition of the fact that that is the question which the court granted certainly needed some basis for grounding its argument in that decision of course for the reasons we give the rule it's advocating here has only passing resemblance to the actual bob richards rule applied by the lower courts or by the th circuit in this case and so and so i don't think that the government's refusal to address the question can be a reason for the court to allow a rule that's is i think for the reasons we given our opening brief just fails every possible test for the creation of federal common law something that is permitted only in the narrowest of circumstances and there's a circuit split and there is a circus but one thing government benefits from this rule throughout the country absolutely it and this is manifestly indefensible and this is a rule of no small d so their argument suggests because they're not defending it maybe they're going to tell me it is defensible but well that will be a surprise to us but the i think the problem is that this rule is a massive economic significance this refund is four million dollars there's cases where these tax refunds go into a one hundred dollars in the downy case seventeen billion three hundred and seventy million dollars and these issues arise all the time in the bankruptcy courts and it's often difficult for bankruptcy cases  reach this court because they move out frequently because the bankruptcy proceeding concludes so i think in this case where the th circuit said literally this rule clearly applies to this dispute and then set it up set forth the analysis that applied this is an opportunity for the courts to at last address a rule that has all essentially abrogated state property rights for decades with massive implications for creditors and for parties drafting these agreements which should know with clarity which law their agreements are going to be interpreted in light of and if there are no further questions thank you counsel solution mr chief justice and made please the court the question in this case is whether the parties who made this contract intended the bank to be the equitable owner of the tax refund that question turns on the parties contractual intent to determine that intent start with the facts that are undisputed st the bank was the taxpayer in this consolidated group who paid the taxes and then generated the losses that earned this refund in the st place you w b i is just a holding company that had zero taxable income in the relevant year it did nothing to earn this refund nd the parties here agree that under the expressed terms of their contract when the i r s paid the four million dollars tax refund at issue in this case the bank was entitle to receive that amount days so given those two undisputed facts the refund is headed within ten days to the bank and the bank is the tax payer that generated the refund in the st place ask yourself why would these parties have intended to make you w b i the equitable owner of the tax refund and left the bank as nothing more than an unsecured creditor especially when if the parties had made that type of arrangement they would very likely have violated the federal reserve act the answer is they didn't every relevant provision of the contract shows that the parties intended to make the bank the owner of the refund and to make you w b i an agent st as justice sotomayor pointed out the party specified that you did b i would act as an agent on behalf of the subsidiaries that's the language of their contract nd they said further that the essence of their agreement the core logic of the agreement was that the bank ought to be treated as a separate tax payer and you w b i should be quote merely an intermediary with the i r s that type of language agent near intermediary that is exactly what you would expect to find in a contract if what the parties really wanted to get across was that when you w b i collects a tax refund like this one from the i r s it does not acquire equitable title to it the parties then went on to implicated in this case and what is your position on its viability your honor we think that bob richards supply as the case describes on its facts and as the courts have understood it it provides a rule for determining who ends up with a tax refund where parties have not made a contract i would urge the court to look at page seventeen a of the ten circuits opinion this is where the court describes the barbara churchill it's true as my friend suggests that the th circuit understood that bob richards applied to this case but on the immediately preceding page of the opinion the th circuit explain what the bob richards rule is what the bar bridget's rule is a rule where there is not an explicit agreement the court went on to say absent any differing agreement it can the bob richards cruel stand and why should it stand appreciating submitting respectfully that the court that would be a pure advisory opinion in the context of this case you are happy to answer the question i think the answer to the question is that where parties do not have a contract the right way to determine who owns a tax refund is to look to state law i think as my friend suggests the f b o p k so you are rejecting the richards rule idea there isn't we should we certainly yes you're right that it applies only when the parties don't have an agreement you don't think it's right i do not think that it is a correct as a rule of federal common law i think the court and bob richard justice was trying to get at and and just to sort of mire to if bob richards as understood by the lower courts as creating a federal common law rule to require a clear statement in a contract before a contract will be enforced contrary to existing state law do we all agree can we all agree on one thing that's wrong the answer to the question is that where parties have made a contract ownership of a tax refund is determined pursuant to the terms of the contract pursuant to state law without any thumb on the scale by federal common  ok all right now if that's the case why shouldn't this court i say so it seems like it would be of material benefit to the lower courts across the country that have operated under a different understanding for this court to say so that's why we took certain this case after all i'm perfectly comfortable to the