Case 17-51882-CSS Doc 319-5 Filed 06/04/20 Page 1 of 20
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`EXHIBIT E
`Proposed Redacted Document
`Memorandum Of Law In Support Of The Paragon Litigation
`Trust’s Motion In Limine To Exclude Settlement Evidence
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`Case 17-51882-CSS Doc 319-5 Filed 06/04/20 Page 2 of 20
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`IN THE UNITED STATES BANKRUPTCY COURT
`FOR THE DISTRICT OF DELAWARE
`
`Chapter 11
`Case No. 16-10386
`
`Adv. Proc. No. 17-51882 (CSS)
`
`In re
`PARAGON OFFSHORE PLC, et al.,
`Debtors.
`PARAGON LITIGATION TRUST,
`Plaintiff,
`
`v.
`NOBLE CORPORATION PLC, NOBLE
`CORPORATION HOLDINGS LTD,
`NOBLE CORPORATION, NOBLE
`HOLDING INTERNATIONAL
`(LUXEMBOURG) S.à.r.l., NOBLE
`HOLDING INTERNATIONAL
`(LUXEMBOURG NHIL) S.à.r.l., NOBLE
`FDR HOLDINGS LIMITED, NOBLE
`HOLDING INTERNATIONAL LIMITED,
`NOBLE HOLDING (U.S.) LLC, NOBLE
`INTERNATIONAL FINANCE COMPANY,
`MICHAEL A. CAWLEY, JULIE H.
`EDWARDS, GORDON T. HALL, JON A.
`MARSHALL, JAMES A. MACLENNAN,
`MARY P. RICCIARDELLO, JULIE J.
`ROBERTSON, AND DAVID W.
`WILLIAMS,
`
`Defendants.
`
`MEMORANDUM OF LAW IN SUPPORT OF
`THE PARAGON LITIGATION TRUST’S
`MOTION IN LIMINE TO EXCLUDE SETTLEMENT EVIDENCE
`
`Laura Davis Jones (DE Bar No. 2436)
`Timothy P. Cairns (DE Bar No. 4228)
`Pachulski Stang Young & Jones LLP
`919 N. Market Street, 17th Floor
`P.O. Box 8705
`Wilmington, DE 19899-8705 (Courier
`19801)
`Telephone: (302) 652-4100
`Facsimile: (302) 652-4400
`
`Filed: June 1, 2020
`
`David J. Zott, P.C. (admitted pro hac vice)
`Jeffrey J. Zeiger, P.C. (admitted pro hac vice)
`William E. Arnault (admitted pro hac vice)
`Anne I. Salomon (admitted pro hac vice)
`Jason A. Feld (admitted pro hac vice)
`Kirkland & Ellis LLP
`300 N. LaSalle Street
`Chicago, IL 60654
`Telephone: (312) 862-2000
`Facsimile: (312) 862-2200
`
`

