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

Case 1 :04-cv—00583-GIVIS Document 99 Filed 09/02/2005 Page 1 of 3 h
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
In re INACOM CORP., etal., Bankruptcy Case No. 00-2426 (PIW)
INACOM CORP., on behalf of all affiliated Civil Action No. 04-583 (GMS)
Debtors, [Bk Adv. Case No. 02-3500 (PIW)] "
Plaintiff}
v. [Related to Docket Nos. 77 and 90] _:
LEXMARK NTERNATIONAL, INC., 1
Defendant. ·
AND RELATED THIRD PARTY
ACTION.
PLAINTIFF’S REPLY RE ITS MOTION IN LIMINE TO EXCLUDE EVIDENCE T
RE DEFENDANT’S ARGUMENTS UNDER 547( @(2) and Q5) I
Plaintiff s Motion seeks to exclude evidence regarding the assmnption of invoices Ii
in connection with an Asset Purchase Agreement ("APA") between Plaintiff and Compaq
g Computer Corporation, because even if viewed in a light most favorable to Defendant, the '
evidence is legally insufficient to block Plaintiffs proof of two contested elements of its prima ·_
facie case under Bankruptcy Code section 547(b), and is thus irrelevant and inadmissible under i
Federal Rules of Evidence 401 and 402. l
Defenda11t’s "Novation" argument to defeat the "antecedent debt" reguirement of `
Section 547§Q){2).
In response to the Motion, Defendant appears to assert that it intends to offer
evidence of a novation to extinguish the outstanding indebtedness of Inacom to Defendant,
removing any "antecedent debt” to which to apply the preference payments. Clearly, however,
no such "novation" document exists; there was no agreement between Defendant, Inacom and
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Case 1 :04-cv—OO583-GIVIS Document 99 Filed 09/02/2005 Page 2 of 3 Y
Compaq with respect to liability for invoices for goods delivered by Defendant to Inacom.'
The APA clearly does not qualify as the requisite "novation" because (a) the APA
merely effected a fmancial agreement between Compaq and Inacom, and thus, did not relieve
Inacom of its liability to Defendant on the unpaid invoices, and (2) the APA does not constitute a
"novation" between the three parties, which would be necessary to release Inacom.
Even if Defendant can prove that Compaq assumed responsibility under the _
APA for the invoices paid by the preferential payments, Inacom remained liable for the invoices, -
and the preference payments on these invoices were clearly made on accotmt of "antecedent ·
debt." In order to avoid a waste of the Court’s resources through the submission of irrelevant
evidence related to the APA, the Court should grant this motion in limine absent Defendant’s
presentation of the purported "novation" at the hearing on this Motion.
Defenda11t’s "third pag}; source" argument to defeat Section 547gl;)g5).
Defendant’s one paragraph response on this issue is unintelligible. Defendant
apparently does not challenge the proposition that, for purposes of the analysis required under
Section 547(b)(5), only payment from the debtor’s estate is considered; the right to or prospect of {
payment from other sou.rces is not to be considered. In re Powerine Oil Co., 59 F. 3d 969, 972- i.
973 (9th Cir. 1995); In re Virginia-Carolina Fin. Corp., 954 F.2d 193, 199 (4th Cir. 1992). See,
Union Bank v. Wolos, 502 U.S. 151, 160-161, 112 S. Ct. 527 (1991).
Thus, even if Defendant can overcome several factual and legal obstacles to prove
that, under the APA, Compaq became responsible for Defendant’s invoices paid by the i
L Under New York law, a novation requires four elements: (1) a previously valid obligation; (2)
agreement of all parties to a new contract; (3) extinguishment of the old contract; and (4) a valid new (
contract." Atlantic Mutual Ins. Co., v. Balfour MacLoine Int ’l Ltd., 85 F.3d 68, 82-83 (2d Cir. 1996).
"New York courts have set a stringent standard for novation." Holland v. F ahnestock & Co., 210 F.R.D.
487, 499 (S.D.N.Y. 2002).
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Case 1 :04-cv—OO583-GIVIS Document 99 Filed O9/O2/2005 Page 3 of 3 i
preference payments, AND that Defendant was entitled to enforce that obligation in direct action _1
against Compaq, the argument does not defeat Plaintiff’ s claim under Section 547(b)(5). The
proposed evidence relating to Compaq’s assumption of debt under the APA is of no
"consequence to the determination of the action," and is thus legally irrelevant under Federal
Rules of Evidence 401 and 402.
Dated: September L 2005 PACHULSKI, STANG, ZIEHL, YOUNG, JONES
& WEINTRAUB P.C. -
Laura Davis Jones (Bar No. 2436) J
Sandra G. McLamb (Bar N0. 4283)
919 North Market Street, 16th Floor _
P.O. Box 8705 1
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
Los Angeles, California 90067-4100 Q
Telephone: (310) 277-6910 .
Facsimile: (310) 201 -0760
Counsel for the Plaintiffs/Debtors
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