Free Reply to Response to Motion - District Court of Delaware - Delaware

Case 1 :04-cv—00593-GIVIS Document 75 Filed 09/06/2005 Page 1 of 3
IN THE UNITED STATES DISTRICT COURT A l
FOR THE DISTRICT OF DELAWARE
In re INACOM CORP., etal., Bankruptcy Case No. OO-2426 (PIW)
INACOM CORP., on behalf of all affiliated Civil Action No. 04-593 GMS
Debtors, Adversary Case No. 02-3 960 (PJ W)
Plaintiff, [Related to Docket Nos. 58 and 66]
v.
DEFENDANT INGRAM ENTERTAINMENT
INC., as successor in interest to NASHVILLE T
COMPUTER LIQUIDATORS, L.P.,
Defendant.
F PLAINTIFF’S REPLY BRIEF IN SUPPORT OF MOTION IN LIMINE TO
S EXCLUDE THE EXPERT TESTIMONY OF STEVEN GADSEY AT TIME OF TRIAL E
But for a single string cite, Defendant’s Opposition To Plaintiff s Motion in Limine to °
Exclude Expert Testimony of Stephen Gadsey (the "Opposition") does not refute that Mr.
Gadsey, an employee of the Defendant ("NCL"), admitted he has no knowledge of the payment
terms of NCL’s industry competitors, Matrix, BLT, Logicare and Tech Express (collectively, the E
"Competitors").I The Opposition similarly concedes that Mr. Gadsey did not know whether A;
NCL’s Competitors varied their payment terms, had more stringent or lenient terms, or offered pl
an early pay discount.2
Rather, the Opposition would have this Court believe that notwithstanding these
shortcomings, Inacom and NCL are in the “same industry" and "Mr. Gadsey’s knowledge of A
NCL’s credit terms with Inacom and NCL’s other customers is sufficient to provide a reasonable gj;
l Despite the Opposition’s suggestion that Mr. Gadsey has knowledge of "credit terms of some of NCL’s and lngram’s
competitors", at his deposition, Mr. Gadsey claimed knowledge of the credit terms of only one NCL competitor,
Resilien/Logicare, which knowledge he obtained solely from the expert report of Stuart Gollin, Plaintiff" s expert, just hours
before his deposition. See, Gadsey Depo., p. 59, lns. 24 — p.60, Ins. I5, see Exhibit A hereto. -
2 The parties agree that section 547(c)(2)(C) focuses on the terms in the creditor’s industry, not the debtor’s, and as such, the
payment terms of Competitors are directly relevant as an objective frame of reference to evaluate NCL’s terms.
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Case 1 :04-cv—00593-GMS Document 75 Filed 09/06/2005 Page 2 of 3 `I
and reliable basis for his opinion about the ordinary business terms in the computer distribution
industry. (Opp. '|]3). Defendant’s contention fails for two independent reasons. First, Inacom
and NCL did not operate in the same industry, and second, assuming arguendo they did, Mr.
Gadsey has no knowledge of the payment terms for gg NCL customer other than Inacom. {
Asked, point blank, who were the competitors of NCL, meaning who competed within
this industry, Mr. Gadsey named Matrix, BLT, Tech Express and Resilien/Logicare. Sec,
Gadsey Depo., p. 58, lns. 11-15, Exhibit A hereto. Inacom was not included, and for good
reason: while NCL was in the business of refitting and distributing used computers, Inacom an
provided only computer management services, including planning and installing operating
systems, software licensing and networking. See, Schedule 1 to Stuart Gollin’s expert witness
report, Exhibit B hereto.3 Therefore, the rationale in Global fissile, for accepting less than ;
specific objective evidence of competitors’ practices, is not applicable here. See, In re APS
Holding Corporation, 282 B.R. 795, 804 (Bankr. D. Del. 2002). See, In rc Molded Acoustical, l
18 F.3d 217, 225-226 (3rd Cir. 1994) (wherein the Third Circuit attached substantial independent
significance to Section 547(c)(2)(C), requiring objective evidence that demonstrates that the
parties’ payment practices comported with relevant industry norms). h
Assuming arguendo, that Inacom and NCL did operate in the same industry, In re Global _.
Tissue, 302 B.R. 808, 813 (D. Del. 2003), is clearly distinguishable. The court accepted _
testimony of` employee witnesses only after they presented "significant evidence conceming the
payment standard in the. .. industry for their other customers." Here, Mr. Gadsey has no
knowledge of terms or practices for NCL’s other customers. In responseto questions as to what
payment terms NCL employed with other customers such as Inacom, Mr. Gadsey’s response was
"I don’t know." See, Gadsey Depo., p.57, ln. 12—p.58, ln. 2, Exhibit A hereto. The reliability of I
3 Moreover, Inacom had operations in Central America, South America, Mexico, as well as Europe, Asia, the Caribbean, the
Zliiliiiifa.§‘§‘2§2.Z2‘.l.‘F.?('ES§;.‘,?‘r§Z.§‘.i?;”l§,i2.°§?$l°§$,°T.ZT i§fT§§T’ ‘°°“"°“ ‘“ M "¤1rt·T¤""rSr»a“dS°‘d "’“"*"S“""
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Case 1 :04-cv—00593-GIVIS Document 75 Filed 09/06/2005 Page 3 of 3 Q
the employees’ testimony in In re Global Tissue in defining an industry standard by presenting
detailed knowledge of the industry is simply not present with Mr. Gadsey. Expert testimony 2
must be "properly grounded, well-reasoned and not speculative? See, In re Unisys, 173 F. 3d.
145, fn 9 ( 3“1 Cir. 1999). Mr. Gadsey’s testimony clearly establishes that he has no knowledge
of competitor or customer payment terms and practices, which is not surprising because, from
1992 to 1998, he oversaw accounts payable for rent and utilities at Ingram, not vendor
receivables, a point Defendant glosses over. See, Gadsey Depo., p.29, ln. 7-p.30, ln. 9. Mr. _
1 Gadsey cannot even give a ballpark estimate as to whether NCL’s payment terms to other
customers were more stringent or lenient than those provided for Inacom. See, Gadsey Depo., C
p.56, ln. 23-p.57, ln. 5, Exhibit A hereto.
The record from his deposition evidences that Mr. Gadsey cannot offer any reliable or
legally relevant expert testimony on standards of (a) Competitors in the industry, or (b)
customers of NCL. He should be excluded from testifying on 11 U.S.C. § 547(c)(2)(C).
Dated: September Q, 2005 PACHULSKI, STANG, ZIEHL, YOUNG, JONES
& WEINTRAUB P.C. 3 5
Laura Davis Jones (Bar No. 2436) 1
Sandra G. McLamb (Bar No. 4283) 3
919 North Market Street, 16th Floor
P.O. Box 8705 '
Wilmington, Delaware 19899-8705 (Courier 19801)
Telephone: (302) 652-4100
Facsimile: (302) 652-4400
Andrew W. Caine (CA Bar No. 110345)
Jeffrey P. Nolan (CA Bar No. 158923)
10100 Santa Monica Blvd., 1 lth Floor Q
Los Angeles, California 90067-4100 ;
Telephone: (310) 277-6910 ’
Facsimile: (310) 201-0760
Counsel for the Plaintiffs/Debtors
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