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IN THE UNITED STATES COURT OF FEDERAL CLAIMS __________________________________________ INNOVAIR AVIATION LIMITED, Plaintiff, v. THE UNITED STATES OF AMERICA, Defendant. ) ) ) ) ) ) ) ) ) ) )

DOCKET NO. 96-408C (Senior Judge Loren A. Smith)

PLAINTIFF INNOVAIR AVIATION LIMITED'S REPLY IN FURTHER SUPPORT OF POST-TRIAL BRIEF PURSUANT TO THE COURT'S ORDER OF NOVEMBER 2, 2007

Respectfully submitted, s/Ty Cobb_________________________ Ty Cobb HOGAN & HARTSON L.L.P. 555 Thirteenth Street, N.W. Washington, D.C. 20004 (202) 637-5681 (direct) (202) 637-5910 (facsimile) Attorney of Record for Plaintiff Innovair Aviation Limited Of Counsel: H. Christopher Bartolomucci Audrey E. Moog HOGAN & HARTSON L.L.P. 555 Thirteenth Street, N.W. Washington, D.C. 20004 (202) 637-5810 (202) 637-5910 (facsimile) Dated: March 31, 2008

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TABLE OF CONTENTS Page QUESTION ONE: WHAT IS THE PROPER LEGAL STANDARD FOR DETERMINING DAMAGES? .......................................................................................................1 QUESTION TWO: WHAT IS THE MOST APPROPRIATE ECONOMIC MEASURE OF DAMAGES?..........................................................................................................1 A. The $1.375 Million Res Bond Posted by BTC for the TLA Was Not a "Comparable Sale" -- Much Less the Fair Market Value of the TLA....................................................................................................................1 Innovair Is Not Seeking Lost Profits or Consequential Damages ...........................2 Arthur Cobb's Valuation of the TLA Employs the Best Method for Calculating Just Compensation in This Case...........................................................3 Innovair Should Receive Compound Pre-Judgment Interest...................................5

B. C. D.

QUESTION THREE: WHAT ARE THE DATES OF THE RELEVANT DAMAGES PERIOD?.....................................................................................................................6 QUESTION FOUR: HOW MANY KITS WOULD INNOVAIR HAVE SOLD? ........................9 A. B. Government Expert Ernest Arvai Is Not Credible.................................................10 The Government's "Exhibit A" Is Not Evidence But Only Unpersuasive Argument.........................................................................................15

QUESTION FIVE: WHAT WAS THE PROFITABILITY OF EACH SALE? ..........................22 QUESTION SIX: DID UTC AND INNOVAIR HAVE AN ENFORCEABLE CONTRACT? IF SO, WHAT WERE UTC'S PURCHASE OBLIGATIONS UNDER THE CONTRACT?.........................................................................................................25 QUESTION SEVEN: WHAT VALUE WOULD AN INVESTOR HAVE PLACED ON THE TLA WITH THE UTC CONTRACT? ..........................................................29 QUESTION EIGHT: WOULD INNOVAIR HAVE BEEN PROFITABLE WITHOUT ACCESS TO THE TECHNOLOGY OWNED BY BTC AND BFS?.......................33 QUESTION NINE: WOULD IT HAVE BEEN MORE PROBABLE THAN NOT THAT INNOVAIR COULD HAVE OBTAINED THE VARIOUS OPTIONAL PARTS, SUCH AS THE LONG RANGE FUEL TANK, WITHOUT COOPERATION FROM BTC AND BFS?...................................................................................33 CONCLUSION..............................................................................................................................38

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TABLE OF AUTHORITIES Page CASES: B.F. Goodrich Co. v. VinylTech Corp., 711 F. Supp. 1513 (D. Ariz. 1989).................................27 Bannum, Inc. v. United States, 59 Fed. Cl. 241 (2003) ...............................................................8, 9 Bassett, N.M. LLC v. United States, 55 Fed. Cl. 63 (2002) ....................................................6, 7, 9 Bath Iron Works Corp. v. United States, 34 Fed. Cl. 218 (2003)................................................8, 9 Bowles v. United States, 31 Fed. Cl. 37 (1994)...............................................................................6 C3 Media & Mktg. Group, LLC v. Firstgate Internet, Inc., 419 F. Supp. 2d 419 (S.D.N.Y. 2005)......................................................................................28 De Laval Steam Turbine Co. v. United States, 284 U.S. 61 (1931) ................................................2 DSC Communications Corp. v. Next Level Communications, 107 F.3d 322 (5th Cir. 1997) .....................................................................................................5 Energy Capital Corp. v. United States, 302 F.3d 1314 (Fed. Cir. 2002) .........................................5 Florida Rock Indus., Inc. v. United States, 45 Fed. Cl. 21 (1999)...................................................6 Goodstein Constr. Corp. v. City of N.Y., 604 N.E.2d 1356 (N.Y. 1992)......................................28 Innovair Aviation, Ltd v. United States, 72 Fed. Cl. 415 (2006).....................................................1 Julius Goldman's Egg City v. United States, 697 F.2d 1051 (Fed. Cir. 1983)................................3 Kearney & Trecker Corp. v. United States, 688 F.2d 780 (Ct. Cl. 1982)......................................26 Monongahela Navigation Co. v. United States, 148 U.S. 312 (1893)......................................... 2-3 Omnia Commercial Co. v. United States, 261 U.S. 502 (1923) ....................................................26 Osprey Pacific Corp., 41 Fed. Cl. 150 (1998) .................................................................................6 Questar Pipeline Co. v. Grynberg, 201 F.3d 1277 (10th Cir. 2000)..............................................27 Shelden v. United States, 34 Fed. Cl. 355 (1995)........................................................................6, 9 State Office Sys., Inc. v. Olivetti Corp. of Am., 762 F.2d 843 (10th Cir. 1985)...........................31

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Stearns Co. v. United States, 53 Fed. Cl. 446 (2002), rev'd on other grounds, 396 F.3d 1354 (Fed. Cir. 2005)..............................................................................................6, 9 Tractebel Energy Mktg., Inc. v. AEP Power Mktg., Inc., 487 F.3d 89 (2d Cir. 2007).................................................................................................25, 26 Whitney Benefits, Inc. v. United States, 18 Cl. Ct. 394 (1989), aff'd, 926 F.2d 1169 (Fed. Cir.), cert. denied, 502 U.S. 952 (1991) .....................................4, 7 Whitney Benefits, Inc. v. United States, 30 Fed. Cl. 411 (1994) ....................................................6 RULES: Fed. R. Evid. 702 .....................................................................................................................30, 31 Fed. R. Evid. 1006 ...................................................................................................................10, 15 OTHER AUTHORITIES: Curt Anderson, Clinton Signs Bill Lifting Remaining South Africa Sanctions, (Associated Press, Nov. 23, 1993) ...........................................................................................16 For the Record, (The Washington Post, Nov. 25, 1993)................................................................16

