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1:05-cv-02817-MBS Date Filed 01/10/08 Entry Number 1173 Page 1 of 12

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA

AIKEN DIVISION


Avondale Mills, Inc. and Factory Mutual
Insurance Company,




Plaintiffs,

v.


Norfolk Southern Corporation and
Norfolk Southern Railway Company,



Defendants.












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Civil Action No. 1:05-CV-2817-MBS

[Norfolk Southern in limine No. 15]

REPLY TO PLAINTIFFS’ RESPONSE TO NORFOLK SOUTHERN’S

MOTION IN LIMINE [DE # 975] TO EXCLUDE EVIDENCE RELATING

TO AVONDALE’S ALTERNATIVE THEORY OF DAMAGES,

INCLUDING CERTAIN TESTIMONY AND OPINIONS OF

AVONDALE MILLS’ EXPERT WITNESS, HAROLD V. MEYER




On December 7, 2007, Defendants Norfolk Southern Railway Company and Norfolk

Southern Corporation (hereinafter “Norfolk Southern”) filed a motion in limine to exclude

evidence relating to Avondale’s alternative theory of damages, including certain testimony and

opinions of Avondale Mills’ expert witness, Harold V. Meyer (“Defendants’ Motion”) [DE

#975]. In its Motion, Norfolk Southern argued that the evidence should be excluded because

Avondale’s alternative theory of damages is inconsistent with South Carolina law and, as such, is

irrelevant, unfairly prejudicial and likely to mislead and confuse the jury. See Defendants’

Motion 4-9.

Norfolk Southern also argued that such evidence should be excluded because Avondale

has elected not to pursue the alternative theory and its exclusion best serves the interest of

judicial economy. Id. at 9-11. Finally, Norfolk Southern argued that Meyer’s specific testimony

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and opinions regarding the cessation of operations at Avondale Mills, efficiency of the

machinery, the Loss Summary report and conclusions based on the replacement cost

extrapolation method should be excluded because they are unreliable and lack sufficient factual

and/or scientific bases pursuant to Federal Rules of Evidence 602, 701, 702 and 703 and/or were

not identified in Meyer’s March 23, 2007 Rebuttal Report as required under Federal Rule of

Civil Procedure 26. Id. at 11-16.

On January 4, 2008, Plaintiffs filed a response in opposition to Defendants’ Motion,

(“Plaintiffs’ Response”) [DE #1069], in which they argue that Norfolk Southern’s Motion should

be denied as an untimely and improper motion for reconsideration under Federal Rule of Civil

Procedure 59. See Plaintiffs’ Response 3-4. In addition, Plaintiffs argue that Mr. Meyer does

not state an improper legal conclusion regarding the appropriate measure of damages, id. at 4-6,

and that repair and replacement cost is the best measure of the actual value of Avondale’s

property because there is no market for the property. Id. at 6-8. Plaintiffs also argue that

Norfolk Southern’s attacks on Meyer’s specific opinions and testimony go to the weight, not the

admissibility of the evidence. Id. at 9-10. Finally, Plaintiffs contend that they should be

permitted to plead and prove their entitlement to alternative remedies and should not be required

to elect which measure of damages they intend to pursue at trial. Id. at 10-11.

Defendants now submit this Reply Memorandum to Plaintiff’s Response. In responding

to the issues raised in Plaintiff’s Response, Defendants incorporate herein the arguments set forth

in their Motion.



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1:05-cv-02817-MBS Date Filed 01/10/08 Entry Number 1173 Page 3 of 12

ARGUMENT

I.

Norfolk Southern’s Motion in Limine, Even if Couched as a Motion for
Reconsideration, is Timely and Proper



Plaintiffs contend

that Norfolk Southern’s Motion

is an untimely motion for

reconsideration of Norfolk Southern’s previous motions – specifically, its Daubert motion to

exclude Mr. Meyer and its motion for partial summary judgment as to Plaintiffs’ repair and

replacement cost theory – under Fed. R. Civ. P. 59. It is not. This is a motion to exclude or limit

the presentation of evidence in this case pursuant to Rules 403, 602, 701, 702 and 703 of the

Federal Rules of Evidence, as well as Rule 26 of the Federal Rules of Civil Procedure. As such,

the Plaintiffs’ arguments are without merit.

