Free Response to Motion - District Court of Federal Claims - federal

Case 1:05-cv-00956-CCM

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS DAVID S. LITMAN And MALIA A. LITMAN, Plaintiffs-Counterdefendants, v. THE UNITED STATES, Defendant-Counterplaintiff ____________________________________ ROBERT B. DIENER And MICHELLE S. DIENER, Plaintiffs-Counterdefendants, v. THE UNITED STATES, Defendant-Counterplaintiff ____________________________________ HOTELS.COM, INC. and Subsidiaries (f/k/a HOTEL RESERVATIONS NETWORK, INC.) Plaintiffs, v. THE UNITED STATES, Defendant ____________________________________ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

No. 05-956T

No. 05-971T

No. 06-285T (Judge Christine O.C. Miller)

HOTELS.COM AND SUBSIDIARIES' OBJECTIONS TO UNITED STATES' MOTION FOR LEAVE TO FILE DEPOSITION TESTIMONY Plaintiffs Hotels.com and Subsidiaries ("Hotels.com") object as follows to the United States' Motion for Leave to File Deposition Transcripts. To the extent Hotels.com designated testimony to which we now object, such designations were protective in nature in the event our objections (which were anticipated at the time of our designations and are set forth herein) were overruled. In the event the Court overrules any objection, where surrounding or related testimony was designated by Hotels.com, we rely on our original designation.

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Witness and Testimony Subject Designation DeGraw Asset Purchase 40:20 - 41:5 Agreement and the Amended and Restated Asset Purchase Agreement

Objection Foundation

Basis for Objection Witness testified that he lacks personal knowledge regarding all aspects of the Asset Purchase Agreement other than the tax due diligence, and all aspects of the Amended and Restated Asset Purchase Agreement. (DeGraw Dep. 18:9 ­ 19:9 (acquisition involvement limited to due diligence); 27:8 ­ 11 (no involvement in amendment)). [hereinafter "Admitted Lack of Personal Knowledge re Agreement and Amended Agreement"] Admitted Lack of Personal Knowledge re Agreement and Amended Agreement

DeGraw 46:10 ­ 17

DeGraw 50:8 ­ 51:9

Asset Purchase Agreement and the Amended and Restated Asset Purchase Agreement Value of additional goodwill reported on HRN 2000 IRS Form 1120

Foundation

Foundation and Opinion Testimony by Lay Witness

DeGraw 55:7 ­ 11

Preparation for IRS audit and communications concerning same

Hearsay, Settlement Preparation, Preparation for IRS Audit

DeGraw lacks personal knowledge as to the number used on the tax return (50:14), did not review subsidiary tax returns (100:18 ­ 101:18); did not recall reviewing the HRN 2000 Form 1120 ( 101:19 ­ 102:4). [hereinafter "Admitted Lack of Personal Knowledge re HRN's 2000 IRS Form 1120"]. Additionally, testimony seeks to elicit opinion testimony from lay witness concerning GAAP and tax accounting requirements, where witness was not qualified to offer such testimony. [hereinafter "GAAP/Tax Opinion Testimony by Lay Witness"] Subject of motion in limine: what occurred administratively is irrelevant to refund litigation because the standard of review is de novo [hereinafter "de novo Review of Refund Litigation"]. Further, any discussions concerning settlement, including positions considered or taken in connection with settlement, are barred under FRE 408 [hereinafter "FRE 408"].

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Witness and Testimony Subject Designation DeGraw Reasonableness of 56:20 ­ Deloitte Valuation 58:11

Objection Opinion Testimony by Lay Witness

Basis for Objection Witness testimony on reasonableness of valuation results, where witness admits to being unqualified to evaluate valuations (58:7 - 11) is inadmissible opinion testimony by lay witness de novo Review of Refund Litigation and FRE 408, hearsay

DeGraw 63:21 ­ 65:4

Preparation for IRS audit and communications concerning same Preparation for IRS audit and communications concerning same Preparation for IRS audit and communications concerning same Testimony concerning filing original and amended return Communications concerning IRS audit

DeGraw 66:8 ­ 67:21

DeGraw 87:11 ­ 18

DeGraw 90:6 - 15

Hearsay, Settlement Preparation, Preparation for IRS Audit Hearsay, Settlement Preparation, Preparation for IRS Audit Hearsay, Settlement Preparation, Preparation for IRS Audit Hearsay; Foundation

de novo Review of Refund Litigation and FRE 408, hearsay

de novo Review of Refund Litigation and FRE 408, hearsay

DeGraw 90:16 - 22

DeGraw 91:5 ­ 11 DeGraw 94:7 ­ 95:15

Testimony concerning "the company" Preparation for IRS audit and communications concerning same Share value against which to apply discounts

Hearsay, Settlement Discussions, IRS Audit Hearsay; Foundation Hearsay, Settlement Preparation, Preparation for IRS Audit Foundation

Witness testified that he did not review subsidiaries' tax returns, and that he did not recall reviewing the HRN, Inc. 2000 tax return (100:18 ­ 102:4), hearsay de novo Review of Refund Litigation and FRE 408, hearsay

Witness testified regarding "the company's" position, unclear whether referencing parent or subsidiary and hearsay de novo Review of Refund Litigation and FRE 408, hearsay

Ziekel 57:1 ­ 4

Ziekel was the primary author of the Deloitte & Touche report prepared on behalf of Hotels.com. Question assumes that Ziekel's report applied discounts to a certain stock price, but the report did not determine a price against which the discount should be applied, it only determined a discount.

