Free Motion in Limine - District Court of Colorado - Colorado

Case 1:03-cv-01973-PSF-MJW

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Civil Action No. 03-cv-1973-PSF-MJW (Consolidated with 04-cv-02112-PSF-MJW) THE WALKER GROUP, INC. Plaintiff, v. FIRST LAYER COMMUNICATIONS, INC. and J.E.H. KNUTSON Defendants.

MOTION IN LIMINE TO EXCLUDE EVIDENCE REGARDING ALLEGED ASSETS NOT INCLUDED IN SHIPMENT FROM DAVID MENZEL TO WALKER AND ASSOCIATES

Plaintiff Walker Group, Inc. ("Walker Group"), by and through counsel, respectfully moves the Court for an Order excluding all evidence relating or referring to the receipt by Walker Group of any alleged assets of First Layer Communications, Inc. ("First Layer") that were not included in the shipment from David Menzel to Walker and Associates1 in September 2002, and, in support thereof, states the following: 1.
Based on Defendant Knutson's exhibit list, the Menzel Affidavit and Defendant's

contentions during this litigation, Walker Group anticipates that Defendant may seek to
1

Mr. Menzel shipped the items from First Layer's Kansas City office to Walker and Associates, a wholly owned subsidiary of Walker Group. (See Aff. of Douglas E. Leckie, III ¶ 15 (Feb. 28, 2005)).

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introduce evidence relating to certain tangible and intangible assets that he contends Walker Group received from First Layer. Specifically, Walker Group anticipates that Defendant may seek to introduce evidence regarding First Layer's goodwill, workforce in place and other similar purported intangible assets, as well as evidence regarding contracts, other than those with Qwest and AT&T Wireless, that First Layer allegedly had in place when it ceased operations. Walker Group understands that Defendant will attempt to offset the amount of First Layer's debt by suggesting that Walker Group received or should have received these assets.

2.

As the Court noted in its August 12, 2005 Order on Walker Group's Motion

for Partial Summary Judgment ("Order"), all of the evidence shows "that the entire transfer of assets [from First Layer to Walker Group] consisted of one shipment from First Layer's Kansas City office." (Order at 23 (citing Knutson Dep., Steel Dep. and Menzel Aff.)) But as the Court further noted, "while there is no dispute that assets were shipped by First layer to Walker through the acts of Menzel, there appears to be a dispute as to exactly what was shipped. . . ." (Id. at 17). 3. Any alleged goodwill, workforce in place or similar intangible assets certainly

were not included in the shipment of hard assets from Menzel to Walker and Associates. The Court already found that "there is no evidence of record that there was a merger or business combination between Walker and First Layer." (Order at 23). Therefore, there was no mechanism for an alleged transfer of such intangible assets from First Layer to Walker Group, and any evidence or testimony related to goodwill, workforce in place or similar intangible assets should be excluded, under Federal Rule of Evidence 402, as irrelevant.

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4.

Any such evidence should be excluded under Rule 403 because it is more

likely to confuse or mislead the jury than it is to assist the jury in reaching a determination of the claims at issue. Admitting this evidence presents a significant risk that the jury will be confused or misled into thinking that some type of recognized business combination occurred between First Layer and Walker Group, when this Court has already found that there is no evidence of any such combination. 5. Moreover, valuation of intangible assets such as goodwill and work force in

place would require expert analysis and testimony, and Defendant Knutson does not have an expert to testify on these matters. See e.g. Skeef v. Skeef, 523 P.2d 473, 474 (Colo. App. 1974) (reversing judgment where trial court assigned value to intangible assets of business without hearing expert opinion evidence); see also Coleco Indus., Inc. v. Berman, 423 F. Supp. 275, 306 n.52 (E.D. Pa. 1976) (noting that valuation of business's intangible assets required expert analysis). If this evidence were to be admitted without expert testimony from Defendant, expert testimony would be needed to explain valuation of these intangible assets, resulting in an undue waste of time and expense. Accordingly, this evidence should be excluded under Rule 403 of the Federal Rules of Evidence. 6. Evidence related to contracts First Layer had in place when it ceased

operations, other than the MSAs with Qwest and AT&T Wireless, also should be excluded. As the Court noted, the issue with respect to Defendant's liability on his guaranty is what items Walker Group received and what value, if any, they had. (Order at 21, 24). Although Mr. Menzel generally refers to contracts and Master Service Agreements in his description of