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QUESTION ONE What is the Proper Legal Standard for Determining Damages? QUESTION TWO What is the Most Appropriate Economic Measure of Damages? A. The $1.375 Million Res Bond Posted by BTC for the TLA Was Not a "Comparable Sale" ­ Much Less the Fair Market Value of the TLA. The government argues that the fair market value of the TLA should be determined by the comparable sales method and that the $1.375 million res bond posted by BTC in connection with forfeiture proceedings was a comparable sale that reflects the value of the TLA. See Govt. Opp. at 1, 6-9. The government's argument borders on the preposterous, and this Court already has rejected it. The res bond did not represent the value of the TLA. Rather, it was set at the amount that the government deemed forfeitable. As this Court has explained, "the bond was `in place of the sum of $1,375,000 paid by Air Colombia to Innovair,' and subsequently paid by Innovair to BTC. Res Bond Stipulation ¶ 11. This sum was to secure the government's interest in the TLA." Innovair Aviation, Ltd. v. United States, 72 Fed. Cl. 415, 418 (2006). Accordingly, the res bond does not represent the fair market value of the TLA or the fair market value of Innovair's interest in the TLA. Indeed, "this Court has already held that `there never was a valuation of Innovair's interest in the TLA . . . the valuation of the TLA was to protect the Government's interest, not Innovair's.' " Innovair Aviation, Ltd v. United States, Op. of Dec. 14, 2007 (Doc. 151) at 2 (quoting Innovair, 72 Fed. Cl. at 424) (ellipses in Court's opinion). Fair market value is "the amount that a willing buyer would pay a willing seller in an arm's length transaction." Id. (emphases in original). Innovair was by no means a willing seller, and the

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transaction surely was not at arm's length. The government had seized the TLA in connection with forfeiture proceedings. The res bond was not the result of a market transaction open to all (or even many) interested bidders. It was a forced sale ­ and a rigged one at that. The government itself in its brief admits that the TLA was "a one-of-a-kind asset not freely exchanged in the market." Govt. Opp. at 6 (record citation omitted). The government hopes to give its "comparable sale" argument an air of plausibility by attempting to connect the argument to its expert, Daniel Kaplan. As Innovair explained in its opening brief, Mr. Kaplan disclaimed the utility of the comparable sales method. He admitted that the TLA was a unique asset, that there were no comparable assets or sales, and that the comparable sales approach is not useful here. Mr. Kaplan agreed that the approach taken by Innovair expert Arthur Cobb was close to the approach that he deemed to be proper. See Br. at 6, 11 & n.3 (citing the record). B. Innovair Is Not Seeking Lost Profits or Consequential Damages. Innovair is not seeking lost profits or any form of consequential damages. Innovair seeks only just compensation for the value of the TLA - i.e., to be placed "in as good a position pecuniarily as if [its] property had not been taken." Innovair, Op. of Dec. 14, 2007 (Doc. 151) at 2. Innovair's approach determines the value of the TLA by analyzing the income stream that the TLA would have generated in Innovair's hands over the relevant time period. This Court may look to the expected income stream in order to determine the value of the TLA and the just compensation owed for its taking. See De Laval Steam Turbine Co. v. United States, 284 U.S. 61, 72 (1931) ("[T]he fact that the contract, if carried out, would be profitable is one of the circumstances which naturally would be considered by one seeking an assignment of the contract, and must be given its proper weight in fixing just compensation. But that is very

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different from an allowance of anticipated profits as in the case of a breach."); Monongahela Navigation Co. v. United States, 148 U.S. 312, 328-329 (1893) (just compensation for the taking of a lock and dam may be "determined by [the property's] productiveness, -- the profits which its use brings to the owner") (discussed in Innovair Br. at 8). This Court in Whitney Benefits rejected the argument that the approach to determining just compensation proposed by the property owner in that case was an impermissible claim for lost profits. See Whitney Benefits, Inc. v. United States, 18 Cl. Ct. 394, 409 (1989) ("[P]laintiffs do not seek lost profits as consequential damages.... Instead, they seek the value of their coal which is measured by the dollar amount for which they could sell it."), aff'd, 926 F.2d 1169 (Fed. Cir.), cert. denied, 502 U.S. 952 (1991). The approach proposed by Innovair is similar to the approach used by the Court in Whitney Benefits, and the "lost profits" argument should fare no better here. See also Julius Goldman's Egg City v. United States, 697 F.2d 1051, 1056 (Fed. Cir. 1983) (upholding approach to valuing destroyed chicken flock that "included some recognition of lost profits as an element of fair market value, i.e., the values represented by the opportunity to make profits from a chicken"). C. Arthur Cobb's Valuation of the TLA Employs the Best Method for Calculating Just Compensation in This Case. The government contends that the approach used by Innovair's expert Arthur Cobb to value the TLA is speculative. That criticism is as baseless as it is predictable. Mr. Cobb's approach is not speculative. See SuppApp074, 076-77 (Cobb. Test. at 557:14-558:5; 1535:15-1536:4). The government does not dispute that Mr. Cobb's approach is strikingly similar to the approach used by the government's expert, Ernest Arvai, in a prior matter. See Br.

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at 11-12. 1/ Mr. Kaplan, too, agreed that the Cobb approach was close to the cash flow approach ­ an approach that Mr. Kaplan said was proper. See id. at 11. We already have explained Mr. Cobb's methodology and why it is sound. See id. at 7-12, 40-41. And Mr. Cobb's reports speak for themselves and dispel any notion that his projections are speculative. There is no need to repeat here what has previously been said. There are a number of ways to determine fair market value, and fair market value is not the only way to determine just compensation. See id. at 4-5; see also Govt. Opp. at 3-4. Mr. Cobb's approach ­ whether it is viewed as a means of determining fair market value or an alternative measure of just compensation (see Br. at 5) ­ is the best available method given the unique facts of this case. The government attacks Mr. Cobb's approach on the ground that "Innovair had not produced or sold in the international market any BT-67 kits as of the time of the taking." Govt. Opp. at 14 (footnote omitted). The government is incorrect. Shortly before the taking, UTC had agreed in the Distributor Agreement to purchase from Innovair a minimum of 35 kits over a seven year period. See Br. at 29. As it often does in its analysis, the government simply ignores the UTC contract or assumes it away. The UTC contract obliterates the government's claims that the sale of kits was not "a viable business strategy" and that there was no "market for conversion kits." Govt. Opp. at 16. If the government had not taken the TLA, Innovair likely would have negotiated other sales and contracts like the Distributor Agreement. In any event, even if Innovair had not sold any kits or executed the UTC contract before the taking, that would not be a reason to reject Mr. Cobb's approach or deny Innovair just compensation. In Whitney Benefits, 18 Cl. Ct. 394 (1989), this Court explained that "the absence of an ongoing concern" does not "establish that a market does not exist." 18 Cl. Ct. at

