morning may please the court my name is nicholas grove on behalf of appellant i q products i respectfully submit that this is a case in which both the law and the facts are clear the relief we are seeking is that you reverse the district court's january tenth two thousand and thirteen order granting w d forty s motion to compel arbitration because there is no plausible argument to show arbit we ask that you remain in the case to the district court for a jury trial because we believe this case is virtually trial ready we believe there's no plausible argument in favor of arbitron because a plain reading of the nine ninety six agreement on its face comp tells a finding that there is no plausible argument in support of arbitron billeted and if there is any doubt and the court wants to look at extrinsic evidence may be considered in connection with the interpretation of a contract may be in what circumstance in a circumstance where the plane reading of the contract is where it's not perhaps clear on  face ok we believe this contract is clear on its face and you do not need to turn to expensive governance but california law allows you to do that in the event you believe it's not clear and in this case if you believe that the nine hundred ninety six agreement is ambiguous and not clear on its face you can look at that letter which i respectfully submit is the most important and virtually the only piece of evidence before both the magistrate judge in late ninety two when she issued her  memo and recommendation in the district court judge in january of two thousand and thirteen when in his one paragraph decision he affirms her ruling there all of the other evidence that has been cited to you by w d forty was not before either the magistrate judge or the district court judge during that period it all got introduced years later through but the destroy i don't read the district order to say that it relied on the evidence presented to the arbiter arbitrat panel and i'm assuming that arbiter panel even if we were to look at the that evidence had the letter you're talking about the show it just seems to be the water itself isn't infected by looking at other evidence and i'm guessing if i did look at the other evidence that letter would have been considered to that maybe just seems like a frolic and detour that we should only get to if you convince us there's ambiguity right i don't believe that there's any ambiguity but if you believe there's ambiguity and we would look at that letter you're meant to get looked at the evidence that was what about just apply mean obviously i was on the douglas panel and so right or wrong it's sort of something legally that why isn't it plausible that the disputes covered because the language says any controversy related to an extension and even if we had the provisions saying can't modify without writing what's an extension seems like this could have been an  extension from the propane into the c o two that won the propane to the c o two is a completely different product i know you say that but when we're looking at the language that is the basis for your holy ground this it talks about extensions and related to and it only talks about extensions even if it had been some of this language before the district court the other documents that lend itself to all those aside all those  ok this contract what the parties agreed is that it could not be modified absent a written instrument signed by an officer of both parties let's say that neutralizes the modification you still have language about an extension what did the extension mean with what the extension would might mean i do not know that is but that doesn't that allow plausibility i don't believe it does when you're dealing with a not using perhaps i thought maybe a safer you were using it w d forty product today that is operates with a carbon dioxide propellant right this contract was changed with handwritten and it was changed to limit it to a w d forty product based on propane slash butane propelled formulations and specifications and that is the definition of the product in this contract and it appears the product as defined some thirty times in that agreement and i respectfully submit that if you were to read the contract and every word has the word the product you were to read instead the way the product is the find it couldn't be clearer that this contract is limited to this product and we know if you turn to extrinsic evidence why it was limited to the product because you see the letter where w i q tells w d forty we are not comfortable with your change from propane butane tain the carbon dioxide we haven't seen your testing for this we are experts in filling air assault and with carbon dioxide we know that unless your formula is perfect can rather than creating a safe product creates your position were california governor law governs whether we turn to extrinsic is it yes yes ok and what's your best case under california law as to when we would turn just one case that defines it most clearly would help me because you do you are coming back to it and i agree that creates a bigger orbit of inquiry as to whether the so what's your best california case for the central proposition i well you'll think about it i don't dress up on the road thank you but i will say that what is before the magistrate judge in the district court judge at the time this decision is made in ninety two ninety three is critical and what is before them is a contract the ninety six agreement that they put into evidence in support of their motion to compel arbitration and they put it into evidence without exhibit a and b there is no exhibit a the record you will see in this case that once you get past page one thousand and ninety three of the record everything after that which is virtually