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`Case 17-51882-CSS Doc 319-5 Filed 06/04/20 Page 3 of 20
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`TABLE OF CONTENTS
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`Page
`
`STATEMENT OF THE NATURE AND STAGE OF THE PROCEEDINGS ........... 1 
`
`SUMMARY OF THE ARGUMENT .............................................................................. 1 
`
`STATEMENT OF FACTS ............................................................................................... 2 
`
`I. 
`
`II. 
`
`III. 
`
`PARAGON NEGOTIATES THE PROPOSED SETTLEMENT IN
`THE CONTEXT OF ITS RESTRUCTURING ................................................. 2 
`
`PARAGON AND NOBLE REACH A PROPOSED SETTLEMENT
`AGREEMENT ...................................................................................................... 7 
`
`PARAGON’S CREDITORS AND THE COURT REJECT THE
`PLAN AND PROPOSED SETTLEMENT ......................................................... 8 
`
`ARGUMENT ..................................................................................................................... 9 
`
`I. 
`
`II. 
`
`THE SETTLEMENT EVIDENCE IS INADMISSIBLE UNDER
`RULE 408. ............................................................................................................. 9 
`
`THE SETTLEMENT EVIDENCE IS ALSO INADMISSIBLE
`UNDER RULE 403. ............................................................................................ 12 
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`CONCLUSION ............................................................................................................... 14 
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`Case 17-51882-CSS Doc 319-5 Filed 06/04/20 Page 4 of 20
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`TABLE OF AUTHORITIES
`
`
`
`Page(s)
`
`Cases
`
`Affiliated Mfrs., Inc. v. Aluminum Co. of Am.,
`56 F.3d 521 (3d Cir. 1995).................................................................................... 10, 11
`
`Applebaum v. Target Corp.,
`No. 11-CV-15035, 2015 WL 13036873 (E.D. Mich. Feb. 11, 2015) ......................... 11
`
`Blu–J, Inc. v. Kemper C.P.A. Grp.,
`916 F.2d 637 (11th Cir. 1990) .................................................................................... 10
`
`E.E.O.C. v. UMB Bank Fin. Corp.,
`558 F.3d 784 (8th Cir. 2009) ...................................................................................... 10
`
`ECEM European Chem. Mktg. B.V. v. Purolite Co.,
`451 F. App’x 73 (3d Cir. 2011) .................................................................................. 11
`
`EEOC v. Gear Petroleum, Inc.,
`948 F.2d 1542 (10th Cir. 1991) .................................................................................. 13
`
`ICU Med., Inc. v. RyMed Techs., Inc.,
`752 F. Supp. 2d 486 (D. Del. 2010) ............................................................................ 15
`
`In re Paoli R.R. Yard PCB Litig.,
`35 F.3d 717 (3d Cir. 1994).......................................................................................... 14
`
`Perez v. Perry,
`2014 WL 2533801 (W.D. Tex. June 5, 2014) ............................................................ 11
`
`PharmaStem Therapeutics, Inc. v. Viacell Inc.,
`2003 WL 22387038 (D. Del. Oct. 7, 2003) .......................................................... 10, 11
`
`Ramada Dev. Co. v. Rauch,
`644 F.2d 1097 (5th Cir. 1981) .................................................................................... 10
`
`Rathemacher v. IBM Corp.,
`1992 WL 41719 (D.N.J. Feb. 28, 1992) ..................................................................... 14
`
`Rules
`
`Fed. R. Evid. 403 ................................................................................................ 1, 2, 13, 14
`
`Fed. R. Evid. 408 ....................................................................................................... passim
`
`
`
`ii
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`Case 17-51882-CSS Doc 319-5 Filed 06/04/20 Page 5 of 20
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`STATEMENT OF THE NATURE AND STAGE OF THE PROCEEDINGS
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`1.
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`On February 14, 2016, Paragon Offshore plc and related entities filed for
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`chapter 11 bankruptcy protection in this Court. D.I. 1. On December 15, 2017, the
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`Paragon Litigation Trust (the “Trust”) began this adversary proceeding. D.I. 2. Pursuant
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`to the Court’s December 20, 2019 Amended Scheduling Order, the Trust brings this
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`Motion in Limine to narrow disputes at trial, and exclude settlement-related evidence
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`pursuant to Federal Rules of Evidence 408 and 403.
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`SUMMARY OF THE ARGUMENT
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`2.
`
`One year after its spin-off from Noble, Paragon retained counsel and
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`financial advisors to assist it in restructuring. They developed a chapter 11 plan of
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`reorganization that included a proposed settlement of Paragon’s fraudulent transfer
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`claims against Noble—the same claims in this litigation. Neither that plan nor the
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`proposed settlement was ever approved.
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`3.
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`As part of negotiating the restructuring plan and proposed settlement,
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`Paragon’s counsel and financial advisors undertook an abbreviated review of Paragon’s
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`fraudulent transfer claims. Weil, Gotshal & Manges LLP focused on the legal issues.
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`Lazard spent about a week in total analyzing financial issues that centered on reviewing
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`the solvency opinion that Noble commissioned from Houlihan Lokey pre-spin.
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`Following this work, Paragon and Noble reached the proposed settlement, conditioned on
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`approval of the plan, that would have released Paragon’s fraudulent transfer claims solely
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`in exchange for Noble’s support on historical Mexican tax liabilities that Noble had
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`foisted on Paragon through the spin-off. Creditors objected to both the plan and the
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`settlement. The Court then rejected the plan, and with it fell the settlement. The Court
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`ultimately approved a chapter 11 plan that created the Trust to pursue these same claims.
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`Case 17-51882-CSS Doc 319-5 Filed 06/04/20 Page 6 of 20
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`4.
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`Now, Noble seeks to defend against the Trust’s fraudulent transfer claims
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`with evidence related to this prior failed settlement. Although Noble separately noticed
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`and deposed only three fact witnesses in this litigation, the depositions it took focused
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`largely on Paragon’s efforts during the restructuring to settle these claims and the limited
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`analysis its advisors prepared in the course of those efforts. This evidence should be
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`excluded for two independent reasons:
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`5.
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`Pursuant to Federal Rule of Evidence 408, the Court should bar evidence
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`of both the failed settlement itself and all analyses and communications related to it,
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`including Weil’s and Lazard’s work in furtherance of those efforts.
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`6.
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`Apart from Rule 408, this evidence is independently inadmissible under
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`Rule 403, as any probative value is far outweighed by the danger of unfair prejudice and
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`diversion on collateral issues.
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`STATEMENT OF FACTS
`
`I.
`
`PARAGON NEGOTIATES THE PROPOSED SETTLEMENT IN THE
`CONTEXT OF ITS RESTRUCTURING
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`7.
`
`By July 2015, less than a year after the spin-off, Noble and Paragon were
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`already engaged in settlement negotiations, including regarding Mexican tax liabilities
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`and bonding for those liabilities. (App. A63, 9/25/2019 Strickler Dep. at 278:9-18
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`
`
` (Todd Strickler, Paragon’s general counsel).) In August 2015, Paragon
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`retained Weil and Lazard to prepare for its restructuring. (App. A40, id. at 45:10-19
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`(Weil); App. 76, 9/26/2019 Fordyce Dep. at 48:7-8 (Lazard retained
`
`
`
`.) Shortly thereafter, settlement negotiations between Paragon and
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`Noble expanded.
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`2
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`Case 17-51882-CSS Doc 319-5
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`8.
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`On behalf of Paragon, Weil and Lazard analyzed Paragon’s potential
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`fraudulent transfer claims against Noble asee
`ES 3. 1-2
`
`Strickler Dep. at 48:15-49:3.) Beginning in fall 2015, Weil, Lazard and Paragon
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`prepared documents to facilitate settlement negotiations, including emails, talking points,
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`presentations, and financial assessments. All documents and communications fromthis
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`timeframe relating to Paragon’s fraudulent transfer claims against Noble were made in
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`the context of and for the purpose of settlement. As Paragon’s general counseltestified:
`
`
`
`ae
`
`ee
`
`
`
`
`
`| e
`
`e
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`(App. A48-49,id. at 232:21-233:6 (emphasis added).)
`
`9.
`
`Lazard’s work on these claims began at the end of September 2015, when
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`Weil instructed Lazard to perform anaccelerated financial review to support negotiations.
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`(See App. A8, 9/30/2015 Emails from Lazard; see also App. A78, 9/26/2019 Fordyce
`
`Dep. at 83:13-17 (Lazard hadee) Even though the
`
`questions were “potentially demanding,” Lazard only had about a week to provideits
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`views.
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`(See App. A10, 9/30/2015 Emails from Lazard (“We have about a week ... [the
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`questions] are potentially demanding”); see also App. A41, Strickler Dep. at 48:7-10
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`

