good morning your honor is my name is jonathan bondi represent federal insurance company i think the central issues are going to focus on this morning is the lower court's expansion of incorporation by reference and finding that section eight  three of the underlying landmark m t a contract binds the surety through its performance bond and i think that it comes down to the court setting the below setting the right standard but not applying it purple and i think the court below sort of implicitly acknowledged that it didn't really fit but it's close enough and with all due respect to the court below it's not close enough and i would direct the court to a special ten special appendix page twelve where the court quoted an arbitration agreement restricted to the immediate party does not bind the nonparty notwithstanding words of incorporation or reference in a separate contract by which the nonparty is bound there's no question that the bond incorporates the underlying contract by reference you have to go look at the language in the underlying contract where it talks about the contractor contract being quote rife with references to the surety except in this section there's nothing here all it talks about is what can happen between the contractor and the a if they want to go back and rewrite their contract and say it impacts anybody who has any claims or issues of any type or kind relating to this contract fine that would do it if they want a successor to a contractor legally as a matter of corporate law i'm not about successor in the sense of bonding company comes in and undertakes completion of a project it basically steps  contractors shoes for performance of the work it doesn't make them the legal successor to the contractor it makes the performing surety the performance surety in courts or frequently recognized that for example a performing surety has subrogation rights on behalf of the owner for whom it is rendering performance the default the contractor doesn't have that and your honor in anticipation of that question if you look at the bond itself it talks about include the word successor here if you go lower down they do talk about successors and actually at the very beginning it says this bond is binding on the signatories their executors administrators successors and the science well you don't need to have the surety successors be defined if the surety is the successor to the contractor and we mentioned in our reply papers why a successor is a matter of corporate law it's not a matter of surety law per se and the minority the nursing home case that was cited by the appellate is different because there is a surety was the completing surety and what they had there is a subrogation right on behalf of everybody because they were the performing surety here federal didn't perform it's not subrogated to the rights at this point because it has perform issue here the issue is that the surety did not consent to arbitrate and i focus your attention on and the language that says the parties to this contract so that's different contract right and why is it that the district court is not correct in saying this language is broad enough and the district or does not perfect but close enough i grant you that but why is it that the the landmark contract that would incorporates a landmark contract but it doesn't make the surety a party to that contract it is a party to the surety bond contract and doesn't make it a party to the contract no if we had performed we step into the contract or shoes then you have a different issue for example and that's when they decide to the parsons and whitmore case if the surety steps in and completes then the surety would be stuck as the completing surety under the contract to eight o three i think i have about two minutes i'm going to try to save some more time for but i think it was a decision that came down after all our papers were in but the supreme court's decision in lamps plus i think supports our view because fundamentally they talk about arbitration being a matter of consent and this is a contract that talks about disputes between specifically identified par we're not disputing that eight o three is an arbitration provision between landmark and we are not disputing that by the chief engineer rises and falls on its own we're not here to contest whether landmark is or is not in the fault the findings below have been made that's fine we just want our opportunity to have our case heard in the district court that we have been asked to perform an illegal contract and that the decisions in the whole participants are and where not one of them we didn't consent to it we didn't participate in it we consistently said we're having nothing to do with it and i think that for that reason the court below should be reversed either you do have the authority to rule on the issue or you can take a more narrow approaching just send it back that's entirely up to you once a more narrow endeavor and one is not and it opens with parties to this contract parties with a small case in that sense federal is a party to this contract why well start out with the definitional sections and in the definitions of the contract documents one of the contract documents is the bond so it's a contract document  surety is referenced throughout the contract the contract requires the contractor to procure a bond in accordance with the form of the m t a and chapter seven governing  default also references the surety explicitly when it imposes the fundamental obligation on the surety to complete the work upon the default of the contract or to the whole idea so when the bond incorporates the entire clubs under the terms of the contract it is the surety signed the bond the bond incorporates the contract and the contract says that the bond is a contract document the   and where the arbitration clause refers to contracting parties that can be read broadly enough to cover a non signatory to the agreement and that is  course this case is really easy easier because they really are a signatory to bond and again the bond incorporates the contract in the contract references the surety so we don't see how they're not really even a signatory but even if they're not under progressive casualty they are they are tired and based upon the eight