everything in their statement of facts trying to create a plausible argument was not before either the magistrate judge or the district court judge at the time this case most respectfully went off the rails but the district court judge didn't rely on that and i know it's a stronger you're you're well any controversy related to any extension of the agreement that's language there was no extension of the agreement because the agreement could not have been it was six ok without a written instrument wouldn't been modified i know i'm propellant to it in your then your manufacturing process and that was butane propane and the time you were out they had butane propane you had this language and limited current product it products here or propellor that contract had nothing to do with that we continued at the same practice they've been operating under since ninety six in dealing with w d forty this relationship with packaging this product with them goes back to ninety six with their i think everything  a propane product intentionally and there is not a single document in this record that demonstrates that anyone ever thought that the nine hundred ninety six agreement was in effect after propane butane between cane protein and carbon dioxide that scientifically was a major change for a manufacturing company in the manner which this product was being a factor that's why a by w d forty because we're required to follow their specifications there is a letter sent out one month before that says w d forty you have a choice either we will wait hold off on entering into this ninety six agreement until you can satisfy us that you have met the safety standards for changing the karma dioxide or we can limit this contract to propane butane and that is what is done that's why on its face the product the complaint based propellant that is why this on its face is clear that this can't relate to this and the problem here is that when the magistrate judge first got it she saw the arbitration clause i don't think she she didn't in her work in her memo in recommendation she mentioned the holy groundless standard but she just saw the arbitration clause and did not even mention the definition of product in her decision at during this period of time or you deformed and if the can is subjected to certain temperatures which it could be in the back of a truck in the south in the summer it becomes a bomb and that is what i q was afraid of and i q because they specialize in this they don't just do it for w d forty they have their own line of products they ran a factor products for other the that the engineer who is in charge was in court today who he recognized we're not going to fill these cans with propelled product for many years by the way it wasn't a bomb no one's ever been injured by the w d forty product in one thousand nine hundred ninety six w d forty decided that it would change the propellant so the propellant moved from propane butane to c o two and that changeover occurred as far as united states market in july of ninety six the contract and safety concern one of the concerns was safety there had been a it was a pleasant coincidence to hear the archer and white case was here before us this morning to distinguish this case from the archer and white case in archer and white there were specific carve outs or exclusions within the arbitration provision itself such as claims for injunctive relief trademarked things that that's in the arbitration clause the arbitration clause that's before your honor's is it is a standard form aaa well all disputes all controversies in claims relating to arising out of the agreement but it goes a little bit further and says and any modification or extension the so in this particular case we don't have what they had an archer and white the argument that i q would be inconsistent to a far margin white and affirm this case i want to make sure i'm on the right side of consistent  own gut feeling on the viability of the holy ground this rule of i understand the policy in the reason behind it i guess and you're bracing it hear you when you say on it but just correct what you've recently twenty seven thousand tents are good says it's wrong and i thought they did they do say that wrong but i think that the the holy ground was exception as it's been defined so far within the circuit is so narrow i think your honor used the term earlier common sense i think you can define it more by what it isn't than what it is it isn't holy ground less if it's plausible or if it's legitimate or if it's on and if we took the case in which it was applied more specifically the douglas case i guess you can i don't want to make new law here it was obvious when you look at the facts in obvious joke but what if california says law and you may tell me it doesn't that for under california law you've got to look beyond the language to what they were negotiating so let's look at the march twelfth suddenly it may become their argument is more obvious that allows the court under the facts and circumstances of this case to do what was called in the kabbala cases a close contract interpretation or to do a deep dive into the contract in the claims i think the case said i think  i'm fine with the march letter what happened in this case was that the kickoff for the manufacture of the c o two propel product wasn't there yet in march i q said they want to be on board they wanted to be a continued assembler in packager about forty products they had not as yet seen the specifications they had not as yet discussed pricing so when the contract was signed that was the state of affairs  correspondence or get a little blurb on the first time around it was not but then again this point that your honor should only consider the evidence that was before the magistrate back