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`Case 17-51882-CSS Doc 319-5 Filed 06/04/20 Page 8 of 20
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`(noting
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` and
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`
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`.) Delays at Lazard further compressed that
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`period. (See App. A11, 10/2/2015 Email from Lazard
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`
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`; App. A14, 10/5/2015 Email from Lazard (“Do you have time to work on the
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`Noble spin off this week? … worry I won’t have capacity to do it”).) Lazard presented
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`its conclusions in a call with Paragon on October 9, 2015. (See App. A16, 10/9/2015
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`Invitation
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`; App. A50-51,
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`Strickler Dep. at 245:23-246:3.) After that call, Lazard’s analysis
`
`(App. A52, Strickler Dep. at 251:13-16.)
`
`10.
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`Noble and Paragon next met
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`
`
`
`
` (App. A55, id. at 259:4-7.) Once again, work on Paragon’s side was rushed.
`
`Steve Manz, Paragon’s CFO, provided
`
`
`
` (App. A59, id. at 268:13-16; see also App. A21,
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`12/21/2015 Email from S. Manz.) There
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` Paragon
`
` and was
`
`
`
`
`
` (App. A59, Strickler Dep. at 268:17-20; App. A60, id. at 270:15.)
`
`11.
`
`By January 12, 2016, Paragon and Noble had met a number of times
`
` (App. A62-63, id. at 277:22-278:1.)
`
`
`
` (App. A63, id. at
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`278:3-4.) Yet, as Paragon’s general counsel admitted to Noble’s general counsel,
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`Paragon was still failing to convey what its claims even were:
`
`
`
`” (See App.
`
`A25, 1/12/2016 Email from T. Strickler; see also App. A61, Strickler Dep. at 272:19-23.)
`
`
`
`4
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`