court to write that opinion your honor but the last line of it has got to be that the judgment is affirmed well because care terribly about i know your colleagues on the other side care terribly about it but the supreme court of united states is here to resolve circuit splits on questions of law we took this to decide the bob richards rule whether it's a thing and both sides seem to agree that it is not a thing as understood by so many courts of appeals across the country why shouldn't we say put a period at the end of saying most sides agree this is not a thing go back and do it properly because the court reviews judgments more bob rigid or anything it'll be easy enough for the th circuit to say that on remand to follow up on justice courses question if bob richards did not put a thumb on the scale and its analysis so you will end up getting  the result you want from the time circuit if they truly did what you think they did i think your honor i don't know because they start out with this whole bob richards framework and i don't think you can be sure and what's the problem with doing is just as course it's  vacating remaining and they can do without power richard i think you do know your honor and i think it would be so if we do know that it will be simple and wanted it would be strange for the court i think to vacate a decision and remain so that the th circuit can simply reinstate includes the qualification that it applies only where the parties don't have a contract remember the judgment that the th circuit was reviewing the district court's judgment the district court had said this is on page forty nine to fifty eight of the petition and the court says thankfully i don't have to wade into this about the bar bridget's rule because these parties have a contract the contract is ambiguous and the contract itself supplies the way of resolving that n b c used to make me ask a question of about another aspect of your answer to just discourse which i think you said that the if there is no contract and do you think that there is a federal rule that decides to question them again i think that question's not presented by this case but i know generally not state law determines the rights in ownership of property but the th circuit settling for that the bob richards wrong whether it's a matter of contract interpretation or whether it's a default rule where no contract exists as to both aspects of the dive richards rule you're saying there's no place for such a rule in our law there's not a there's not a place for a rule of federal common law but importantly i think the court should also recognize that bob richards then went on in an important part of its opinion to say don't make any i don't have any misunderstanding about how the i r s tax regulations work in this case and the suggestion that this is a new argument that we've sort of sprung on the court for the st time is completely incorrect we cited bob richards for this proposition on page thirteen of our brief to th th circuit but the point here is the only reason why we're even entertaining the idea that you would be the equitable owner of a tax refund that the group has allocated to the bank and that the bank on it because the i r s regulations for reasons of the i s s own convenience pay that refund to the parent but what the regulations very much want to make clear and what i hope this court will use this case is an opportunity to make clear in its opinion is that when the i r s makes that tax payment to the parent it does not  any equitable title and the reason you know that's true is because the regulations use the term agent which has a well established common law meaning and thereby draw on the general common law agency and i don't even take my sort of surreal is that going i guess i'm a little bit confused by this because that suggests that there is a federal rule that comes from the i r s regs that allocates this money in the absence of an agreement i think of you would ask mr rush mr a should say no that state law that does that so that this does seem as though you are essentially saying that in the absence of a contract federal law controls it you're out of the regulations but the suggestion that corporate parents like you to be i have made all the time that they ought to be viewed as the owner of a tax refund like this because they're in possession of it and you can see this argument all over the blue brief petition to repeatedly says we are the party who is in possession of the refund that account when you're figuring this out the i r s regulations say no no they did we do not mean to confer any equitable title we are for reasons of purely our own convenience giving you this refund and so what i think it means is that you can't you can't put a thumb on the scale the other way in favor of corporate parents which is what some corporate parents have repeatedly tried to ask for by citing the i r s regulations bob richards correctly interpreted the regulations not to do that it's obviously you know before you i just don't want you to stop i like where you're going it's interesting and helpful but i have two related question you're assuming throughout the colorado law goes give the money to the bank ok on pages sixteen and seventeen of their reply brief they say no colorado law does not because colorado law requires control by the agent of the principal and that hasn't happened here ok so just writing the word affirmed is going to overlook what seems like a significant dispute and the other thing that is bothering me and i'll mention it once is i tend to think words like federal common law are labels which have a uncertain meaning in some instances and i guess if i had a cousin who was running the i r s that cousin might think a very good tax principle is when the i r s owes an entity money you should pay it to the entity and if for example the postman got a hold of the check and then went bankrupt i don't think you'd say if you were running the i r s but there may be no state law to the contrary the postman's bubblegum creditor get some of that four million dollars all right so i'm worried about the term i'm worried about the implications of what we write but maybe there is an argument about colorado law here oh you're certain there isn't there  so what do we do your honor let me address all the questions in one