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

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

No. 96-408C (Senior Judge Smith)

DEFENDANT'S REPLY TO PLAINTIFF'S OPPOSITION TO DEFENDANT'S MOTION FOR AUTHORIZATION OF SERVICE OF SUBPOENAS MORE THAN 100 MILES FROM THE PLACE OF TRIAL Defendant respectfully replies to plaintiff's opposition to the Government's motion for authorization to serve subpoenas upon seven of the Government's witnesses to testify at trial. Plaintiff, Innovair Aviation, Ltd. (Innovair), filed its motion in an attempt to bar the Government from presenting the heart of its case at trial. Contrary to Innovair's representations, the seven witnesses, David T. Thompson, Thomas Fraker, Fred Johnson, Thomas Weigt, Michael Hintze, Ray Stone, and Randy Myers, whose testimony Innovair has challenged in its opposition to the Government's motion for the Court's authorization of service of subpoenas, have highly relevant testimony that is not cumulative. In addition, with the exception of Mr. Thompson, the presentation of these witnesses' live testimony is the only method by which the Government can present this highly relevant testimony at trial. Moreover, Innovair's suggestion that the presentation of this testimony would unnecessarily burden the Court with an overly long trial is incorrect. Defendant is fully aware of the Court's trial schedule in this case and the Government intends to comply with the schedule. Finally, the Government has met with or spoken by telephone to all of these witnesses and they have all willingly agreed to testify as witnesses in this case. The serving of subpoenas

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upon these witnesses is out of an abundance of caution and to insure that the witnesses are properly reimbursed for their expenses by the United States Marshals' Service. INTRODUCTION Innovair, in another act of desperation, has filed a second motion to preclude the Government from calling its fact witnesses at trial. Innovair suggests that it is doing a favor to the Court in an effort to keep the trial to the five days, as the Court has ordered. Innovair, instead, is simply just trying to prevent the Government from putting on its defense of this case. In Attachment 1 to Innovair's pretrial brief filed on August 31, 2007, Innovair indicated that it will object to every document that was contained on the Government's August 2007 proposed exhibit list, including more than 60 exhibits that are contained on the Innovair's own exhibit list. See Docket# 122, Attach. 1. In anticipation of the fact that Innovair might object to the admissibility of the Government's exhibits, the Government identified on its August 9, 2007 proposed witness list that was provided to Innovair's counsel the identity of a number of potential witnesses whom the Government would need to call to testify at trial in the event that Innovair objected to the Government's exhibits. In its opposition to the Government's motion for authorization of service of subpoenas more than 100 miles from the place of trial, Innovair suggests that the Government does not need to call all of the witnesses it identified on its preliminary witness list. However, unless and until Innovair withdraws its objections to the Government's proposed exhibits, the Government will be required to call all of the witnesses it identified on its proposed witness list in order to avoid Innovair's objections to its documents. The Court has identified the dates for the trial in this case, and the Government is aware

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of the need to narrowly tailor the testimony of its witnesses to the matter at hand ­ the value of the TLA. However, given the fact that (1) the Government is the defendant in this case and must identify all of its witnesses, even those who will be used only for rebuttal purposes prior to trial, and (2) Innovair's current position is that all of the Government's exhibits are objectionable, so the Government has no choice but to identify and make available for trial all of the witnesses it believes that it needs for direct and rebuttal testimony. Under the circumstances, the best solution is for the Court to grant authority for the Government to issue the subpoenas to those witnesses whom the Government contends are necessary and for the parties to confer to try to narrow the scope of documents and the number of witnesses the parties will rely upon at trial. That will require the cooperation of both parties. DEFENDANT'S ARGUMENT Defendant filed its motion to request the Court to issue an order pursuant to Rule 45(b)(2) of the Rules of the United States Court of Federal Claims (RCFC) to permit the Government to issue subpoenas to call Messrs. David T. Thompson, Thomas Fraker, Fred Johnson, Thomas Weigt, Michael Hintze, Raymond E. Stone, and Randy Myers. The Court of Federal Claims is a Court of nationwide jurisdiction governing cases which arise throughout the United States. See, e.g., Adrienne Village v. United States, 25 Cl. Ct. 457, 461 n.3 (1992); Johnson City Med. Ctr. Hosp. v. United States, 20 Cl. Ct. 515, 516 (1990); see also RCFC 45, Rules Committee Note. Unlike litigants appearing in the Federal district courts, parties appearing before this Court must have greater latitude to subpoena trial witnesses outside 100 miles from the courthouse. Compare Fed. R. Civ. P. 45 with RCFC 45. Therefore, this Court's nationwide jurisdiction establishes the basis for granting such authorization. Without such

