IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF ALABAMA

EASTERN DIVISION

yES LEASING cci )

)

Plaintiff, )

CIVIL ACTION NO.

vs. ) 3:06cv638-SRW

)

G.E KELLY, INC. dlb/a KELLY )

TRUCKING; and GUY KELLY, )

)

Defendants )

PLAINTIFF’S REPLY TO DEFENDANTS’ RESPONSE IN OPPOSITION

TO PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT

COMES NOW Plaintiff VFS Leasing Co. (“VFS” or “Plaintiff’) and submits this reply to

Defendants’ Response in Opposition to Plaintiff’s Motion for Summary Judgment.

Introduction

Plaintiff’s breach of contract claim against Defendants (G.F. Kelly, Inc. and Guy Kelly)

arises from Defendants’ lease oftwenty-one (21) commercial tractors (“Leased Tractors”) from

Plaintiff. Defendants do not dispute the leases or that they failed to make payments to Plaintiff

as required under the lease. Defendants also concede that their failures to make payments

constitute a default under the lease terms and that Plaintiff appropriately exercised its right under

the leases to declare the full unpaid amount immediately due and payable. Moreover,

Defendants admit that deficiencies remain under the lease terms and, thus, they owe some

amount of money to Plaintifffortheir default. Thus, the only issue forthis Court to decide is the

amount ofdeficiency that Defendants owe to Plaintiff.

Defendants raise the affirmative defense of failure to mitigate in their Response to

Plaintiff’s Motion for Summary Judgment, and argue that VFS charged excessive fees for

repossession, inspection and detailing ofthe Leased Tractors. Defendants also contend that VFS

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did not sell the Leased Tractors in a “commercially reasonable” manner and, therefore, it failed

to mitigate its damages. However, as discussed in more detail below, Plaintiffs clearly complied

with the accepted industry practices when repossessing, inspecting, detailing and remarketing the

Leased Tractors. Defendants offer no competent evidence in support oftheir affirmative defense

and arguments that the sales were not commercially reasonable. Defendants’ purported “expert”

testimony is due to be stricken in its entirety. Neither Guy F. Kelly (“Kelly”) nor Charles David

Lance (“Lance”) are qualified to offer expert opinions regarding accepted commercially

reasonable practices. Their testimony is nothing more than speculation and conjecture; it is

conclusory and it is without proper foundation. For these reasons, there is no genuine issue of

material fact and Plaintiff is entitled to judgment as a matter oflaw.

Ar2ument

1. Plaintiff Complied With Nationwide Industry Standards Regarding The

Repossession And Resale Of Used Heavy Trucking Equipment By Finance

Companies, Leasing Companies And Banks.

Defendants leased twenty-one (21) Leased Tractors from Plaintiff, a national finance and

leasing company. The transaction was memorialized in a lease agreement (the “Lease

Agreement”) that contained clear and specific terms. Defendants defaulted on the lease.

Consistent with the lease terms, Plaintiff placed Defendants in default and undertook measures to

repossess and sell the Leased Tractors in an effort to recover its damages. Plaintiff had the

Leased Tractors inspected, detailed and remarketed based on accepted commercially reasonable

practices for the sale of heavy transportation equipment to the wholesale market.2 See

For purposes of this summary judgment motion only, Plaintiff does not seek to recapture from Defendants the

amounts ($12,000) paid to the purchasers ofthree of the tractors for repairs made after the sale was finalized.

2 Defendants repeatedly referto a “commercially reasonable” standard in analyzing Plaintiff’s mitigation of its

damages. The term “commercially reasonable” can be a term ofart under Article 9 ofthe Uniform Commercial

Code (“UCC”). It is not technicallyappropriate to apply Art. 9 in this case. This case arises under Article 2A ofthe

2

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Declaration of Michael Cox, pgs. 5-6, ¶ 27, attached as Exhibit A to Plaintiff’s Evidentiary

Submission being filed contemporaneously herewith.

