NYE et al v. INGERSOLL-RAND COMPANY
Filing
664
OPINION fld. Signed by Judge Dickinson R. Debevoise on 11/9/11. (sr, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
WALTER NYE, ET AL,
Plaintiffs,
Consolidated Civ. No. 08-3481 (DRD)
Assoc. Civil Action Nos. 08-4260 and
08-5371
v.
OPINION
INGERSOLL RAND COMPANY,
Defendant.
Appearances by:
THE LANIER LAW FIRM, PLLC
by:
Richard D. Meadow, Esq.
Evan M. Janush, Esq.
126 East 56th Street
6th Floor
New York, NY 10022
THE LANIER LAW FIRM, PC
by:
W. Mark Lanier, Esq.
Eugene R. Egdorf, Esq.
Kevin P. Parker, Esq.
6810 FM 1960 West
Houston, Texas 77069
Attorneys for Plaintiffs, Walter Nye, et. al.
HELLRING LINDEMAN GOLDSTEIN & SIEGAL LLP
by:
Bruce S. Etterman, Esq.
One Gateway Center
Newark, NJ 07102
RUSTY HARDIN & ASSOCIATES
by:
Rusty Hardin, Esq.
Ryans Higgins, Esq.
5 Houston Center
1401 McKinney, Suite 2250
Houston, TX 77010
Attorneys for Plaintiffs, Brown, et. al.
SIMPSON THACHER & BARTLETT LLP
by:
Barry R. Ostrager, Esq.
Lynn K. Neuner, Esq.
425 Lexington Avenue
New York, New York 10017
McCARTER & ENGLISH, LLP
by:
Anthony Bartell, Esq.
Steven H. Weisman, Esq.
Four Gateway Center
100 Mulberry Street
Newark, NJ 07102
Attorneys for Defendant
2
DEBEVOISE, Senior District Judge
This consolidated action incorporates cases brought by similarly situated Plaintiffs: Nye,
et. al. v. Ingersoll Rand Company, Civ. No. 08-3481, Brown, et. al. v. Ingersoll Rand Company,
Civ. No. 08-4260, and Bond, et. al. v. Ingersoll Rand Company, Civ. No. 08-5371. Plaintiffs are
one hundred thirty former current and former employees of the Dresser-Rand Company
(“Dresser-Rand”), a former subsidiary of Defendant Ingersoll-Rand Company (“Ingersoll
Rand”). Plaintiffs allege that Defendant breached the terms of a Sales Incentive Plan (“2000
SIP”) when it failed to pay them benefits due upon the sale of Dresser-Rand. The Court has
granted summary judgment as to liability against Defendant with respect to all but three of the
plaintiffs. (Doc. Nos. 355, 529). The claims of the remaining plaintiffs and the calculation of
damages remain for a jury.1
Presently before the Court are multiple motions concerning the upcoming damages trial.
Plaintiffs have moved to exclude Defense experts Dale Kitchens, Stuart Pachman, and David
Smalstig. Plaintiffs have also moved to: (1) preclude the use of late-produced documents; (2)
preclude the use of amended interrogatories; (3) exclude evidence that the SIP expired; (4)
exclude evidence that Plaintiffs investigated legal options concerning the SIP before accepting
the 2004 Plan; (5) exclude extrinsic evidence which varies the terms of the SIP and Hanover
Purchase Agreement Contracts; (6) exclude the video depositions of Sammy Antoun and John
Gallagher; (7) exclude evidence related to taxes, capital contributions or pre-paid insurance
write-offs that Ingersoll Rand wishes to deduct from the gross sale price; (8) exclude the 2005
Estimated FAS 106 Expense document; and (9) preclude testimony or argument concerning
Plaintiffs’ compensation after the sale of Dresser-Rand.
1
In evaluating the logistical difficulties in selecting and instructing a jury as to liability and
damages, the Court has decided to separate the issues for trial. The damages trial will be held
first, on November 15th.