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`12.
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`As the next meeting with Noble in January loomed, Weil gave Lazard less
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`than 24 hours for follow-up work: “We need the following analysis ASAP … in
`
`preparation for tomorrow’s 8 AM CT meeting with Noble[.]” (App. A27, 1/13/2016
`
`Email from Lazard.)
`
` (App. A64, Strickler Dep. at 289:14-17.) After that,
`
`
`
`
`
` and the deal in principle was done. (App.
`
`A64-65, id. at 289:25-290:1.)
`
`13.
`
`All of the analysis by Weil and Lazard of the potential fraudulent transfer
`
`claims against Noble took place in the context of settlement negotiations. Paragon’s
`
`general counsel confirmed
`
`
`
`
`
` (App. A56-57, id. at
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`261:24-262:3 (emphasis added).) Lazard’s corporate representative likewise testified that
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`Lazard’s work was to facilitate settlement. (See App. A83, 9/26/19 Fordyce Dep. at
`
`174:14-15
`
`A81-82, id. at 172:16-173:8.)
`
`; see also App.
`
`14.
`
`Positions were developed, adapted, and pitched around reaching a
`
`settlement. For example, on January 15, 2016—as Paragon and Noble neared a
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`settlement—Weil’s lead litigator asked: “What’s our objective for this call? Am I
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`supposed to switch to being pessimistic about the litigation?” (App. A28, 1/15/2016
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`Email from B. Meyer (emphasis added).) Paragon’s general counsel explained:
`
`
`
`
`
` (App. A58, Strickler Dep. at 266:2-13.)
`
`Lazard also adjusted its analysis based on settlement objectives. (See App. A33,
`5
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`

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`Case 17-51882-CSS Doc 319-5 Filed 06/04/20 Page 10 of 20
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`8/23/2016 Fordyce Dep. at 163:16-164:7
`
`.)
`
`15.
`
`All along,
`
` (See App. A53-54, Strickler Dep. at 254:13-255:19.)
`
` (See App. A66, id. at 294:15-25.)
`
`
`
`
`
`
`
`
`
`
`
` (See App. A79, 9/26/2019
`
`Fordyce Dep. at 128:7-16
`
`.) Instead,
`
`. (See id.; App. A77, id. at 78:11-22
`
`
`
`
`
`
`
`
`
`
`
`.) Unbeknownst to Lazard at the time, subsequent discovery has revealed
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`that Noble manipulated the financial projections that Houlihan relied on to mask the
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`known decline in Paragon’s future business prospects. (See App. A4, 2/1/2014 Email
`
`from Barclays (explaining that without higher projections,
`
`
`
`
`
`Duncan (noting
`
`; App. A5, 1/31/2014 Email from J.
`
` for the ratings agencies);
`
`App. A7, 2/20/2014 Email from J. Duncan
`
`
`
`.)
`
`
`
`6
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`

