Boyer v. Gildea et al

Filing 259

OPINION AND ORDER DENYING 208 GT Defendants Motion for Summary Judgment on Count III of Trustees Second Amended Complaint; DENYING 212 Defendant Arlington Capitals Motion for Summary Judgment on Count III of the Trustees Second Amended Complaint; Defendant Arlington Capitals 225 Motion to Strike and the GT Defendants 234 Motion to Strike are GRANTED IN PART, DENIED IN PART and DENIED IN PART AS MOOT; Plaintiffs 216 Motion for an Order Striking or Summarily Denying Defendants Motions Addressed to Count III is DENIED AS MOOT. Signed by Judge Theresa L Springmann on 5/17/2012. (kjm)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
FORT WAYNE DIVISION
R. DAVID BOYER, TRUSTEE
Plaintiff,
v.
CHRISTOPHER GILDEA et. al,
Defendants.

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CAUSE NO.: 1:05-CV-129-TLS

OPINION AND ORDER
Presently before the Court are motions for summary judgment and motions to strike by
the Defendants as to Count III of the Second Amended Complaint [ECF No. 183], along with a
motion by the Plaintiff to strike the Defendants’ Count III motions for summary judgment. This
Opinion and Order addresses all motions relating to Count III of the Second Amended
Complaint, which are the last remaining outstanding motions in this case.
On December 8, 2008, this Court entered an Opinion and Order [ECF No. 181] allowing
the Plaintiff to amend his complaint by filing a Second Amended Complaint incorporating
evidence gathered through discovery and a new claim for attorney’s fees. On April 17, 2009,
Defendants GT Enterprises LLC, Christopher Gildea, Katherine Gildea, Mike Motter, and Matt
Mercer (“GT Defendants”) filed a Motion for Summary Judgment on Count III of Trustee’s
Second Amended Complaint [ECF No. 208], along with a Brief in Support [ECF No. 209], a
Statement of Material Facts [ECF No. 210], and an Appendix of Designated Documents [ECF
No. 211]. Also on April 17, Defendant Arlington Capital, LLC filed a Motion for Summary
Judgment on Count III of the Trustee’s Second Amended Complaint [ECF No. 212], along with
a Brief in Support [ECF No. 213], a Statement of Material Facts [ECF No. 214], and an
Appendix of Designated Evidence [ECF No. 215]. On May 18, the Plaintiff responded with a
Memorandum of Law in Opposition [ECF No. 222] which addressed both Count III summary

judgment motions, along with a Response to Defendants’ Statements of Material Facts and
Statement of Genuine Issues [ECF No. 223], and an Appendix of Additional Evidence [ECF No.
224]. On June 2, Defendant Arlington Capital filed a Reply [ECF No. 227] with respect to the
Count III motion, and the GT Defendants filed a Reply [ECF No. 236] with respect to the Count
III motion. Also on June 2, Defendant Arlington Capital filed a Motion to Strike Certain
Statements that the Trustee Makes and Certain Evidence that the Trustee Cites in Support of his
Opposition to Defendant Arlington Capital, LLC’s Motion for Summary Judgment on Count III
of Trustee’s Second Amended Complaint [ECF No. 225], along with a Brief in Support [ECF
No. 226], and the GT Defendants filed a Motion to Strike Certain Statements that the Trustee
Makes and Certain Evidence that the Trustee Cites in Support of His Opposition to Defendants’
Motion for Summary Judgment on Count III of Trustee’s Second Amended Complaint [ECF No.
234], along with a Brief in Support [ECF No. 235]. On June 17, the Plaintiff filed a
Memorandum of Law in Opposition to Defendants’ Motions to Strike [ECF No. 239] relating to
Count III, along with a Declaration of John G. McCarthy [ECF No. 240]. On June 24, the GT
Defendants filed a Reply [ECF No. 243], and on June 26, Defendant Arlington Capital filed a
Reply [ECF No. 244].
Additionally, on April 27, 2009, the Plaintiff filed a Motion for an Order Striking or
Summarily Denying Defendants’ Motions Addressed to Count III [ECF No. 216]. On May 12,
the GT Defendants and Defendant Arlington Capital both filed Responses [ECF Nos. 217 &
218]. For the following reasons, the Court will deny the Defendants’ Motions for Summary
Judgment with respect to Count III of the Second Amended Complaint.

BACKGROUND
The Court has previously outlined the history of this case in its October 5, 2006, Opinion
[ECF No. 112], its August 24, 2007, Opinion [ECF No. 124], its November 5, 2007, Order and
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Opinion [ECF No. 137], its December 8, 2008, Opinion and Order [ECF No. 181], and its
February 21, 2012, Opinion and Order [ECF No. 258]. In the interest of completeness, the Court
will supplement and update the case history.
This case arose out of the bankruptcy of GT Automation Inc. (the Debtor). Steven Gildea
was the president of the Debtor and sole equity owner. Defendant Anita Gildea is Steven
Gildea’s wife. Steven and Anita Gildea were the only directors of the Debtor. Defendant
Christopher Gildea, Steven and Anita Gildea’s son, was an officer of the Debtor. Christopher
Gildea also owned Defendant Gasson, LLC, which leased equipment to the Debtor. Defendant
Katherine Gildea is Christopher Gildea’s wife.
The Debtor filed for bankruptcy on October 9, 2001, and the bankruptcy court allowed
the Debtor to continue operating as a debtor-in-possession. Comerica was the Debtor’s largest
secured creditor and held a first priority security interest and lien on all of its assets. Comerica
filed a proof of claim in the bankruptcy proceedings for $7,818,406.10.
During the bankruptcy, Defendant Christopher Gildea and other Gildea family members
and officers of the Debtor (the Gildea Group) made efforts to secure financing to purchase the
Debtor’s assets. There were negotiations between the Gildea Group and Comerica from the
summer of 2002 until sometime in early 2003. The Gildea Group also began meeting with
Defendant Arlington Capital in February 2003. On February 12, 2003, the Debtor moved for an
order authorizing an auction of the Debtor’s assets. The Gildea Group sought to purchase the
Debtor’s assets. The bankruptcy court issued an order allowing an auction of the Debtor’s assets
pursuant to 11 U.S.C. § 363, subject to conditions agreed to by the Debtor and its creditors.
The auction for the Debtor’s assets was held on April 3, 2003. Defendant GTA
Acquisition, LLC submitted a bid of $2,725,000, which was the highest bid. The only other bid
was a credit bid submitted by Comerica. Defendant GTA Acquisition was an entity created by
Defendant Arlington Capital on or about April 1 for the purpose of acquiring the Debtor’s assets.
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Defendant Arlington also formed GTA Realty, LLC for the purpose of taking title to the
Debtor’s real estate. After holding a hearing on April 7, the bankruptcy court, on April 8,
approved the sale of the Debtor’s assets to Defendant GTA Acquisition. On April 16, 2003, an
amended sale order was issued. There were no objections to the sale.
Pursuant to a Buyout Agreement dated April 7, 2003, Defendant GT Enterprises, LLC
(Defendant GT/E) acquired Defendant GTA Acquisition. Defendant GT/E was formed and is
owned by Defendants Katherine Gildea, Mike Motter, and Matt Mercer. Defendant Matt Mercer
was a Vice President of the Debtor. Defendant Mike Motter was the Debtor’s accountant.
This case was filed on April 7, 2004. The Plaintiff’s Complaint stated claims against
Defendants Christopher Gildea, Katherine Gildea, Michael Motter, Matt Mercer, Anita Gildea,
Arlington Capital, LLC, GT Acquisition, LLC, GT/E, LLC, Gasson, LLC, and Gildea &
Gorman, LLC. An Amended Complaint was filed on October 18, 2004, containing eight counts.
In its Opinion of October 17, 2005, the Court granted summary judgment to Defendant
Arlington Capital on the Plaintiff’s state law claims against it (Counts VI to VIII of the Amended
Complaint), finding the bankruptcy court’s April 16, 2003, Amended Sale Order precluded such
claims. (Opinion, ECF No. 49.) The Court stated that the state law claims could be brought only
if the Amended Sale Order was set aside. In response, the Plaintiff brought a separate case
alleging fraud on the court and seeking to alter the Amended Sale Order. Boyer v. GT
Acquisition, 1:06-CV-90 (N.D. Ind. filed March 22, 2006). The bankruptcy court declined to
provide the relief sought by the Plaintiff, stating that granting the requested relief probably
would not remove the preclusive effect of the Amended Sale Order, and holding that a judgment
that is alleged to have been obtained by fraud on the court cannot be amended, it must be
vacated. The Plaintiff appealed, and this Court agreed with the bankruptcy court as stated in its
Opinion and Order of August 9, 2007. Boyer v. GT Acquisition LLC, No. 1:06-CV-90-TS, 2007
WL 2316520 (N.D. Ind. Aug. 9, 2007).
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In its Opinion of October 5, 2006, the Court denied summary judgment on Count I of the
Amended Complaint, granted summary judgment on Counts III, IV, and V of the Amended
Complaint, and withheld ruling on Count II of the Amended Complaint pending further briefing.
(Opinion, ECF No. 112.) Counts I and II sought to set aside transfers of Debtor funds to
Defendant Christopher Gildea, and Count III was to set aside a transfer of Debtor funds to
Gildea & Gorman, LLC. Count IV was a state law claim alleging that Defendants Mike Motter
and Christopher Gildea breached their fiduciary duties to the Debtor. Count V alleged that
Defendants Arlington Capital, GT/E, Christopher Gildea, Katherine Gildea, Mike Motter, and
Matt Mercer colluded to control the price of the Debtor’s assets at the auction sale.
In its Opinion of August 24, 2007, the Court denied summary judgment on Count II of
the Amended Complaint. (Opinion, ECF No. 124.) The Court additionally granted the Plaintiff’s
Motion to Alter its previous decision with respect to Count V of the Amended Complaint,
vacating its previous Order granting summary judgment on Count V.
In its Order and Opinion of November 5, 2007, the Court certified its previous Opinion of
August 24, 2007, for interlocutory appeal (Order & Opinion, ECF No. 137), but the United
States Court of Appeals for the Seventh Circuit denied the petition for interlocutory appeal.
(Appellate Order, ECF No. 144.)
In its Opinion and Order of December 8, 2008, the Court granted the Plaintiff’s request to
file a Second Amended Complaint. (Opinion & Order, ECF No. 181.) The Second Amended
Complaint includes four counts, the first three of which are functionally equivalent to Counts I,
II and V of the Amended Complaint, with some additional factual allegations. Count I seeks to
avoid the transfer of $170,000 from the Debtor to Defendant Christopher Gildea which the
Plaintiff claims was setoff without approval of the bankruptcy court. Count II seeks to avoid
more than $30,000 of the Debtor’s payments to Defendant Christopher Gildea which the Plaintiff
claims were not in the ordinary course of business. Count III alleges that Defendants Arlington
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Capital, GT/E, Christopher Gildea, Katherine Gildea, Mike Motter and Matt Mercer colluded to
control the price of the Debtor’s assets at the auction sale. Finally, Count IV is a request for
attorney’s fees.
In its Opinion and Order of February 21, 2012, the Court denied summary judgment to
Defendants Gasson, LLC and Christopher Gildea on their Second Amended Complaint Count I
motion, and denied summary judgment to Defendant Christopher Gildea on his Second
Amended Complaint Count II motion. (Opinion & Order, ECF No. 258.)
This Opinion and Order addresses all motions relating to Count III of the Second
Amended Complaint.

SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate if the facts supported by materials in the record show
that there is no genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law. Fed. R. Civ. P. 56. The motion should be granted so long as no
rational fact finder could return a verdict in favor of the party opposing the motion. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A court’s role is not to evaluate the weight of the
evidence, to judge the credibility of witnesses, or to determine the truth of the matter, but instead
to determine whether there is a genuine issue of triable fact. Anderson, 477 U.S. at 249–50; Doe
v. R.R. Donnelley & Sons Co., 42 F.3d 439, 443 (7th Cir. 1994). The party seeking summary
judgment bears the initial burden of proving there is no genuine issue of material fact. Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986); see also N.D. Ind. L.R. 56.1(a) (stating that the
movant must provide a “Statement of Material Facts” that identifies the facts that the moving
party contends are not genuinely disputed). In response, the nonmoving party cannot rest on bare
pleadings alone but must use the evidentiary tools listed in Rule 56 to designate specific material
facts showing that there is a genuine issue for trial. Celotex, 477 U.S. at 324; Insolia v. Philip
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Morris Inc., 216 F.3d 596, 598 (7th Cir. 2000); N.D. Ind. L.R. 56.1(b) (directing that a response
in opposition to a motion for summary judgment must include “a section labeled ‘Statement of
Genuine Disputes’ that identifies the material facts that the party contends are genuinely
disputed so as to make a trial necessary”). According to Rule 56:
A party asserting that a fact cannot be or is genuinely disputed must support the
assertion by:
(A) citing to particular parts of materials in the record, including depositions,
documents, electronically stored information, affidavits or declarations, stipulations
(including those made for purposes of the motion only), admissions, interrogatory
answers, or other materials; or
(B) showing that the materials cited do not establish the absence or presence of a
genuine dispute, or that an adverse party cannot produce admissible evidence to
support the fact.
Fed. R. Civ. P. 56(c)(1).
Although a bare contention that an issue of fact exists is insufficient to create a factual
dispute, the court must construe all facts in a light most favorable to the nonmoving party, view
all reasonable inferences in that party’s favor, see Bellaver v. Quanex Corp., 200 F.3d 485,
491–92 (7th Cir. 2000), and avoid “the temptation to decide which party’s version of the facts is
more likely true,” Payne v. Pauley, 337 F.3d 767, 770 (7th Cir. 2003) (noting the often stated
proposition that “summary judgment cannot be used to resolve swearing contests between
litigants”). A material fact must be outcome determinative under the governing law. Insolia, 216
F.3d at 598–99. “Irrelevant or unnecessary facts do not deter summary judgment, even when in
dispute.” Harney v. Speedway SuperAmerica, LLC, 526 F.3d 1099, 1104 (7th Cir. 2008).
Under Federal Rule of Civil Procedure 56(c)(4), any affidavit or declaration “used to
support or oppose a motion [for summary judgment] must be made on personal knowledge, set
out facts that would be admissible in evidence, and show that the affiant or declarant is
competent to testify on the matters stated.” On a motion for summary judgment, a court must
disregard parts of an affidavit that fail to comply with this rule. Cooper-Schut v. Visteon Auto.

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Sys., 361 F.3d 421, 429 (7th Cir. 2004); Friedel v. City of Madison, 832 F.2d 965, 970 (7th Cir.
1987). The following statements do not comply with the rule and should be disregarded: “(1)
conclusory allegations lacking supporting evidence; (2) legal argument; (3) self-serving
statements without factual support in the record; (4) inferences or opinions not grounded in
observation or other first-hand experience; and (5) mere speculation or conjecture.” Heltzel v.
Dutchmen Mfg., Inc., No. 3:06-CV-227, 2007 WL 4556735, at *4 (N.D. Ind. Dec. 20, 2007)
(quotation marks and citations omitted). Although “self-serving statements in affidavits without
factual support in the record carry no weight,” Butts v. Aurora Health Care, Inc., 387 F.3d 921,
925 (7th Cir. 2004) (emphasis omitted), “a self-serving affidavit supported by facts in the record
[can] defeat summary judgment,” and the record “may include the self-serving affidavit itself,
provided that the affidavit meets the usual requirements for evidence on summary
judgment—including the requirements that it be based on personal knowledge and that it set forth
specific facts showing that there was a genuine issue for trial,” Buie v. Quad/Graphics, Inc., 366
F.3d 496, 504 (7th Cir. 2004) (quotation marks and citations omitted).

ANALYSIS
A.

Count III of the Second Amended Complaint
In Count III, the Plaintiff alleges that Defendants Arlington Capital, GT/E, Christopher

Gildea, Katherine Gildea, Mike Motter, and Matt Mercer colluded to control the price at the
auction for the Debtor’s assets.

1.

Facts and Evidence Relevant to Count III
Due to the multiple motions and briefs filed regarding what is now Count III of the

Second Amended Complaint, an in-depth recitation of the Court’s previous rulings and
rationales for those rulings is appropriate. Further, the Court will set out and summarize the
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evidence relied upon by the parties now that discovery is complete.
After the Debtor filed for bankruptcy, Defendant Christopher Gildea and other
Defendants made several attempts to obtain financing in order to purchase the assets of the
Debtor. But Defendants Christopher Gildea, Katherine Gildea, Mike Motter, and Matt Mercer
did not bid on the assets of the Debtor when they went up for auction on April 3, 2003.
Defendant Arlington Capital was the only bidder apart from Comerica’s credit bid. The
bankruptcy court held a hearing on the auction sale on April 7, 2003, and entered an order
approving the sale on April 8. In a document dated April 7 and signed by Defendants Mike
Motter and Christopher Gildea, Defendant GT/E (owned by Defendants Katherine Gildea, Mike
Motter, and Matt Mercer) agreed to purchase the Debtor’s assets from Defendant Arlington
Capital.1 The Plaintiff averred in his Amended Complaint that Defendants Arlington, GT/E,
Christopher Gildea, Katherine Gildea, Mike Motter, and Matt Mercer were potential bidders
within the meaning of § 363(n) who colluded to control the price at auction. The Defendants
denied that any agreement existed and argued that even if an agreement had existed, it could not
have been intended to control the price at auction because the GT Defendants did not have
financing to submit a competitive bid. In its October 5, 2006, Opinion, the Court agreed with the
Defendants. Regarding the timing of an alleged agreement, the Court stated as follows:
The timing of the agreement between Arlington and the GT insiders, and the
extensive negotiations between them leading up to the sale, do not add support to the
Plaintiff’s case, as they are consistent with the Defendants’ assertion that they did not
enter an agreement until after the close of bidding.
Boyer v. Gildea, No. 1:05-CV-129-TLS, 2006 WL 2868924, at *15 (N.D. Ind. Oct. 5, 2006).
Regarding the ability of the GT Defendants to submit a competitive bid, the Court stated:

1

The agreement states that Defendant GT/E is purchasing Defendant GTA Acquisition from
Defendant Arlington Capital, and states that Defendant Arlington is the “only member” of Defendant
GTA Acquisition. (Buyout Agreement, ECF No. 215-13 at 25–32.)

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The Plaintiff’s allegation that the Defendants agreed to collude to avoid bidding
against each other makes little sense in light of the Gildea group’s failure to obtain
financing to make an independent bid. The Gildea group obtained financing of about
$1.4 million, which is what they offered in the initial sale motion, filed in February
2003. This is substantially less than the $2.75 million bid that Arlington submitted.
Significantly, months after the contract was entered into, the Gildea group still could
not obtain sufficient financing to pay off the $2.1 million remaining on the note to
Arlington. GT/E paid $617,000 for the personal property of the Debtor and obtained
another $600,000 loan. This is also far less than the amount they would have needed
to submit a competitive bid. Because the Gildea group could not offer a competitive
bid, it is not reasonable to infer that Arlington and the Gildea group colluded to avoid
bidding against each other.
Id., at *16. Accordingly, the Court’s October 5, 2006, Opinion granted summary judgment to the
Defendants on this count. However, the Plaintiff filed a motion to reconsider, and in an August
24, 2007, Opinion, the Court reversed itself, denying the Defendants summary judgment on this
count. The Court explained that the Plaintiff had solidified the inference of collusion with
evidence that the GT Defendants discontinued their vigorous pursuit of financing to purchase the
assets of the Debtor only after beginning to meet with Defendant Arlington Capital, and with
evidence that the GT Defendants had the possibility of obtaining financing sufficient to submit a
competitive bid. Specifically, the Court stated as follows:
According to the affidavit of Michael Peters, a managing member of Arlington, he
and another managing member of Arlington met with Steven Gildea, Chris Gildea,
and Michael Motter in late February 2003, to discuss a possible investment in the
Debtor by Arlington. (Peters Aff. 1, DE 70-34.) On February 27, 2003, Chris Gildea
told Werling [from Comerica] that he was disappointed in their offer to finance a
Gildea Group bid and to accept such a bid at $3.7 million. He said he would not offer
a lower number. Taking all inferences to favor the Trustee, the Gildea Group’s
meeting with Arlington occurred before Chris Gildea’s statement to Comerica that
they would not offer a lower number. These facts establish that the Gildea Group
declined to continue negotiating with Comerica only after meeting with Arlington.
Because the Gildea Group cut off negotiations with Comerica only after meeting
with Arlington, and because it had been persistently seeking financing from
Comerica to purchase the Debtor’s assets, it is reasonable to infer that the decision
to spurn Comerica financing and work with Arlington was due to something
occurring at the meeting. The Trustee argues that the evidence in this case
concerning the intent of the parties at that time and their subsequent actions suggest
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that what occurred at the meeting was an agreement to work together to control the
price at auction. The Court agrees that this is a reasonable inference.
Boyer v. Gildea, 374 B.R. 645, 659–60 (N.D. Ind. 2007). The Court concluded its analysis
finding that an inference of collusion was reasonable by stating:
[T]he fact that the Gildea Group declined financing from Comerica shortly after
meeting with Arlington, the fact that the parties could both benefit by working
together, the fact that they never disclosed the fact that they had been negotiating, the
fact that the Gildea Group never reopened discussions with Comerica, and the fact
that Arlington sold its interest in the assets to the Gildea Group shortly after the
auction, make the inference that the Defendants agreed to work together with the
intent of obtaining a lower bid price more likely.
Id. at 661.
The GT Defendants and Defendant Arlington again challenge the Plaintiff’s claim that
they colluded to control the price at auction. The Defendants, in functionally congruent briefs,
argue first, that Comerica’s rights as an undersecured creditor negate the elements of a § 363(n)
claim; second, that the Plaintiff has not produced evidence to raise even the inference that an
agreement existed between Defendant Arlington and the GT Defendants prior to the auction sale,
and that if the Court found such an inference to exist it would be negated by the GT Defendants’
legitimate business reasons for declining financing from Comerica in early March 2003; and
third, that the Plaintiff has not produced evidence showing the value of the Debtor’s assets on the
date of the sale.
In support, the Defendants submit three different offers tendered by the GT Defendants to
Comerica from December 3, 2002, to January 6, 2003. (C. Gildea Aff., ECF No. 215-8 at 8–20.)2
All three are efforts by the GT Defendants to obtain financing and purchase the assets of the
Debtor. The Defendants also submit many documents from Comerica’s records to support their
argument that Comerica considered the GT Defendants’ January 6 offer over the course of nearly
2

All documents attached to ECF No. 215 are also attached to ECF No. 211. The Court will direct
all citations to ECF No. 215.