3
In turn, Defendant has moved to exclude Plaintiffs’ expert John Cherpock. In addition,
Defendant has moved to: (1) exclude evidence of inter-company cash transfers; (2) preclude
comparisons between the Bond Plaintiffs and Plaintiffs Titus, Rostan, and Johnson; (3) compel
the testimony of Plaintiffs Nightingale, Stonebarger, and Buehler; (4) introduce the 2004 Plan at
Trial; and (5) clarify whether the Court has pre-judged its long list of proposed deductions from
the gross sale price for Dresser-Rand.
I.
BACKGROUND
The facts of the case are long familiar to the parties and are discussed at length in this
Court’s prior Opinions. See, e.g., Doc. No. 355. As such, the relevant facts need be only briefly
summarized.
In early 2000, Ingersoll Rand began to solicit buyers for Dresser-Rand, a recently
acquired subsidiary. To further that purpose and to achieve a desirable sale price for DresserRand, Ingersoll Rand adopted the Sales Incentive Plan (“2000 SIP”) (Doc. No. 566-3). The 2000
SIP was meant “to reward key employees for their contributions toward maximizing [earnings]
and consequently, a desirable sale price for Dresser-Rand Company.” Id. It did so by providing
Sale Value Units (“SVUs”) to select employees that would trigger payments from Ingersoll Rand
once Dresser-Rand was sold. The size of the payments increased linearly with the ultimate sale
price, in accordance with a predetermined formula.
The 2000 SIP included a section setting forth how the value of an SVU would be
calculated. That provision states, in its entirety:
PERFORMANCE MEASUREMENT
The value of the Dresser-Rand Sale Incentive Plan is based on one component;
the net sale price of Dresser-Rand Company. The threshold net D-R sale price for
the success pool payout curve to start payment above a base of $1.25 per SVU is a
sale price of $500MM net of retained liabilities and sale expenses as determined
4
by Ingersoll-Rand Controller's office. The payout curve starts with an SVU value
of $1.25 that will be paid for any sales value. The payout is only for a successfully
completed sale as determined by IR of Dresser-Rand Company.
The success pool (payout curve) generated will be paid based on the Net proceeds
from the sale of D-R as summarized below:
Gross Selling Price/Proceeds
Less all transaction fees; such as:
Fees paid to investment bankers
Amounts paid to bankers or others to finance the sale
Other transaction fees
Less any liabilities associated with D-R that are assumed by Ingersoll-Rand
Company
Note: In the event IR accepts a note receivable or other equity as part of the sale it
will have no consequence on the above calculation of net proceeds.
Awards under the 2000 SIP are calculated on the basis of a linear payout function which
rewards sale prices above “$500MM net of retained liabilities and sale expenses.” Payouts begin
at $1.25 per SVU and increase to $13.58 at $600MM and $38.24 at $800MM. The 2000 SIP also
provides that “[t]he sale of any major Dresser-Rand assets prior to the complete sale of the
Company will be included in the overall net sale price. This overall net sale price will be used to
determine the value of an SVU.” Finally, the 2000 SIP contains a payment section which states,
in part, that “[a]ny award under this plan will be paid no later than 90 days following the closing
date of the sale of Dresser-Rand Company.”
In spite of high hopes, efforts to sell Dresser-Rand initially failed. When the company
could not be sold by the end of 2002, Ingersoll Rand temporarily abandoned its sale activities.
Years passed without significant attempts to market the subsidiary to potential buyers. Then, in
2004, Ingersoll Rand received an unsolicited offer from a would-be acquirer, First Reserve. In
light of this new offer, management restarted the sales process and instructed its agents to
formulate a deal.