in two thousand and twelve i think is is terribly wrong grey that in light of douglas the court needed to conduct a wholesale new examination of this whole holy ground lasy issue and then they put everything in the record and we responded that the motion of a case by putting everything on the record they replied they didn't say we object judge gray you can't consider this they said you know it's it's nonsense you should accept our evidence and not their evidence so there was never any it wasn't even in the opening brief that debate that the i q filed in this particular case but just confining ourselves to the ninety six agreement and he did there were initial slimming it to the first product if we can call it that and then there was an integration cla time it was made it they keep saying that the interlinear nation was this agreement is limited soley or only to the butane propane propel product that isn't it doesn't say that and that's not correct because we know that at the time the contract was entered into of i q was also assembling in packaging other products that were not propelled such as the ball product that we talked about and there were other items that were all listed ultimately on these exhibits a and b but i think the bigger point is this is not a static contract if you look at paragraph four and six it was set up in a way that in paragraph four the component parts that the packager needed to purchase and the price at which those component parts would be purchased and the price could be changed on thirty days notice if you look at paragraph six and this goes to the integration clause it's the other side the assembler or package or such as i q could change the price or a product that it was willing to sell back to w d forty after they completed the assembly process so what you had was a mechanism built into the contract whereby the products could change the prices could change the component parts could change and what happened was in may of two  six where on board were ready to go in the record there's negotiation of the price i q prepares an exhibit b it's in the record they send it to to a w d forty setting forth the prices at which they were willing to sell the c o two propelled product and then the parties went on for fifteen years with not no suggestion ever that there was no contract covering this and in fact as the arbitrators eventually said well first of all this this any way shape or form and it becomes very ambiguous when you consider that other products were being packaged at the same time that were non butane propane propelled products and the claims in this case involve not simply c o two products they involve both products while products that are sitting today still in the i q warehouse but more importantly what the panel found was that during the course the parties would say here's a price change and one side would say you didn't give me the thirty day notice under the agreement that went on all the time so and under california law one of the principles of interpretation or construction that is entirely appropriate is to look at the conduct of the parties how did they perform in the fifteen years before the time any dispute  there's a provision in this contract again it's a multi page contract in the magistrate judge when she look at this she said basically that the parties dispute regarding whether this  patricians centers on issues of whether the arbitration agreement still in effect whether the parties disputes fall within the scope of the arbitration agreement and whether the arbitration agreement remains valid these are complicated issues and they were complicated but what they found for instance was in this contract there's a covenant not to compete i q can't assemble a competing product without the permission of the forty what happens during the term of the contract seeing what it said and what it didn't said they said well for fifteen years these parties conducted themselves and i think the term they used was the parties it was unmistakable that the parties conducted themselves as though they were bound by the one nine hundred ninety six contract you look at what they did but that seems to be just inherently at odds with what douglas allows courts to i don't it has to be an obviousness my view our view of of holy that it's got to be obvious it's got to be obvious because once once you go beyond that and if the theory is that there's a valid delegation clause that means the parties have contractually delegated that access to or that question to the arbitrator so you're undercutting the parties agreement or importantly in douglas what the court said was it would be a waste of resources and futile to send to arbitration we agreed on the appointment of an arbitrator judge son told to determine the gateway issue of arbitrary arbiter ability and rather than flatly telling them there was nothing to arbitra brief in their final decision they said fully three quarters of the record in this case was spent on an issue that i q has lost and lost and lost again arbiter ability so rather than the result that was forecasted by douglas in a case of obviousness or wholly groundless the exact opposite is true every judicial officer who has looked at this issue since it first arose has agreed not only is it plausible earlier agreement between the parties the defense and indemnity agreement the ninety three contract the second issue is whether the parties modify the nine hundred ninety six contract disclose right to the question whether they modify the contract to expand it vacate in the district court footnote in the arbitration proceedings i q ultimately agreed to arbitrate its request for a declaration that i q is entitle to indemnity for carbon dioxide propelled products under the one nine hundred ninety