Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_02-cv-01277/USCOURTS-azd-2_02-cv-01277-4/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

FINOVA Capital Corporation, )

)

Plaintiff, ) No. CIV 02-1277-PHX RCB

)

Vs. ) O R D E R

)

Richard A. Arledge, Inc., )

d/b/a Arledge Motor Co., )

et al., )

)

Defendants. ) )

On July 10, 2002, Plaintiff FINOVA Capital Corporation

("FINOVA") filed a complaint against Defendants Richard A.

Arledge, Inc., d/b/a Arledge Motor Co., et al. ("the Arledges"),

in this Court. Compt. (doc. 1). On August 25, 2004, the Court

granted partial summary judgment in favor of the Arledges. Order

(doc. 167) at 33. The bench trial on the remaining claims and

counterclaims between the parties is scheduled to begin on April

11, 2006. Final Pretrial Order (doc. 231). 

Prior to the start of the trial, FINOVA has filed two motions

in limine seeking the exclusion of certain evidence, and a motion 

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to supplement the final pretrial order in this matter. Mot. to

Exclude Evid. (doc. 237); Mot. to Exclude Damages Evid. (doc. 238);

Mot. to Supp. (doc. 241). These motions were fully briefed on

March 28, 2006. Reply Mot. to Supp. (doc. 249). The Court has

considered the arguments presented and is now prepared to rule.

I. FINOVA's Motion to Exclude Evidence Conflicting with Summary

Judgment Ruling

In its first motion in limine, FINOVA requests that the Court,

for purposes of trial, force both sides to accept the findings and

conclusions made by the Court during its analysis of the material

facts in its Order dated August 25, 2004. Mot. to Exclude Evid.

(doc. 237) at 1-2. Specifically, FINOVA submits that the Court

should bind the parties at trial to the following determinations:

1. That, although the parties may disagree as to

the precise amount of AMC's cash flow shortfall,

Defendant/Counter-Claimant Richard A. Arledge,

Inc., d.b.a. Arledge Motor Co. ("AMC") violated

the Minimum Net Cash Flow Covenant to at least

some extent, as noticed by FINOVA in its default

notice dated May 7, 2002; and

2. That AMC had a right to cure such default

within the ten-day cure period under Section

7.1(B) of the Loan Agreement.

Id. at 2. FINOVA asserts that these determinations were set forth

as findings of fact and conclusions of law in the Court's prior

Partial Summary Judgement Order. Id. at 2-4.

In response, the Arledges agree that the issue as to whether

AMC had a right to cure has been resolved by the Court and the

parties should be bound by that ruling. Resp. Mot. to Exclude

Evid. (doc. 247) at 4. However, the Arledges contest FINOVA's

motion in relation to the issue of whether there was an actual

violation of the Minimum Net Cash Flow Covenant ("MNCFC"). Id. at

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2-6. The Arledges maintain that the Court never made any judicial

findings in relation to the alleged breach of the MNCFC, but,

instead, merely discussed it in relation to the other matters that

were reviewed at that time. Id. at 3.

The Court believes this motion is, essentially, a motion to

reconsider, except to the extent the Arledges assert that the Court

never considered the issue of the alleged breach of the MNCFC in

its prior order and that the comments from the order, cited by

FINOVA, were only made in relation to the other findings that were

made therein. The Court is troubled by the extensive delay in

raising this issue, but, on balance, will allow evidence on the

issue of the alleged breach of the MNCFC, but not on the issue of

the Arledges' right to cure. 

II. FINOVA's Motion to Exclude Evidence Regarding Damages

In its second motion in limine, FINOVA seeks entry of an order

prohibiting the Arledges from offering evidence to support certain

business loss damages that, FINOVA argues, are either duplicative

or were not properly disclosed. Mot. to Exclude Damages Evid.

(doc. 238) at 1. First, FINOVA asserts that the damages the

Arledges define as "Lost receivables and inventory," and those

accounted for in the damage expert report of Donald Erickson, are

the same. In general, FINOVA contends that "Defendants seek to

recover not only the profits allegedly lost by AMC as a result of

the UCC sale, but also the alleged value of AMC's assets foreclosed

upon by FINOVA (which would have been used by AMC to generate the

alleged lost profits)." Id. at 4. FINOVA argues that such

duplicative damages are inappropriate, and, thus, requests that the

Court preclude the Arledges from introducing evidence on the value

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of the assets sold at the UCC sale as a component of their damage

claim. Id. at 4-5. 