5
In spite of the intervening years, executives at Ingersoll Rand were cognizant of 2000 SIP
and the payout schedule that it mandated upon sale. While management wanted Dresser-Rand
employees to continue to work hard and boost Dresser-Rand’s financial performance, it also
wished to limit the amount of money that it would be required to pay in the event that a sale was
consummated. In addition, Ingersoll Rand did not want the defection or retirement of critical
employees to jeopardize the sale. In this vein, Ingersoll Rand devised a new incentive plan (the
“2004 Plan”). Various materials were prepared for Ingersoll Rand executives which highlighted
the thrift of the new arrangement relative to the 2000 SIP.
Ingersoll Rand announced the terms of the 2004 Plan in a letter distributed to DresserRand employees at a July 16, 2004 meeting. Other similar letters were sent to a broader group of
employees on August 26, 2004 (the “Henkel Letters”). In each letter, Ingersoll Rand claimed that
the 2000 SIP was no longer in effect, writing that “the sale value units awarded for 2001, 2002
and 2003 have expired, as have all rights under that plan.” The Henkel Letters promised cash,
bonus opportunities, and in some cases stock options for employees who elected to enroll in the
2004 Plan. The letters required the recipients to sign and return the letters promptly or they
would not be eligible for the benefits. However no portion of the letters suggested that the
recipients were giving up any rights by enrolling. All of the Nye Plaintiffs signed and returned
the Henkel letters. All of the Brown Plaintiffs except for Arthur Titus, William Rostan, and
Gregg Johnson also signed the Henkel letters.2
On October 31, 2004, Ingersoll Rand sold Dresser-Rand to First Reserve for
approximately $1.2 billion. After the sale was finalized, Ingersoll Rand paid Dresser-Rand
2
Titus, Rostan, and Johnson left Dresser-Rand well in advance of the Henkel letters—
Titus and Johnson in 2003 and Rostan in early 2004.
6
employees the benefits due under the 2004 Plan, totaling approximately $23.5 million. In
addition, approximately $11 million in stock options vested early due to the sale.
In 2005 Ingersoll Rand entered into litigation with a number of employees who had left
the company prior to the sale date (the “Antoun” and “Barnett” actions) (Ingersoll Rand
Company v. Barnett, et.al., and Antoun, et. al. v. Ingersoll-Rand, Consol. Civ. No. 05-1636
(DRD)). The Antoun and Barnett plaintiffs claimed that the 2000 SIP had not terminated and that
as retirees, they were entitled to pro-rated benefits under the plan. On October 26, 2006, this
Court ruled that the 2000 SIP had not expired and that the Barnett and Antoun Plaintiffs were
each “retirees” as contemplated under the agreement. Following the decision, on January 15,
2008, both cases were dismissed pursuant to a confidential settlement.
The consolidated action currently before the court asserts claims for breach of the same
agreement that was at issue in Antoun and Barnett— the 2000 SIP. However, unlike the retirees
in Antoun and Barnett, many of the Nye and Brown plaintiffs worked for Dresser-Rand until it
was sold.3 Ingersoll Rand contends that the 2000 SIP expired prior to the sale of Dresser-Rand
and that in any event, the Plaintiffs surrendered any right to payment under the 2000 SIP by
accepting payments under the 2004 Plan. On October 25, 2010 and May 10, 2011, the Court
issued a set of Opinions and Orders granting summary judgment with respect to liability on
behalf of each of the Bond, Nye and Brown plaintiffs except for Titus, Rostan, and Johnson.4
The instant set of motions concern the upcoming damages trial.
3
In contrast, the Bond Action involves individuals who worked for Dresser-Rand at the
time that the 2000 SIP was promulgated but left the company prior to the sale.
4
The October 25, 2010 Opinion held that the Bond plaintiffs were retirees as contemplated
under the terms of the 2000 SIP. (Doc. No. 355). The May 10, 2011 Opinion held that the 2000
SIP had not expired, and that the Nye and Brown Plaintiffs were not estopped from collecting on
it by virtue of their acceptance of the 2004 Plan. (Doc. No. 529). The status of Plaintiffs Titus,
7
II.