three and dum agreement accordingly the arguments in this brief do not address correctly so they have before they got to the reply going to got here today early on in this case  that there were issues that were in fact are beautiful because they are rows out of or related to the one nine hundred ninety six agreement and that is entirely inconsistent with any test of holy grounds whether it's obvious ness or some other measure of that so to to to say that something and that's why the magistrate said we've got to send this to the arbitrator we have to have the arbitrator determine what's within the scope of the arbitration clause in this case which again as i started off by saying is eight is a broad form is a standard aaa clause that doesn't have the specific i understand it's a different argument archer archer and white because you had the parties negotiating and agreeing to a a separate agreement so this agreement was fluid these exhibits a's and b s change throughout the course and in the end what they're asking you to do is to throw out the baby with the bathwater they're saying we want you to judge this case solely on a little slice what did the magistrate see in two thousand and twelve and if we went on that we want you to throw the whole thing out well i don't i think that's wrong headed i think if if it should have gone to the arbitrator to dirt determine the gateway issue involving arbiter ability it would have gone to the district court and what did the district court say the district court has said covered only butane propane propelled products so judge greg who is the alternative to judge sun told determine the arbiter ability issue judge gray himself as stated that q's argument that this is this agreement was limited solely to that certain product is wrong had it rejected it once before back in two thousand and twelve and he rejected it once again when this ninety eight which stands for the proposition that the failure to receive any proffered extrinsic evidence which is relevant to show whether the contract is reasonably subset of a particular meaning constitutes revers error now the judge kills trap and the analysis that he did in the archer case is precisely what was lacking here by the district court judge which must respectfully shoot this opinion this one paragraph opinion in one thousand nine hundred ninety three with virtually no analysis and simply adopting the magistrate judges finding that there was a case that had to go to arbitration without even analyzing the definition of product only looking at the arbitration clause and sending it and the problem is one stat happens and the case actually mistakenly gets panel everything else that comes up afterwards from the arbor top panel back to the magistrate judge and back to the district court gets evaluated under a completely different standard is afforded a level of deference that is defined by the u s supreme court's decision in believe it's first union city it's the supreme court case from nineteen completely differ standard so what you have here is a situation that once you once a district court judge who is the gatekeeper under douglas does not get it right and does interpret a contract which is clear on its face appropriately and you slip into the world of arbitration as a practical matter you will never recover because the standards required to overrule what an arbitrator has determined is a standard that is so much higher and so much difficult to attain now this is a contract that was fluid and yes every three months or every so often there are going to be updates to the pric but if you look at the updates to the pricing lesson on correcting for the record he just seventeen sixteen through seven nineteen there are up there are new pricing missed for carbon dioxide but you will see no reference to the ninety six agreement in any of these documents because the nine hundred sixty nine hundred ninety six agreement was never referred to by the parties again after the product was switched from propane butane to carbon dioxide in fact when you look at the w d forty new carbon dioxide pricing in the record at seven hundred eighteen you don't see exhibit a or exhibit beyond this because it's not an exhibit to the nine hundred ninety six contract which no longer exists this is consistent with the practice that the parties have been engaged in since one thousand nine hundred sixty and the parties completely conducting a douglas inquiry to not now look at the three years of evidence presented to the arbitrators i think it would be a mistake to look at the three years of evidence i think you have a but i thought your citing moray to say it's reversible error if you don't if you don't look at news that was before the magistrate judge in the district court judge in ninety two and ninety three when the key determination that sent this case off the rails was decided that is you need to look at that march let ter which is entered into one month before the ninety six agreement is entered because it clearly shows that the entire reason for the handwritten interlinear asians is to limit this contract to protein pain butane until the parties can agree that there is a manner of filling these cans with carbon dioxide that is satisfactory to i q it is limited to that and that letter which is the only piece of extensive x evidence which is relevant and which is before the court in ninety two and ninety three new must be considered all of the other evidence isn't before the court and once at the time and then when it's later thrown in and the arbitrator's get a chance to look at it with a little get like i q is forced to do is then try to have an arbitrary panel's decision overturned based on a completely different standard which is almost impossible to me thank you for your time