1/ We respond to Mr. Arvai's criticism of Mr. Cobb's sales projections, see Govt. Opp. 1516, in connection with Question Four, infra.
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400. "The court must weigh the evidence of market conditions as of the taking date to determine whether a market for [plaintiff's product], with its particular quality and cost characteristics, existed. The question cannot be resolved by any simple formula or legal rule." Id. Significantly, this Court in Whitney Benefits awarded more than $60 million in just compensation even though none of the coal at issue had ever been mined or sold by the property owner before it was taken by the government. See also Br. at 14 (discussing DSC Commc'ns Corp. v. Next Level Commc'ns, 107 F.3d 322 (5th Cir. 1997)); Innovair's Memorandum of Contention of Facts and Law (Doc. 122), at 44 (discussing the Federal Circuit's rejection of the so-called "new business rule" in Energy Capital Corp. v. United States, 302 F.3d 1314 (Fed. Cir. 2002)). The government argues (Govt. Opp. at 16-18) that Innovair's business model does not support Mr. Cobb's financial model. The government is incorrect. See SuppApp076-77 (Cobb. Test. at 1535:15-1536:4). The government also argues (Govt. Opp. at 19) that Mr. Cobb ignored start-up costs. He did not. See SuppApp077 (Cobb. Test. at 1536:5-1537:3). The government complains that Mr. Cobb did not discount the TLA's value to present value (i.e., as of 1991, when the taking occurred). See Govt. Opp. at 20-22. We already have explained why Mr. Cobb did not do so. See Br. at 12. We have also explained how any discounting should be done if the Court concludes it must be done. See id. at 49-53. Finally, as Innovair argued in its opening brief, see Br. at 12-15, any uncertainty that inheres in determining the value of the TLA is attributable to the government's taking of the TLA and is not a reason to deny just compensation to Innovair. The government does not contend otherwise.

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D.

Innovair Should Receive Compound Pre-Judgment Interest. Innovair explained in its opening brief why it is entitled to compound pre-

judgment interest. See Br. at 15-16. The government asserts that Innovair has failed "to carry its burden" of justifying such interest. Govt. Opp. at 29. Yet the government simply ignores the arguments and authorities presented by Innovair. Awarding compound interest is the just thing to do where a substantial period of time has passed since the taking. See Br. at 15. Here, the taking occurred some 17 years ago. Compound pre-judgment interest also is necessary to restore Innovair to where it would have been financially but for the taking. See id. This Court has frequently awarded compound pre-judgment interest. See Bassett, N.M. LLC v. United States, 55 Fed. Cl. 63, 81 (2002) (Smith, J.); Stearns Co. v. United States, 53 Fed. Cl. 446, 466 (2002) (Smith, J.), rev'd on other grounds, 396 F.3d 1354 (Fed. Cir. 2005); Fla. Rock Indus., Inc. v. United States, 45 Fed. Cl. 21, 43 (1999) (Smith, C.J.); Osprey Pacific Corp. v. United States, 41 Fed. Cl. 150, 160 (1998) (Smith, C.J.); Shelden v. United States, 34 Fed. Cl. 355, 377-378 (1995) (Smith, C.J.); Bowles v. United States, 31 Fed. Cl. 37, 52-53 (1994) (Smith, C.J.); Whitney Benefits, 30 Fed. Cl. 411, 413-16 (1994) (Smith, C.J.). The Government has no response to this unbroken line of authority. QUESTION THREE What are the Dates of the Relevant Damages Period? As explained in Innovair's opening brief, the date of the taking was November 14, 1991, when the Substitute Res Bond Agreement giving BTC immediate use and possession of the TLA was executed by the United States. Br. at 16-19. Thus, the damages period runs from no later than November 14, 1991, to at least June 23, 1998, the end date of the initial term of the

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TLA. Id. 2/ The government takes the position that the taking did not occur until May 21, 1992, the date the district court approved the Res Bond Agreement, but that is wrong. The government does not and cannot dispute that as of November 14, 1991, the Substitute Res Bond Agreement expressly authorized BTC to "immediately begin to conduct, facilitate and pursue the marketing and sales of aircraft" in Innovair's territory. Res Bond Stipulation ¶ 6(A). Thus, Innovair's property interests were invaded at that moment. See Br. at 17 (discussing Bassett, N.M. LLC v. United States, 55 Fed. Cl. 63, 81 (2002) and Whitney Benefits, Inc. v. United States, 18 Cl. Ct. 394, 407 (1989), aff'd, 926 F.2d 1169 (Fed. Cir. 1991)). And the proof is in the pudding: BTC in fact immediately used the TLA to conclude a sale in Innovair's territory ­ a sale Bryan Carmichael and Bob Clark initiated in August 1991 for Innovair. SuppApp082 (Clark Test. at 301-02); App042 (JX 75). November 14, 1991 is the date of the taking. For the first time over the course of this lengthy litigation, the government posits a cockamamie theory in an effort to forestall the start of the damages period. Govt. Opp. at 3234. 3/ Even though the government argues that the taking occurred in May 1992, it argues that the damages period should not begin to run until the once-scheduled trial date of a different lawsuit, on the theory that Innovair would not have had access to its technology until that time. Govt. Opp. at 32-33. This hypothesis suffers from a number of defects.

2/ The TLA expressly calls for renewal periods which would have extended the damages period by years. App021 (JX 1/6 ¶ 3.13). Among other methods that Innovair has employed to structure its request to avoid speculative damages ­ including, for example, assuming no income stream from sales of spare parts or from optional equipment ­ Innovair does not in this case seek damages for losses associated with renewal periods of the TLA. The government's curious theory is mentioned nowhere in its pre-trial brief. See 3/ Defendant's Contentions of Fact and Law (Doc. 140), at 47.
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First, it is wrong in its premise. At the time of the taking, Innovair lacked access to its technology because of the government's actions, not due to discord with BTC. The only reason Innovair was not holding its technology as of the date of the taking was because of the government's seizure of the TLA. See also Br. at 53-54. Innovair formally requested documentation of the technology on May 1991. See Govt. Opp. at 32. As of June 1991, BTC had agreed to provide Innovair with all necessary technology Innovair was entitled to under the TLA. See SuppApp001-03 (PX313-37). As correspondence of June 11, 1991, makes clear, "Larry Burnett [BTC's counsel] ha[d] informed Bob Binder [Innovair's counsel] that the technology requested will be supplied on a timely basis in accordance with the terms of the [TLA.]" Id. (listing all required drawings, data, and manuals). BTC clearly intended to honor its obligations under the TLA. That conclusion also is consistent with Tom Weigt's testimony agreeing that he, as president of BTC, "maintained a professional relationship with Mr. Carmichael and Mr. Wilson" even after litigation arose. SuppApp095-96 (Weigt Test. at 98891). BTC's later refusal to turn over the technology, which led to Innovair's motion for preliminary injunction before the district court in Wisconsin, occurred only after the government seized the TLA and dispossesed Innoivar of its rights. Likewise, the district court in Wisconsin initially denied Innovair's preliminary injunction motion because the court was concerned about the effect of an injunction on the government "because of the forfeiture action pending in Arizona District court" and related investigations. SuppApp123 (Order dated Sept. 11, 1991, at 2, Basler Turbo Conv. v. Carmichael, No. 2:91-cv-00480 (E.D. Wis.). By the time the Wisconsin district court's decision was reversed by the Seventh Circuit Court of Appeals in January 1992, the taking had occurred. Before the Wisconsin district court could rehear the motion on remand, the Arizona district court