DISCUSSION
Rule 702 governs the admissibility of expert testimony. It allows a qualified individual
who possesses “scientific, technical, or other specialized knowledge” to testify as an expert if “it
will assist the trier of fact to understand the evidence or to determine a fact in issue.” FRE 702. A
witness may be qualified by “knowledge, skill, experience, training, or education.” Id. The
expert may offer his or her opinion on matters outside the scope of his personal knowledge only
if “(1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of
reliable principles and methods, and (3) the witness has applied the principles and methods
reliably to the facts of the case.” FRE 702. Put another way, “Rule 702 has three major
requirements: (1) the proffered witness must be an expert, i.e., must be qualified; (2) the expert
must testify about matters requiring scientific, technical or specialized knowledge; and (3) the
expert's testimony must assist the trier of fact.” Pineda v. Ford Motor Co., 520 F.3d 237, 244 (3d
Cir. 2008).
The “proponent of expert testimony must establish his expert is qualified and his
testimony is admissible by a preponderance of the evidence.” Poust v. Huntleigh Healthcare, 998
F.Supp. 478, 490 (D.N.J. 1998). The Court has an obligation to act as a “gatekeeper” to ensure
the “reliability and relevancy of expert testimony” presented to the finder of fact. Kumho Tire
Co. v. Carmichael, 526 U.S. 137, 152 (1999); See also Daubert v. Merrell Dow Pharms., 509
U.S. 579, 592–593 (1993).
To aid in this inquiry, Daubert and Downing cite several factors for the court to consider
in examining the expert’s methodology “(1) whether a method consists of a testable hypothesis;
(2) whether the method has been subject to peer review; (3) the known or potential rate of error;
Rostan, and Johnson and the appropriate measure of damages for all Plaintiffs were held to
require the adjudication of disputed issues of material fact. Id.
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(4) the existence and maintenance of standards controlling the technique's operation; (5) whether
the method is generally accepted; (6) the relationship of the technique to methods which have
been established to be reliable; (7) the qualifications of the expert witness testifying based on the
methodology; and (8) the non-judicial uses to which the method has been put.” In re Paoli R.R.
Yard PCB Litigation, 35 F.3d 717, 742 (3d Cir. 1994) citing Daubert and United States v.
Downing, 753 F.2d 1224 (3d Cir. 1985).
Applying this standard, the Court will first discuss the motions to exclude or limit the
testimony of the various experts and then turn to the topical in limine motions.
A.
Plaintiff Expert John Cherpock
As a threshold matter, Mr. Cherpock, by virtue of his education, certifications, and
experience, is clearly qualified to render expert opinions concerning the accounting treatment of
business expenses. Mr. Cherpock is a Certified Public Accountant, a Certified Fraud Examiner,
and is additionally certified in Financial Forensics by the American Institute of Certified Public
Accountants. He has over thirty years of experience and a lengthy C.V.
Ingersoll Rand asks that the Court preclude Mr. Cherpock from testifying on several
grounds. First, it argues that his “alternative method” of computing SVU value based on gross
sales price has no bearing on the case. Second, it argues that his conclusions are based entirely
upon Mr. Cherpock’s limited direct experience with mergers and acquisitions. Third, it argues
that Mr. Cherpock does not cite sufficient accounting authorities in his initial expert report. Last,
it argues that Mr. Cherpock improperly opines on the state of mind of Ingersoll Rand and its
executives. The Court will address each claim in turn.
First, the Court has already held that the 2000 SIP unambiguously embraces the “net sale
price” as the benchmark of SVU value. (Doc. No. 603). Indeed, the contract uses the term “net”
9
no fewer than seven times. As such, the Court will preclude any suggestion—from Mr. Cherpock
or anyone else— that the gross sale price be used in determining SVU value. The gross sale price
may be used as a starting point to calculate the net sale price, nothing more.