Additionally, to the extent that Norfolk Southern’s Motion in Limine requires the Court to

reconsider its prior rulings with respect to Norfolk Southern’s Motion for Partial Summary

Judgment as to Plaintiff’s Claim for Repair and/or Replacement Cost [DE #584] and Norfolk

Southern’s Motion to Exclude Expert Testimony of Harold V. Meyer [DE #578], Norfolk

Southern’s Motion in Limine is timely. Those rulings involved the denial of Norfolk Southern’s

motions and are interlocutory by definition.

The Fourth Circuit Court of Appeals has held, unequivocally, that a district court retains

the power to modify its interlocutory orders, including orders on motions for partial summary

judgment, any time prior to entry of final judgment. American Canoe Ass’n v. Murphy Farms,

Inc., 326 F. 3d 505, 514-515 (4th Cir. 2003); Fayetteville Investors v. Commercial Builders, Inc.,

936 F. 2d 1462, 1469-1470 (4th Cir. 1991). Consequently, the ten day deadline contained in

Rule 59(e) is not applicable to the reconsideration of these rulings. Fayetteville Investors, 936 F.

2d at 1469 (confirming the district court’s recognition that the Rule 59 (e) time requirements are

only applicable to final judgments).



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Finally, as discussed fully on pages 4-9 of Defendants’ Motion, Norfolk Southern

contends that this court’s interlocutory orders which would allow Plaintiffs to present evidence

concerning Avondale’s alternative repair and replacement cost theory of damages are erroneous

under South Carolina law. Thus, assuming arguendo, that the grounds necessary to amend a

final judgment under Rule 59 (e) are applicable here, which Norfolk Southern denies, Norfolk

Southern has established such grounds.

II. Meyer’s Statements Regarding the Appropriate Measure of Damage that
Should be Applied in this Case are Unfounded Legal Conclusions, which are
Inconsistent with South Carolina Law and Should be Excluded to Prevent
Jury Confusion




In his report, Meyer unequivocally opines that “[r]eplacement cost is the appropriate

valuation methodology for measuring the damage to Avondale’s machinery, equipment and

property caused by the chlorine contamination.” See Harold V. Meyer Expert Rebuttal Rpt. 2,

12, March 23, 2007 [DE # 370-371]. In their Response to Defendants’ Memorandum, Plaintiffs

suggest that this conclusion by Meyer is not a legal conclusion. Rather, they claim, “Meyer’s

expert report and testimony merely provide what he believes, factually, to be the appropriate

amount of money required to return Avondale’s equipment to its pre-derailment condition.”

Plaintiffs’ Response 4. This interpretation of Meyer’s report by Avondale’s attorneys is entirely

inconsistent with Meyer’s own statements. Meyer does not state that he has calculated the

amount of money required to return Avondale’s equipment to its pre-derailment condition. What

he does say is that “[r]eplacement cost is the appropriate valuation methodology for measuring

the damage to Avondale’s….property.” Meyer Rebuttal Rpt. at 2, 12 (emphasis added). This is

absolutely a legal conclusion as to the appropriate measure of damages in this case. As such, it

is improper and should be excluded.



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Assuming, arguendo, that the Court accepts this statement as a factual opinion,

regardless of how it is characterized, it should be excluded because it is entirely contrary to

South Carolina law. See Defendants’ Motion 5-6. Meyer provides no assessment of the actual

value of the machinery, equipment and property prior to the derailment, and he imposes no

limitation on his replacement cost estimate to account for any improvement to the value of

Avondale’s property and/or business as a result of the proposed wholesale replacement of

decades old equipment and machinery with brand new equipment and machinery. 1 This failure

to impose such limitations is inconsistent with South Carolina law and the presentation of

Meyer’s replacement cost estimate, couched as the appropriate measure of damages in this case,

poses a high risk of jury confusion. For that reason, Meyer’s opinion that replacement cost is

“the appropriate valuation methodology for measuring the damage to Avondale’s equipment,

machinery and property” should be excluded.

III. The Court has not Ruled that Repair and Replacement Cost is the
Appropriate Measure of Damages in this Case and, Indeed, a Ruling as Such
Would be Contrary to South Carolina Law


In their Response, Plaintiffs state that “[t]he Court has already determined that, when

there is no market for damaged property, repair and replacement cost is appropriate to

demonstrate the value of the damaged property.” Plaintiffs’ Response 6, citing Hr’g Tr., Sept.