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had approved the Substitute Res Bond Agreement, rendering all subsequent events in Wisconsin moot as they may relate to this action. The government's effort to punt the blame onto the Wisconsin litigation is patently erroneous where the government's actions in seizing and transferring the TLA permanently disrupted and invaded Innovair's rights under the TLA. In fact, the docket of the Wisconsin action reflects that virtually nothing happened in the litigation after the Substitute Res Bond proceedings in Arizona. SuppApp125-28 (Docket Sheet, Basler Turbo Conv. v. Carmichael, No. 2:91-cv-00480 (E.D. Wis.)). The government's theory on the damages period also is in conflict with the government's arguments elsewhere in its brief that the value of the TLA must be measured on the date of the taking. See Govt. Opp. at 2. In concert with that argument, the government argues that the Court should apply a large discount rate to future income streams to account for the risk of the investment. Id. at 20-22. Last, the government provides absolutely no authority to support its rather unusual theory that a taking damage period begins years after the taking itself. No surprise there. It is basic takings law that the obligation to pay just compensation is incurred as of the date of the taking, which is why interest accrues from that date. Bassett, 55 Fed. Cl. at 81; Stearns Co. v. United States, 53 Fed. Cl. 446, 466 (2002); Shelden v. United States, 34 Fed. Cl. 355, 377-78 (1995). QUESTION FOUR How Many Kits Would Innovair Have Sold? As detailed in Innovair's opening brief, there was a significant market opportunity for the BT-67 in Innovair's territories in the period of 1991 to 1998, in which Innovair and UTC had initiated specific sales opportunities. Br. at 21-40. The record amply supports Cobb &

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Associates' estimate that Innovair would have sold 90 to 130 units over the initial term of the TLA. 4/ In presenting its response to Question 4, the government does not even attempt to refute many of the facts presented in Innovair's opening brief and in the alternative, relies almost exclusively on the testimony of its expert, Ernest Arvai, and its "Exhibit A." The Court should rely on neither. Mr. Arvai is not credible and much of his testimony should be disregarded. "Exhibit A," disingenuously titled "Summary of Innovair's Alleged Sales Opportunities," attached to the government's brief, is no "summary" of evidence as contemplated by Federal Rule of Evidence 1006. It is only argument of counsel and it fails as a work of persuasion. A. Government Expert Ernest Arvai Is Not Credible

Although Mr. Arvai offers a few reasonable observations, much of his testimony is unreliable, displaying ignorance, bias, and sweeping conclusions untethered to any solid foundation. For example, testifying about passenger markets in developing nations, he proclaimed that the Third World has a "bifurcated economy with a class of very rich people and a class of very poor people." SuppApp099 (Arvai Test. at 1112). In Mr. Arvai's Third World, there are the "poor [ ] living in abject poverty . . . and [the] wealthy [living in] lovely houses up on the hills that I could only dream about[.]" SuppApp110 (Id. at 1219); see also App322 (Id. at 1088) (referring to "coolie" labor). In this world, according to Mr. Arvai, the poor cannot afford to travel on aircraft and the rich only want the very best. As Mr. Arvai concedes, he is no expert

4/ Cobb & Associates also presented a lower, pessimistic estimation of sales of fifty units over the term of the TLA, which Cobb testified represented the results of an unsuccessful enterprise. App209 (PX 9/55); App300 (Cobb Test. at 550). The 50-unit scenario, which Innovair believes is too low, is more than amply supported by the record: UTC committed to purchase 35 units and BTC sold 16 units in Innovair's territory, a total of 51 units before considering any other sales opportunities. App156 (PX 37/10); SuppApp104 (Arvai Test. at 1169).
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in socioeconomic development. SuppApp110 (Id. at 1219). Moreover, Mr. Arvai's opinion on passenger markets is an example of generalizations substituting for sound analysis. His observations about customer preferences make some sense in a competitive passenger market where airline customers have a choice among operators, but far less sense in the many areas of developed, developing, and undeveloped nations where only one passenger airline serves a route. While passenger airlines or charters were not likely to have been a primary customer for the BT67, there is no question that the plane was employed for passenger use during the 1990s. For example, some of the BT-67s purchased by the Thai Air Force were later used as passenger planes, see SuppApp092 (Weigt Test. at 866), and BTC was invited to present proposals for passenger airlines in both Mongolia and Indonesia. SuppApp090-91, 092 (Id. at 861-62, 867). Mr. Arvai's testimony is also at odds with itself. His ultimate conclusion is that BTC's 16 sales in the special missions market across Innovair's territory over the time period perfectly captured the entire market for the plane. SuppApp104, 108 (Arvai Test. at 1169, 1197). But he also opines that there was a potential cargo market for the BT-67 in "regional operations [in] which demand better matches the capacity of the aircraft, and in which higher cargo yields can accommodate its cost structure," SuppApp005 (DX322/14), and that the BT-67 was "very competitive [for use] in short and unimproved runways." SuppApp101 (Arvai Test. at 1147) (emphasis added). These markets, however, somehow evaporated before Mr. Arvai totaled his numbers, because his ultimate conclusion that the entire market was two to three aircraft a year conveniently matches up with his estimation that the BT-67's special missions market would have included two to three aircraft per year. SuppApp103 (Arvai Test. at 1168). 5/

5/ Another example of Mr. Arvai's conflicting testimony is found in his testimony concerning the BT-67's use in the package express market. He opines that the "BT-67 could not be used in the package express market[,]" largely because of the size of the plane and certain
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Mr. Arvai's opinion that BTC captured the market for the BT-67 further lacks credence because he failed to conduct any real analysis of the quality and depth of BTC's marketing and sales programs. For example, though he met with Tom Weigt, BTC's president, prior to preparing his report, he had no knowledge of the qualifications and experience of BTC's sales agents (SuppApp108 (Arvai Test. at 1199-1200)), nor did he consider the implication of BTC's failure to maintain any sales agents in important regions in the 1990s. For example, apart from China, BTC had no sales agent for any other countries or regions in Asia, and in Europe, BTC had no sales agents apart from an agent for Poland. See SuppApp007-08 (DX 320). Nor did he factor the impact of BTC's failure to develop a leasing program during the 1990s, even though he concedes that such a program would be important to making sales to private aircraft operators. SuppApp105 (Arvai Test. at 1174). In this regard, he also overlooked documentary evidence indicating that BTC had such opportunities as early as late 1991 but lost them. See App177-79 (PX 263) (Nov. 14, 1991 letter concerning Global Airfinance Group's efforts to provide leasing arrangement for BT-67s for BTC and UTC). 6/ He also failed to consider the impact on BTC's sales caused by its refusal to enter into a distributorship with UTC. See Br. at 47. For these reasons, Mr. Arvai's opinion that BTC met market demand is unfounded.