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`Case 17-51882-CSS Doc 319-5 Filed 06/04/20 Page 11 of 20
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`II.
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`PARAGON AND NOBLE REACH A PROPOSED SETTLEMENT
`AGREEMENT
`
`16.
`
`After several months of settlement discussions, Paragon agreed to a
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`proposed settlement with Noble as part of its restructuring plan. See In re Paragon Int’l
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`Fin. Co., No. 16-10391 (Bankr. D. Del.), D.I. 716, 9/12/2016 Strickler Decl. ¶¶ 2, 5. The
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`proposed settlement was
`
` and conditioned on the
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`Court’s approval of the plan. (App. A49, Strickler Dep. at 233:7-11.)
`
`17.
`
`The proposed settlement would have released Paragon’s fraudulent
`
`transfer claims in exchange for Noble’s support for historic Mexican tax liabilities that
`
`Noble had imposed on Paragon in the spin-off. See In re Paragon Int’l Fin. Co., No. 16-
`
`10391, D.I. 716, 9/12/2016 Strickler Decl. at ¶ 68 (summarizing settlement terms:
`
`at 108:3-7
`
`; App. A46, Strickler Dep.
`
`
`
`
`
`.) Noble imposed these tax liabilities on Paragon even
`
`though Noble had enjoyed the revenues that generated those tax liabilities pre-spin.
`
`(App. A44, id. at 104:11-18; App. A36, 8/1/2019 Stilley Dep. at 70:3-21.) In fact, Noble
`
`dumped these tax liabilities on Paragon even though Noble’s own general counsel
`
`recognized pre-spin:
`
`
`
` (App.
`
`A45, Strickler Dep. at 107:2-7; App. A1, Nov. 14, 2013 Email from W. Turcotte.)
`
`18.
`
`Paragon had little choice but to agree to Noble’s settlement terms. As
`
`Paragon’s general counsel testified, Paragon’s business was in collapse, and it lacked
`
`both the time and resources to thoroughly investigate the fraudulent conveyance claims.
`
`
`
`7
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`

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`Case 17-51882-CSS Doc 319-5 Filed 06/04/20 Page 12 of 20
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`(See, e.g., App. A67, Strickler Dep. at 301: 21-25
`
`
`
`; App.
`
`A73, id. at 357:7-15.) Paragon had no ability to bond the potentially multi-billion dollar
`
`Mexican tax liabilities that Noble imposed on it (a prerequisite to appealing them)
`
`without Noble’s help. (See App. A36-38, 8/1/2019 Stilley Dep. at 70:22-72:1.)
`
`Paragon’s general counsel believed
`
`
`
`
`
` (App. A68, Strickler Dep. at 312:11-12; App. A17, 12/5/2015
`
`Email from T. Strickler.) Accordingly, Paragon was
`
`(App. A47, Strickler Dep. at 121:2-8.)
`
`A69-72, id. at 318:6-321:19.)
`
`
`
`
`
`
`
` (App.
`
`III.
`
`PARAGON’S CREDITORS AND THE COURT REJECT THE PLAN AND
`PROPOSED SETTLEMENT
`
`19.
`
`Paragon’s creditors challenged the proposed settlement in the bankruptcy.
`
`(See, e.g., App. A43, Strickler Dep. at 50:3-12
`
`.) As part of that challenge,
`
`
`
`
`
`
`
` (See App. A42-43, id. at 49:21-50:15). Paragon’s
`
`general counsel, Todd Strickler, and Lazard’s corporate representative, Doug Fordyce,
`
`were deposed. The Court rejected the plan as not feasible, and with it fell the settlement.
`
`See In re Paragon Int’l Fin. Co., No. 16-10391, D.I. 890 ¶¶ 79-80, 158-59. Paragon then
`
`submitted its next plan, again including the settlement, and creditors again objected. See
`
`
`
`8
`
`

