Free Response to Motion - District Court of Delaware - Delaware

Case 1 :04-cv—00583-GIVIS Document 85 Filed 08/22/2005 Page 1 of 4
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
In re: Chapter ll
INACOM CORP., et al., Bankruptcy Case No. 00-2426 (PIW)
Debtors.
INACOM CORP., on behalf of all affiliated Civil Action No. O4-CV-5 83 (GMS)
debtors,
Plaintiff],
vs.
LEXMARK INTERNATIONAL, INC.,
Defendant and Third-Party
Plaintiff]
vs.
COMPAQ COMPUTER CORP., ITY
CORP., and CUSTOM EDGE, INC.,
Third-Party Defendants.
HEWLETT-PACKARD COMPANY ’S REPLY IN SUPPORT OF ITS MOTION IN
LIMINE TO EXCLUDE EVIDENCE RELATED TO
LEXMARK’S CLAIMS AS A THIRD-PARTY BENEFICIARY
Lexmark International, Inc. ("Lexmark")’s response to Hewlett-Packard
Company’s ("HP") motion in limine fails to cite any authority in which the intent to create third-
party beneficiary rights was disputed, or which involved a "no third-party beneficiary cIause" in
the contract. Instead, Lexmark focuses on a non—assignment clause, which is entirely different
and has nothing to do with Lexmark’s right to enforce the Asset Purchase Agreement in this
case.
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The Court should exclude all evidence and dismiss Lexmark’s claims relating to
the Asset Purchase Agreement because, as a matter of law, Lexmark is not a third-party
beneficiary to the agreement. Accordingly, Lexmark lacks standing to enforce the agreement.
I. LEXMARK IS NOT AN INTENDED BENEFICIARY OF THE
ASSET PURCHASE AGREEMENT
The parties agree that only intended beneficiaries to a contract have a right to
enforce the contract, and incidental beneficiaries do not. See Lexmark’s Proposed Jury
Instructions at p. 15 ("To establish that it is entitled to enforce the contract as a beneficiary, the
plaintiff [Lexmark] has the burden to prove by a preponderance of the evidence that the original
parties to the contract intended the plaintiff to be a direct beneficiary and not just an incidental
beneficiary?). See also Fourth Ocean Putnam Corp. v. Interstate Wrecking Co., Inc., 66 N.Y.2d
38, 44 (1985).
The parties further agree that, as a matter of law, the best evidence of whether
contracting parties intended their contract to benefit third parties is the language of the contract
itself See Lexmark’s Proposed Jury Instructions at p. 15 ("Although you may consider all of the
circumstances surrounding the original parties at the time they entered into the contract, the
plaintw must prove that the contract terms themselves contain some clear indication that the
original parties intended the plaintiff to be a direct beneficiary.")(emphasis added). Burns,
Jackson, Miller, Summit & Spitzer v. Lindner, 108 Misc. 2d 458, 475-76 (N.Y. Sup. 1981);
Nepco Forged Products, Inc. v. Consolidated Edison, 470 N.Y.S.2d 680, 681 (App. Div. 1984).
Where a provision exists in an agreement expressly negating an intent to permit enforcement by
third parties, that provision is decisive of the parties’ intent. Id. (complaint dismissed based on
no-third-party-beneficiary provision).
Here, the intent of the parties to the Asset Purchase Agreement — Inacom,
Compaq, and ITY Corp — is expressed in Section 13.08 which states that there is no intent to
confer any rights or remedies on any third parties. This is the exclusive statement of intent
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regarding third party beneficiaries.! That provision is decisive and negates any intent to permit
enforcement by Lexmark.
Section 13.08 is not "best characterized" as a non-assignment clause. Compaq
and Inacom were well aware of the distinction between a clause precluding intended
beneficiaries and a clause precluding assignment, and specihcally addressed both in the Asset
Purchase Agreement. See Asset Purchase Agreement, Sections 13.04 and 13.08. Lexmark’s
citation to a case involving a non-assignment clause — without any provision that precluded third-
party beneiiciaries — has no bearing to the facts of this case.
1 Section 13.09 of the Asset Purchase Agreement contains the following integration clause:
Entire Agreement. This Agreement, the Fulfillment Agreement, the Services, Supply and Sales Agreement,
the agreements contemplated by Section 7.07 and the Confidentiality Agreement constitute the entire
agreement between the parties with respect to the subject matter of this Agreement and supersedes all prior
agreements and understandings, both oral and written, between the parties with respect to the subject matter
of this Agreement.
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CONCLUSION
For the foregoing reasons, HP requests that the Court grant an in limirze order
dismissing Lexmark’s breach of contract claims and precluding Lexmark from presenting any
argument or evidence based on a claim as a third-party beneficiary to the Asset Purchase
Agreement.
Dated: August 22, 2005
Wilmington, Delaware MORRIS, NICHOLS, ARSHT & TUNNELL
William H. Skldell, Jr. (No. 463)
Derek C. Abbott (No. 3376)
Gregory T. Donilon (No. 4244)
Daniel B. Butz (No. 4227)
1201 N. Market Street
Wilmington, DE 19899-1347
(302) 658-9200
- and -
FRIEDMAN DUMAS &. SPRINGWATER LLP
Ellen A. Friedman
Cecily A. Dumas
Gail S. Greenwood
Brandon C. Chaves
One Maritime Plaza, Suite 2475
San Francisco, CA 94111
(415) 834-3800
Attorneys for Third-Party Defendant
Hewlett—Packard Company
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