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authority, the defense of our case will be greatly prejudiced, as we will be unable to present important testimony. Innovair has moved to preclude the testimony of all of the Government's fact witnesses. However, none of the reasons Innovair provides addresses the relevant law. Therefore, no basis exists for the Court to deny the Government's motion. Moreover, contrary to Innovair's contentions, all of these witnesses possess testimony that is relevant to the value of the Technology License Agreement (TLA), which is the subject of the forthcoming trial in this matter. Mr. Arthur Cobb, one of Innovair's proposed expert witnesses, bases his report on the value of the TLA in part upon the projections prepared by four different entities at the inception of the DC-3 conversion program. Def. App. 2-5. The four reports are: (1) the Basler Turbo Conversions, Inc. and Innovair Five Year Business Plan 1990-1994 (the BTC/Innovair Business Plan); (2) a May 16, 1990 Compilation Report of Deloitte & Touche (the D&T report); (3) a May 18, 1991 study conducted by Warwick Consulting Group, Inc. (the Warwick report); and (4) a United Technologies and Pratt & Whitney "Sales Potential." Mr. Cobb relied heavily upon the projections that are contained in these four documents to justify his contention that but for the transfer of the TLA from Innovair to Basler Turbo Conversions, Inc. (BTC), Innovair would have sold 90 BT-67 kits in the seven years from 1991 through 1998. Def. App. 6-7. Mr. Cobb strongly suggests that the fact that the projections came from four "different" sources lends credibility to his conclusion. The testimony of Messrs. David Thompson, Thomas Fraker, and Fred Johnson is highly relevant to rebut Mr. Cobb's testimony, as well as the anticipated testimony of Mr. Bryan Carmichael. The Government proposes to call Mr. David Thompson, Mr. Thomas Fraker, and Mr.

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Fred Johnson to testify that Mr. Cobb's reliance upon three of the four reports is unwarranted. Mr. Thompson will testify that he did not prepare the projections contained in the D&T Report, as Mr. Cobb assumed. Mr. Thompson merely provided Mr. Carmichael with a format for presenting Mr. Carmichael's projections along with other relevant financial information to potential investors who might be interested in purchasing Mr. Carmichael's interest in the Innovair and BTC. Should the Court decide that it would be helpful, in lieu of calling Mr. Thompson to testify as a witness at trial, the Government would be willing to designate certain passages of Mr. Thompson's deposition testimony. We would also expect that the exhibits about which Mr. Thompson testified about during his deposition would be admitted into evidence as part of the trial record. Mr. Fraker will testify that he prepared the May 18, 1991 Warwick report and that the sales projections were not based upon any independent determination on his part. Rather, these projections contained in the Warwick report were based upon projections that were supplied by Mr. Bryan Carmichael and that he, Mr. Fraker, had no independent way of verifying whether they were accurate. In addition to this, Mr. Fraker will testify concerning his valuation of BTC and Innovair in the spring of 1991, his unsuccessful efforts to locate suitable investors, and his assessment of the riskiness of Innovair's business venture as the spring of 1991. Mr. Fraker's testimony is necessary for the Government's defense of this case and highly relevant to the Court's determination of the value of the TLA. None of Mr. Fraker's testimony is cumulative of any other witness's testimony. Mr. Fraker has not been deposed in connection with this matter. Although he was deposed in connection with the litigation before the United States District Court of the District of