Second, the contention that Mr. Cherpock’s conclusions are exclusively drawn from his
mergers and acquisitions experience is unpersuasive in light of his extensive accounting training
and multiple expert reports. Mr. Cherpock will not be precluded from testifying on this basis. If
Ingersoll Rand wishes to cross examine Mr. Cherpock with its artfully parsed snippet of
deposition transcript, it may do so.
Third, the methodology articulated in Mr. Cherpock’s expert reports is well reasoned and
supported by his use of and citation to multiple reliable accounting treatises. The Court finds that
it embraces the level of intellectual rigor common among experts in the field. Whether Mr.
Cherpock reaches the appropriate conclusions is a matter for the jury to determine, and Ingersoll
Rand may critique his assumptions and methods at trial. However neither is so obviously suspect
or flimsy as to warrant preclusion as a matter of law.
Last, Mr. Cherpock takes some liberties when he speculates as to the intentions of
Ingersoll Rand in structuring its transactions or characterizes certain determinations as made in
“bad faith.” The jury may come to the conclusion that Ingersoll Rand has acted in manifest bad
faith in attempting to cheat its employees out of money promised under a valid contract. The jury
may also conclude that Ingersoll Rand’s attempt to deduct three hundred million dollars in sales
expenses on a one billion dollar transaction is a continuation of these efforts. However this is not
a matter where expert testimony will assist the fact-finder. Mr. Cherpock may not offer opinions
as to the intentions or motivations of Ingersoll Rand or its employees.
10
B.
Defense Expert John Dale Kitchens
Like Mr. Cherpock, Mr. Kitchens is doubtlessly qualified by virtue of his education,
certifications, and experience. Mr. Kitchens is a Certified Public Accountant with over thirty
years of experience performing audits, quality reviews, investigations, and other assessments of
financial statements. His experiences more than qualify him to offer the type of opinions
contained within his expert report.
Plaintiffs ask the Court to exclude some of Mr. Kitchens’s opinions for several reasons.
First, they claim that his analysis of the Hanover Purchase Agreement is inappropriate, as the
date of sale is a “legal question” about which the expert may not testify. Second, they challenge
the methodology of Mr. Kitchen’s analysis of the transaction. Third, they ask that his analysis of
retiree medical liability be excluded due to its reliance upon the “2005 Estimated FAS 106
Expense” document. The Court will address each claim in turn.
First, while the closing date for the Hanover transaction may be determined through
recourse to the transaction documents, it is not clear that this date governs its inclusion or
exclusion from calculations under the 2000 SIP. The 2000 SIP uses the term “sale” rather than
closing. The substance of Mr. Kitchens’s opinion concerns the date in which the economic
substance of the Hanover sale occurred and the date on which the sale occurred for reporting
purposes. These matters may assist the jury in evaluating the otherwise ambiguous language in
the 2000 SIP that may not be determined as a matter of law. Mr. Kitchens may testify on these
matters.
Second, the methodology undergirding Mr. Kitchen’s report is both well reasoned and
well sourced. While Plaintiffs may cross examine Mr. Kitchens as to whether he has properly
11
interpreted SEC guidance, his reliance upon SAB 30 and SAB 99 is not so clearly improper as to
warrant the exclusion of his testimony.
Third, the 2005 Estimated FAS 106 Expense document is clearly relevant to this case and
will be permitted as evidence provided that it can be properly authenticated. Mr. Kitchen’s
reliance upon this document is proper and does not taint his conclusions.
C.
Defense Expert Stuart Pachman
Mr. Pachman is also highly qualified in his area of expertise, based on his significant
experience in the field of business law. Mr. Pachman has practiced law for over forty years and
has extensive experience in the field.
However the conclusions that Mr. Pachman draws in his expert report are fundamentally
legal conclusions. Mr. Pachman tacitly acknowledges this failing, noting that he provides his
certification “to assist the Court as to how the Transaction would be viewed from the perspective
of a Business lawyer.” (Pachman Rep. 2). Mr. Pachman’s expert report, though well written, is
essentially a legal brief, setting forth a legal interpretation of the contracts at issue based on his
review of the documents in the case. While Mr. Pachman’s opinions are not implausible or
poorly-conceived, this form of expert testimony runs afoul of the Court of Appeal’s prohibition
on legal opinion in the guise of expert testimony.