characteristics of the airframe. See SuppApp099A-99C (Arvai Test. at 1124-1130). But he holds this sweeping opinion even though he conceded that Federal Express wanted to lease BT67s in the United States. Clearly Federal Express' interest in the BT-67 ­ an interest strong enough to send BTC a "written confirmation that Federal Express agrees to lease . . . 3 [BT-67] aircraft," App030 (JX 6) ­ means there was a place for the BT-67 in Federal Express's hub and spoke delivery system, yet Mr. Arvai disregards that fact. 6/ Writing to Fred Johnson of UTC, Global Airfinance expressed its concerns about BTC: "It is unfortunate that the Basler people appear to be more focused on large theoretical profits and maintaining `control' than they are on selling real aircraft . . . A window of opportunity now exists for the whole program to be advanced commercially to Basler's benefit utilizing the expertise, relationships and efforts of others. I hope the Basler people ultimately come to realize this." App177 (PX 263).
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In some instances, Mr. Arvai's testimony is flatly contradicted by the contemporaneous work of experts in the field. For example, Mr. Arvai opined that "there was no leasing program that could provide a cost-effective lease [because] the residual values of a BT67 would probably be discounted by financial institutions, given the age of the airplane, making the lease rates unacceptably high." SuppApp105 (Arvai Test. at 1174). But Avmark performed this exact analysis on the BT-67 in 1989. Avmark concluded, "[t]he imputed value of an aircraft, simply stated, is the forecasted earnings stream plus an estimate of the residual value at the end of the stream . . . . Thus, the imputed value of the BT-67 today is $5,556,500 based on the price/earnings ratio"; after adjustment to 65% to account for economic life expectancy, the "adjusted imputed value [is] $3,612,000." SuppApp011-15 (JX12/25-29). In early 1990, the price of a BT-67 configured for cargo use with multiple options, including long-range fuel tanks, was less than $3 million. See SuppApp017 (JX 67/53). Thus, the contemporaneous record demonstrates that the economics of the BT-67 would have supported leasing programs. Importantly, in preparing his opinions, Mr. Arvai did not even attempt to follow his own methodology for valuing similar assets. In a prior engagement, Mr. Arvai was hired to "estimate[ ] the fair market value of [an STC] for an [ ] aircraft conversion program [involving reengining the Falcon 20], should [an STC] be obtained[,]" an engagement remarkably similar to the task here of valuing the TLA. App198 (DX322/32). In carrying out that engagement, Mr. Arvai built a financial model of the present value of future cash flows from the STC, estimating potential sales under an optimistic scenario, an expected scenario, and a pessimistic scenario, and calculated expected profits on a cash flow model. App324 (Arvai Test. at 1185-87). In developing his opinions in this case, Mr. Arvai did not prepare any forecast of sales or a financial model. Rather than performing the rigorous analysis he employs in his consulting practice, in

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this case he preferred to proffer unquantified generalizations about the BT-67's market. See, e.g., SuppApp101-02 (id. at 1146-50). Another example where Mr. Arvai's opinion appears unconsidered is his conclusion that the "economics are simply better for the basic DC-3." SuppApp100 (Arvai Test. at 1138). First of all, he did not provide a breakdown of the assumptions and components he used to develop his economic model, either in his testimony or in his report, SuppApp109, 111, 112 (Arvai Test. at 1209-12, 1225-26, 1234), so it is not even possible to check his math. Avmark, an international aviation consultant, did provide a detailed comparison of the economics of the DC-3 compared to the BT-67 in a 1989 valuation of a BT-67 aircraft and found the BT-67 to have quite favorable economic advantage. See SuppApp012 (JX12/26); see also SuppApp010 (id. at 5) (BT-67 had a 30% lower operating cost over the DC-3). 7/ But on top of that, Mr. Arvai ignores the economic impact of unreliability on an aircraft. As the government agrees, by the 1980s the old piston engines on the DC-3 were quite old and out of production, and were difficult to repair. See Defendant's Contentions of Fact and Law at 4. DC-3s required engine overhauls every 1200 hours, and the engines often required repairs. App264 (Clark Test. at 245:11-16). For that reason, DC-3 operators were losing business as customers looked for operators flying more reliable aircraft. See SuppApp080-81 (Clark Test. at 231-32)(describing the loss of business BFS experienced due to its use of a DC-3 fleet). Mr. Arvai is right that DC3s were cheap ­ but they were cheap because there is little demand for an unreliable aircraft.

Operating costs are calculated based on the operator's specific use of the aircraft. For 7/ example, Herb Hayes recounted discussions with an Indonesian cargo operator in which they analyzed the operating costs of the BT-67 in the operator's business based on the operator's freight volume, freight charges, hours of operation, flying days per year, and other factors, concluding that the BT-67 "should be a moneymaker." App165 (JX55/3 (detailing breakdown)).
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Last, Arvai's opinion is infected with a fundamental misapprehension about Innovair's business. He opined that the kit business was a flawed strategy because "customer prefer completed airplanes, not kits." SuppApp105 (Arvai Test. at 1174). Innovair entirely agrees that customers, aircraft operators, want completed airplanes. Innovair did not sell or offer to sell kits to customers, it offered to sell kits to distributors. Br. at 20. (One potential exception would have been a military or government customer which owned a fleet of DC-3s it wanted to convert itself and had the technical capability and manpower to undertake conversions.) Apart from that, Innovair would have sold completed aircraft to its customers. Id. Although a customer could have one of its own DC-3s converted, it also could have arranged for Innovair to supply the airframe. See SuppApp021 (JX41/22). Such aircraft could have been converted at BTC, which was obligated to complete conversions for Innovair if requested, see App020 (JX1/5 ¶ 3.073) or at UTC's facility at Air Asia. Br. at 20. Arvai's opinion about Innovair's kit business rests on a misapprehension. As these examples demonstrate, Mr. Arvai's sweeping conclusions about the market for BT-67s in the 1990s should be viewed with great skepticism and discredited. This is particularly so where Innovair's expected sales of 90 units over the term of the TLA represents, at best, only modest success in the market. SuppApp071-72 (Cobb Test. at 538:23-541:14). B. The Government's "Exhibit A" Is Not Evidence But Only Unpersuasive Argument

The government has submitted with its brief and cited therein a document it refers to as "Exhibit A" and titled "Summary of Innovair's Alleged Sales Opportunities." Despite the nomenclature, this writing is neither a proper exhibit nor an admissible summary under Federal