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Wisconsin, Basler Turbo Conversions, Inc. v. Carmichael, et al., Nos. 91-C-480, 91-C-496, the Government was not a participant in that litigation and Mr. Fraker was not questioned concerning any of the matters about which the Government intends to call him to testify. Counsel for the Government has interviewed Mr. Fraker personally, and he has agreed to testify in connection with this matter. It is anticipated that Mr. Fraker's testimony will take no more than one hour on direct. Mr. Fraker has requested that we serve him with a subpoena to testify at trial so that the expenses he incurs in connection with his appearance at trial are reimbursed by the United States Marshal's Service. Mr. Fred Johnson was in charge of the United Technologies Corporation's (UTC) effort to market the BT-67 kit and aircraft in the Far East, including the Taiwan joint venture effort with Innovair and BTC. He will testify that he prepared the chart upon which Mr. Cobb relied in his expert report but that the projections contained in the chart were not his projections, but were unscientific guesses prepared by someone else, which he used to persuade his management to pursue the possibility of obtaining offsets through conversion of DC-3s. Mr. Johnson will testify concerning UTC's goals with respect to entering into the Purchase Agreement with Innovair and BTC. Mr. Johnson will further testify that the Government's transfer of the TLA to BTC did not cause UTC to fail in its efforts to set up a conversion facility in Taiwan or to obtain customers for BT-67 aircraft or kits in the Far East.1 Therefore, Mr. Johnson's testimony is highly relevant to the Government's defense of

Innovair contends in its opposition to our motion that "it is beyond dispute that UTC continued its program to launch a distributorship for the BT-67 well after the taking occurred, even in the absence of Innovair, its distribution partner." Pl. Br. 3. However, Mr. Cobb testified in his deposition that the seizure of the TLA prevented UTC from making sales in the Pacific Rim. Def. App. 11-12 (Cobb Tr. 118:17 - 119:3). -6-

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this lawsuit, and his testimony is not cumulative.2 In fact, Innovair has also identified Mr. Johnson on its witness list. Both Innovair and the Government have interviewed Mr. Johnson, but neither side has taken Mr. Johnson's deposition. It is expected that the Government will require two to three hours to complete its direct examination of Mr. Johnson. If Innovair calls Mr. Johnson to testify during its case in chief, the Government will likely require less time with Mr. Johnson on direct. Mr. Johnson has agreed to testify at trial. However, he will require us to issue a subpoena for him to testify and for the United States Marshals' Service to reimburse him for his expenses. The testimony of Mr. Thomas Weigt is also highly relevant to the Court's determination of the value of the TLA. Mr. Weigt has been president of BTC, the sister company of Innovair, since August 1990. Therefore, he is familiar with the Innovair's performance under the TLA prior to the transfer of the TLA to BTC. He is very knowledgeable about and can testify about the availability of airframes and the manufacture of the BT-67. It is anticipated that he will testify about Innovair's and BTC's marketing efforts prior to the transfer of the TLA and BTC's marketing efforts after the seizure of the TLA. In that regard, it is anticipated that he will testify about BTC's follow-up efforts with the potential customers whom Mr. Carmichael and Mr. Cobb testify during Innovair's examination of these witnesses. All of these matters have a bearing upon the value of the TLA. In fact, Innovair's own expert, Mr. Arthur Cobb testified that, of all

Mr. Johnson was the supervisor of Mr. Herbert Hayes and Mr. Kiko Brenneisen, both of whom appear on plaintiff's witness list. In fact, both Innovair and the Government have identified Mr. Herbert Hayes, who, as a retiree of UTC, worked under Mr. Johnson as consultant to UTC in connection with UTC's effort's to find a buyer for the BT-67 in the Far East. Neither Mr. Hayes, nor Mr. Brenneisen can testify to the matters about which the Government will call Mr. Johnson to testify. If Innovair were willing to forego calling Mr. Herbert Hayes to testify, the Government would also be willing to forego calling Mr. Hayes to testify as a witness at trial. -7-

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the people with whom he would have liked to talk before the preparation of his report, Mr. Weigt was the main person. Def. App. 10 (Cobb Tr. 32:12-19). For these reasons, it is clear that Mr. Weigt's testimony is essential to the Government's case. Moreover, Mr. Weigt's testimony is not cumulative. There is no other witness who can testify about the sales efforts and successes relating to the TLA from the period from 1991 through 1998. He is necessary for the Government's rebuttal of Innovair's fact testimony in this case. It is anticipated that Mr. Weigt's testimony will require between three to four hours on direct, but it could be less depending upon the testimony of Innovair's fact witnesses. Mr. Weigt has agreed to make himself available to testify at trial. However, he will require a subpoena in order for the Government to reimburse him for his expenses to travel to and from trial. The Government has identified three additional witnesses, Messrs. Randy Myers, Raymond E. Stone, and Michael Hintze, who will testify primarily as rebuttal witnesses. Although we do not anticipate that we will call any of these witnesses to testify on behalf of the Government with respect to our case in chief, it is quite possible that we will need to call these witnesses to testify to rebut the testimony of Innovair's witnesses. Mr. Michael Hintze was BTC's accountant both prior to and after the transfer of the TLA to BTC. He is knowledgeable about the underlying information contained in the financial documents prepared by the company during this period of time, including information relating to the pricing of the BT-67 kits and the aircrafts. Should we be required to rebut any testimony that Innovair presents at trial concerning any of these matters, the Government will call Mr. Hintze to testify at trial. It is anticipated that Mr. Hintze's testimony will require no more than 30 minutes. Although we have spoken to Mr. Hintze and he has agreed to cooperate with us, we will need to

