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

Case 1 :04-cv-00148-GIVIS Document 91 Filed O9/O2/2005 Page 1 of 3 A
IN THZE 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. 04-148 (GMS) .
Debtors, [Bk Adv. Case No. 03-50501 (P.IW)]
Plaintiff]
v. [Related to Docket Nos. 72 and 80]
TECH DATA CORPORATION,
· Defendant.
AND RELATED THIRD PARTY .
ACTION.
PLAINTIFF’S REPLY RE ITS MOTION IN LIMINE TO EXCLUDE EVIDENCE [
RE DEFENDANT’S ARGUMENTS UNDER 54'7gI2)g2[ and {5) “
Plaintiffs Motion seeks to exclude evidence regarding the assumption of invoices [
in connection with an Asset Purchase Agreement ("APA") between Plaintiff and Compaq
Computer Corporation, because even if viewed in a light most favorable to Defendant, the
evidence is legally insufficient to block Plaintiff s proof of two contested elements of its prima _
facie case under Bankruptcy Code section 547(b), and is thus irrelevant and inadmissible under
Federal Rules of Evidence 401 and 402. -`
Defendant’s "Novation" argument to defeat the "antecedent debt" reguirement of
Section 547QIg[{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, in
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-00148-GIVIS Document 91 Filed O9/O2/2005 Page 2 of 3 `
Compaq with respect to liability for invoices for goods delivered by Defendant to Inacom.]
A The APA clearly does not qualify as the requisite "novation" because (a) the APA -
merely effected a financial 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 p
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 account of "antecedent pl
I debt." 1r1 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 A
presentation of the purported "novation" at the hearing on this Motion.
Defendant’s "third pagy source" argument to defeat Section 547(g)(5).
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 hl
payment from other sources is not to be considered. In re Powerine Oil Co., 59 F. 3d 969, 972- p
973 (9m Cir. 1995); In re Virginia-Carolina Fin. Corp., 954 F.2d 193, 199 (4m Cir. 1992). See,
Union Bank v. Wolas, 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 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 MacLaine Int ’l Ltd., 85 F.3d 68, 82-83 (2d Cir. 1996).
"New York courts have set a stringent standard for novation." Holland v. Fahnestock & C0., 210 F.R.D.
487, 499 (S.D.N.Y. 2002).
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Case 1 :04-cv—OO148-GIVIS Document 91 Filed O9/O2/2005 Page 3 of 3 I
preference payments, AND that Defendant was entitled to enforce that obligation in direct action
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 Lmder 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 QJ 2005 PACHULSKI, STAN G, ZIEHL, YOUNG, JONES
& WEINTRAUB P.C.
Laura Davis Jones (Bar No. 2436) .
Sandra G. McLamb (Bar No. 4283) J
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., 11th Floor
Los Angeles, California 90067-4100
Telephone: (310) 277-6910
F acsimile: (310) 201 -0760
Counsel for the Plaintiffs/Debtors
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