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Rule of Evidence 1006. 8/ "Exhibit A" is a chart identifying countries or regions with sales opportunities cited in Innovair's brief in the left column with corresponding commentary by the government in the right column. It was apparently prepared by government counsel in connection with drafting the government's post-trial brief. It certainly was not admitted into evidence at trial or at any other time. If it is to be considered at all, it must be considered simply as part of the government's argument. While it purports to summarize evidence of record, "Exhibit A" is riddled with the government's subjective, argumentative interpretation of evidence, and is plagued with inconsistent and sometimes illogical statements, as well as a number of contentions unsupported by any citation. Some examples: The government asserts that "AMI captured the market" in South Africa but there is no evidence to support that view. Instead, we know that there was a robust conversion program in South Africa using the AMI technology during the 1990s, demonstrating some market demand for which Innovair could have competed. SuppApp023 (PX9/14). The government on the one hand states that it was difficult to import into South Africa when sanctions were in place, but on the other hand recognizes that BTC sold a plane to a South African operator ­ a sale, by the way, that Innovair initiated. See "Ex. A" at 1, rows 3 & 4; see App273 (Clark Test. at 301:23-302:9). More importantly, sanctions against South Africa were

8/ Under Fed. R. Evid. 1006, "[f]or a summary of evidence to be admissible . . , the proponent must lay a proper foundation by establishing that" (1) the summarized evidence is voluminous, (2) the underlying evidence is admissible, (3) the documents summarized were made available to the opposing party, and (4) the proposed summary "accurately summarizes the underlying documents and only the underlying documents." Bannum, Inc. v. United States, 59 Fed. Cl. 241, 244-45 (Fed. Cl. 2003) (quoting Bath Iron Works Corp. v. United States, 34 Fed Cl. 218, 232-33) (1995), aff'd, 98 F.3d 1357 (Fed. Cir. 1996)) (emphasis added). Here, the government has not laid the proper foundation for the use of a summary of evidence. Furthermore, "Exhibit A" would not meet the criteria in any case. The underlying documents are not voluminous, but more importantly, "Exhibit A" does not simply summarize the cited materials accurately, but presents subjective contentions about the alleged facts.
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lifted in 1993. Curt Anderson, "Clinton Signs Bill Lifting Remaining South Africa Sanctions", Associated Press, Nov. 23, 1993; "For the Record," The Washington Post, Nov. 25, 1993 at A30. Furthermore, there is nothing in evidence to suggest Innovair, a Hong Kong company, was precluded from making sales in South Africa in the 1990s. For South America, the government asserts that Innovair "had no coverage" and "anticipated that much of Latin and South America would be FMS" and manages to cite three incorrect citations, none of which support the assertion, and one of which refers to an exhibit never entered into evidence (PX 308). "Ex. A" at 1, row 9. In fact, Innovair had an agent in South America, Phil Trudell, with whom BTC also worked. See App091 (JX 41/37). Further, many of BTC's sales in that region were not FMS sales, including five sales to the Guatemalan Air Force. See SuppApp024 (DX 321). In row 10, the government reduces all of the Eastern European market to comments about Poland, neglecting the rest of the region. The government suggests that Innovair did nothing about Poland while Mr. Basler made an attempt to establish a facility there, citing Mr. Carmichael's testimony. "Ex. A" at 1, row 10. Here, the government appears to equate Mr. Carmichael with Innovair and Mr. Basler with BTC, but in this instance, the testimony is describing Mr. Basler's activities while the companies were working jointly, and while Mr. Basler was an Innovair shareholder fully able to run projects on behalf of Innovair. See SuppApp119, 120-21 (Carmichael Test. at dep. pg. 233, 238-41); see also SuppApp066-67 (PX 313-27/1-2). Some of the government's contentions are at odds with each other. For example, the government first contends that "Zimbabwe had no money" to buy planes, and then states that Zimbabwe bought MIGs from China. "Ex. A" at 1, rows 5-6. In any case, by the Spring of 1991,

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Innovair was in discussions with a government-owned airline Affretair about an initial purchase of three aircraft. App095 (JX41/42). As for Turkey, the government offers a host of disconnected contentions, several without any citation or citing to documents from 1989. "Ex. A" at 2, row 4. Nevertheless, a series of contemporaneous correspondence between Innovair and its Turkish agent and Innovair and UTC right around the time of the seizure demonstrate that there was high interest in the BT67 and that the parties were engaged in discussions on how to structure a transaction. See App128-30 (JX 45); App133-37 (JX 50); App148-51 (JX 53). As for Malaysia, the government's twist on the evidence is that "Malaysia was pursued unsuccessfully by UTC" and that commercial operators would want leased aircraft. "Ex. A" at 2, row 9. 9/ The government disregards that UTC's marketing trip in Malaysia and Indonesia led to serious negotiations to set up a leasing program for commercial operators, with one operator actively engaged in negotiating a transaction before BTC apparently scuttled the effort; see App171-76 (PX212); App177-79 (PX 263); App183-84 (JX59); App180-82 (JX58). With respect to the Philippines, the government argues that BTC was unsuccessful there, but Mr. Weigt's testimony on this topic suggests that BTC only pursued military or government sales, not sales to commercial operators. See "Ex. A" at 3, row 3; SuppApp091 (Weigt Test. at 86465). The government then cites Avmark's market study to assert that currency restrictions impeded foreign exchange debts, but ignores Avmark's further remarks about methods to structure transactions to overcome that obstacle (see SuppApp028 (JX 31/35)), as well as Avmark's observation that geographic and economic features in the Philippines were well-suited

9/ The government also contends importation into Malaysia was under the control of a government official known for favoritism, but ignores the fact that UTC's contact in Malaysia was a lower level official who was a personal friend of the government official. See App164-65 (JX 55/2-3).
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to the BT-67 and offered room to grow. See SuppApp027 (id. at 33). Again, in regard to New Guinea, the government selects only those parts of the Avmark study it likes, see Govt. Ex. A at 3, row 7, and ignores Avmark's statement that the BT-67 was very well-suited to New Guinea's "arduous [ ] environment" with 280 airstrips serving remote villages, mining camps, and administrative centers. SuppApp026 (JX 31/20). A couple of the government's contentions relate to misconceptions about government regulation of aircraft. For example, with respect to Australia, the government contends that getting certification in Australia "would have been difficult, which would require Innovair to invest time and money." "Ex. A" at 3, row 6. It is true that in the past Australian regulation required aircraft manufactured and certified in other countries ­ even those certified by the FAA ­ to undergo another rigorous certification program in Australia. But as the Avmark market study reports, that system had long been under severe criticism and a governmentcommissioned report was issued in 1990 recommending that Australia dispense with that requirement for aircraft certified by well-regarded foreign regulators, including the FAA and the Joint Aviation Authorities ("JAA"), an association of European civil aviation regulators who adhere to a common regulatory regime. See App026A-26B (JX31/26-27). That recommendation was soon implemented, dramatically easing the importation of new aircraft types in Australia. See Austr. Civ. Aviation Safety Reg. § 21.29, available at http://www.casa.gov.au/rules/index.htm. The government also refers to the "challenges of aviation certification" in its commentary on Federal Express, stating that "FedEx was unable to get permission for the Fokker F-27 to fly across European borders." "Ex. A" at 3, row 8. It appears that the government is confusing certification for the manufacture of aircraft, such as the STC for the BT-67, with other