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issue Mr. Hintze a subpoena in order for him to testify at trial and to be reimbursed for his expenses. Mr. Ray Stone prepared the UTC Purchase Agreement and the UTC Distributor Agreement. In Mr. Cobb's supplemental expert report served upon the defendant on September 18, 2007, Innovair asserts that the Distributor Agreement between Innovair and UTC was a "take or pay" contract which required UTC to pay Innovair's lost profits on any of the unsold kits in the event that it did not order five BT-67 conversion kits from 1991 until 1998. Should Mr. Cobb testify that the Government is liable for any damages that stem from the UTC Purchase and/or Distributor Agreements, the testimony of Mr. Stone will be highly relevant. Although we agree with Innovair that this is a matter of contract interpretation, in the event that Innovair seeks to elicit any testimony from any of the witnesses at trial concerning the meaning of the termination provision contained in the UTC Distributor Agreement or any other provisions contained in the Purchase Agreement or the Distributor Agreement, we anticipate that we will want to call Mr. Stone to testify concerning the meaning of those documents. We anticipate that Mr. Stone's testimony will require no more than 30 minutes on direct. We have spoken to Mr. Stone regarding his anticipated testimony and he has agreed to cooperate with us. However, we will need to issue Mr. Stone a subpoena in order for him to testify at trial and to be reimbursed for his expenses. Mr. Randy Myers is the BTC production manager for the manufacture of the BT-67. We do not currently anticipate that we will be required to call Mr. Myers to testify during our case in chief. However, Innovair has indicated that it will call Mr. Robert Clark to testify concerning "the conversion process and the conversion kit manufacturing process; technical, engineering

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and operational aspects of the DC-3 and BT-67; the FAA's Supplemental Inspection Program and the Supplemental Inspection Document for DC-3 aircraft." Accordingly, we may need to call Mr. Myers to testify as a rebuttal concerning any of these matters. If we need to call Mr. Myers to testify, we anticipate that Mr. Myers' testimony will require no more than 30 minutes on direct. We have spoken to Mr. Myers regarding his anticipated testimony and he has agreed to testify at trial. However, we will need to issue Mr. Myers a subpoena in order for him to testify at trial and to be reimbursed for his expenses. CONCLUSION For the foregoing reasons, we respectfully request that the Court grant our motion for authorization of service of subpoenas more than 100 miles from the place of trial upon Messrs. David T. Thompson, Thomas Fraker, Fred Johnson, Thomas Weigt, Michael Hintze, Raymond E. Stone, and Randy Myers. Respectfully submitted,

PETER D. KEISLER Assistant Attorney General

/s/ Jeanne E. Davidson JEANNE E. DAVIDSON Director

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/s/ Sheryl L. Floyd SHERYL L. FLOYD Senior Trial Counsel BRIAN T. EDMUNDS Commercial Litigation Branch Civil Division Department of Justice Attn: Classification Unit, 8th Floor 1100 L Street, N.W. Washington, D.C. 20530 Tele: (202) 616-8278 Attorneys for Defendant OCTOBER 4, 2007

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CERTIFICATE OF FILING I hereby certify that on this 4th day of OCTOBER, 2007, a copy of this "DEFENDANT'S REPLY TO PLAINTIFF'S OPPOSITION TO DEFENDANT'S MOTION FOR AUTHORIZATION OF SERVICE OF SUBPOENAS MORE THAN 100 MILES FROM THE PLACE OF TRIAL" was filed e1ectronically. I understand that notice of this filing will be sent to all parties by operation of the Court's electronic filing system. Parties may access this filing, through the Court's system.

/s/ Sheryl L. Floyd

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