o three language reference and parties to this contract believe that  governing whether or not a party has agreed to arbitrate and that old new york says that there has to be a clear and unequivocal expression of that in the body of the  case which did the same thing not with the new york provision but with the vermont statute that imposes special requirements more than the ordinary contract requirements for the actually sign the agreement which i again think that they did now wholly apart from the f a a the judge should be upheld anyway just based upon part of new york law which is consistent with the f a a and that's the parsons in with a more case federal plucked from that a principle that they liked which also addressed separately that principle being well if the dispute arises under the bond then we don't have to arbitrate it well i'll have something to say about that also and whether that really works under the f a a but just for the sake of argument supposing it does  the federal ignores is the rest of the decision from the court of appeals and they said well whether or not you can participate in the arbitration or not you're still bound by the arbitrary determination  that are binding on the surety so if the results of that are a sustaining of the default then the default is final and it's binding on them and then under the contract which and the has we don't know how that has because it has panned out and you know i should be saying things that are in the record but i don't think that it's been finally resolved through the judicial review process which the article eight hundred and three resolves so stock in this idea that the contract is illegal they say well you know this is at the core of their claim and why they think it is a bond issue and not a  that they signed on to governs disputes for any issue that arises under or is related to the contracts a very broad clause but more than that the issue that they raise that the contract is illegal well you know the supreme court in buckeye dealt with that harkening back to the prime of paint case you can't get out of an arbitration clause just because you say that the contract was illegal in the buckeye case and involved plaintiffs there  o complained that the lending contract that they entered into was criminally huge areas and the supreme court said well maybe maybe not but there's an arbitration clause in there and you have to adhere to that arbitration cla so it's almost as if it's like a non sequitur they're saying that there are code violations i just want to finally add and i don't really think the court needs to address this but but they're working on a twenty five year old building and they find a code violation and they think oh well we don't have to satisfy our bond obligations whether or not there was a code violation which it's in the record you'll see that the m t a disputes quite vigorously and whether or not that has any impact on on on the contract dispute which is contested quite vigorously but that's a matter for the the chief engineer through the arbitral process why does that mean that this goes to judge keenan for a trial on whether or not the fact that the masonry was lacking some kind of a horizontal reinforcement in the stack bond or that that anchors were spaced too far apart this is supposed to go to for a  contract form they identify everyone they want and they leave the surety out with no reference whatsoever in any of the a d r language and there's nothing in the bond that talks about a d r and while there is been a shift in some courts to have incorporation by reference expanded in certain respects arbitration comes back to did you consent to arbitrate and here federal did not and just addressing some of the points that that mr lipton raised walk me through again because i want to understand why the incorporation by reference which obviously the surety was well aware  is entirely contingent when the contract is originally entered into surety only gets a call if somebody knocks on their door because there's an issue in performance i'm going to have to ask you to explain that part to me again because when i pointed out the language the parties to this contract said well that's a different contract that means the capital c contract of landmark let's break but i'm looking at the performance on here and it says where is the contractor seeking to enter or has entered into a contract known as contract capital c a copy of which contract capital c is an ax to and here by may part of the bond as to and here set forth in full yes i guess i just don't get it and maybe i'm missing something three b two with respect to any dispute the chief engineer wouldn't go to whether something was covered right whether the subject matter was and and then that's a question that perhaps goes to the arbitrator we're just talking about the st question about whether they have consented to the arbitration agreement it would seem to me that your argument about the wanting to go to the subject matter of the arbitration which is   nd question or a minus understand no i think it goes to whether or not the bond is subject to arbitration at all if it's not subject to arbitration at all the nothing goes to the arbitrator to determine the issue of arbiter ability because you have a non article dispute in the  instance well it but the st question is whether the parties have consented to arbitrate right when you say the parties i think landmark and transit have i don't think the surety understand that's where you disagree i'm just trying to justify the st question contest there has been a fully litigated i mean some court in state court may look at the article seventy eight and find that it was arbitrary and capricious but that proceeding hasn't even been commenced yet but the issue as things stand today is actually do it both ways here the problem is that they specifically identified who the a d r parties are and by doing that they box themselves and i'm sure that no they're there smart people there they will figure out how to break the box open for the next round of contracts but the way this one is drafted the only people who are bound by this are transatlantic nobody else that unless you have any further questions thank you both will reserve decision this matter