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the items shipped to Walker Group, all of the evidence indicates that the only First Layer contracts that arguably may have been assigned to Walker Group were those with Qwest (for the World Wide Networks program ("WWN")) and AT&T Wireless. (Steel Dep. at 25, 2729, 33, 37 (cited portions attached as Exhibit A); Knutson Dep. at 146, 174-75, 187-88 (cited portions attached as Exhibit B)). With respect to alleged contracts other than those with AT&T Wireless and Qwest WWN, Lorie Loman, Walker Group's Contracts Manager, attested that Walker Group neither received nor operated under any of the contracts Defendant has suggested First Layer had in place at the time it ceased operations.2 (Order at 18 (citing Loman Aff. ¶¶ 5-6)). 7. To the extent Defendant seeks to introduce evidence regarding any revenue

Walker Group allegedly received from these contracts, or revenue Walker Group allegedly received from companies First Layer had agreements with and that Walker subsequently did work for without a contract, such evidence should be excluded. Aside from AT&T Wireless and Qwest WWN, Defendant has offered no evidence that Walker Group's installation revenue is directly attributable to any contracts that First Layer may have had and that may have been sent from First Layer to Walker and Associates in the shipment from David Menzel.

After the close of discovery, Defendant belatedly produced 510 pages of signed and unsigned documents that appeared to have been contracts between First Layer and customers other than AT&T Wireless and Qwest WWN. On April 12, 2005, Magistrate Judge Watanabe entered an Order granting Walker Group's Motion to Strike Knutson's Third and Fourth Supplemental Disclosure Statements and the accompanying documents on the grounds that they were untimely and Knutson was unable to provide "a valid explanation as to why these documents were not produced anytime between May 2004 and January 31, 2005." (Minute Order (Apr. 12, 2005)). Ms. Lohman's affidavit makes clear that even if the Court had not stricken the documents, Walker & Associates never operated under, or received the benefit of, any of the contracts that First Layer had in place, other than, perhaps, ATTW and Qwest WWN.

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8.

Finally, to the extent Defendant seeks to introduce evidence suggesting that

Walker and Associate's general installation revenue is directly related to the assets shipped from First Layer, such evidence should also be excluded. As noted above, Defendant has offered no evidence that Walker Group's installation revenue is directly attributable to any contracts that may have been transferred from First Layer to Walker and Associates and purported evidence regarding those alleged contracts previously was stricken by the Court. Furthermore, any argument that Walker and Associate's general installation revenue is the result of the items transferred to Walker and Associates is really an argument that Walker and Associates received First Layer's goodwill or work force in place. As discussed above, such evidence should be excluded under Federal Rules of Evidence 402 and 403.

WHEREFORE, Walker Group respectfully requests that the Court exclude all evidence relating or referring to the receipt by Walker Group any alleged assets of First Layer Communications, Inc. that were not included in the shipment from David Menzel to Walker and Associates in September 2002.

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Respectfully submitted, this the 18th day of October, 2005.

s/ Richard S. Gottlieb Richard S. Gottlieb Laura A. Greer Kilpatrick Stockton LLP 1001 West Fourth Street Winston-Salem, North Carolina 27101-2400 Telephone: (336) 607-7300 Attorneys for Plaintiff Walker Group, Inc. Joshua Maximon, Esq. The Maximon Law Firm, LLC 12202 Airport Way, Suite 170 Broomfield, Colorado 80021 Telephone: (303) 991-3344

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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO CERTIFICATE OF SERVICE (CM/ECF) I hereby certify that on October 18, 2005, I electronically filed the foregoing WALKER GROUP'S MOTION IN LIMINE TO EXCLUDE EVIDENCE REGARDING ALLEGED ASSETS NOT INCLUDED IN SHIPMENT FROM DAVID MENZEL TO WALKER GROUP with the Clerk of Court using the CM/ECF system which will send notification of such filing to the following email addresses: [email protected] [email protected], and I hereby certify that I have mailed or served the document or paper to the following non CM/ECF participants by first class mail addressed as follows: none.

s/ Richard S. Gottlieb Richard S. Gottlieb Attorney for Plaintiff Walker Group, Inc. Kilpatrick Stockton LLP 1001 West Fourth Street Winston-Salem, North Carolina 27101-2400 Telephone: (336) 607-7300 [email protected]

02560-207219 9001362.3

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