Second, FINOVA asks the Court to preclude the Arledges from

attempting to introduce at trial evidence in support of their

claimed "incidental" and "consequential" damages. Id. at 6. 

FINOVA asserts that such a sanction is appropriate, because the

Arledges failed to provide either computations of such damages or

the documents upon which such computations are based, in violation

of Rule 26(a)(1)(C) of the Federal Rules of Civil Procedure. Id.

at 5. 

In response, the Arledges object to FINOVA's motion. They

argue that the damages they seek as "Lost receivables and

inventory" and those defined in Erickson's report are not

duplicative. Resp. Mot. to Exclude Damages Evid. (doc. 246) at 4-

7. Additionally, they assert that the appropriate documentation

regarding the Arledges' "incidental" and "consequential" damages

was provided to FINOVA, and, if FINOVA required more explanation of

such damage claims, it should have moved the Court to order

additional disclosures. Id. at 3, 7-8. The Court agrees. 

As to the issue of whether the Arledges are seeking

duplicative damages, the Court, at trial, shall determine what

damages evidence it will consider. At that point, the parties may

argue their positions on the damages claims, examine each other's

witnesses regarding damages, and argue whether such damages are

duplicative. The Court finds it inappropriate to resolve this

issue at this time. 

Additionally, in relation to the Arledges' claimed

"incidental" and "consequential" damages, the Court finds FINOVA's

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assertion untimely. If FINOVA believed that a further explanation

of the contested damages claims was necessary, it should have filed

a motion to compel. The Court shall deny FINOVA's motion.

III. FINOVA's Motion to Supplement Final Pretrial Order

Finally, FINOVA filed a motion requesting that the Court enter

an order supplementing the Final Pretrial Order in this matter. 

Mot. to Supp. (doc. 241). Specifically, FINOVA seeks to supplement

the Final Pretrial Order with an email sent from Ryan De Witte to

Jim Montgomery and dated May 17, 2002 ("De Witte Email"). Id. at

1. In its motion, FINOVA explains that it originally believed that

the De Witte Email was identical to the document currently filed as

Defendants' Exhibit 124. Id. However, upon closer review, FINOVA

determined that the documents are not the same, and, thus, now

seeks to add the De Witte Email to the Final Pretrial Order. Id.

The Arledges contest FINOVA's motion, and ask that the Court

to deny FINOVA's request. Resp. Mot. to Supp. (doc. 248) at 2. In

their response, the Arledges argue that the motion should be

denied, because FINOVA does not present sufficient reasons to

justify its failure to include the exhibit in the original Final

Pretrial Order. Id. Furthermore, the Arledges assert that FINOVA

fails to establish how denying its motion would work the "manifest

injustice" required by Rule 16(e) of the Federal Rules of Civil

Procedure. Id. Finally, the Arledges maintain that they would be

prejudiced by the addition of the De Witte Email, "because [they]

have relied upon Plaintiff's exhibit list in preparing its

examinations and cross-examinations." Id. at 3.

Under Rule 16(e), a court can modify a pretrial order if, in

its discretion, modification is necessary "to prevent manifest

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injustice." The factors to consider when modification of a

pretrial order is requested include the following:

(1) the degree of prejudice to the moving party resulting

from a failure to modify;

(2) the degree of prejudice to the opposing party resulting

from a modification;

(3) the impact of the modification on the orderly and

efficient conduct of the case at the present stage of

litigation; and,

(4) the degree of willfulness, bad faith or excusable

neglect on the part of the moving party.

See U.S. v. First Nat'l Bank, 652 F.2d 882, 887 (9th Cir. 1981).

After considering the factors enumerated above, the Court

concludes that the Final Pretrial Order may be modified. The Court

finds that the Arledges have not demonstrated that they would be

prejudiced by the addition of the De Witte Email to the Final

Pretrial Order. The prejudice they claim is not sufficiently

severe. Thus, the Court shall grant FINOVA's motion.

Therefore,

IT IS ORDERED that FINOVA's Motion to Exclude Evidence

Conflicting with Summary Judgment Ruling (doc. 237) is GRANTED in

part and DENIED in part.

IT IS FURTHER ORDERED that FINOVA's Motion to Exclude Evidence

Regarding Damages (doc. 238) is DENIED.

IT IS FURTHER ORDERED that FINOVA's Motion to Supplement Final

. . . 

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Pretrial Order (doc. 241) is GRANTED.

DATED this 31st day of March, 2006.

Copies to counsel of record

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