Plaintiff contracted with a national repossession company, Alternative Collection

Solutions, Inc. (“ACS”), to reclaim the tractors from Kelly Trucking. See Declaration ofKeith

Weachter, pg. 1, ¶ 4, attached as Exhibit B to Plaintiffs Evidentiary Submission being filed

contemporaneously herewith. ACS’ services are utilized by a host offinance and leasing clients

who are required to repossess over-the-road tractors due to their customers defaults. In general,

ACS charges a flat, pre-approved standard rate to its clients for repossessions. Id. at pg. 1, ¶ 3.

Included in this charge are the costs of coordinating the repossession, paying the local agents

their fees for the actual repossession and the costs incurred to locate the tractors. ~.j. Ifits actual

costs exceed the flat fee, ACS does not charge extra. Charging a pre-approved flat fee per tractor

is a generally accepted practice in the industry. Id. In 2005, ACS charged Plaintiff a $1,000

repossession fee per tractor. This was a reasonable and competitive rate within the repossession

industry and was, in fact, lower than the average rate. Id. However, because Plaintiff was

contracting to have more than 10 tractorsrepossessed on this occasion, ACS charged Plaintiff an

even lower rate -- $700/tractor. Id. at pg. 1, ¶ 4.

As is a standard accepted practice in the industry, Plaintiff also had the Leased Tractors

inspected. See Exhibit A, pg. 4, ¶ 21. Plaintiff incurred a $300 charge for each inspection. The

amount ofthis charge was a reasonable and competitive rate in the industry and in the mid-range

of what other customers were being charged for inspections during the same time period. Id.

The Leased Tractors were also detailed as necessary to prepare them for resale. Plaintiff was

UCC. The Article 9 “commercially reasonable” requirements do not apply verbatim where the transaction atissue

does not involve an ownership interest in the property. Because these were leased tractors, Defendants had no

equity interest in the them.

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charged a $500.00 fee for each truck that received the standard detailing. Detailing a

repossessed tractor is an accepted practice in the industry. j~.at pg. 5, ¶ 27. The fee Plaintiff

was charged, which was passed on at cost to Defendants (as were all costs) was reasonable and

competitive in the marketplace at the time. Id. at pg. 3, ¶ 16.

Afler repossession, inspection and detailing, Plaintiff remarketed and sold the tractors at

auction. The method that Plaintiff utilized to sell the tractors was not unique and was thoroughly

consistent with acceptable industry practices ofselling repossessed over-the-road tractors. Id. at

pgs. 2-3, ¶IJ 9-14. Plaintiff could have pursued other acceptable methods of selling the

equipment, but doing so could likely have caused longer marketing periods at additional cost

which ultimately could have decreased the overall return on the sale. Id. at pg. 3, ¶ 15. Plaintiff,

however, chose the accepted practice of marketing the Leased Tractors to the relevant

marketplace and consigning them in a reserve auction. Specifically, this was done at the Adessa

Heavy Truck Sale in Atlanta, Georgia, one ofthe largest fixed location auctions in the U.S. Id.

at pg. 3, ¶ 11. Because of this, the sale prices that Plaintiff received for the tractors were

consistent with market values for similar units under the market conditions present during the

relevant time frame -- October 2005 to January 2006. j~.The method and manner ofsale were

in accordance with accepted industry practices. . at pg. 5, ¶ 27. Interestingly, Defendants were

willing to sell the tractors to a third-party just months before they were repossessed for virtually

the same price that Plaintiff got for them. See Kelly Depo., pgs. 101:15 - 102:14, attached as

Exhibit C to Plaintiff’s Evidentiary Submission being filed contemporaneously herewith. ~

also Price Comparison Chart, attached as Exhibit D to Plaintiff’s Evidentiary Submission being

filed contemporaneously herewith. The price the tractors sold for at auction and what

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Defendants were willing to sell them for just months earlier was virtually the same. ~ Exhibit

C at pgs. 98:4 * 102:13 and Plaintiff’s exhibits 1, 2, 8 & 10 thereto.