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two months before communicating a counter-offer in a March 3 fax (Zarb Dep. I & Exhibits,
ECF No. 215-9; Zarb Dep. II & Exhibits, ECF No. 215-22; Shaya Dep. & Exhibits, ECF Nos.
215-11 & 215-12; Werling Dep. 258–59, ECF No. 215-15; Motter Aff. Ex. 47, ECF No. 215-13
at 9–12), documents showing that by December 2002, Comerica was controlling the Debtor’s
use of its cash collateral account (Zarb Dep. I 40–41; Burns Dep. 144–45, ECF No. 215-7; Cash
Collateral Order, ECF No. 215-18), and affidavit and deposition testimony by the Defendants
asserting that the terms of Comerica’s March 3 proposal were financially impossible to accept
due to the poor financial condition of the Debtor, and were also unpalatable due to the
breakdown of the relationship between the Debtor and Comerica by early 2003 (Motter Aff.;
Motter Dep., ECF No. 215-19; Christopher Gildea Aff., ECF No. 215-8; Christopher Gildea
Dep., ECF No. 215-17). Specifically, Defendant Christopher Gildea states in his affidavit that on
March 3 there was no offer from Greenfield Commercial Credit to loan money using the
Debtor’s accounts receivable as collateral, and thus accepting the terms as stated in the March 3
fax would have been impossible. (C. Gildea Aff. ¶ 24.) The Defendants identify specific
documents they claim are insufficient to establish the value of the Debtor’s assets on the date of
the auction, including a letter dated August 15, 2003, from Defendant Christopher Gildea to First
Federal Bank of Huntington which states that the assets purchased in the auction were worth $5
million (Letter, ECF No. 80-2), and a financial analysis by Bill Badie of Defendant Arlington
stating that the “Net Gains” on purchasing the Debtor’s assets would be $1,013,000, to be
allocated between Defendant Arlington and the GT Defendants (Arlington Offer, ECF No. 22418 at 1). The Defendants argue, largely by reference to Defendant Motter’s affidavit and
accompanying exhibits, that in early 2003 the Debtor was losing money, had no use of its cash
collateral, was effectively on its deathbed, and therefore a proper valuation of the Debtor’s assets
at the time of the auction is liquidation value. (Motter Aff. Ex. F, ECF No. 215-13 at 17–24.)
Finally, the Defendants offer in full the Plaintiff’s Objections and Responses to Defendant
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Arlington Capital LLC’s First Set of Interrogatories, filed on September 29, 2008, to support
their argument that the Plaintiff’s estimation of damages has been inconsistent. (ECF No. 21510.)
The Plaintiff responds to the Defendants’ contentions by arguing, first, that the Court’s
previous analysis finding an inference of collusion between Defendant Arlington and the GT
Defendants was correct; second, that the inference of collusion is strengthened by new evidence
that the GT Defendants had actually submitted the offer which Comerica approved in the March
3 fax, showing that Comerica agreed to provide the GT Defendants financing to submit a
competitive bid; third, that the plain language of § 363(n) provides for claims whether the
secured creditor is in an undersecured position or not; fourth, that Comerica’s credit bid at the
auction is not determinative of fair market value of the Debtor’s assets because Comerica had
many reasons for submitting that bid; fifth, that significant admissible evidence exists to show
that the value of the Debtor’s assets on the date of the auction exceeded the auction price; and
sixth, that the Court should sanction the Defendants under 28 U.S.C. § 1927 for unreasonably
and vexatiously multiplying these proceedings.
In support, the Plaintiff relies on the Amended Plan Offer, submitted by Defendant
Motter in July 2002, previously discussed by this Court and found to be admissible, which
proposes Comerica financing a purchase of the Debtor’s assets by Steven Gildea, Joe Siela, and
Defendants Christopher Gildea and Matt Mercer. (Opinion & Order 12–13, ECF No. 258;
Werling Aff. Ex. A, ECF No. 82-2.) The Plaintiff also submits, or directs the Court, to the
following evidence: deposition testimony by Ernest Zarb, a senior vice president at Comerica,
suggesting that the financing plan approved by Comerica on February 13, 2003, and
communicated to the GT Defendants in the March 3 fax was actually an offer from the GT
Defendants to Comerica, communicated by Defendant Christopher Gildea and/or Steven Gildea
two to three weeks prior to February 13 (Zarb Dep. 72, ECF No. 224-2); deposition testimony by
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Zarb indicating that by February 5, 2003, Bill Badie from Arlington was calling and was “very
interested” in purchasing the Debtor’s assets (Zarb Dep. 149–50; Note, ECF No. 224-20 at 3);
deposition testimony from Defendant Matt Mercer suggesting that from the beginning of the GT
Defendants’ association with Defendant Arlington, he viewed Defendant Arlington as a partner
and not a competing bidder (Mercer Dep. 30–31, ECF No. 224-3); deposition testimony from
Defendant Motter that recounts a meeting between executives of Defendant Arlington including
Bill Badie and some of the GT Defendants including Christopher Gildea and Matt Mercer where
Defendant Motter describes the meeting as occurring around February 27, 2003, but admits he
was employed by the accounting firm of BKD and would have billed for his time (Motter Dep.
36–37, ECF No. 224-7); a BKD time report for Defendant Motter for the period ending February
15, 2003, indicating Defendant Motter met with Bill Badie on February 11, 2003, and billed his
time to the Debtor (BKD Time Report, ECF No. 224-13 at 4); additional deposition testimony by
Zarb, and the same exhibits relied upon by the Defendants, indicating that sometime between
Comerica’s February 13 approval of the GT Defendants’ financing proposal and February 28,
the GT Defendants revoked their offer (Zarb Dep. 191; Zarb Dep. I Exs. G & V, ECF No. 215-9
at 22–37, 39–56); Exhibit V to the Zarb Deposition—one of the exhibits submitted by the
Defendants—suggesting that after the GT Defendants revoked the offer in late February,
negotiations between the GT Defendants and Comerica continued (Zarb Dep. I Ex. V, ECF No.
215-9 at 47 (March 4 entry describing “[t]he new Gildeas’ offer”)); Exhibit G to the Zarb
Deposition—also submitted by the Defendants—showing that on or about January 16, 2003,
Steven Gildea submitted a financial statement to Comerica which was considered as part of
Comerica’s February 13 risk rating and recommendation to finance the GT Defendants (Personal
Financial Statement, ECF No. 215-9 at 37); deposition testimony by Defendant Motter along
with a time line of events created by Defendant Motter showing that he was informed he would
be leaving BKD on December 31, 2002, and that “some discussions had begun” about Defendant
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Motter joining the Debtor prior to the February meeting between Defendant Arlington and the
GT Defendants (Motter Dep. 38–39, ECF No. 224-7; Motter Time Line 2–3, ECF No. 224-11);
Mark Werling’s affidavit testimony that he communicated with Defendant Christopher Gildea in
a phone call on February 27, 2003, and that Defendant Christopher Gildea acknowledged the
current price “under discussion with Comerica” was $3.7 million, but expressed disappointment
that Comerica had not responded sooner and therefore declined to pay $3.7 million (Werling Aff.
¶ 22, ECF No. 82); a Baker & Daniels invoice to Comerica showing that Werling had an 18
minute phone conversation with “C. Gildea on behalf of new LLC re offer” on February 27,
2003 (Invoice, ECF No. 224-15); deposition testimony by Defendants Motter and Mercer that
they were aware of Comerica’s offer to finance a purchase of the Debtor’s assets for $3.7 million
(Motter Dep. 48, ECF No. 224-7; Mercer Dep. 42); a letter dated February 18, 2003, from
Defendant Arlington to Zarb offering $1.4 million for the assets of the Debtor (Letter, ECF No.
224-21); a letter dated February 21, 2003, from Defendant Arlington to Zarb offering $2.2
million for the assets of the Debtor (Letter, ECF No. 224-22); a memorandum suggesting
Defendant Arlington increased the offer to $2.55 million sometime before February 26 (Memo,
ECF No. 224-23); Exhibit V to the Zarb Deposition showing that Defendant Arlington’s offer
increased to $2.7 million by February 28, 2003, and to $2.725 million by April 2 when Comerica
and Defendant Arlington reached a final agreement (Zarb Dep. I Ex. V, ECF No. 215-9 at
46–47); deposition testimony from attorney Robert Nicholson, who was representing Defendant
Arlington at the time, indicating that some or all of the GT Defendants met with representatives
from Defendant Arlington on March 4, 2003, to discuss “strategy” (Nicholson Dep. 23, ECF No.
224-6); the transcript of the March 5, 2003, hearing before the bankruptcy court—submitted by
the Defendants—during which representatives of the Committee of Unsecured Creditors
objected to a sale because they saw the GT Defendants as likely to defeat the interests of the
unsecured creditors, and during which a Comerica representative stated that Comerica would
15