1 Recognizing the potential problems with the calculations set forth in his “Rebuttal” Report,
Meyer has recently filed an impermissible and untimely “Corrected Report,” which Norfolk
Southern has moved to strike. See Norfolk Southern’s Motion to Strike “Corrected” Meyer
Report and Memorandum in support thereof [DE #1081]. In his “Corrected Report,” Meyer
purports to take into account betterment and depreciation, but the replacement cost valuation set
forth in his original Rebuttal Report, as it stood at the time of Norfolk Southern’s Motion, did not
account for these factors. Although the Corrected Report was served on December 28, 2007,
prior to Avondale’s Response to Norfolk Southern’s Motion, which was filed on January 4,
2008, the Response curiously does not mention the Corrected Report at all. Norfolk Southern
contends that Meyer’s Corrected Report constitutes an admission that his original report was
wrong.




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17, 2007 [DE # 795].2 The implication in Plaintiffs’ Response is that this Court has held that

repair and replacement cost alone constitute the actual value prior to the derailment. However,

this implication is a blatant mischaracterization of the Court’s ruling. The Court held as follows:

If there is a market for the property the correct measure of damages is the difference
between the market value of the property immediately before the injury and its market
value immediately after the injury. If there is no market value, the question would
become whether the property could be restored, or if it had to be replaced. Restoration
and replacement value are but two factors the jury would need to consider. The jury will
also need to consider whether the cost of restoration or replacement, if that measure is
utilized, should be reduced for any betterment accruing to Avondale.


Hr’g Tr. 222-223, Sept. 17, 2007 (emphasis added). The Court clearly ruled that repair and

replacement cost, if considered, are but two factors among others, including betterment, that

should be considered in determining the value of property with no market value.3 As such,

Plaintiffs’ reliance upon the Court’s order to support their contention is misplaced.

Similarly, the majority of cases cited by Plaintiffs in their Response instruct that repair

and/or replacement cost should be considered only as a factor among many, including

betterment, depreciation and obsolescence, when determining the actual value of property for

which there is no market, consistent with the Court’s September 17, 2007 ruling.4 Indeed, the


2 Although Plaintiffs failed to reference a specific page of the Hearing Transcript, Norfolk
Southern assumes this interpretation of the Court’s ruling is taken, albeit loosely, from pages
222-223 of the Sept. 17, 2007 Transcript.

3 One of the reasons Avondale contends that there is no market for its property is that the
property is “unique.” For the reasons set forth in Norfolk Southern’s Motion at page 7, as well
as Norfolk Southern’s Memorandum and Reply in support of its Motion for Partial Summary
Judgment as to Plaintiffs’ Claim for Repair and/or Replacement Cost, Norfolk Southern
disagrees. See also, John H. Geiser Dep. 16, Dec. 14, 2007 (testifying that there is a market for
used textile equipment); id. at 82-83 (testifying that Avondale had no “special machinery or
equipment that’s not available in the…open market”); and id. at 84 (testifying that he did not
recall any “specially manufactured” equipment at Avondale).

4 As mentioned, Meyer’s original report did not take into account betterment or depreciation.
This is directly contrary to the cases Plaintiffs cite at pages 7-8 of their Response. See Shaw
Tank Cleaning Co. v. Texas Pipeline Co., 442 S.W.2d 851, 855 (Tex. App. 1969) (where



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1:05-cv-02817-MBS Date Filed 01/10/08 Entry Number 1173 Page 7 of 12

only cases Plaintiffs cite which expressly allow replacement cost with no reduction for

betterment are those involving damaged or destroyed utility poles. See Duke Power Co. v.

Thornton, 303 S.C. 454, 401 S.E.2d 195 (Ct. App. 1991), Hartford Elec. Light Co. v. Beard, 213

A.2d 536 (Conn. Cir. Ct. 1965) and Ohio Power Co. v. Johnston, 247 N.E.2d 338 (Ohio Com. Pl.

1968). This line of cases is inapplicable to the facts of this case because in each of these, the

court reasoned that the utility pole(s) had no discernable life expectancy and, therefore, the

replacement of the pole(s) did not necessarily confer a benefit on the property owner. In

contrast, in this case, replacement of Avondale’s decades old equipment and machinery, which is

at the end or beyond its life expectancy, would unquestionably confer a benefit on the company

and enhance the value of its business and property. For that reason, these cases are

distinguishable and not applicable to Avondale’s claim.