in one answer petitioner has not identified a single case under colorado law in which parties said we want the nature of our relationship to be an agency and then a cour came back and said oh no you have not created an agency because you haven't provided the specific forms of interim control that that agency relationship requires it's supposed to be easy to create an agency relationship think about an example or my coworkers appoint me as their agent to go to the deli and pick up lunch they say michael you will be our agent the order at the deli will be placed in your name bring us back the sandwiches and bring us back the change to when i'm on my way back to the office if i suddenly declare bankruptcy everyone understands that the sandwiches and the change are the property of my coworkers they don't become part of my bankruptcy estate and it doesn't matter that my colleagues didn't specify here's a specific route you have to take from the deli back to the office and it doesn't matter that they if they don't particularly care about it and you can understand why closely affiliated parties like these would have wanted to say you know for ten days which is the only interim period that we're talking about we're just not that especially concerned about what you do when you're talking about you're talking about general agency law which is to say you're talking about state law salute your honor that's right and that's that's but it's also honest to make a decision of state law we wanted we want you to the judgment rests on the contract we think that judgment is absolutely correct there's error in it and that judgment should be a fun and another pretty reason that you know that this judgment is correct is that when this particular group which can chains and ensure depository institution sat down to write their contract their federal regulator had told them that pursuant to the federal reserve act they would not be permitted to engage in a contract like the one that petition advocates say one of the things i took from what you said a few minutes ago but maybe this isn't what you meant was that you want federal law to be involved in this to the extent of not having the actions taken by the i r s in mailing the check figure at all in the determination of ownership under state law he want the federal government's entitlement to this refund by virtue of the mere fact that it has possession we know by the way on this is put a question in my mind it may have an obvious answer but how do we know there is a bob richards who now how do we kno like flu just how do we know it really exists because it could be every time a court has mentioned bob richards rule what they are doing is going through exactly where they would go if they simply look to state law unless of course it's in the contract now do we know there is a problem i mean which is the case that would be most obvious that a court invoked the bob richards rule that went to a result that was different than what you'd reach reach if you just read the contract under state law your honor i think generally speaking there aren't very many of them and that's why when these contracts when part went beyond one i'm not sure that there is one i think in fairness i think the question would be better directed to to my friend but i think that what these court the courts that have looked at these things have said where there is a contract we should generally speaking apply in fact always we're going to apply the contract every court of appeals recognizes that where the parties have a contract you apply the contract and then the question is but and this is the important part and again i think this goes to one of your other your daughter's other questions i really hope that the court's opinion will make clear in this case that when parties set out to determine equitable ownership of a tax refund using words like agent and mere intermediary in your contract is a perfectly sensible way indeed i think it's the best way to make clear that the party who holds bear title who collects the refund from the i r s does not acquire equitable ownership of it has no sensible explanation for what that language is doing in this contract and you are not in the area answer to justice alito where you said it should be affirmed should be affirmed on the basis of the i r s reg or affirmed on the basis of state law it should be a you to a different answer as you describe it than state law does what happens it would not that would not the iris right does not override state law that's not all the new senate you said in your brief federal law provides relevant background the contract what did you mean we mean that be a petition or pick a party like petitioner i cannot come into court and say we we have a good claim to being the equitable owner of this refund because we are in possession in session then you are the owner of the state law certainly does not say that your honor i mean it's infallibly the case that the restatement does not say that mere possession coupled with something like you know the absence of specific description of interim control leads to equitable ownership indeed as i said it's supposed to be easy to create then it just seems as though it's a matter of state law it is what it is a lot have to do with it it is ultimately at the end of the day and matter of state law and more specifically here it's  matter of state contract law and on the question of state law just as pryor was pointing out that there's disagreement about on page sixteen and seventeen about what the state law is in the bankruptcy court and a different view correct that's right you know the different groups an incorrect view that had a different view on state law so if it is purely a question of state law and there's been disagreement here and there is disagreement between the bankruptcy court which is expert in these matters and the district court in the th circuit should we remain for the state law question to be sorted out you've implied just a follow up on this you've implied that the state law question is so obvious but we have the bankruptcy court going the other way on well it's particular it's overwhelmingly obvious here because these parties that have a contract that resolves any ambiguity in favor of the bank so to whatever extent there is a fight about what you would do