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BP Amoco Chemical Co. v. Flint Hills Resources LLC

July 10, 2009

BP AMOCO CHEMICAL COMPANY, PLAINTIFF/COUNTER--DEFENDANT,
v.
FLINT HILLS RESOURCES LLC, DEFENDANT/COUNTER--PLAINTIFF.
FLINT HILLS RESOURCES LLC, THIRD-PARTY PLAINTIFF,
v.
BP CORPORATION NORTH AMERICA INC., THIRD-PARTY DEFENDANT.



The opinion of the court was delivered by: Judge Amy J. St. Eve

BP AMOCO'S RESPONSE TO FHR'S MOTION IN LIMINE NO. 5 RESPONSE OF BP AMOCO CHEMICAL COMPANY AND BP CORPORATION NORTH AMERICA INC. TO FHR'S MOTION TO BAR EVIDENCE OF PRE-SALE PRICE NEGOTIATIONS

Flint Hills Resources, LLC ("FHR") moves to bar the admission of evidence relating to pre-sale negotiations and pre-sale internal communications relating to those negotiations, contending that such evidence either is irrelevant or its probative value is substantially outweighed by the undue prejudice its admission would cause. FHR's motion should be denied for several reasons.

First, FHR's motion is an untimely Daubert challenge. BP Amoco's principal damages expert, Craig Elson, relied on and referenced the very same evidence as a basis for certain of his opinions in this case. FHR failed to move to exclude those opinions on Daubert grounds. This motion in limine, therefore, should be denied as an untimely Daubert challenge.

Second, this evidence is relevant and material to the jury's understanding of the importance of due diligence, its role in the transaction, and its effect on the ultimate price of the deal. Thus, in ruling on FHR's Daubert challenges to BP Amoco's due diligence expert (James Peters), the Court ruled that evidence about the due diligence process - which would include any effect that process had on the negotiations over the sale price - is appropriate for the jury to consider in construing certain disputed terms with respect to the condition-of-asset warranty, as well as in assessing FHR's fraud claim, the reasonableness of FHR's reliance, and the relative degree and amount of due diligence FHR performed relating to production capacity matters as compared to condition-of-asset and environmental matters.

Third, this evidence is relevant to BP Amoco's betterment defenses. As the Court has noted, FHR is entitled to be returned to the position in which it would have found itself absent the alleged breach - but not to a better position. Thus, the jury can consider evidence that FHR may have received a reduction in the purchase price for certain condition-of-asset issues for which it now seeks further compensation in the form of repair costs or loss of value, which may ultimately result in FHR improperly being placed in a better position than that in which it would have been absent the alleged breach.

Fourth, although FHR disputes that the $19 million price reduction at issue was attributable to its due diligence findings or to the assets at issue its claims, that is not a basis for excluding the evidence. Instead, this is a disputed issue for the jury to resolve.

Fifth, FHR's undue prejudice argument lacks any support, explanation, or authority and should be denied on these grounds alone. Moreover, the evidence FHR seeks to exclude is in fact not unfairly prejudicial, confusing, or misleading.

RELEVANT BACKGROUND

A. The Parties Agreed To A $19 Million Reduction In The Purchase Price In The Fall Of 2003

There is no dispute that BP Amoco and FHR agreed to a reduction of $19 million in the purchase price for the PCBU in late October and early November 2003. (See Ex. 1, Sementelli Dep. at 206:1 - 209:25; Ex. 2, DX-2240; Ex. 3, Mahoney Dep. at 225:11 - 229:18; Ex. 4, DX-2206; Ex. 5, Elson Dep. at 12:15-19; Ex. 6, DX-2774 at App. W; Ex. 7, Jackson Dep. at 267:19 -283:13; Group Ex. 8, DX-2183, -2184, -2185.) There is also no dispute that FHR asked BP Amoco for this price reduction. (See id.)

B. The Reasons For The $19 Million Purchase Price Reduction Are Disputed

While the fact that a purchase price reduction of $19 million was sought by FHR and agreed to by BP Amoco in the Fall of 2003 is not disputed, FHR apparently now disputes that this purchase price reduction had anything to do with its due diligence findings relating to the assets at issue in its claims. Instead, FHR contends that the reduction was solely attributable to the declining financial performance of the business or other issues having nothing to do with its due diligence findings relating to the condition of certain assets. (See Dkt. # 588 at 3.) There is, however, documentary and testimonial evidence to the contrary, which evidence suggest that the price reduction was attributable to FHR's due diligence findings relating to the condition of certain assets, at least in part. (See, e.g., Ex. 9, Wrenn Dep. at 228:7 - 241:10, 243:15 - 246:9, 259:14 - 263:18; Group Ex. 10, DX-1864, -899. -1866.)

C. Two Of BP Amoco's Experts, Craig Elson And James Peters, Have Relied On Evidence Relating To The $19 Million Price Reduction With Respect To Certain Of Their Opinions In This Case

Craig Elson is BP Amoco's damages expert. In his October 2008 report, Elson summarized at some length the evidence relating to the $19 million price reduction. (Ex. 6, DX-2774 at App. W.) Elson also cited and discussed this evidence in connection with certain of his betterment opinions and other critiques of FHR's damages claims. (See, e.g., Ex. 11, DX-2773 at 3, 7 & n.19, 16 & n.41, 17 & n.46; id. at Ex. 5; Ex. 6, ...


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