In addition to mischaracterizing the Court’s September 17, 2007 ruling, Plaintiffs have

also mischaracterized the arguments set forth in Defendants’ Motion. Plaintiffs suggest that

“Norfolk Southern admits that Meyer’s repair and replacement estimates themselves are relevant

and admissible evidence.” Plaintiffs’ Response at 6 n. 1. In doing so, they cite to Norfolk

Southern’s statement that “[i]f Avondale could show that there is no market for certain of its


property was shown to have no market value, jury instruction to consider “cost of restoration
‘reduced by any betterment which might result from the replacement of the existing tank with a
new tank’…properly included elements of depreciation, obsolescence, if any, and anticipated
serviceability of the tank which was destroyed”) (emphasis added); Beaufort & Morehead R. Co.
v. Damyank, 122 F. Supp. 82, 85 (E.D.N.C. 1954) (where bridge was damaged by one accident
and then, before repairs could be made, was destroyed by another, measure of damage was cost
of replacement reduced by the cost of repairing the original damage) (emphasis added); Pillsbury
Co. v. Midland Enters. Inc., 715 F. Supp. 738, 764 (E.D. La. 1989) (“[w]here repair or
replacement costs form the basis of the damage award, the Court must determine whether the
repair or replacement adds new value to or extends the useful life of the property; if so, an
appropriate reduction from the full repair or replacement costs should be made.”) (emphasis
added); and Krueger v. Steffen, 141 N.W.2d 200, 202 (Wis. 1966) (cost of repair may be shown
as bearing upon the diminution in value and estimates of repair costs are properly considered
together with other evidence of diminished value).



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1:05-cv-02817-MBS Date Filed 01/10/08 Entry Number 1173 Page 8 of 12

equipment…evidence of repair and/or replacement cost may be considered…” Id., citing

Defendants’ Motion at 6. This statement is taken entirely out of context and it has been

inappropriately edited to suit Avondale’s purpose. Norfolk Southern argued – and continues to

argue – that credible evidence of repair and/or replacement cost may be admissible under certain

limited circumstances. Norfolk Southern maintains that those circumstances are not present in

this case and, therefore, diminution in value should be applied as the measure of damages in this

case. Moreover, Norfolk Southern continues to argue, for the reasons set forth in its Motion to

Exclude Expert Testimony of Harold V. Meyer [DE #578] as well as the reasons set forth in

Defendants’ Motion at pages 11-16,5 that Meyer’s testimony and opinions regarding the repair

and/or replacement cost are unreliable, do not constitute credible evidence of value and/or are

inadmissible and, therefore, should be excluded.

Finally, Plaintiffs state that “Defendants contend that repair and replacement should only

be used as a factor in assessing the upper limit of Avondale’s damages.” Plaintiffs’ Response 6,

citing Defendants’ Motion at 6. This statement also mischaracterizes Norfolk Southern’s

argument, which is that the difference in pre- and post-derailment value of Avondale’s property

is the “upper limit” of Avondale’s damages and that repair and/or replacement costs are only

allowed as evidence of damages where such “costs are reasonable, i.e., not in excess of the value

of the property immediately prior to becoming injured.” See Defendants’ Motion at 6 and

Defendants’ Motion for Partial Summary Judgment as to Plaintiffs’ Repair and/or Replacement

Cost [DE #584].


5 In response to Norfolk Southern’s arguments regarding the specific opinions rendered by Mr.
Meyer, Plaintiffs merely reiterate their argument that Norfolk Southern’s motion to exclude
Meyer has already been considered and ruled upon. In reply, Norfolk Southern reiterates the
argument set forth in section I above regarding the timeliness of its motion in limine. In
addition, Plaintiffs failed to address Meyer’s failure to disclose the basis for his replacement cost
extrapolation method and efficiency opinions in his expert report as required by Fed. R. Civ. P.
26, a point which was not raised or known at the time of Norfolk Southern’s previous motions.



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IV. Avondale Should be Required to Elect Which Measure of Damages it Intends

to Pursue at Trial




Norfolk Southern recognizes that, as a general rule, a party may be permitted to plead and

prove entitlement to alternative remedies at trial. See Harper v. Ethridge, 290 S.C. 112, 121, 348

S.E.2d 374, 379 (Ct. App. 1986). However, as the court in Harper v. Ethridge clearly states,

“the demands of fairness and orderly adjudication” may require a party to elect a remedy prior to

trial. 290 S.C. at 122, 348 S.E.2d at 380. Plaintiffs ignore these considerations and instead seek

to present to the jury two widely disparate theories of damages. Given the facts and posture of

this case, they should not be allowed to do so.



