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

Case 1:04-cv-00583—Gl\/IS Document 106 Filed 09/06/2005 Page 1 of 4
UNITED STATES DISTRICT COURT
DISTRICT OF DELAWARE
INACOM CORP., et al.
Plaintiff
v. Civil Action No. 04-CV-583 (GMS)
LEXMARK INTERNATIONAL,
INC.
LEXMARICS REPLY TO PLAIN TH-•`F’S OPPOSITION
TO JOINT MOTION IN AID OF LITIGANT’S RIGHTS
Lexmark International, Inc., as and for its Reply to the Plaintiffs Opposition to
the Joint Motion in Aid of Litiganfs Rights Seeking Remedies for Plaintiffs Late
Production of Certain Discovery Materials, respectfully states as follows:
The most telling aspect of Plaintiffs Opposition to Defendants’ Joint Motion
Seeking Remedies for Late Production of Certain Discovery Materials (the "Motion") is
what the Opposition fails to say, rather than what it does. Lexmark submits that the
Plaintiff in hard pressed to counter the instant Motion with any showing of “good cause"
for its failure, and the failure of its counsel, to have maintained documents that were
reasonably foreseeable of being requested by preference case defendants once they
commenced these preference cases.
While Plaintiff asserts that the Motion is an "extreme" remedy because Plaintiff
already produced some 23,000 pages of documents, the Opposition conveniently
sidesteps the truth that: (1) the vast majority of these 23,000 pages were not produced
tmtil czjfer the Defendants took the depositions of Plaintiffs’ two primary witnesses; and
(2) the balance sheets and financial statements upon which Plaintiffs expert bases much
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of his criticism of the Defendants’ experts’ solvency opinion was not produced until afar
the expert report disclosure deadline.
The Defendants do not concede the relevancy (and have indeed objected to the
admission) of much of the late produced materials. If`, however, this self-claimed
"critical" evidence is relevant, Plaintiff provides no legitimate reason why it was not
produced years ago, and certainly before the depositions and expert reports.
The Plaintiff has continued to conveniently “find" more evidence during the
progress of this litigation, as demonstrated by the Plaintiff even in responding to the
current pre-trial motions. For example, in Inacom's opposition to the Defendants’ Motion
to exclude expert witness Dean Vomero's testimony, Inacom attaches certain "charts" as
Exhibit B. Those charts purport to criticize the conclusions of the Defendants’ expert
witnesses, Messrs. Fensterstock and Whalen, because the Defendants’ expert report is not
based on Inacom's "actual financials" from January - April 2000. However, the "actual
data" touted by the Plaintiff is derived from the balance sheets and other financial
documents that were not produced to the Defendants, despite prior request, until after the
Defendants had already completed and disclosed their expert report. The Plaintiff
continues to "find" more evidence, the Defendants continue to be prejudiced. While the
compliance of a litigant and its counsel with the procedural obligation of supplemental
disclosure is expected, the tmavailability of these documents to begin with is both
mysterious and inexcusable.
Importantly, the Plaintiff is not a bankruptcy trustee or other neutral party, to
whom the task of attempting to avoid certain pre-bankruptcy transactions devolved. The
Plaintiff is the real party in interest, possessed of first hand knowledge of the case and of
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the documents and other evidence needed by the Defendants. And the Plaintiff s counsel
has represented Inacom as the bankrupt entity since 2000, when the bankruptcy cases
were commenced. Bankruptcy jurisprudence recognizes, in analogous circumstances,
that some procedural latitude must be afforded statutory parties like bankruptcy trustees U
because they enter a debtor’s house in troubled circumstances and assume obligations
along problems and failures that were not of the their own creation. See, e.g., In re
Everfresh Beverages, Inc., 238 B.R. 558 (Bankr. S.D.N.Y. 1999) (The bankruptcy court
must take a liberal approach in construing allegations of fraud pleaded by the trustee
because the trustee is a third party outsider to the transaction and must plead based upon
second hand knowledge); In re Col/ins, 137 B.R. 754 755 (Bankr. E.D. Ark 1992).
However, Inacom Corporation and its present counsel are not "third party outsiders" and
are not acting on “second hand knowledge? They are possessed with the institutional
knowledge of the Plaintiff] and were responsible for maintaining the Plaintiff s business
records, especially insofar as they knew those records were likely to be requested once
they sued creditors for avoidance of transfers.
To the extent that documents sought by the Defendants were conveniently
misplaced or spoliated, the Plaintiff and its present counsel either caused it, or were in a
possession to safeguard documents and failed to do so. lnsofar as the commencement of
avoidance actions is authorized by statute, and a bankruptcy case event anticipated by all
debtors in bankruptcy cases, the certainty of which was further recognized long ago by
the Plaintiff and its counsel long ago in lnacom Corporation’s plan and disclosure
statement, the safeguarding of documents that constitute evidence in the process of
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commencing avoidance actions is a duty that cannot be delegated, the failure of which
duty should not be rewarded.
The Defendants have not crafted a draconian motion, but rather a broad prayer for
such relief as may be fashioned by the Court in due regard to the circumstances and the
relative prejudices to the parties. In re Lands End Leasing, Inc., 220 B.R. 226 (Bankr. D.
N.J. 1998) (Sanctions for discovery violations must be just and must specifically relate to
the claims at issue.) In this case, it is respectfully submitted that the equities weigh in
favor of the Defendants, and not the Plaintiff In this regard, it is also respectfully noted
that the prejudices certainly militate in favor of granting an appropriate remedy to the
Defendants.
It is therefore respectfully submitted that the Motion should be granted.
Dated: September 6, 2005 Respectfully submitted,
Thomas G. Whgi r. (No. 4034)
Stevens & Lee, P.C.
1105 North Market Street, 7th Floor
Wilmington, Delaware 19801
Tel: (302) 425-3304
Fax: (302) 654-5181
and
Culver V. Halliday
Emily L. Pagorski
Stoll, Keenon & Park, LLP
2650 AEGON Center
400 West Market Street
Louisville, Kentucky 40202-3377
Tel: (502) 568-9100
Fax: (502) 568-5700
Attorneys for Defendant
Lexmark International, Inc.
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