block the GT Defendants from cheaply purchasing the Debtor’s assets at auction, and referred to
the bid submitted by Defendant Arlington as “a non-inside bid” (See Transcript, ECF No. 2156); evidence that Nicholson met with “GT Automation personnel re structure of possible
investment” on March 7, 2003 (March 31, 2003, Invoice, ECF No. 224-10); a May 28, 2004,
letter from W. Randall Kammeyer, an attorney representing the GT Defendants, indicating—via
Defendant Motter—that during the March 7 meeting between the GT Defendants and Defendant
Arlington “Motter and the group proposed a 30/70% ownership with the management team
owning 70%. Arlington immediately responded with the exact opposite counteroffer.” (Letter
¶ 6, ECF No. 82-7); a series of documents (previously referenced above), some dated March 7,
2003, indicating that Bill Badie of Defendant Arlington projected $1.013 million in net gains on
the purchase of the Debtor’s assets, to be divided $517,000 to Defendant Arlington and $496,000
to the GT Defendants, and valuing the “Total Assets” of the Debtor at $3.4 to $4.1 million
(Arlington Offers, ECF No. 224-18; Badie Dep. 67–68, ECF No. 224-5); a March 11, 2003,
email from Defendant Motter to representatives of Defendant Arlington discussing the
continuing negotiations toward an agreement (Motter Email, ECF No. 224-16); deposition
testimony from Zarb and Exhibit G to his deposition indicating that the liquidation value of the
Debtor’s assets was approximately $3.1–3.2 million, that the true value of the collateral was
$4.895 million, and that Comerica allowed Defendant Arlington to purchase the Debtor’s assets
for $2.725 million because of a desire to preserve jobs in the community, because it viewed
Defendant Arlington’s bid as a stalking horse bid which it hoped would stir up other potential
bidders, and because “cash is king” (Zarb Dep. 127–28, 148–49, 193–95; Zarb Dep I Ex. G, ECF
No. 215-9 at 35); an email dated March 28, 2003, from Defendant Arlington (through Nicholson)
to Defendant Motter with an attached draft of the Buyout Agreement that was ultimately signed
between Defendant Arlington and the GT Defendants indicating that it was to be an agreement
between Defendant Arlington, “____________, an Indiana limited liability company
16

(‘___________’), and GT Holdings, LLC” (Nicholson Aff. ¶ 8, ECF No. 70-35; Buyout
Agreement Draft, ECF No. 70-36); the final Buyout Agreement dated April 7—also submitted
by the Defendants—requiring the GT Defendants “not to discuss the terms of the Buyout with
any third parties” (Buyout Agreement ¶ 5, ECF No. 215-13 at 27); deposition testimony by
Defendant Motter plus the Buyout Agreement to show that the GT Defendants paid $300,000 to
Defendant Arlington contemporaneously with execution of the Buyout Agreement and that the
“Buyout Price” of $517,000 to be paid to Defendant Arlington was the same as the share of the
net gain allocated by Badie to Defendant Arlington in his March 2003 calculations (Motter Dep.
27, ECF No. 224-7; Buyout Agreement ¶¶ 3.1–3.2, ECF No. 215-13 at 26); an April 9, 2003,
email from Defendant Motter to Nicholson proposing changes to the Buyout Agreement, and
referring to the “initial identified gain of $1,013,000” (Email and Attachment ¶ 4.3, ECF No.
224-9); Exhibit G to Zarb’s Deposition indicating that the Debtor’s real estate was appraised at
$2.395 million in May 2002, a value similar to the $2.4 million real estate valuation assigned by
Badie in his March 2003 spreadsheets (Zarb Dep I Ex. G, ECF No. 215-9 at 35; Arlington
Offers, ECF No. 224-18; Zarb Dep. 148); a Worden Group Appraisal of the Debtor’s real estate
dated May 23, 2003, valuing the real estate at $2.050 million (Appraisal, ECF No. 80-5 at 3); a
letter dated August 15, 2003, from Defendant Christopher Gildea to First Federal Bank of
Huntington (previously referenced above) which states that the assets purchased in the auction
were worth $5 million (Letter, ECF No. 80-2 at 3); a statement by Nicholson from a transcription
of a March 5, 2004, meeting, where Nicholson states that Defendant Arlington was not
“interested in buying a big pile of metal” (Meeting Notes 7, ECF No. 77-19); a loan
document—submitted by the Defendants—showing that on January 16, 2003, Steve Gildea,
Anita Gilda, Defendant Christopher Gildea, Joe Siela and Defendant Mercer entered a loan
commitment with the Fort Wayne Community Development Corporation for $250,000, which
was contingent on their obtaining additional funding within a six month period, and which
17

contemplated their receiving $1 million from Greenfield Capital Corporation (CDC Loan
Commitment, ECF No. 215-8 at 21–28); deposition testimony by Defendant Christopher Gildea
that Greenfield Commercial Credit approved a loan to some of the GT Defendants in November
2002 (C. Gildea Dep. 24); Exhibit G to Zarb’s Deposition showing that the proposal approved by
Comerica on February 13, 2003, contemplated that the Debtor’s accounts receivable be “factored
to Greenfield” (Zarb Dep. I Ex G, ECF No. 215-9 at 26); deposition testimony by Steven Gildea
in the bankruptcy case where he states that he and Defendant Motter, Defendant Christopher
Gildea, Joe Siela and Anita Gildea were approved for partial financing to purchase the Debtor’s
assets by Huntington Savings Bank (Steven Gildea Dep. 88, ECF No. 221-2); the Debtor’s
ledger showing that trade accounts receivable dipped below $300,000 on March 10, 2003, but
then had rebounded to over $628,000 by April 10 (Ledger, ECF No. 224-14 at 6–7; Sales
Transaction Spreadsheet, ECF No. 224-17); and affidavit testimony by Werling suggesting that
at the time of the March 5 hearing there was speculation that insiders of the Debtor were
withholding sale orders to depress the apparent market value of the Debtor’s assets until after a
sale (Werling Aff. ¶ 32).

2.

The Defendants’ Motions to Strike
The Defendants have moved to strike portions of the Plaintiff’s Response to Statements

of Material Facts and the Plaintiff’s Memorandum of Law in Opposition. Because the Court
finds enough admissible evidence to overcome summary judgment, the Court will here analyze
the Defendants’ arguments for striking only insofar as they are necessary to decide the motion
for summary judgment.3

3

For those portions of the Motions to Strike [ECF Nos. 225 & 234] that address evidence not
material to the outcome of the Motions for Summary Judgment, the Court will deny the Motions to Strike
as moot.

18

a.

Bill Badie’s Statement of the Net Profit on Purchase
The Defendants argue that the series of documents containing Arlington Capital’s offer

for the GT Defendants to participate with Defendant Arlington in the purchase of the Debtor’s
assets [Arlington Offer, ECF No. 224-18] is inadmissible. They argue that the documents are
unauthenticated, and are hearsay. The Plaintiff makes no response to the Defendants’ arguments
except to suggest that the Arlington Offer is “redundant evidence supporting a particular fact.”
(Pl.’s Mem. of Law Opp’n Defs.’ Mot. to Strike 10, ECF No. 239.) The Court notes that the
Plaintiff offered the documents to show that Bill Badie of Arlington calculated that the net profit
on purchase for Defendant Arlington and the GT Defendants would be $1,013,000. At his
deposition, Badie confirmed that the $1,013,000 figure appearing in the first page of the
Arlington Offer was based on his own calculation. Accordingly, while the Plaintiff has failed to
show that the Arlington Offer documents contained in ECF No. 224-18 are authentic or
nonhearsay, the Court will deny the Motions to Strike with respect to Badie’s statement that the
anticipated net profit on purchase for Defendant Arlington and the GT Defendants was
$1,013,000. The Motions to Strike will be granted with respect to the remainder of the contents
of the Arlington Offer documents. If the Plaintiff can lay a proper foundation for the Arlington
Offer documents at trial, the Court will reconsider the Motions to Strike.

b.

Defendant Motter’s April 9, 2003, Email and its Attachment
The Defendants argue that the email [Email and Attachment, ECF No. 224-9] sent by

Defendant Motter to representatives of Defendant Arlington on April 9, 2003, is unauthenticated,
and Defendant Arlington argues it is hearsay as to Arlington. The Plaintiff responds that
Defendant Motter authenticated the email and the attachment at his deposition. The Plaintiff does
not respond to Defendant Arlington’s hearsay argument, and does not argue that the email and its
attachment are statements of a coconspirator admissible under Rule 801(d)(2)(E). The Court
19

agrees with the Plaintiff that Defendant Motter’s deposition transcript appears to lay a
foundation authenticating the email and its attachment. (See Motter Dep. 147–48, ECF No. 2403.) However, the Court finds that the email is hearsay as to Defendant Arlington although it is a
statement of a party opponent against Defendant Motter. See Corner Pocket of Sioux Falls, Inc.
v. Video Lottery Techs., Inc., 979 F. Supp. 1269, 1283 (D.S.D. 1996) (admission by a party
opponent is “not evidence against any other party in the case”) (quotation marks omitted); Fed.
R. Evid. 801(d)(2). Accordingly, the Motions to Strike will be granted as to Defendant
Arlington, and the Court will not consider Defendant Motter’s contemplated “initial identified
gain of $1,013,000” as against Defendant Arlington. But consistent with the holding above,
Badie’s calculation of a $1,013,000 net profit on purchase for the Defendants is admissible as to
all Defendants. As above, if the Plaintiff can lay a proper foundation for the email and its
attachment at trial, the Court will reconsider the Motions to Strike.

c.

Mark Werling’s Affidavit, Paragraph 22
Defendant Arlington argues that Paragraph 22 of Mark Werling’s Affidavit, concerning a

conversation with Defendant Christopher Gildea on February 27, 2003, is hearsay as to
Defendant Arlington. The Plaintiff responds that the statements attributable to Defendant
Christopher Gildea are not hearsay under Rule 801(d)(1), 801(d)(2)(A), and 801(d)(2)(E). In the
alternative, the Plaintiff argues Defendant Christopher Gildea’s statements should be admissible
against Defendant Arlington under Rule 807. Defendant Arlington replies that Rule 801(d)(1) is
inapplicable, that Rule 801(d)(2)(A) admissions by Defendant Christopher Gildea are not
admissible against Defendant Arlington, see Corner Pocket, 979 F. Supp. at 1283, and that the
Plaintiff has not shown why Rule 801(d)(2)(E) or Rule 807 should apply. The Court agrees with
Defendant Arlington that Rule 801(d)(1) appears inapplicable, and that Defendant Christopher
Gildea’s admissions are not admissible against Defendant Arlington under Rule 801(d)(2)(A).
20

Further, the Court agrees that the Plaintiff has failed to make any showing that Defendant
Christopher Gildea’s statements are coconspirator statements admissible under Rule
801(d)(2)(E) or that they should be admitted under Rule 807. The Court notes, however, that
both Defendant Mercer and Defendant Motter stated in their depositions that they were aware of
a proposal for Comerica to finance the GT Defendants up to $3.7 million to purchase the assets
of the Debtor. (Mercer Dep. 42, ECF No. 224-3; Motter Dep. 48, ECF No. 224-7.) Defendant
Mercer stated he heard about the proposal from Defendant Christopher Gildea. Accordingly, the
Court will consider the existence of a proposal for Comerica to finance the GT Defendants’
attempt to purchase the assets of the Debtor up to $3.7 million. But the Court will grant the
Motion to Strike as to Defendant Arlington with respect to paragraph 22 of Werling’s Affidavit.
If the Plaintiff can lay a proper foundation for this evidence at trial, the Court will reconsider the
Motion to Strike.
d.