Defendant attempts to salvage the opinion by characterizing it as a report on the “custom
and practice” of business transactions. However Mr. Pachman’s report is not merely an
anthropological assessment of the culture of business lawyers. He draws specific conclusions
concerning the intentions and legal significance of actions taken in this case. His opinion as to
the legal significance of actions is inappropriate, and to the extent that the parties’ intentions are
unclear, direct testimony is better suited to reveal them. Mr. Pachman may not testify.
12
D.
Defense Expert David Smalstig
Mr. Smalstig is also a highly qualified individual. Mr. Smalstig is a Certified Public
Accountant with over twenty-eight years of experience working at accounting and consulting
firms to provide guidance on accounting, auditing, and other financial reporting practices related
to complex business transactions. Mr. Smalstig is qualified to offer an opinion on the topics
presented to him.
Plaintiffs ask the Court to exclude Mr. Smalstig’s testimony for two reasons. First, they
claim that Mr. Smalstig’s opinions have insufficient “fit” with the facts of this case as they are
predicated on assumptions that contradict the clear language of the SIP. Second they claim that
his analysis of the impact of tax liability incurred by Ingersoll Rand in connection with the
Dresser-Rand sale is irrelevant absent evidence establishing the taxes that Ingersoll Rand
actually paid.
As a preliminary matter, Mr. Smalstig attaches undue importance to the portion of the
second sentence of the “PERFORMANCE MEASUREMENT” section of the SIP. That
provision states that “[t]he threshold net D-R sale price for the success pool payout curve to start
payment above a base of $1.25 per SVU is a sale price of $500MM net of retained liabilities and
sale expenses as determined by Ingersoll-Rand Controller's office.” (emphasis added). Mr.
Smalstig (and Defendant) appear to read this provision as some delegation of authority to the
Ingersoll Rand Controller to define what a “sales expense” is for the purposes of the SIP. Mr.
Smalstig then devotes significant energy to arguing how a Controller—both in the abstract and
the Ingersoll Rand’s Controller specifically—would understand the term “sales expense.”
This method of contract construction is improper, as it would: (1) void other portions of
the contract which more carefully define which expenses are to be included in determining the
13
net sale price under the SIP; and (2) render the contract hopelessly indefinite. Clearly the
Ingersoll Rand Controller cannot arbitrarily designate any expenditure as a sales expense.
Properly read, the quoted language is not a grant of arbitrary authority—rather it provides that
the Ingersoll Rand Controller shall be the party to tabulate the sales expenses. The Controller is
not an interpretive authority; it is a calculator. This is in keeping with both the language of the
contract and the traditional role of a Corporate Controller in tracking corporate expenses.
The SIP provides what expenses can be deducted from the Gross Selling Price/Proceeds
to determine the “Net proceeds from the sale of D-R.” Neither the Controller nor Mr. Smalstig
can add to or subtract from listed expenses, although the practices in other contexts may assist
the jury in determining whether a particular expense falls within the meaning of the language
used in the SIP. Mr. Smalstig’s testimony will be limited to that extent. It will be the function of
the jury to determine the meaning of “Gross Selling Price/Proceeds,” “transaction fees,” “other
transaction fees,” and “sale of any major D-R asset.”
E.
Plaintiffs’ In Limine Motions
1.
Late Produced Documents
Plaintiffs object to the introduction of documents produced after the discovery deadline.
The documents in question have been available to Plaintiffs for many months and Plaintiffs have
made no showing of prejudice. The documents may be introduced, provided that they are
otherwise admissible.
2.
Amended Interrogatories
Plaintiffs object to the introduction of interrogatory answers that they have subsequently
amended, claiming that they are “stale” and “superceded.” Interrogatory answers are clearly
admissible evidence, even if they have been subsequently modified or supplemented. To the
14
extent that the answers are otherwise relevant and proper, both sets of interrogatory answers may
be admitted.