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types of regulatory approvals airlines require in order to fly dedicated routes. Aircraft certification in much of Europe is and has been regulated under a common set of regulations issued by the JAA, which tries to harmonize its standards with those of the FAA. See The European Joint Aviation Authorities, http://www.jaat.eu/introduction/introduction.html (last visited Mar. 31, 2008). 10/ In sum, for the reasons described in detail in Innovair's opening brief and above, there was a more than sufficient market to support Cobb & Associates' sales estimates. In addition to Innovair's business records and testimony, UTC's records and the testimony of Herb Hayes, the record includes the testimony of Jim Eckes, whose background and qualifications would surely qualify him to testify as an expert or provide lay opinion testimony on the market for the BT-67 during the 1990s, and the work of Avmark, an international aviation expert engaged by UTC to provide a market study and roadmap for UTC's marketing and sales efforts. See generally PX312 (Eckes Test.); JX 31 (Avmark Market Study). All this contemporaneous evidence, including evidence from individuals and entities at arms-length from Innovair, provides an ample foundation to support Mr. Cobb's opinions. QUESTION FIVE What was the Profitability of Each Sale? In response to Question 5, the government offers up a handful of complaints about Cobb & Associates' analysis and Innovair's submission, none of which survive scrutiny.

10/ As stated on its website, the JAA "is an associated body of the European Civil Aviation Conference (ECAC) representing the civil aviation regulatory authorities of a number of European States who have agreed to co-operate in developing and implementing common safety regulatory standards and procedures. This co-operation is intended to provide high and consistent standards of safety and a `level playing field' for competition in Europe. Much emphasis is also placed on harmonising the JAA regulations with those of the USA." The European Joint Aviation Authorities, http://www.jaa.nl/introduction/introduction.html (Mar. 31, 2008).
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Despite the government's contentions, Innovair's response is well-supported by the detailed Cobb Report and Mr. Cobb's testimony, both of which, in turn, are supported by the record. The government contends that Mr. Cobb's kit pricing is unfounded because Mr. Cobb used $2,025,000 per unit as the initial selling price and because he estimated a higher selling price for non-UTC customers. See Govt. Opp. at 42. The government is wrong. As set forth in his report, the initial selling price was based on the UTC Distributor Agreement, and is therefore based on hard evidence of the actual selling price in 1991, as compared to the earlier estimated selling price contained in the Warwick Memorandum. App204 (PX 9). Clearly, the price established by an executed contract is a strong foundation for Mr. Cobb's initial pricing, and stronger evidence of the actual price at the time of the taking than estimations used in the Warwick Memorandum. Likewise, the government's complaint about two-tiered pricing is meritless. Again, based on the record, Mr. Cobb determined that UTC and Innovair had negotiated annual price increases to offset cost inflation. App210 (PX9/56); see also SuppApp 030 (PX37/5 ¶ 5.2.1.(b)(1)). The Distributor Agreement also provided UTC with "most favored customer" pricing over the term of the agreement, SuppApp031 (PX37/6 ¶ 5.2.2); see also App301 (Cobb Test. at 555). These contractual provisions did not apply to other customers and Mr. Cobb reasonably estimated that Innovair would apply an annual 3% increase to the pricing for other customers. App207-08 (PX9/53, 54); see also SuppApp 070 (Cobb Test. at 411). The government's complaint about commission rates is likewise without merit. The government does not dispute that the 10% commission rate reflects the rate BTC paid to sales agents, see Govt. Opp. at 42; in fact, Mr. Cobb relied on prior testimony by Tom Weigt that, as of July 1997, BTC had never paid more than a 10% commission. App213 (PX9/59). Instead, the government argues that because Innovair planned to sell kits to distributors, rather than sales

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agents, a higher commission rate of 12.5% commission rate applies. Govt. Opp. at 43. The government is wrong for two reasons. First, Innovair anticipated that some sales would be of converted aircraft (not kits) negotiated by or facilitated by sales agents, with the conversion performed by BFS, by Air Asia, or future facilities. See Br. at 20; App091, 092, 094 (JX41/37, 38, 41) (identifying sales agents as of May 1991). According to the evidence the government relies on, the commission rate for such sales would be 5%, not 10%. See SuppApp034 (JX68/10) (Deloitte & Touche Projected Financial Statements). Thus, Mr. Cobb's use of the 10% rate may overestimate the commission to be paid on those sales. In 1990, Deloitte & Touche did assign the rate of 12.5% for distributor commissions, but that rate was a projected one, not based on actual experience. Id. In fact, the actual rate used in the UTC Distributor Agreement was 10%, hard evidence of the actual rate to be paid distributors. SuppApp030 (PX37/5 ¶ 5.2.1(a)). Mr. Cobb's use of a 10% commission rate is more than sound. The government also asserts that Mr. Cobb erred by failing to account for start-up costs, but again it is wrong. Govt. Opp. at 43-44. Mr. Cobb did consider start-up costs. Having reviewed the comprehensive record of Innovair's and BTC's venture, he concluded that the startup costs, including research and development of the technology, development of a business plan, of marketing materials, and of initial distribution agreements, had been incurred and paid for. SuppApp075, 077 (Cobb Test. at 1525-27, 1536). The government's argument that $5-10 million of start-up costs were required rests on strained interpretation of a single page of a single document. See SuppApp037 (JX34/9). First of all, what the government treats as unavoidable start-up costs were only identified as "potential use of proceeds" of a debt or equity investment. Id. There is nothing in the document to suggest that Innovair or Warwick thought the "potential uses of proceeds" were required uses, or that they ought to be considered necessary start-up costs.

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Second, the "potential uses" of investment funds are expressly premised on the structure of transaction outlined in the document, which in turn is premised on a near-term purchase of Mr. Basler's interests in both BTC and Innovair. SuppApp036, 037 (JX34/7, 9). As the record reflects, the Baslers refused Mr. Carmichael and Mr. Wilson's offer of $14 million about six weeks after Warwick prepared the memorandum upon which the government relies. SuppApp 038, 41 (DX151/1, 4). Thus, there is no basis to infer that the "potential uses" for funds had any further validity after the parties' negotiations concluded. Moreover, there is nothing on the list of "potential uses" of investment funds that was required in order for Innovair to conduct its business and reap the benefit of the TLA. A large chunk of the potential funds, $1.5 to $3 million, conceivably would have been used to purchase Mr. Basler's shares, but that transaction could have been forestalled indefinitely and does not factor into the value of the TLA. SuppApp037 (JX34/9). Another $1.1 million was potentially allocated to paying off certain bank and shareholder loans, but there is no evidence that either type of loan was due and payable in the short-term. Id. Another $320,000 potentially was allocated to unspecified enhancements to the STC and product development of different aircraft conversions, but again, neither was a requirement of doing business. Id. The remaining items, inventory and working capital, address possible uses of funds to operate both BTC, as a kit manufacturer, and Innovair. See SuppApp036 (JX34/7). As a manufacturer, BTC had an entirely different business than Innovair and had on-going expense for inventory and personnel that Innovair, operating alone, did not share. To the extent Innovair had its own need for inventory and personnel, those costs are quantified and included in Mr. Cobb's report and schedules. App207-09, 212-13 (PX9/53-55, 58-59). Furthermore, Innovair's distribution model provided for favorable cash flows, with more than 60% of the kit price paid with or before the