Defendant Motter’s Time Line and BKD Time Report
The Defendants argue that Defendant Motter’s Time Line [ECF No. 224-11] and BKD

Time Report [ECF No. 224-13] are unauthenticated, and Defendant Arlington argues they
contain hearsay statements as to Defendant Arlington. The GT Defendants also argue that the
BKD Time Report is hearsay as to “Defendants,” but make no hearsay argument with respect to
the Time Line. The Plaintiff responds that Defendant Motter authenticated the Time Line at his
deposition (Motter Dep. 57, ECF No. 240-3), and offers the subpoena and production email for
the BKD Time Report (see ECF Nos. 240-4 & 240-5) in order to authenticate it. The Plaintiff
makes no response to the Defendants’ hearsay arguments. Because the Time Line appears to be
an out of court statement offered for the truth of the matter asserted—that Defendant Motter was
informed on December 31, 2002, that he would be leaving BKD, and because the Plaintiff has
not shown why an exception would apply, the Court will grant the Motion to Strike with respect
to Defendant Arlington. Further, the BKD Time Report appears to be an out of court statement
21

offered for the truth of the matter asserted—that Defendant Motter met with Bill Badie on
February 11, 2003. Although the Plaintiff has not shown why an exception would apply, viewing
all reasonable inferences in favor of the non-moving party, because it appears that the BKD
Time Report is a business record admissible under Rule 803(6), the Court will deny the Motions
to Strike with respect to the BKD Time Report.4

e.

Debtor’s Sales Transactions Spreadsheet
The Defendants argue that the Sales Transactions Spreadsheet [ECF No. 224-17]

submitted by the Plaintiff is unauthenticated, is hearsay, and cannot be used by the Plaintiff to
support the statement that the Debtor’s accounts receivable had rebounded to over $628,000 by
April 10, 2003. The Plaintiff offers no response to the Defendants’ arguments. Accordingly, the
Motions to Strike will be granted with respect to the Sales Transactions Spreadsheet. If the
Plaintiff can lay a proper foundation for this evidence at trial, the Court will reconsider the
Motions to Strike. The Court notes that none of the Defendants have objected to the Debtor’s
Ledger, which states that the Debtor’s trade accounts receivable dipped below $300,000 on
March 10, 2003, and amounted to over $628,000 by April 10. (Ledger, ECF No. 224-14 at 6–7.)
The Court will therefore consider those facts.

f.

Steven Gildea Personal Financial Statement
The Defendants argue the financial statement submitted by Steven Gildea and dated

January 15, 2003, is unauthenticated, and Defendant Arlington argues it is also hearsay as to
Defendant Arlington. The Plaintiff does not respond to either the authentication or hearsay
4

The Plaintiff also argues that Defendant Mercer testified at his deposition that the February 2003
meeting between the GT Defendants and Defendant Arlington “occurred before Sean McBride was
terminated on February 13, 2003.” (McCarthy Decl. ¶ 3, ECF No. 240.) However, nothing in the portions
of Defendant Mercer’s deposition submitted by the Plaintiff states the date of McBride’s termination.

22

arguments against admissibility. Accordingly, the Motions to Strike will be granted. If the
Plaintiff can lay a proper foundation for the financial statement at trial, the Court will reconsider
the Motions to Strike. However, the Court notes that the Defendants submitted the second page
of the financial statement as part of their summary judgment motions, indicating that Steven
Gildea faxed to Comerica his personal financial statement on January 16, 2003, and indicating
that it was considered as part of Comerica’s February 13 recommendation to extend financing to
the GT Defendants. Those facts are before the Court without limitation. United States v. Capital
Sav. Ass’n, 576 F. Supp. 790, 797 (N.D. Ind. 1983) (“Where a party seeks to limit the purpose
for which evidence is admitted at trial, it is incumbent upon the party to make an explicit request
for such a limitation.”); Fed. R. Evid. 105.

g.

Zarb’s $4.895 Million Valuation of the Debtor’s Assets, and Zarb Deposition Exhibit G
Defendant Arlington argues that Zarb’s deposition statement that the assets of the Debtor

were worth $4.895 million should be stricken because Zarb did not have personal knowledge of
that fact and because Zarb did not have the qualifications to make such a valuation. Defendant
Arlington also argues that the statement on page 13 of Exhibit G to Zarb’s Deposition is
unauthenticated, and is hearsay. The Plaintiff does not respond to any of these arguments. The
Court finds that Zarb testified the value of the Debtor’s assets was $4.895 million. At his
deposition, the Defendants did not attempt to undercut his personal knowledge of that fact or his
qualifications to give an opinion about the value of the property. Although Zarb’s testimony
appears to reference Exhibit G, the words he used do not suggest he lacked a basis upon which to
testify to this fact. Accordingly, the Court will deny the Motions to Strike as to Zarb’s statement
that the assets of the Debtor were worth $4.895 million. Furthermore, the Court notes that the
Defendants submitted Exhibit G to Zarb’s Deposition as part of their summary judgment
motions. Accordingly, Exhibit G being offered without limitation by the Defendants, Capital
23

Sav. Ass’n, 576 F. Supp. at 797, the Court will deny the Motions to Strike with respect to Exhibit
G and consider it for its internal assertion that the assets of the Debtor were worth $4.895
million.

3.

Analysis
Section 363(n) of the Bankruptcy Code states:
The trustee may avoid a sale under this section if the sale price was controlled by an
agreement among potential bidders at such sale, or may recover from a party to such
agreement any amount by which the value of the property sold exceeds the price at
which such sale was consummated, and may recover any costs, attorneys’ fees, or
expenses incurred in avoiding such sale or recovering such amount. In addition to
any recovery under the preceding sentence, the court may grant judgment for
punitive damages in favor of the estate and against any such party that entered into
such an agreement in willful disregard of this subsection.

11 U.S.C. § 363(n). The Plaintiff alleges that the Defendants entered into an agreement
controlling the sale price of the Debtor’s assets and seeks compensatory damages, costs, fees,
and punitive damages for willful disregard of § 363(n). For the Plaintiff to prevail, “(1) there
must be an agreement; (2) between potential bidders; (3) that controlled the price at bidding.”
Birdsell v. Fort McDowell Sand & Gravel (In Re Sanner), 218 B.R. 941, 944–45 (Bankr. D.
Ariz. 1998). An agreement controls the sale price where an intended objective of the agreement
is to influence the sale price, and where the sale price is actually controlled by the agreement. In
re N.Y. Trap Rock Corp., 42 F.3d 747, 752 (2d Cir. 1994). Where potential bidders enter an
agreement, and the agreement has as an unintended consequence an effect on the sale price, the
agreement does not control the sale price within the meaning of § 363(n). Id. (“The influence on
the sale price must be an intended objective of the agreement, and not merely an unintended
consequence.”). The Trap Rock court further outlined the concept of control, distinguishing
control of a sale price from effect on a sale price, and stating: “To control a price is to exercise
restraining or directing influence over it; to regulate or curb, dominate, or rule it. In such context
24

the term control implies more than acts causing an incidental or unintended impact on the price;
it implies an intention or objective to influence the price.” Id. (quotation marks and citation
omitted). Finally, where the trustee seeks to recover damages instead of seeking to avoid a sale,
in order to prove damages a plaintiff must show that the value of the assets sold at auction
actually exceeded the price paid for the assets. See Landscape Props., Inc. v. Vogel, 46 F.3d
1416, 1423 (8th Cir. 1995) (upholding a district court jury instruction which listed the following
as an element of the § 363(n) claim: “that the value of the property at the time of the approval of
the sale by the Court . . . exceed[ed] the purchase price.”).
The Court must decide whether there is a triable issue of material fact as to 1) the
existence of an agreement between the Defendants to control the price of the Debtor’s assets at
auction; 2) whether any agreement by the Defendants could have actually controlled the price at
auction in light of Comerica’s statutory rights as an undersecured creditor; and 3) whether the
Plaintiff can show that the actual value of the Debtor’s assets exceeded the price paid at auction.5
The Court notes that the evidence submitted by the Defendants alone is significant, and
raises a new inference not present before the Court when it issued its August 24, 2007, Opinion.
The Defendants have submitted Exhibits G and V to Ernest Zarb’s Deposition. Exhibit G is a
Comerica Bank risk rating and loan recommendation dated February 13, 2003. It indicates that a
Comerica loan department representative recommended financing the Gildeas’ attempt to
purchase the assets of the Debtor with several different loan transactions totaling approximately
$3.7 million. It includes a valuation of the total assets of the Debtor at $4.895 million. It also
5

The Defendants have not argued that any Defendant was not a potential bidder at the auction
within the meaning of § 363(n). Nor have the Defendants argued that there is any issue as to the intention
to control the price at auction. Rather, they have argued that there was no agreement to control the price at
auction at all; and in the alternative, they have argued that even if there were such an agreement, it could
not have actually controlled the price at auction. The Defendants have not argued that an agreement could
have existed without the intention of controlling the price at auction. For obvious reasons, the Plaintiff
has also not raised such a possibility. Accordingly, the Court will analyze the issues as raised by the
Defendants in their motions.