3.
SIP Expiration
Plaintiffs object to the introduction of any evidence to prove that the 2000 SIP “expired”
prior to the sale of Dresser-Rand. The Court has ruled on this matter—at length—and found as a
matter of law that the 2000 SIP did not expire. Defendant may not present evidence or argument
suggesting that the 2000 SIP expired.
4.
Plaintiffs Evaluation of Legal Options
Plaintiffs object to the introduction of evidence concerning their consultation—with each
other and legal counsel—concerning their legal options with respect to the 2000 SIP. Throughout
this case, Defendant has pointed to these consultations as evidence of bad faith conduct and
“double dipping” by Plaintiffs in an attempt to unreasonably collect on two mutually exclusive
employee benefit arrangements.
Plaintiffs’ consultations occurred years after the promulgation of the 2000 SIP. The
meaning of the contract and the value of an SVU are facts independent of any subsequent actions
by Plaintiffs. Evidence of Plaintiffs’ consultations is irrelevant to the case at bar and may not be
introduced.
5.
Extrinsic Evidence on 2000 SIP and Hanover Purchase Agreement
Plaintiffs object to the introduction of extrinsic evidence concerning the date of the
Hanover sale. Plaintiffs argue that this date is conclusively determined by the contract. As stated
above, neither the Hanover Purchase Agreement nor the 2000 SIP defines “sale” in a fashion that
would enable this Court to rule on date of purchase as a matter of law. As such, both parties will
be permitted to introduce evidence to resolve this ambiguity.
15
6.
Video Depositions of Antoun and Gallagher
Plaintiffs wish to exclude the video depositions of Antoun and Gallagher from trial.
Plaintiffs claim that Ingersoll Rand has made no showing that the witnesses are unavailable, that
Plaintiffs were not provided with complete copies of the depositions and exhibits, and that
Plaintiffs have had no opportunity to cross examine Messrs. Antoun and Gallagher.
Defendant represents that it has no ability to compel either witness to appear at trial, and
the Court will take Defendant at its word. Contrary to Plaintiffs’ contention, the depositions and
exhibits have been fully produced by Defendant. While Plaintiffs did not have an opportunity to
personally cross examine the witnesses at deposition, the witnesses in question were well
represented by able counsel with a like interest in creating a useful trial record.
It is unclear from the briefing which sections Defendant intends to introduce. To the
extent that the sections that Defendant seeks to introduce are otherwise admissible, they may be
presented at trial.
7.
Taxes, Capital Contributions, and Pre-Paid Insurance Write-Offs
Plaintiffs wish the Court to rule, as a matter of law, that the taxes, capital contributions,
and pre-paid insurance write-offs claimed by Ingersoll Rand as deductions from the gross sale
price of Dresser-Rand are inappropriate.
Defendants have introduced evidence that the sales taxes, capital contributions and
insurance write-offs would be ordinarily understood by the parties to the SIP to be “sales
expenses” or “transaction fees.” While Plaintiffs may dispute these conclusions, the issue cannot
be resolved as a matter of law and must be submitted to the jury. Both parties may introduce
evidence to permit the jury to determine whether these expenses should be subtracted from the
gross sale price in determining SVU value.
16
8.
2005 Estimated FAS 106 Expenses
Plaintiffs ask the Court to exclude a document titled “2005 Estimated FAS 106
Expenses,” claiming that it was late-produced, hearsay, and cannot be properly authenticated.
The document in question was produced over nine months ago. Plaintiffs have had ample time
investigate this document and/or move for additional discovery. Their arguments concerning
authenticity and relevance are similarly unpersuasive. As Plaintiffs have demonstrated no
prejudice resulting from the late disclosure, Defendant may introduce the document.
9.
