dash six usa of title forty eight of the code of federal regulations requiring that all types of pension costs expressly mentioning and including segment closing adjustments at issue in this case must be timely funded to be allowable costs and raytheon has never funded these costs can i ask you when either generally or in specific discussions with raytheon the government first articulated the position that the segment closing costs needed to have been funded before the two tax returns revised that was in  the first specific mention your honor was in september thirtieth of two thousand and four when the contracting officer sent four letters to write saying we do not intend to fund any of these we do not intend to pay any of the second closing adjustments because you haven't funded them in response rates you know and then submitted it certified claims on the contract disputes act and the contracting officer then denied them beyond regular september two thousand and four as i understand it tell me if this is right that i think there were three segments that issue here and for two of them the tax returns with extensions were due in september two thousand and two and for the  third the optical one i guess it was due in september of two thousand and three so yes in two thousand and three so only after the time at which raytheon could have performed the required funding did the government inform them that that timely funding was in fact required the timing is correct your honor and the regulation it's been true for forty years itself which as are mentioned is clear on its face and it's particularly been clear since october of one nine hundred ninety eight when it was the regulation was amended the particular regulation six j was amended to specifically list segment closing adjustments as one of the types of pension costs that were subject to the timely funding requirement the regulation is quite clear on this this is in our in our brief you've done them to our brief identify three a page five seventy five has been applicable regulation that the key sentence is the number of sentences but the key sentence  the sentence at the and paragraph six jerry two which says pension costs are allowable subject through the reference standards referring to the counts for twelve and counts for thirteen which two standards that govern pension costs and the cost limitations and exclusions set forth in paragraphs j to i and j three three three three eight now j two online is the one that sets out the timely funding requirement it says that it requires that all pension costs be timely funded that is by the time of the federal income tax return and if not then the process or not allowable in that year and goes on to say should cost assigned to the current year but not funded by the tax return time shall not be allowable in any subsequent year that's one of the requirements for a while building the others are set forth in jerry j three thirty eight is applied to specific kinds of pension costs for example the cost of employee stock ownership plans the cost of pay as you go pension plans and paragraph j for specifically says segment clo segment closings and contains additional limitations in addition to the funding requirement that have to be met in order for the cost to be allowable mr byrd when i read j for it just seems to do little more than first back to jazz for thirteen and then if we had for twelve and cats for thirteen in a way to that segment closing adjustments or not mention cost and what do we do there still cannot prevail on this issue the reason is that the the far reign supreme on matters of cost of our ability based on this court's decisions almost thirty years ago and the farm regulation the federal acquisition regulation we've been talking about specifically says that engine costs are allowable subject to three requirements have to comply with caps for twelve counts for thirteen you have to be timely funded under sixty j to i and the third one is you have to comply with the specific limitations applicable to various kinds of pension c j four mentions specifically refers to segment closing adjustments and it requires an additional steps out an additional requirement if the farm makes segment closing adjustments that are under funded not timely funded on allowable costs so if if it is some kind of a non pension cost it doesn't matter because of the far which reigns supreme on questions of allowed delivery as i said segment closing adjustments that are not timely funded are not allowable costs can they can i just ask you that the legal question that takes as a premise something that i know you need to speak if you've argued that the farmer is actually quite clear assume with me for a moment that i found the combination of the far and the at the cast not terribly clear then i'm thinking is it does this case fall into that category of cases in which a new regulatory interpretation can't be retroactively applied that is after the time at which the regulated party can any longer do anything to come into compliance that is in this case after the september ninety three nineteen ninety eight some of those cases that these talk about new regulatory interpretations and hence the premise is the question which i do appreciate you you dispute that that that the regulations themselves are not clear and that there was no prejudge a nine hundred ninety four announcement of the government's interpretation of the regulations and by then they  was not a was not any authority that statement by the federal acquisition regulation by the federal acquisition council by the far council it was the guidance provided by two the regulation and self on what basis could the court reasonably construe that being timely funding requirements did not apply to segment closings when segment closings are specifically mentioned as one of the it's j four and you have to require you have to comply with additional requirements of j three through g eight as applicable  interpretation issued by any of the agencies involved upon which raytheon could reasonably or and the contractor could reasonably have aligned regulation was there to i two thousand and four that been there for six years assets and liabilities in this case raytheon retained all of the assets and liabilities of the pension plans so that if there was no transfer issue that was also a surplus case which did not involve the funding requirement because the funding requirement is a requirement that it is imposed upon contractors before they could charge the government they have to actually fund the pension funds by paying it into the pension fund there's no comparable requirement that applies to  