Taken on its face, Avondale’s alternative theory of damages is confusing. Avondale

initially articulated its damages as including the loss or diminution in value of its business caused

by the derailment. See Avondale’s Revised and Restated Initial Disclosures and Local Rule

26.03 Disclosures 35-36, September 8, 2006 [DE # 290]. According to Avondale, the

calculation of diminution in business value comprises the “value of Avondale’s business as a

going concern immediately before the derailment and chlorine release.” See id. at 35. Thus, by

definition, Avondale’s alternative theory of damages based on the repair or replacement cost of

its property – assets of a business and, thus, a part of its going concern – is subsumed by this

measure of damages. Consequently, a juror may view Avondale’s multiple damages theories as

consisting of distinct elements where, in fact, elements of the theories overlap.

In addition to this obvious potential for confusion, the Plaintiffs’ theory is totally

inconsistent with South Carolina law, thus giving rise to the distinct possibility of more

confusion. Given this potential and the fact that Avondale has already elected not to pursue its



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alternative theory6 – a fact which Avondale entirely ignores – the presentation of yet another

theory of damages will do little to promote “orderly adjudication.”

Further, contrary to Avondale’s assertion that presentation of its alternative theories of

damages “will result in a slightly longer trial,” see Plaintiffs’ Response 10 n. 2, claims of repair

and replacement costs of 370 million dollars of very diverse equipment spread across three plants

would be extremely time consuming to prove and defend. Given this fact and the necessity of

defending Avondale’s disparate theories of damages in the limited amount of trial time allotted

by the Court, judicial economy will undoubtedly suffer and unfair prejudice to Norfolk Southern

will occur. Therefore, adhering to the principles of “fairness and orderly adjudication,”

Avondale should be not entitled to present alternative theories of damages at trial.

CONCLUSION





For the foregoing reasons, Defendants Norfolk Southern Corporation and Norfolk

Southern Railway respectfully request that this Court grant its motion in limine to exclude

evidence regarding Avondale’s repair and replacement cost theory of damages, including the

testimony and opinions of Avondale Mills, Inc.’s expert witness, Harold V. Meyer.






(SIGNATURE ON FOLLOWING PAGE)


6 Interestingly, Avondale lists Meyer as a “may call” witness, giving further credence to Norfolk
Southern’s argument that Meyer’s measure of damages is an alternative theory only and one that
should not be presented.



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1:05-cv-02817-MBS Date Filed 01/10/08 Entry Number 1173 Page 11 of 12



January 10, 2008

















Respectfully submitted,









s/Phillip E. Reeves
W. Howard Boyd, Jr. (Fed. I.D. #1431)
Ronald G. Tate, Jr. (Fed. I.D. #4021)
Phillip E. Reeves (Fed I.D. #3232)
Jennifer E. Johnsen (Fed. I.D. #5427)
Ronald K. Wray, II (Fed. I.D. #5763)
GALLIVAN, WHITE & BOYD, P.A.
55 Beattie Place, Suite 1200
P.O. Box 10589
Greenville, SC 29603
(864) 271-9580 (tel.)
(864) 271-7502 (fax)
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]

Joe G. Hollingsworth (pro hac vice)
Katharine R. Latimer (pro hac vice)
Frank Leone, Jr. (pro hac vice)
Bruce J. Berger (pro hac vice)
Peter J. Skalaban, Jr. (pro hac vice)
SPRIGGS & HOLLINGSWORTH
1350 I Street, N.W.
Washington, DC 20005
(202) 898-5800 (tel.)
(202) 682-1639 (fax)

Crawford S. McGivaren, Jr. (pro hac vice)
CABANISS, JOHNSTON, GARDNER, DUMAS
& O’NEAL, LLP
P.O. Box 830612
Birmingham, AL 35283-0612
(205) 716-5312 (tel.)
(205) 716-5389 (fax)



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1:05-cv-02817-MBS Date Filed 01/10/08 Entry Number 1173 Page 12 of 12


John C. Duffey (pro hac vice)
STUART & BRANIGIN, LLP
300 Main Street, Suite 900
P.O. Box 1010
Lafayette, IN 47902
(765) 423-1561 (tel.)
(765) 742-8175 (fax)

ATTORNEYS FOR DEFENDANTS NORFOLK
SOUTHERN CORP. AND NORFOLK
SOUTHERN RAILWAY COMPANY

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