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Witness and Testimony Subject Designation Robinson Audit Committee/ 27:10 ­ 28:2 Board Conversations

Objection Hearsay, Foundation

Basis for Objection Out of court statements are inadmissible hearsay, therefore testimony regarding statements by the Audit Committee or the Board are inadmissible. [hereinafter "Hearsay Audit Committee/ Board Conversations"] Robinson also was not employed by HRN until after the IPO, so any testimony by Robinson concerning the IPO is lacking personal knowledge and thus without foundation and also hearsay. [hereinafter "Lacking Personal Knowledge"] Hearsay Audit Committee/ Board Conversations, Lacking Personal Knowledge Hearsay Audit Committee/ Board Conversations, Lacking Personal Knowledge Hearsay Audit Committee/ Board Conversations, Lacking Personal Knowledge Witness testimony on reasonableness of valuation results, where witness admits to being unqualified to evaluate valuations is inadmissible opinion testimony Robinson 7:21 ­ 10:12, 33:18 ­ 34:11. [hereinafter "Lay Witness Opinion Testimony re Reasonableness of Valuation"] Hearsay Audit Committee/ Board Conversations, Lacking Personal Knowledge Hearsay Audit Committee/ Board Conversations, foundation, lacks personal knowledge Lay Witness Opinion Testimony re Reasonableness of Valuation Lay Witness Opinion Testimony re Reasonableness of Valuation Lay Witness Opinion Testimony re Reasonableness of Valuation; Foundation; Presumes facts not in evidence because the Deloitte Valuation does not conclude a value but rather simply a discount (and does not set forth the amount against which the discount should be applied)

Robinson 28:22 ­ 29:4 Robinson 30:13 - 18 Robinson 32:1 ­ 11 Robinson 32:7 ­ 35:6

Audit Committee/ Board Conversations Audit Committee/ Board Conversations Audit Committee/ Board Conversations Reasonableness of Deloitte Valuation

Hearsay, Foundation Hearsay, Foundation Hearsay, Foundation Opinion Testimony by Lay Witness

Robinson 35:7 ­ 25 Robinson 63:23 ­ 64:23 Robinson 65:1 - 20 Robinson 67:21 ­ 68:17 Robinson 70:22 ­ 71:9

Audit Committee/ Board Conversations Audit Committee/ Board Conversations Reasonableness of Deloitte Valuation Reasonableness of Deloitte Valuation Reasonableness of Deloitte Valuation

Hearsay, Foundation Hearsay, Foundation Lay Witness Opinion Testimony Lay Witness Opinion Testimony Lay Witness Opinion Testimony, Foundation, Presumes Facts not in Evidence 4

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Witness and Testimony Subject Designation Robinson Audit Committee/ 77:12 ­ Board Conversations 77:18 Robinson 84:12 ­ 86:9 Audit Committee/ Board Conversations

Objection Hearsay, Foundation

Basis for Objection Hearsay Audit Committee/ Board Conversations, foundation, lacks personal knowledge, hearsay, Lay Witness Opinion Testimony re Reasonableness of Valuation Hearsay Audit Committee/ Board Conversations, Lacking Personal Knowledge, Lay Witness Opinion Testimony re Reasonableness of Valuation, hearsay Lay Witness Opinion Testimony re Reasonableness of Valuation; Lay witness testimony re appropriate methodology in applying valuation

Hearsay, Foundation

Robinson 100:5 ­ 101:20

Reasonableness and application of Deloitte Valuation

Opinion Testimony by Lay Witness

Hotels.com further objects to the exclusion of certain portions of testimony under FRE 106 "Rule of Completeness." To the extent any of Robinson's testimony is admitted by the Court, the following identified designations should also be admitted in order to provide necessary context to the United States' designations, and to ensure a fair and impartial understanding of Robinson's testimony. Witness and Designation Robinson 35:7 ­ 13 Testimony Subject Robinson's recollection of Audit Committee action Basis for Inclusion Portions of Robinson's designated deposition testimony concern issues addressed and positions taken by the Audit Committee. Although such testimony is inadmissible hearsay, in the event it is determined to be admissible, Robinson's inability to recall such actions and conversations should also be admitted in order to place the admitted portion in context, and to insure a fair and impartial understanding. Portions of Robinson's designated deposition testimony concern HRN's 2000 tax reporting, and HRN's tax reporting generally. Robinson's inability to recall certain actions and conversations should also be admitted in order to place the admitted portion in context, and to insure a fair and impartial understanding.

Robinson 47:21 ­ 48:2

Robinson's recollection of HRN's 2000 tax reporting

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Witness and Designation Robinson 54:14 ­ 55:8

Testimony Subject Robinson's recollection of action taken in connection with e-mail

Basis for Inclusion Portions of Robinson's designated deposition testimony concern an e-mail he received from R. Diener. Robinson's inability to recall actions taken in connection with the e-mail should also be admitted in order to place the admitted portion in context, and to insure a fair and impartial understanding. Portions of Robinson's designated deposition testimony concern HRN's valuation of the stock at issue in this matter. The additional testimony that should be included, concerning whether Deloitte prepared amended tax returns for 2000 based on the valuation, provides context for Robinson designations, and will insure a fair and impartial understanding. Respectfully submitted,

Robinson 70:18 ­ 21

Robinson's recollection concerning amended tax returns for HRN in 2000

April 9, 2007 s/ Kim Marie K. Boylan Latham & Watkins, LLP 555 11th Street, NW Washington, DC 20004 (202) 637-2235 Attorney of Record for Plaintiffs Hotels.com and Subsidiaries Kari M. Larson Latham & Watkins, LLP 555 11th Street, NW Washington, DC 20004 Of Counsel Jennifer S. Crone Latham & Watkins, LLP 555 11th Street, NW Washington, DC 20004 Of Counsel

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