Post-Sale Compensation
Plaintiffs finally request that evidence of the Dresser-Rand IPO or other post sale
compensation of Plaintiffs be excluded as irrelevant and prejudicial. Plaintiffs note that
Defendant is not arguing for an offset related to IPO related compensation.
The wealth or poverty of the parties is irrelevant to any issue in this case. Defendant
would doubtlessly object if Plaintiffs sought to introduce evidence that it reported 14 billion
dollars in net revenues last year. Defendant has offered no credible reason why the jury need be
informed of the extent of Plaintiffs’ earnings. Evidence of the IPO or any post-sale compensation
will be precluded.
F.
Defendant’s In Limine Motions
1.
Inter-Company Cash Transfers
Defendant asks the Court to exclude evidence of Ingersoll Rand’s cash management
system. Ingersoll Rand’s cash management policies led to regular inter-company transfers of
cash between subsidiaries and the parent company. These transfers led to receivables
documenting the substantial debt obligations between the parent and subsidiary. Receivables
owed to Dresser-Rand from Ingersoll Rand were transferred to Ingersoll Rand and thereby
17
forgiven in connection with the sale to First Reserve. Plaintiff argues that these inter-company
receivables constituted “major assets” under the SIP. Plaintiff further argues that evidence
concerning the inter-company transfers is necessary for the jury to evaluate whether the intercompany receivables should be added to the gross sale price of Dresser-Rand for the purposes of
determining the value of an SVU.
As stated above, the SIP does not clearly define “major asset.” Given this ambiguity, the
parties will be permitted to present evidence and argument that the inter-company receivables
should or should not be considered for SVU calculation purposes.
2.
Comparisons Between Bond Plaintiffs and Liability Plaintiffs
Defendant asks the Court to prohibit Plaintiffs from arguing that Plaintiffs Titus, Rostan,
and Johnson are entitled to benefits under the SVU by virtue of their similarity to the Bond
Plaintiffs. As the Court will separate the liability trial from the damages trial, it will defer ruling
on this matter.
3.
Testimony of Nightingale, Stonebarger, and Buehler
Defendant asks the Court to compel the testimony of Plaintiffs Nightingale, Stonebarger,
and Buehler. Plaintiffs claim that the designated Plaintiffs are beyond the subpoena power of the
Court and unavailable. Plaintiffs also argue that the witnesses’ deposition testimony will suffice
at trial.
Plaintiff’s position is untenable. The designated plaintiffs are parties to this case and have
voluntarily availed themselves of this Court’s authority as a means to obtain relief against the
Defendant. By filing a lawsuit in this district, Plaintiffs have voluntarily submitted to the
jurisdiction of the Court and its inherent powers to “control the disposition of the causes on its
docket with economy of time and effort for itself, for counsel, and for litigants” Cheyney State
18
College Faculty v. Hufstedler, 703 F.2d 732, 738 (3d Cir. 1983). If Plaintiffs did not want to
come to New Jersey, they should not have filed a complaint here. The designated Plaintiffs will
make themselves available for testimony.
4.
2004 Plan
Defendant seeks—yet again—permission to introduce the 2004 Plan at trial. The 2004
Plan was prepared years after the 2000 SIP and has absolutely no relevance to the construction of
the prior agreement. Defendant seeks to introduce this contract in hopes of painting Plaintiffs as
greedy “double-dippers” who have been already compensated enough. This is the very definition
of prejudice. Defendant may not introduce evidence of the 2004 Plan.
5.
Clarification of September 8, 2011 Ruling
Last, Defendant asks that the Court not prejudge the expenses that it will ask the jury to
deduct from the gross sale price of Dresser-Rand. As previously discussed, both parties will be
permitted to present evidence of the proper calculation of SVU price to the jury. The Court will
not prejudge the evidence.
III.
CONCLUSION
The Court will enter an Order implementing this Opinion.
s/ Dickinson R. Debevoise
DICKINSON R. DEBEVOISE, U.S.S.D.J.
Dated: November 9th, 2011
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