a four if it's requiring that is applying to a segment closing adjustment i reject for us just saying the pension cost the annual pension hosty contribute to your pension plan to have that be reimbursed by the government that has to be funded either way in this case so i would like you actually to talk to me about j four in that specific language and connect all of the dots to indicate why a section that's in this j section that specifically about segment closing comply with caps for trials and for thirteen caps for twelve this is likely defines the components of peds because this this court is held in the united states there's always a company case that cast for twelve together with for thirteen government quote the determination in measurement of pension cost i really want to hear how j two n j four as they work together don't support your trees argument here j two identified certain things as being pension costs and then it appears that j four is one of those identified pension costs your honor i did that work your honor if if you look at all the different paragraphs within j mr burt assange you're all pension costs but they're clearly not all pension costs for example the employee stock ownership plan doesn't necessarily have to be a pension cost at all it's something entirely different so i think it's just the way the regulation was set up i don't think it says every one of those paragraphs is a pension cost i think that's a misreading of the regulation your position that the j four and referring to the segment closings terminations those are never pension costs so you haven't the point is not that they're never but that it's not intended to define what is a pension costs it's saying if it's a pension costs you have to fund it right but why why if it would never be would you put this in in a subsection that includes that discusses pension costs your jay just happens to cover where they put all the pension cost issues and the fact that the employee stock ownership plans was in there was realized later to be a mistake because it caused the arm service for the contract appeals to go down different lines something was nice up or something wasn't so they ultimately removed it so i'm not sure a whole lot of thought went into other than the fact that jay just happens to be we're all the pension costs but even more important than that forty one u s c fifteen zero four c says that costs that are the subject of a cost accounting standard quote are not subject to regulations established by another executive agency that differ from those standards with respect to the measurement assignment allocation so even if mr burr is correct that that's what the far says if there's a conflict or even a difference the cas reigns supreme so his promise that the far allowed bill the reigns supreme is presumption in favor of finding regulations and harmony and i think you can read them in harmony by saying it doesn't really define what a pension cost is it's as if it is a pension costs it has to be funded but it actually as you noted earlier refers you right back to cas for twelve  thirteen and even as recently in the general dynamics case where this court talked about the interviewer finding assumptions you went back to the old boeing case that says task reigns supreme in that case you were talking about a different part of the federal acquisition regulations but you said to the extent that the truth negotiations at regulations in the far conflict with cas the cast takes precedence with the very same thing is true here but the court trial court's decision in viacom had two other compelling reasons why the far ultimately doesn't matter and the government is completely ignore those industries one is that it under revised cas for thirteen it specifically allows a price adjustment to fixed price contracts is this court recognised in the rumsfeld versus united technologies corporation case allow building only applies to cost reimbursement contracts it doesn't apply it all to fixed price contracts so it doesn't matter what the farces ultimately and then thirdly the trial court recognized that under revised cash for thirteen it says  the government's share is alec a bill without limit as a creditor charge without limit it's very clear and it doesn't mean that if you don't fund it by the time for your tax return you cannot recover that would be completely and that's just it can i ask or regular understanding in the industry before july of two thousand and four where segment closing costs were not paid because they hadn't been funded before the tax return absolutely not your honor and the july two thousand for guidance was controversial it was it was promulgated by two agencies in coordination with the department of justice and specifically the trial team that's litigating all those pension cases so we think it's bogus guidance to begin with but it was a rule that would effectively mean that the government would never pay attention deficit in the trial court recognize that in your other decisions that nobody can fund the entire amount of the deficit we're the second closed just for tax reasons you can't put that much money into your pension plan it's pension plans people contribute in accordance with the rest of the amount year after year they don't just put a whole slug of money in at the time but you say you can't make a claim against the government unless you put all the money in upfront was just a way of doing an end run around having this rule apply equally to both parties and so people were it was a controversial guidance we don't think it's political to anyone but certainly raytheon never knew that and i don't think anyone else in industry no value either and it was only after that guidance came out raytheon had some sort segments with surpluses some with deficit parties to discuss they were just offsets and at the end of the day one guy would write a check not both it was not till that guidance came out that the government said sorry we're not going to pay for any of the pension deficits that you pay us for the pension to the government it's somebody with a contract an officer's warrant who's authorized to make these decisions on behalf of the government and so here raytheon had a segment closing claim under cas were thirteen so when the government said we're not going to pay raise the on submitted certified claims under the contract disputes act to the contracting officer the contracting officer just outright denied all those claims saying you didn't find it we're not going to pay it once the contract in which you have a government of contractor claim submitted to the contractor elster for final decision and a final said