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second sub-kit was shipped and the majority of the cost of the kit incurred only with the third and final sub-kit. See App159 (PX37/15, Distributor Agreement ¶ 7.1) (providing payment terms); see also App274 (Clark Test. at 304:9-305:9). In sum, the "potential uses" for investment funds in no way equate to required start-up funds. The government also suggests that Innovair required start-up funds for "STC enhancements" and technical work related to icing, Govt. Opp. at 44, but provides no citations that describe what these items are, who (among BTC, BFS, and Innovair) was responsible for performing the work, what they cost, or whether they are necessary for Innovair to do business. In any event, under the TLA, Innovair was entitled to obtain access to and documentation of any enhancements or improvements to the TLA without additional cost. App017 (JX1/2) (TLA ¶ 3.0221). The government's last contention is that Innovair required start-up funds to obtain regulatory approvals to sell the BT-67 in foreign countries. Govt. Opp. at 44. The government is wrong. Innovair was in the business of selling kits to distributors who would bear any cost associated with foreign certification in the country of manufacture, see, e.g., App156 (PX37/10 ¶ 5.11), and selling completed aircraft to operators, who need only register the plane, and obviously did not need to obtain an STC-equivalent, which authorizes the manufacture of an aircraft type. The government's entire argument about start-up costs is a red-herring. 11/ In sum, the calculations Innovair provided in its opening brief in response to Question 5 are well-founded in the schedules and accompanying text in the Cobb Report and in Mr. Cobb's testimony at trial, and nothing in the government's opposition undermines them.

11/ Moreover, it strains credulity that Innovair and its principals could bear the hefty price of defending its property interest throughout the forfeiture proceeding that took place over the exact period as the damages period here (1991 to 1998) but did not have whatever small amount of working capital that may have been helpful over the short term.
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QUESTION SIX Did UTC and Innovair Have an Enforceable Contract? If So, What Were UTC's Purchase Obligations Under the Contract? By the government's concession in its post-trial brief, the parties are in agreement that the Distributor Agreement between Innovair and UTC, see App152 (PX 37), was an enforceable contract that was executed by the parties on or around July 25, 1991. Govt. Opp. at 44 ("UTC and Innovair did have an enforceable contract"); Br. at 45. The only remaining issue is whether UTC had enforceable purchase obligations under the Agreement.12 Because the Distributor Agreement, by its own unambiguous language, set up a "take or pay" obligation for UTC to purchase, or pay Innovair's net profits on, a minimum of five kits per year, App158 (PX 37/13, ¶ 6.7); and because the contract contains no limitations on Innovair's traditional legal remedies to enforce UTC's "take or pay" obligation, Innovair would have received the benefit of the sale of 35 kits to UTC over the Agreement's term, and could have sued UTC for breach of its obligations under the Agreement if UTC had failed to meet its "take or pay" obligation. See App156-58 (PX 37/10-13, ¶¶ 5.9, 6.0. 6.7). See Tractebel Energy Mktg., Inc. v. AEP Power Mktg., Inc., 487 F.3d 89, 109 (2d Cir. 2007) ("[W]hen the non-breaching party seeks only to recover money that the breaching party agreed to pay under the contract, the damages sought are general damages."). The government's argument that the losses from the Distributor Agreement are noncompensable consequential damages is wrong. Govt. Opp. at 46-47. As this Court already has ruled, the government took Innovair's TLA, and Innovair is entitled to just compensation. In

12/ and because the parties are in agreement that the Distributor Agreement was an enforceable contract, any such commentary is surplusage and will not be addressed by Plaintiff.
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order to value that compensation, the Court must consider the 35 kits that UTC was obligated to "take or pay" under the Distributor Agreement because the value of the Distributor Agremenet inheres in the TLA. Both cases relied upon by the government are inapposite. In both, the issue addressed by the court was not the measure of just compensation (the issue here), but whether or not a compensable taking had occurred. See Omnia Commercial Co. v. United States, 261 U.S. 502, 507-08 (1923); Kearney & Trecker Corp. v. United States, 688 F.2d 780, 780 (Ct. Cl. 1982). In Omnia, the plaintiff lost the benefit of a contract that gave it the right to purchase steel from a steel company, due to the government's requisitioning of the steel company's entire annual production. 261 U.S. at 507. Thus, while Omnia might have been analogous on the question of liability had UTC brought a taking claim based on the loss of its Distributorship Agreement arising from the government's seizure and transfer of Innovair's TLA, it is inapposite here. In Kearney, the plaintiff contracted to manufacture a machine for a government defense contractor. 688 F.2d at 780. When the President issued an order requiring the plaintiff to expedite delivery of the machine, the plaintiff was forced to abandon a separate, unrelated contract with another customer in order to comply with the President's order. Id. at 780-81. The plaintiff claimed that it suffered a taking as to both contracts. As to the expedited contract, the plaintiff had received the negotiated contract price, and the Court ruled there was no taking. Id. at 782 ("In the circumstances, the negotiated price constituted just compensation[]"). As to the second, unrelated contract, the Court held that the government's action concerning the expedited contract, which itself was not a taking, did not effect a taking of the second contract. Id. at 783. This case is entirely different because the TLA was taken and the UTC Distributor Agreement is inherently connected to the value of the TLA.

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The government also fails to refute Innovair's argument that the Distributor Agreement is a "take or pay" contract. See Govt. Opp. at 46. The government does not cite a single case to support its argument that the Distributor Agreement was not a "take or pay" contract. Instead, Defendant simply dismisses all of the cases cited by Innovair by erroneously stating that they relate to contracts for purchase or sale of energy products. Govt. Opp. at 46 (Innovair's cites relating to its argument that the Distributor Agreement is a "take or pay" contract "are contained in contracts for the purchase or sale of energy products, which `are designed to serve specialized purposes in specialized contexts,' not present here"). The government is wrong. One of the cases cited by Innovair, B.F. Goodrich Co. v. VinylTech Corp., where a court enforced a "take or pay" provision, does not involve the purchase or sale of energy products, but rather resin used to manufacture PVC pipe. 711 F. Supp. 1513, 1514 (D. Ariz. 1989). Nor is there any language in any of the cases that Innovair cited in which the courts' rulings on "take or pay" contracts stated that their rulings were specific to the energy context. See Questar Pipeline Co. v. Grynberg, 201 F.3d 1277, 1283-84 (10th Cir. 2000) (calculating damages for breach of a take-or-pay contract and not limiting its holding or rationale to the energy context); See also B.F. Goodrich Co., 711 F. Supp. at 1519 ("The purpose of the take-orpay clause is to apportion the risks of production and sales between the buyer and seller.