where there is not a contract or a contract you know in a different case of the contract or ambiguous again i think you can just read the restatement and understand that it's supposed to be easy for parties to create an agency relationship but to whatever extent you have doubts about how you know how what these parties wanted for their contract you know that they wanted an agency relationship because they went out of their way to write  ambiguity resolving provision in favor of the bank and they did that again because their federal regulator had told them to do that and this is important to the f d i c it would be very troubling if the court made a rule that said you know it's actually really quite difficult for parties to create an agency relationship to specify that the party that generated the refund has equitable title to it you have to engage in this onerous analysis and you have to write down a lot of provision is it a problem for the f b i see if we just said it's a matter of state law you're  i would i think the court should make clear that parties are entitled to rely on the statement that their federal regulator has given them about how they're supposed to handle contracts exactly like this one and what the federal banking regulators have instructed is right your contract to make clear that you are entering an agency relationship and again parties who have made these contracts have relied on that instruction so this court goes back and says you know it's all just a question of state law i don't think that that gives adequate weight to what the regulators are instructing insured depository and i thought you just said to justice kagan it is a matter of it's a matter of it is it is in the sense that at the end of the day you know these parties have to write a contract what i am saying is that the federal regulators in this area have told groups that have insured depository institutions that they should enter an agency relationship they're required to by section twenty three and twenty three b of the federal reserve act those are the affiliate transaction rules and it would be defy think so the the court should should say that it is easy for parties to enter that type of agency relationship and in particular it suffices to say in this group for our purposes what we want to do is have you do collect a tax refund as  remember that the party said that when the bank in personal loss it isn't titled to receive a refund equal to what it would have received if it had filed as a separate tax payer if the bank had been a separate tax payer it would have been the owner of this tax refund not merely an unsecured creditor and again there's just no reason there's no one who benefits from the arrangement that petitioner suggests this debtor creditor relationship in addition to the fact that it would very likely violate federal law think about the parties when they're designing this agreement they know that the bank is the taxpayer that generated it they know that they want the refund to go within ten days to the bank who benefits from structuring the relationship as a debtor creditor relationship for those ten days the only conceivable and it is the parent company's creditors in a hypothetical future bankruptcy and there's no way that this group was you can to protect them and thereby endanger the bank's refund so at the end of the day it is a question of state laws we agree but we think that the judgment that is under review in this court rested entirely on state law the operative part of the opinion is again pages eight hundred and twenty seven a the entirety of that section has nothing to do with federal common law or federal law at all and that's again because the judgment th circuit was reviewing was the one from the district court which itself had focused on resolving the case based on the parties agreement so i hope that again the court will use the case as an opportunity to make clear that the tax regulations don't give a corporate parent saying the opposite you're saying the i r s payment should be seen as an agency payment only that goes back to justice kagan schooling which is you're not taking a position either way the i r s regulations do not override state law your honor they are a corporate parent they don't create a state law agency relationship well they know they i don't that's i think they don't that's right but what they do do i was taught as a child even before i was a lawyer so position has some state law consequences but it is a you want to bar them or not you can't do that unless you explicitly state their honor they do explicitly stated and they do we that they do it is they use the general common law term like agent and that is exactly the term that you would use to make clear that when you w b i collects the tax refund from the i r s it doesn't acquire equitable title to it and you can understand why the parties to this group and the parties to a lot of groups that have these consolidated filing agreements said you know we want to make clear that when you w b i goes to the i r s and it just receives the refund for reasons of the i r s his own convenience that mere fact that mere possession does not in this case give you any claim to equitable title and the way that the regulations do that is by saying agent we in this group know that our federal banking regulators have instructed us to describe our relationship as agency in order to f our legal obligations and for all those reasons we are going to say that you do in this group is an agent it's a mere intermediary again if you wanted to design the debtor creditor relationship the petitioner suggests and you went to a lawyer and said draw that up for me i think with that lawyer would say is the one thing you should not say in your agreement is that the corporate parent is going to be the agent or the mere intermediary of the bank that it makes no sense to me a masochist mystery and maybe this isn't the question maybe this is more in the realm of making a comment and this is not on you mr hughson you have lots of bosses in the solicitor general's office but if you had said to the court that you did not intend to defend bob richards as everybody understands that rule and if you had said to the court that you did not intend to state a position on the only question presented in that case i don't exactly know