25

indicates that the liquidation value of the Debtor’s assets is $3.1–3.2 million. Exhibit V is an
internal Comerica document with status updates regarding the loan to the Debtor. The entries
begin September 14, 2001, and continue through August 20, 2003. The December 5, 2002, entry
indicates Comerica’s receipt of the Gildeas’ first offer. The December 20 entry indicates
Comerica’s receipt of the Gildea’s second offer, described as “still too low.” (Zarb Dep. I Ex. V,
ECF No. 215-9 at 48.) The January 9, 2003, entry indicates the Gildeas had “counter offered
their first bid” and that as “the Gildeas are the only viable bidder,” Comerica would continue to
work with the Gildeas. (Id.) The February 13 entry indicates that Comerica had approved “[t]he
Gildea’s offer,” which appears to be the offer recommended in Exhibit G. The February 14 entry
indicates Comerica’s receipt of an offer of $2.55 million for the assets of the Debtor from
Defendant Arlington. The February 28 entry indicates that “the Gildeas’ have revoked their
original bid and have under bid.” (Id. at 47.) It also states that Defendant Arlington had upped its
bid to $2.7 million. The March 4 entry shows that Comerica approved three possible options for
disposing of the assets of the Debtor, including “[t]he new Gildeas’ offer,” Defendant
Arlington’s $2.7 million offer, and, as a last resort, a collateral liquidation plan. (Id.) Finally, the
April 2 entry indicates that Defendant Arlington had accepted Comerica’s “cash offer” of $2.725
million for the assets of the Debtor. (Id. at 46–47.)
When the Court issued its August 24, 2007, Opinion, the evidence before the Court
showed only that the GT Defendants and Defendant Arlington began meeting together sometime
in February 2003, that Comerica faxed the GT Defendants a financing proposal on March 3,
2003, and that the GT Defendants chose to reject the terms communicated by Comerica. All
indications were that the terms communicated on March 3 came as the result of an offer from
Comerica to the GT Defendants. The Defendants continue to hold to this assertion, arguing in
their briefs that “the alleged financing proposal was in no way related to any offers the Gildeas
had made to Comerica.” (GT Defs.’ Br. in Supp. 10, ECF No. 209; Def. Arlington’s Br. in Supp.
26

10, ECF No. 213.) The evidence submitted by the Defendants, however, suggests another
possibility. The log entries in Exhibit V show that time and again Comerica representatives were
considering offers described as the “Gildea’s offer.” The February 28 entry indicates that the
Gildeas revoked their offer and suggests they submitted a lower offer. As late as March 4,
Comerica describes the offer on the table as “[t]he new Gildeas’ offer.” The evidence submitted
by the Defendants shows that negotiations between Comerica and the GT Defendants for
financing continued into March 2003. The Defendants have averred in their Statement of
Material Facts that “[t]he First Offer, Second Offer, Third Offer, and the proposal attached to the
Sale Motion were the only offers that Christopher Gildea, Anita Gildea, and/or Matt Mercer
made to purchase GT Automation Group’s assets.” (GT Statement of Material Facts ¶ 23, ECF
No. 210; Arlington Capital Statement of Material Facts ¶ 23, ECF No. 214.) But the Defendants’
evidence suggests that a reasonable jury could find the opposite to be true—that the GT
Defendants communicated one or more other offers after the Third Offer,6 and offers that were
considerably more substantial than the Sale Motion proposal. As discussed below, if the offer
rejected by the GT Defendants was actually their own offer, it would strengthen the inference of
collusion between the Defendants when the GT Defendants walked away from the possibility of
financing by Comerica.

a.

Agreement Between the Defendants to Control the Price at Auction
The Court finds, first, that there is substantial evidence upon which a rational factfinder

could conclude that an agreement existed between the Defendants to control the price at auction.
6

The Defendants admit that the Third Offer expired on January 15, 2003. (ECF No. 215-8 at 18,
20.) Yet on January 16, Defendants Christopher Gildea and Matt Mercer, in addition to Steve Gildea,
Anita Gildea, and Joseph Siela, signed the Loan Commitment from the Community Development
Corporation, requiring them to obtain additional financing within a six month period. (CDC Loan
Commitment, ECF No. 215-8 at 28.) This financing may have been pursuant to the proposal attached to
the Sale Motion, or it may have related to additional financing possibilities with Comerica.

27

Most of the facts before the Court have not changed since August 2007. As the Court previously
stated:
The evidence submitted shows that the Gildea Group strongly wanted to purchase
the Debtor’s assets. Throughout 2002 and into the first part of 2003, the Gildea
Group negotiated with Comerica to buy the Debtor’s assets, with financing from
Comerica. Comerica proposed a sale of the assets for $3.7 million. When Arlington
became interested in purchasing the Debtor’s assets, the Gildea Group completely
stopped negotiating with Comerica and began negotiating with Arlington. Those
negotiations involved an ownership role for the Gildea Group. Ultimately, Arlington,
by itself, submitted the highest bid at auction, and the Gildea Group did not submit
a bid. Immediately following the auction, the Gildea Group purchased the assets
from Arlington. A reasonable jury could infer from these facts that the Gildea Group
and Arlington reached an agreement to work together rather than bid against each
other.
Boyer v. Gildea, 374 B.R. at 660. The Court notes that with only two exceptions, its analysis is
the same today as it was in 2007. The first exception is that in 2007 the Court was assuming that
“Comerica proposed” to finance the GT Defendants’ attempt to purchase the Debtor’s assets for
$3.7 million, whereas the evidence submitted by the Defendants suggests that the financing
proposal may have originated with the GT Defendants themselves. Secondly, in 2007 the Court
was assuming that the first meeting between the GT Defendants and Defendant Arlington
occurred in “late February 2003,” id. at 559, whereas the evidence submitted from discovery
suggests the first meeting actually occurred even earlier—on February 11, 2003. Both of these
new facts only strengthen the inference that the reason the GT Defendants in March declined the
financing they had been so fervently seeking since the previous summer was that they had an
agreement with Defendant Arlington which had been developing since February 11. The
Defendants still insist that “negotiations between the Gildeas and Comerica broke down on
January 6, 2003—well before any conversations with Arlington Capital.” (GT Defs.’ Br. in
Supp. 17; Def. Arlington’s Br. in Supp. 17.) But evidence of a February 11 meeting between the
GT Defendants and Defendant Arlington, combined with a Comerica entry on March 4

28

discussing “[t]he new Gildeas’ offer,” casts doubt on the Defendants’ position.
As before, the GT Defendants argue they had legitimate reasons for declining Comerica’s
financing. The question of whether their purported reasons were their real reasons is a question
for a jury. But as the Court previously stated:
the fact that the Gildea Group declined financing from Comerica shortly after
meeting with Arlington, the fact that the parties could both benefit by working
together, the fact that they never disclosed the fact that they had been negotiating, the
fact that the Gildea Group never reopened discussions with Comerica, and the fact
that Arlington sold its interest in the assets to the Gildea Group shortly after the
auction, make the inference that the Defendants agreed to work together with the
intent of obtaining a lower bid price more likely.
Id. at 661. All of these factors remain before the Court, and all of them strengthen the inference
from which a jury could find that the Defendants entered into an agreement with the intent to
control the price at auction. The Court notes that statements by Defendant Mercer also serve to
strengthen the inference that the Defendants agreed to work together to lower the auction price.
He states that from the beginning of the GT Defendants’ association with Defendant Arlington
he understood the parties to be forming a partnership to bid cooperatively at auction instead of
viewing Defendant Arlington as a competing bidder for the Debtor’s assets. (Mercer Dep.
30–31.) Thus, making all reasonable inferences in favor of the Plaintiff, from February 11 on the
Defendants were working together to bid cooperatively at the auction, and to keep their collusion
a secret from Comerica.
The Defendants argue that they have produced evidence that the refusal of the terms in
the March 3 fax represented sound business judgment, and thus under anti-trust case precedent,
the burden is on the Plaintiff to show that “the inference of conspiracy is reasonable in light of
the competing inference[ ] of independent action.” Serfecz v. Jewel Food Stores, 67 F.3d 591,
599 (7th Cir. 1995) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
588 (1986)). As the Supreme Court has stated: “Conduct that is as consistent with permissible

29

competition as with illegal conspiracy does not, standing alone, support an inference of antitrust
conspiracy.” Id. (quoting Matsushita, 475 U.S. at 588) (brackets omitted). The Seventh Circuit
set forth its formulation for sufficiency of the evidence in an antitrust conspiracy case as follows:
(1) is the plaintiff’s evidence of conspiracy ambiguous, i.e., is it as consistent with
the defendants’ permissible independent interests as with an illegal conspiracy; and,
if so, (2) is there any evidence that tends to exclude the possibility that the
defendants were pursuing these independent interests.
Market Force Inc. v. Wauwotosa Realty Co., 906 F.2d 1167, 1171 (7th Cir. 1990) (quoting
Gibson v. Greater Park City Co., 818 F.2d 722, 724 (10th Cir. 1987)); see Serfecz, 67 F.3d at
599.
The Court did not previously decide and does not now hold that the standard for
evaluating evidence of a conspiracy in the antitrust context should always be applied to
allegations of fraud in a bankruptcy case. On this issue, the Court previously held only that the
Plaintiff’s evidence of conspiracy was sufficient to overcome summary judgment even with the
application of a heightened conspiracy standard. As the Court held: “the full context of the
parties’ dealings makes the inference of collusion more reasonable” than the inference of
independent action, and therefore whether or not the heightened standard for substantiating a
conspiracy in the antitrust context applied, the evidence produced by the Plaintiff satisfied that
standard. Boyer, 374 B.R. at 662. For the reasons discussed below, the Court finds that the
Plaintiff’s evidence still establishes an inference of collusion between the GT Defendants and
Defendant Arlington which is more reasonable than the inference that the GT Defendants and
Defendant Arlington were merely pursuing independent interests. Because the Court finds that
the evidence of conspiracy is not ambiguous, i.e., it is not as consistent with the Defendants’
permissible independent interests as with an illegal conspiracy, the Court does not require the
Plaintiff to produce evidence tending to exclude the possibility that the Defendants were
pursuing independent interests instead of colluding.
30

Specifically, the Defendants offer the following arguments that they engaged in
independent, legitimate business conduct. The Defendants argue that the February and March
entries in Exhibit V merely represent Comerica’s continuing changes to the Gildeas’ offer of
January 6, 2003, and do not suggest a new offer or any continuing involvement by the GT
Defendants. As discussed above, the Court finds this reasoning unpersuasive in light of the
number of references in Exhibit V suggesting that the GT Defendants were still actively
bargaining with Comerica. The Defendants also argue that the March 3 fax does not contain
terms normally associated with an offer. But if it represented nothing more than Comerica’s
agreement to an offer previously tendered by the GT Defendants, then it would have been
reasonable for Comerica to communicate its acceptance in light of the GT Defendants’ previous
offer, and not to include all the terms normally associated with an offer. The Defendants argue,
additionally, that the terms included in the March 3 fax would have required them to pay much
more than the assets were actually worth. But the Court finds that the $4.895 million valuation of
the Debtor’s assets—evidence submitted by the Defendants—undercuts the Defendants’
argument. The Defendants continue to argue that they could not have accepted the terms of the
March 3 fax because it included an ongoing business relationship with Comerica, a relationship
the Defendants argue was irrevocably broken by March 2003 due to various factors including
Comerica’s restriction of the Debtor’s use of its cash collateral account. But Court finds that,
according to Exhibit V, the relationship between the GT Defendants and Comerica continued at
least until March 4 when the proposal under discussion was described as “[t]he new Gildeas’
offer.” (Zarb Dep. I Ex. V, ECF No. 215-9 at 47.) Finally, the Defendants argue that it was
impossible for the GT Defendants to accept the March 3 fax offer because of its terms which
required a cash investment of $650,000, and because it did not address their need for working
capital. Both Defendants Motter and Christopher Gildea assert that on March 3 it was impossible
for the GT Defendants to raise $650,000 and that without working capital (i.e. use of the cash
31