in the alternative by every different verse by some court ever viewing my decision in the alternative i want to point out that there should be a some kind of equitable adjustment here and by virtue of the fact that he or she didn't do entitled to an offsetting counter claim and equitable adjustment under completely different regulations fifty two forty eight c f r fifty two to thirty dash two and actually inserted a claim for that in this were rules can work both ways when the the segment closing adjustment has a very specific formula for determining the government share works for both surplus and deficit what this court is never held at the trial court is helping that a change in cost accounting practices when you apply it that triggers the right to an echo adjustment under all claims by the federal government against a contractor have to be the subject of a final decision so i wouldn't say the government itself is much larger the contracting officers are very specific people who have contracting officers warrant where does it say that that the government has to bring a jurisdiction requirement that you have to have a contracting else your final decision on a claim that applies to contractor claims government claims and government counter claims this is a government council estates when the government said we're not going to work we're not going to pay all of this that's that's happen is that we should pretend that instead of raising on asserting a claim and the government asserting a counterclaim in response that we should just melt them altogether which is what their guidance does it's a procedural shortcut where we sort of skip that step and we say we're not going to bother a final decision on the counter claim we're just going to do a mathematically equivalent equation so again on the facts here you would if you wanted to contact an officer to say not only am i denying the claims but in the alternative there is an i'm just trying to understand this area you are contracting officer if the government has a counterclaim the contracting officer would assert either in that same final decision or second when they would actually assert a government claim against the contractor and that happens and it happens frequently comes up in litigation when the optical segment was created no assets were were choir doing that transaction those people were added with zero assets and zero liabilities all the new hires in the optical segment came in as noncontribut and liabilities so we've got this massive chess book they're immediately starting to write checks no money is going in if you're keeping track of it on the checkbook faces it's obvious those guys are in a deficit the trial court made two fundamental errors in construing regulation managed the fact that the four thirteen fifty five to method resulted in a surplus to attack the calculation under four six hundred fifty five one the fact that c five two results in a surplus doesn't tell you anything at all about and in accordance with the government arguments on that issue then this case is over and there are really only two issues there one does a timely funding current apply to the second causing adjustments and to if it did if it does since we raytheon fund these i mean let me ask you a hypothetical what if i were to conclude that as for twelve and cats for thirteen together are unambiguous about outcasts chose to define what a second a closing adjustment and it's not actually cost and then far comes along and somehow misunderstands or misread what cass for twelve for thirteen calls for a you know those those are pension what do what do we do there if if far in our view misreads cads for twelve or thirteen or or could j to be read as saying any pension costs as identified j three through eight those are not allowed and then with there be a way to say well you can't jay for actually isn't a pension and so therefore a segment closing adjustment as not being a pension cost it would make no difference because the farm which controls all our ability has said the segment closing adjustment is subject to the requirements of j two j two i that's the time w actually include segment closing adjustment and the whole premise of the argument to the contrary is that the segment closing adjustment is not listed as one of the four elements of the annual computation of engine cost well of course it isn't the only close the segment wants you're not going to that's not going to be part of the annual computation of pension costs for the plan but in any and all of thence the critical issue is what does the far say because the far you will the exclusive authority on allow ability is the far exclusive authority for already on the measurement assignment and allocation of cost is is the cas but if the cas defines the segment closing adjustment as something different from a pension cost then my last hope if not what is it of course it's a pension cos it's the cost of a pension plan but putting that to one  even if that were the case the farmer had spoken on the far has said this thing called a segment closing adjustment has to be timely funded and i think the argument to make clear that raytheon has no effective answer to the it needed to use the method that it chose to use under the so called c five one method and because of that again that ends the case because of refute those arguments are simply that they don't like that result they don't think it's fair well the regulation is mandatory the regulation is binding and the trial court correctly and so is it your view that every little piece of data has to be accounted for before you can use c five one there's no opportunity for any little bill in at the court and the court does not have to reach that question in order to affirm this judgment below but if the court does reach out as you argue with based on the dictionary ordinary plain meaning of determined and the other materials and are very that estimates are not allowed the estimates are projections arse hypothesizing speculation they're guesswork they're not actually actual readily determinable data and in fact the trial court correctly found in this case the four items of data that raytheon needed to have for the eleven years of the optical segments existence raytheon had exactly none of segment specific data and for that reason the trial court correctly concluded that raytheon could not use the method that requires readily determinable data for those four previous version of the regulation did not have that language what it had once you allocate under c five one if you have the readily determinable data otherwise you allocate on it on a different basis what  in the amended version