It is undisputed that Plaintiff complied with the requisite industry standards when it

repossessed, inspected, detailed, remarketed and resold the twenty-one (21) Leased Tractors at

issue in this case. Plaintiff did not breach its duty to mitigate, and therefore, no issue ofgenuine

factremainsin this case.

2. No Genuine Issue Of Material Fact Remains In This Matter Because Neither

Kelly Nor Lance Are Experts in the Relevant Industry And Their Affidavits

Cannot Be Considered.

“Summary judgment cannot be avoided ... based on hunches unsupported with

significant probative evidence.” Raney v. Vinson Guard Serv., Inc., 120 F.3d 1192, 1198 (11th

Cir. 1997); Bevill v. UAB Walker College, 62 F.Supp.2d 1259, 1268 (N.D. Ala. 1999); Bailey v.

Allgas, Inc., 284 F.3d 1237, 1243 (11th Cir,2002). Moreover, Federal Rule of Civil Procedure

56(e) dictates that the nonmoving party “go beyond the pleadings and by affidavits, or by the

depositions, answers to interrogatories, and admissions on file designate specific facts showing

there exist genuine issues for trial.” Cottle v. Storer Communication, Inc., 849 F.2d 570, 575

(11th Cir. 1988). “If the non-moving party fails to make a sufficient showing on an essential

element ofher case with respect to which she has the burden ofproof, then the court must enter

summaryjudgment for the moving party.” Gonzalez v. Lee County Housing Authority, 161 F.3d

1290, 1294 (11th Cir. 1998). “Bare speculation based on loose construal ofthe evidence will not

satisfy the non-movant’s burden.” Bevill, 62 F. Supp 2d at 1268. In other words, once expert

testimony is excluded, summaryjudgment is appropriate ifthere is no other admissible evidence

supporting the claim. Wheat v. Sofamor, S.N.C., 46 F.Supp.2d 1351

(N.D. Ga. 1999) (Afler the expert’s testimony was excluded, there was insufficient evidence ofa

defect for Plaintiffs to survive Defendants’ summaryjudgment motions.).

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In this case, neither Kelly nor Lance are qualified to offer expert testimony as to the

accepted industry practices and customs for the repossession, inspection, detail and resale of

used/repossessed over-the-road tractors by finance companies, leasing companies and/or banks

to the wholesale market. As demonstrated in Plaintiff’s Motion to Strike filed

contemporaneously herewith, neither Kelly or Lance are qualified to offer expert testimony

regarding accepted commercially reasonable practices. Their affidavits are due to be stricken

and cannot support Defendants’ arguments regarding the only remaining issues in the case.

Consequently, Defendants have presented no probative admissible evidence to create a genuine

issue of material fact. Consequently, Plaintiff’s Motion for Summary Judgment is due to be

granted.

Conclusion

There are no genuine issues ofmaterial fact and VFS Leasing Co. is entitled to judgment

as a matter oflaw.

Respectftilly submitted this 30ti~day of April, 2007.

s/ David B. Hall

DAVID B. HALL (HALO52)

JULIE A. COTTINGHAM (COTO17)

Attorneys for Plaintiff VFS Leasing Co.

OF COUNSEL:

BAKER DONELSON, BEARMAN

CALDWELL & BERKOWITZ

A Professional Corporation

420 North 20th Street

Suite 1600 Wachovia Tower

Birmingham, Alabama 35203-5202

(205) 328-0480 Telephone

(205) 322-8007 Facsimile

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CERTIFICATE OF SERVICE

I hereby certify that on this the

30

th day of April, 2007, the foregoing has been

electronically filed with the Clerk of Court using the CM/ECF system, which will send

notification ofsuch filing, to the following counsel ofrecord:

James H. Starnes

Attorney for Defendants

P0 Box 590003

Birmingham, AL 35259

(205) 320-0800

S. Sanford Holliday

Attorney for Defendants

PU Box 727

Roanoke, AL 36274

(334) 863-2717

s/ David B. Hall

OF COUNSEL

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