collateral account) they could not operate a business. The Court finds these assertions to be
questions of fact for a jury to decide, particularly in light of the following: The Debtor’s Ledger,
to which the Defendants have offered no objection, shows that although the accounts receivable
on March 3 amounted to only $328,000, by April 3 the accounts receivable rebounded to over
$663,000. Furthermore, the Plaintiff has introduced evidence that the GT Defendants had the
possibility of partial financing from Huntington Bank, financing from Greenfield Commercial
Credit at least as of November 2002, and a loan of $250,000 from the Fort Wayne Community
Development Corporation, contingent on the GT Defendants obtaining other financing within six
months of January 16, 2003. Finally, as previously highlighted, the Court accepts as a reasonable
inference in favor of the Plaintiff the possibility that the terms of the March 3 fax represented an
offer from the GT Defendants to Comerica. In light of the Court’s reasonable inference, it is
reasonable to suppose that a party making an offer believes it is possible to accept it. Given all
the evidence before the Court, there is a material question of fact concerning whether the GT
Defendants declined the terms contained in the March 3 fax because of an agreement with
Defendant Arlington to control the price of the Debtor’s assets at auction.
The Defendants cite the Supreme Court’s opinion in First National Bank of Arizona v.
Cities Service Co. for the proposition that declining a business deal only raises the inference of
collusion if the business deal was a good one. 391 U.S. 253, 279 (1968) (“[I]t is only the
attractiveness of the petitioner’s offer that makes failure to take it up suggestive of improper
motives.”). The Court has already analyzed the reasons that the terms of the March 3 fax may or
may not have represented an attractive business opportunity for the GT Defendants. The Court
notes, additionally, that the inference of collusion arises from more than just the GT Defendants
turning down one particular business proposal on or about March 3, 2003. The evidence before
the Court shows that by March 2003, some or all of the GT Defendants had been actively
pursuing financing to purchase the assets of the Debtor for at least eight months. The GT
32

Defendants admit to submitting the Amended Plan Offer in July 2002, three distinct offers in
December 2002 and January 2003, and another proposal as an attachment to the Sale Motion in
February 2003. Yet, they not only spurned a financing proposal in early March 2003 which
would have allowed them to realize the goal they had been pursuing for so long, they also ceased
any further negotiations with Comerica for financing. Even if the March 3 fax represented an
offer from Comerica to the GT Defendants, and even if that offer were unpalatable from a
business perspective, the facts before the Court still show that after declining the March 3 fax
terms the GT Defendants made no further efforts to obtain financing for the following month
until the auction. The Court finds that the GT Defendants’ larger course of conduct—in addition
to the decision not to accept the terms of the March 3 fax—reasonably suggests that the GT
Defendants ceased their search for financing because they had an agreement with Defendant
Arlington to obtain the assets of the Debtors in a mutually beneficial manner.
As the Trap Rock court noted, agreements to control the price of a debtor’s assets at
auction are not likely to be reduced to writing. Trap Rock, 42 F.3d at 753. The Plaintiff’s
evidence is therefore—necessarily—circumstantial evidence showing why an inference of
collusion is reasonable in light of the relationship between the parties. Because the Court finds
that the inference of collusion is more reasonable than the inference that the Defendants acted
independently, a reasonable jury could conclude from all the evidence that there was an
agreement between the Defendants intended to control the price of the Debtor’s assets at auction.

b.

Whether an Agreement by the Defendants Could Have Actually Controlled the Price at
Auction
The Court finds, secondly, that if an agreement existed between the GT Defendants and

Defendant Arlington, it could have controlled the price at auction within the meaning of
§ 363(n). As the Trap Rock court stated: “To control a price is to exercise restraining or directing
33

influence over it; to regulate or curb, dominate, or rule it. In such context the term control
implies more than acts causing an incidental or unintended impact on the price; it implies an
intention or objective to influence the price.” Trap Rock, 42 F.3d at 752 (quotation marks and
citation omitted). The Court has previously held that the agreement between Comerica and
Defendant Arlington to accept Defendant Arlington’s $2.725 million offer as a stalking horse bid
at the auction was not an agreement to control the price at auction within the meaning of
§ 363(n) because it was designed to set the floor for bidding, not to bring down the final sale
price. The Court agrees with the Defendants that an agreement proscribed by § 363(n) must do
more than have the intention of influencing the sales price—it must actually influence the price.7
The Court finds that, under the facts of this case, an agreement between the GT Defendants and
Defendant Arlington could have actually controlled the auction price within the meaning of
§ 363(n), in spite of Comerica’s status as an undersecured creditor.
The Defendants argue that Comerica’s right to credit bid the total amount of its claim
against the assets of the Debtor—which all parties acknowledge was well in excess of the
amount paid for the assets of the Debtor at auction8—negates the elements of a claim under
§ 363(n) because Comerica alone controlled the price at the auction. Specifically, the Defendants
argue that when Comerica credit bid an amount less than the amount of Defendant Arlington’s
bid, Comerica controlled the price at auction by not credit bidding the full amount of its claim.
The Plaintiff responds that the plain language of the statute allows a § 363(n) claim where there
is a secured creditor, whether or not that secured creditor is in an undersecured position. The
Defendants reply that while the Plaintiff certainly has standing to bring a § 363(n) claim, he
cannot establish the elements of such a claim because Comerica as the undersecured

7

The Defendants are incorrect in suggesting that the Court’s August 2007 analysis equated
control under § 363(n) with mere intent to control apart from actual control.
8

Comerica filed a proof of claims in the bankruptcy proceedings for over $7.8 million.

34

creditor—and Comerica alone—controlled the price at auction.
In support, the Defendants cite to cases and a statute with varying degrees of connection
to the statutory right to credit bid. They cite a United States Bankruptcy Court decision stating
that an undersecured creditor “could simply bid in the amount of its debt at the sale and thereby
control the amount of the sales price.” In re Dewsnup, 87 B.R. 676, 683 (Bankr. D. Utah 1988).
They point the Court to the exception to the protections offered to nonrecourse creditors under
§ 1111(b)(1)(A)(ii) of the Bankruptcy Code, providing no protection to a nonrecourse creditor if
such creditor already has the right to credit bid under § 363. Finally, the Defendants argue that
the case of In re Hat, 310 B.R. 752 (Bankr. E.D. Cal. 2004), shows that a court-designed
equitable remedy similar to credit bidding ensures competitive bidding.
The Court agrees with the Defendants that the ability to credit bid could allow an
undersecured creditor to control the price at auction. See Dewsnup, 87 B.R. at 683 (the
undersecured creditor “could . . . control the amount of the sales price”) (emphasis added).
However, where the potential bidders at a § 363 sale collude to control the price and their
collusion is not uncovered, it is their agreement, and not the undersecured creditor’s bid, that
actually controls the price at auction within the meaning of § 363(n). “To control a price is to
exercise restraining or directing influence over it; to regulate or curb, dominate, or rule it.” Trap
Rock, 42 F.3d at 752 (quotation marks omitted). If the undersecured creditor has full information
about the value of the assets as determined by the interest the assets generate at auction and the
number of parties interested in bidding on them, then the undersecured creditor’s credit bid could
dominate or rule the price at auction. But if the undersecured creditor’s belief about the value of
the collateral is clouded by deception, then it is the agreement of the colluding parties and not
the misinformed credit bid that dominates or rules the price at auction. The Defendants’ citation
to In re Hat illustrates the point. The Hat court fashioned a remedy much like credit bidding
because it was informed about the collusion between the potential bidders at the auction. If the
35

collusion had not come to light, then the collusive agreement between the potential bidders
would have controlled the price at auction. Further, the Hat court’s remedy also included a
requirement that in the subsequent auction “all investors, co-owners and sources of financing in
connection with any bid” be identified in writing. Hat, 310 B.R. at 761. Without such full
disclosure, there could be no competitive bidding. The Defendants cite to § 1111(b)(1)(A)(ii) as
part of their argument that “an undersecured creditor will act in its own economic best interest.”
(GT Defs.’ Br. in Supp. 5; Def. Arlington’s Br. in Supp. 5.) But collusion between potential
bidders as outlined in § 363(n) can thwart an undersecured creditor’s attempt to act in its best
economic interest. Section 363(n) exists precisely because collusive agreements between
potential bidders can actually control the price at auction, and an undersecured creditor unable to
credit bid in its economic best interest is damaged by such deception.9
Thus, the Defendants’ arguments about the impossibility of anyone except Comerica
controlling the price at auction ring hollow. The Defendants argue that no agreement between
the Defendants could have actually controlled the price at auction “as the parties had no ability
to control the bidder with the right of first refusal—which solely was Comerica.” (GT Defs.’ Br.
in Supp. 19; see Def. Arlington’s Br. in Supp. 19.) But making all reasonable inferences in favor
of the Plaintiff, the Defendants did have the ability to control Comerica—by a less than full
disclosure about the identities of the parties to Defendant Arlington’s bid, which convinced
Comerica to enter a low credit bid in order to get some recovery. It is undisputed that the
bankruptcy court’s order required all bids to fully disclose the identities of the bidding parties,
yet the schedule that would have identified the bidders was not included with Defendant
Arlington’s April 2, 2003, bid. As Comerica Vice President Zarb stated in his deposition, part of

9

The Court notes that many bankruptcies involve undersecured creditors with the ability to credit
bid. If the Court accepted the Defendants’ policy argument that claims under § 363(n) are impossible
where an undersecured creditor can credit bid, the exception could effectively swallow the rule.

36

the reason Comerica accepted a low bid from Defendant Arlington instead of entering a higher
credit bid was that “Cash is king. Cash has more value than other things.” (Zarb Dep. 149.) The
Plaintiff argues this point, urging that had Comerica known the GT Defendants were involved
with Defendant Arlington’s bid, it would have entered a credit bid more in line with the
financing proposal for the GT Defendants already approved by Comerica. The Plaintiff’s
argument on this point is strengthened by the transcript from the March 5 hearing before the
bankruptcy court which shows that both Comerica and the Committee of Unsecured Creditors
were ready to oppose any effort by the GT Defendants to purchase the assets of the Debtor
cheaply. The Defendants, in response to the Plaintiff’s argument, appear to make the Plaintiff’s
point, stating: “Comerica was not obligated to consent to a sale for an amount less than it
believed would be in its best interest.” (Def. Arlington’s Reply 9, ECF No. 227; GT Defs.’ Reply
9, ECF No. 236.) The Defendants are quite correct that Comerica’s action was based on what it
believed was in its best interest. But § 363(n) exists to protect all creditors from being deceived
by a collusive agreement between potential bidders, including those in a powerful bargaining
position based on their ability to credit bid.
Making all reasonable inferences in favor of the Plaintiff, the Defendants formed a
collusive agreement to control the price at auction by not bidding against each other, and by not
revealing that the GT Defendants were part of Defendant Arlington’s bid. The Court finds that
such an agreement—if it existed—could have actually controlled the price at the auction by
influencing Comerica’s credit bid.

c.