in one thousand nine hundred five what that provides is let's assume you only have data going back for five years for a segment that's been in existence for fifteen years what the amended regulation requires an in that part of your honor is referring to is that you don't allocate as of the date of the segment closing hours of the date when you need to know the assets are eligible to segment you go back to the earliest date where you actually do readily determinable data and then you use that data from you you allocate based on liabilities out of that date and then you do what the actuaries call a roll forward which means you simply bank account terms you figure out what the deposits were what the withdrawals were and what the expenses charged to the account were run that down to the present and that gives you the have any of the readily determinable data for the segment as a whole but that's a trial court second fundamental legal error if you are allowed to shepherd recalculate the assets for the differently situated groups please then the data is readily available because we know trial court to say there's a group of noncontributory and contributory and maybe you did have readily available data for one of those groups you pretty much can see you didn't for the other end and paragraph one applies only if separately calculated or calculated together you actually have the data for everybody in the sec maybe there were only nineteen for which you didn't but it's but one is all are enough you know i don't think it's conceded that we didn't have the readily determinable data for the nineteen i think our position is that it was readily determinable because once you have the data for the non contributory people to figure out a thing to be a tributary part isn't a matter of subtraction that as you pull out the noncontributory piece all the rest of the assets in the plan along with a contributory piece and from that using the same ratio you could you can figure out exactly but it's a question of you know if you want to figure out how many runs were there in the world series you could either google the total number of runs or you could add up each separate game each separate team you come to the same number forty one runs but it's and so that's what happened here  trial court said you had to have a data for the segment as a whole when nobody has been doing composite accounting is ever going to have that data for the segment as a whole because by definition with composite accounting you computing the overall pension cost of the plan as a whole and then just using a mathematical formula to allocate of segment she really don't know exactly how much is going to each segment here because of the unique situation where we've got a whole bunch of people all but nineteen who have zero assets it's pretty easy we know there's only one contribution during the entire time it was fifty five million dollars contribution about two and a half percent goes to the segment about that's about one and a half million we know that when they have a low it's how is that to have for sort of a determined you want to using just the same allocation method for the entire plan which is the same they're using it based on the salaries for the active employees it's just a way of mathematically spreading it out over the top of the it wasn't determined by a figure ing out the potential liabilities of the contributory people versus the potential  liabilities of the noncontributory you know your honor choosing the very same formally you do when you figure out your annual pension cost you do it for a whole plan you just allocated over the segments that's what the actuaries did here in this important note that the government pension actuary specifically approved this because they said it recognizes the employer contributions to put that into context so the entire time that the optical segments in existence at one and a half million employer contributions during that same time the employee contributions to the plan as a whole are three hundred thirty five million so there's this massive surplus out there of contributions that were made for other segments many years before opticals established and employee contributions the government gets a huge windfall here by using the c five two method to say well now we're just going to take you know your alcohol share of the planet the whole bill of course supplant the whole as has a surplus it's always going to piggy back into the much more accurate way to do it is if you allow them to separately calculate it for the differently situated groups of employees and add them together then you can readily determine what the government's argument was in the trial court agreed unfortunately was no you have to bradley terminal data for the segment as a whole you can't separately calculate nothing cast from thirteen so she can't just like nothing cast for thirteen so you can or you can't separately calculate liabilities but both sides agree you always calculate the liability separately because every individual participant and you add them all up well same thing applies here it's much more accurate if you've got differently situated groups employees that you can figure out pretty much exactly what was put in for them to just add them up at the end and that's what they did here but the trial court said no you can't said you know tell them quick question what's your best answer for why we shouldn't permit what's happened in allegheny teledyne when came to only using cash prospectively to let that happen here on the equitable adjustment some a quick answer to your honor the the trysting on the in allegheny is easy offsetting equitable adjustment there is a part of the allegheny case where the court was talking about general motors where they said if it's an existing obligation you have there is no equitable adjustment so i think the trial court actually made a mistake in the part of teledyne that wasn't appealed where she said that this is a change in cost accounting practices entirely new to an equitable adjustment because under the this clause fifty eight forty eight c f r fifty two t thirty days to it's only if there's a change but because all the segment closings happen after new castle already taking effect there is no change that would trigger the right to an ethical adjustment so it's sort of a belt and suspenders the government says well you said we're entitled to nec receipt can't just put a huge slug of money and they do year by year and so every year that segment has been drawing it down in what the trial court said is to extend any contract to recover segment closing just you have to put all that money into the