what we would have done but i would tell you that there's a pretty good probability that we would have thought that that was an appropriate place to appoint an amethyst so i guess to the extent that this is a question i want to know how you think we should deal with this issue your honor i think we told the court in our brief an opposition that contrary to patient petitioners rep not a rule of federal common law and it's a correct interpretation of the federal tax regulations justice kagan just to return to my answer to your question again i think on page sixteen of our brief in opposition we made clear the very limited work that we think bob richards does in the lower courts and in this case and we said that where the parties have a contract you resolve ownership under the contract and that is our core submission here so i think again it's important to understand the what what the regulations do and do not do in the fact that the regulations prevent petitioner from making some of the arguments it's tried to make in this case but at the end of the day it would be very very difficult i think for this court to look at this contract and say that where the parties are owed an ambiguity resolving provision in favor of the bank where they specified that you know b b i should be a mere intermediary the parties nevertheless on ambiguously intended to make the equitable owner of this refund petitioner agree is that he cannot prevail in this case unless he is on ambiguously correct and the reason for that is not because of the rule of federal common law it's because that's the clause that the parties wrote into their agreement that was the basis of the judgment below there is no error in that judgment and so that's why at the end of the day this  also think as i stated that i hope the court will clarify what the regulations do and make clear that it's easy for parties to specify that a party like the bank who earned the refund is the owner of a perfectly sensible way to do that is to say we want to make the agent we want to make them a mere intermediary thank you thank you counsel five minutes mr ridge i think i'll start by what my friends conceded at the podium which is that on the sole question on which this court grants  is the bob richards rule valid the answer is no that that rule is not a valid rule of federal common law the courts are not applied therefore the th circuit erred in saying that bob richards clearly applies this case and sets forth the framework that must govern the parties disputes and justice kavanagh you're exactly right this is a the the lower courts need clarity on this question of the subject of a significant circuit split of great economic significance every day the my friends argued that this decision didn't play a role that agreement must contain specific language that conclusively disavows the bob richards rule in order to depart from this presumption so it's not a rule that vanishes whenever there's an agreement it's a rule that all the lower courts understand as a clear statements rule which puts a entitlements to a refund just because it's been paid to them that that is a response to a straw man that's nobody's argument our argument is state's law governs without any federal law preference one way or the other i want to interrupt you but i didn't quite understand his point to be that that i thought his point was that the fact that the i r s for convenience purposes chooses to pay it to the parent is not cannot be taken as a factor under state law do you disagree with that we do disagree with that and we don't think that the regulations say anything to that effect the regulations say the refunds pay directly to and in the name of the parent and at that point the government's liability is discharge the regulations expressed no interest or concern with how state the refund after that i will note in their brief they make this point many times that parties can claim a federal law in title and by virtue of that but the critical point is that if you think that the that the federal government could not make that could not take that position i think it's entirely within the federal government's power to at least dictate a default to one of the i r s and not to the regulation to that effect we would not argue that's outside of its power and indeed to some extent they have done so in cases where they've said that refunds should be directed to subsidiaries in se we're being asked to address a subsidiary question about the effect of i arrest regulation of the not affect of it do we need to do we need to do that no your honor and i think my friend suggestion that this argument was raised on page thirteen of the th circuit brief is just not correct that  just quotes the ordinary bob richards rule without any suggestion of this new argument about what the regulations mean and my friend also made this argument that it would seem absurd under state law to not allow the term agents to do all the work of establishing an agency relationship this is black letter common law represented in the rd mistake in the nd restatement it's illustration two in the entire nd restatement is making the point that calling something an agency agreement agree an agency does not establish an relationship and colorado supreme court has said many times that words are not enough in the city of aurora case and in the moses case and this doesn't mean it's horrid in any way to assign a refund to the subsidiary the easiest way to do so is in the governments in the banking regulators law requires nothing more than designating someone a trustee and requiring funds to be held to be clearly set aside for the subsidiary and we think that model language is perfectly sufficient to achieve this result an agency relationship is harder to create it requires interim control and that's been the law in almost every state and colorado for a long time i'd like that and maybe i don't hate interrupting his much but it seems i don't what exactly what you're seeking if i say you're my agent you get this money paid over to me in ten dollars days do i have to tell them how to pay it over to me do i have to tell them that i out fulfills that task either by having authority to direct it to seek the refund in the st place or direct how it handles the refund once it's received thank you counsel the case is submitted