Evidence that the Actual Value of the Debtor’s Assets Exceeded the Auction Price
The Court finds, thirdly, that the Plaintiff has enough admissible evidence that the value

of the assets sold at auction exceeds the auction price to overcome summary judgment. Because
the Plaintiff is seeking damages under § 363(n) instead of an avoidance action, the Plaintiff must
37

show that there are actual damages. He can do this by showing that the value of the Debtor’s
assets at the time of the auction exceeded the auction price. See Landscape Props., 46 F.3d at
1423 (upholding a district court jury instruction which listed the following as an element of the
§ 363(n) claim: “that the value of the property at the time of the approval of the sale by the Court
. . . exceed[ed] the purchase price”); In re Edwards, 228 B.R. 552, 566 (Bankr. E.D. Pa. 1998)
(“Absent a showing that the agreement actually did deprive the estate of fair value for the assets,
the sale should be confirmed.”). The Defendants argue that the Debtor’s assets were necessarily
sold for their fair market value because Comerica consented to the sale. The Defendants also
argue that the Plaintiff has no admissible evidence from which he can show that the actual value
of the assets on the date of the auction exceeded the auction price. For the reasons below, the
Court disagrees on both points.
As an initial matter, consistent with the discussion above, Comerica’s approval of
Defendant Arlington’s bid was based upon what Comerica knew about the value of the assets.
The Defendants argue from the case of In re Dever, 164 B.R. 132 (Bankr. C.D. Cal. 1994), that
an undersecured creditor at a § 363 sale must necessarily receive either the fair market value of
the collateral or the collateral itself. Id. at 135 (“If an undersecured creditor forecloses, one of
two things happens: either the creditor is paid in cash the fair market value of the property . . . or
the creditor buys the property itself by credit-bid.”). But the Defendants’ statement of their
argument is again instructive: “The statutory protections built into the Bankruptcy Code assure
that undersecured creditors receive either what they believe is the value of their collateral or the
collateral itself.” (GT Defs.’ Br. in Supp. 8; Def. Arlington’s Br. in Supp. 8.) The Defendants
acknowledge that undersecured creditors’ recovery is based on “what they believe is the value of
their collateral.” When the bidding process is not manipulated, an undersecured creditor’s
informed belief about the value of its collateral will likely ensure that the undersecured creditor

38

either consents to an auction price10 or credit bids to purchase the assets. But when the
undersecured creditor is deceived about the value of the collateral by potential bidders colluding
to control the price at auction, its low credit bid is not dispositive of fair market value.
As to the evidence necessary to show that the value of the Debtor’s assets on the date of
the auction exceeded the auction price, the Court has already addressed the admissibility of
many documents, and finds that the Plaintiff has produced enough evidence to overcome
summary judgment on this issue. Specifically, again making all reasonable inferences in favor of
the Plaintiff, the Court notes the following evidence, all of which suggests the Plaintiff will be
able to prove damages at trial: Exhibit G to Zarb’s deposition, admitted by the Defendants,
includes a valuation of the Debtor’s assets at $4.895 million as of February 12, 2003 (Zarb Dep.
I Ex. G, ECF No. 215-9 at 35); Badie admitted that he calculated a net gain of over $1 million on
the purchase of the Debtor’s assets, to be realized by the GT Defendants and Defendant
Arlington (Badie Dep. 67–68); Exhibit V to Zarb’s deposition suggests that the financing
proposal approved by Comerica represented the GT Defendants’ offer to purchase the Debtor’s
assets for approximately $3.7 million; even the liquidation value of the assets as of the risk rating
and loan recommendation of February 13, 2003, was at least $3.1 million—still $375,000 more
than the price Defendant Arlington paid at auction (Zarb Dep. I Ex. G, ECF No. 215-9 at 29).
Furthermore, Defendant Christopher Gildea’s August 15, 2003, letter to First Federal Bank of
Huntington is admissible against Defendant Christopher Gildea and indicates that the value of
the assets purchased at auction was $5 million. (Letter, ECF No. 80-2.) Finally, it is undisputed
that the GT Defendants purchased GTA Acquisition from Defendant Arlington on July 25, 2003,
for $625,000, and that they paid Defendant Arlington $300,000 on the date of the Buyout
10

The Court need not decide whether an undersecured creditor’s consent to an auction price is
always dispositive of the fair market value of the assets. The Court holds only that in the case of
deception and collusion between potential bidders, an undersecured creditor’s consent to an auction price
is not dispositive of the fair market value of the assets.

39

Agreement. The Court understands the Defendants’ argument that Badie’s calculation was
merely a profit projection based on the investment of time and money, and based on incurring
the risk of the investment. Nevertheless, the Court finds that his projection of a net profit, a profit
Defendant Arlington realized shortly after the transaction, is not irrelevant to the question of the
value of the assets on the date of the auction. The Court also understands the Defendants’
argument that the values in Exhibit G were calculated two months before the auction. But the
Court finds that these valuations are also not irrelevant to the value of the assets on the date of
the auction. As to whether and how much money the Debtor was losing, the Court finds that a
jury can answer that question in light of the evidence adduced by the Plaintiff.11
Further, the Court need not decide whether a liquidation value of the assets or a going
concern value was appropriate as of the auction date. The Seventh Circuit has stated—not in the
context of § 363(n)—that liquidation value is the appropriate valuation method where an entity is
on its deathbed. In re Taxman Clothing Co., 905 F.2d 166, 170 (7th Cir. 1990) (stating that
“going-concern value is not the proper standard if the business is ‘on its deathbed,’” but finding
that the business was not on its deathbed) (quoting In re Utility Stationery Stores, Inc., 12 B.R.
170, 176 (Bankr. N.D. Ill. 1981)). The Court notes, however, that the evidence on this point is
inconclusive. Defendant Arlington’s agreement with Comerica to purchase the assets mandated
that the Debtor “continue to operate in the ordinary course of business” until the closing date.

11

The Defendants are correct that in the absence of any evidence of damages summary judgment
would be appropriate. Ray v. State Farm Mut. Auto. Ins. Co., No. 1:05-cv-1782-DFH-TAB, 2008 WL
474220, at *2–3 (S.D. Ind. Feb. 19, 2008) (granting summary judgment because the plaintiff’s evidence
did “not meet plaintiff’s burden of coming forward with evidence that would allow any damage award
based on more than speculation or conjecture”). Further, where the scope and existence of damages is
“difficult to ascertain” due to the complexity of a case, expert testimony may be required to show
damages. In re Warner Commc’ns Sec. Litig., 618 F. Supp. 735, 744 (S.D.N.Y. 1985). But the Defendants
have not cited a case holding that expert testimony is required to show the existence of damages under
§ 363(n), and in light of the significant evidence regarding the value of the assets of the Debtor, the Court
finds in this case that expert testimony is not required to show that damages exist at the summary
judgment stage, but may be helpful when this case proceeds to trial.

40

(Mem. of Agreement ¶ 2.6, ECF No. 215-12.) Moreover, when Defendant Arlington purchased
the assets of the Debtor, it did so with the understanding that the Debtor would “use its best
efforts to operate the Business only in the ordinary course and in a manner consistent with its
past operations, keep and preserve its Business and Assets in present condition and repair and
maintain insurance thereon in accordance with present practice, and . . . use its best efforts to
preserve its Business and organization intact” until the date of closing. (Asset Purchase
Agreement ¶ 11.5, ECF No. 215-4.) The evidence suggests Defendant Arlington purchased the
Debtor’s assets as a going concern, and that such a valuation may be appropriate if the Plaintiff
can produce admissible evidence on that point at trial. In any case, that is for the Plaintiff to
show at trial.
Because it appears that the Plaintiff has put forward evidence sufficient to support a jury
finding of damages, the Court finds the Plaintiff has introduced enough admissible evidence to
overcome summary judgment on the question of damages.

C.

The Plaintiff’s Request for Attorney’s Fees
The Plaintiff again urges the Court to award him his fees incurred in opposing these

motions under 28 U.S.C. § 1927, which allows a court to award attorney’s fees where an
attorney “multiplies the proceedings in any case unreasonably and vexatiously.” The Seventh
Circuit has stated that a court may award attorney’s fees under § 1927 where an attorney has
acted in an “objectively unreasonable manner.” Jolly Grp., Ltd. v. Medline Indus., Inc., 435 F.3d
717, 720 (7th Cir. 2006) (quoting Pacific Dunlop Holdings, Inc. v. Barosh, 22 F.3d 113, 119 (7th
Cir. 1994)). “The purpose of § 1927 is to deter frivolous litigation and abusive practices by
attorneys and to ensure that those who create unnecessary costs also bear them.” Riddle &
Assocs., P.C. v. Kelly, 414 F.3d 832, 835 (7th Cir. 2005) (quotation marks omitted). The Plaintiff
argues that in light of the February 26, 2009, telephonic conference where this Court ordered the
41

Defendants not to file summary judgment motions on issues already decided by the Court, the
present motions before the Court deserve sanctions.
The Court disagrees. The present Motions for Summary Judgment and Motions to Strike
involve the tail end of an extended discovery and litigation process, and contain evidentiary and
legal arguments not previously raised. Under the circumstances before the Court, § 1927
sanctions are inappropriate, and the Plaintiff’s requests for attorney’s fees will be denied.

D.

The Plaintiff’s Motion for an Order Summarily Striking the Defendants’ Motions
Because the Court has considered and ruled on all dispositive motions, the Plaintiff’s

Motion for an Order Striking or Summarily Denying Defendants’ Motions Addressed to Count
III [ECF No. 216] will be denied as moot.

ORDER
For the reasons stated, the GT Defendants’ Motion for Summary Judgment on Count III
of Trustee’s Second Amended Complaint [ECF No. 208] and Defendant Arlington Capital’s
Motion for Summary Judgment on Count III of the Trustee’s Second Amended Complaint [ECF
No. 212] are DENIED. Defendant Arlington Capital’s Motion to Strike [ECF No. 225] and the
GT Defendants’ Motion to Strike [ECF No. 234] are GRANTED IN PART, DENIED IN PART
and DENIED IN PART AS MOOT. Finally, the Plaintiff’s Motion for an Order Striking or
Summarily Denying Defendants’ Motions Addressed to Count III [ECF No. 216] is DENIED AS
MOOT.
SO ORDERED on May 17, 2012.
s/ Theresa L. Springmann
THERESA L. SPRINGMANN
42

UNITED STATES DISTRICT COURT

43