`

`Case 17-51882-CSS Doc 319-5 Filed 06/04/20 Page 13 of 20
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`id., D.I. 1214 at 4. Ultimately, the proposed settlement with Noble was dropped from the
`
`plan in April 2017. See generally id., D.I. 1387. A plan without a settlement with Noble
`
`was approved in June 2017, creating this Trust to pursue these claims against Noble. The
`
`proposed settlement never took effect.
`
`ARGUMENT
`
`I.
`
`THE SETTLEMENT EVIDENCE IS INADMISSIBLE UNDER RULE 408.
`
`20.
`
`Noble seeks to use settlement-related evidence for precisely the reasons
`
`prohibited by Rule 408: to establish that Paragon’s fraudulent transfer claims—the same
`
`claims at issue in both this litigation and in the prior proposed settlement—are not valid
`
`or have little value. Rule 408, however, is clear. “Evidence of the following is not
`
`admissible—on behalf of any party—either to prove or disprove the validity or amount of
`
`a disputed claim or to impeach by a prior inconsistent statement or a contradiction:
`
`(1) furnishing, promising, or offering—or accepting, promising to accept, or offering to
`
`accept—a valuable consideration in compromising or attempting to compromise the
`
`claim; and (2) conduct or a statement made during compromise negotiations about the
`
`claim.” Fed. R. Evid. 408(a). All evidence relating to prior negotiations between
`
`Paragon and Noble should be excluded. This includes the proposed settlement itself as
`
`well as all of the analyses, statements, and documents made by Paragon, Weil and Lazard
`
`in connection with that settlement.
`
`21.
`
`Rule 408 prohibits the admission of evidence not only of settlements and
`
`settlement negotiations, but also the underlying work and analyses prepared in connection
`
`with the settlement. The Third Circuit has adopted “the view of Rule 408 expressed in
`
`the Ramada and Blu–J decisions of our sister circuits” that all evidence prepared “as part
`
`of [] settlement negotiations” is inadmissible. Affiliated Mfrs., Inc. v. Aluminum Co. of
`
`
`
`9
`
`

`

`Case 17-51882-CSS Doc 319-5 Filed 06/04/20 Page 14 of 20
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`Am., 56 F.3d 521, 529-30 (3d Cir. 1995) (citing Blu–J, Inc. v. Kemper C.P.A. Grp., 916
`
`F.2d 637, 642 (11th Cir. 1990) (“upheld the exclusion of evidence of an accountant’s
`
`evaluation … as part of their settlement negotiations”) and Ramada Dev. Co. v. Rauch,
`
`644 F.2d 1097, 1107 (5th Cir. 1981) (excluding “[architect’s] report that would function
`
`as a basis of settlement negotiations”)). Courts in the Third Circuit exclude “all evidence
`
`relating to negotiations.” See, e.g., PharmaStem Therapeutics, Inc. v. Viacell Inc., 2003
`
`WL 22387038, at *4 (D. Del. Oct. 7, 2003) (emphasis added).
`
`22.
`
`“Not only does Rule 408 apply to statements actually made and
`
`communicated to other parties in attempts to settle disputes, but it applies as well to
`
`internal statements and discussions, and to background memoranda prepared in attempts
`
`to settle disputes.” 2 Christopher B, Mueller & Laird C. Kirkpatrick, Fed. Evid. § 4:57
`
`(4th ed. 2020). Specifically, Rule 408 applies equally to internal “evaluations” that were
`
`“prepared as a basis for compromise negotiations” or that “served as a basis for
`
`calculation of compromise figures.” Affiliated Mfrs., 56 F.3d at 529-30 (affirming
`
`exclusion of settlement documents, including internal “evaluation” and “memoranda”
`
`that were “prepared as a basis for compromise negotiations” and “to assist in calculation
`
`of compromise figures discussed subsequently”); see also E.E.O.C. v. UMB Bank Fin.
`
`Corp., 558 F.3d 784, 791 (8th Cir. 2009) (“The spirit of the Rule, as recognized by
`
`several circuits and as set forth in the commentary to the Rule, supports the exclusion of
`
`certain work product, internal memos, and other materials created specifically for the
`
`purpose of conciliation, even if not communicated to the other party.”); Perez v. Perry,
`
`2014 WL 2533801, at *6 (W.D. Tex. June 5, 2014) (“[I]nternal memoranda,
`
`communications, and analyses performed in furtherance of the compromise plan are
`
`privileged [under Rule 408], regardless of whether they were communicated to
`10
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`
`
`

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`Case 17-51882-CSS Doc 319-5 Filed 06/04/20 Page 15 of 20
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`Plaintiffs.”); Applebaum v. Target Corp., 2015 WL 13036873, at *1 (E.D. Mich. Feb. 11,
`
`2015) (“Rule 408 covers statements made as part of preparations for compromise
`
`negotiations, not only those made during the actual negotiations themselves.”).
`
`Moreover, “when in doubt, the district court should err on the side of excluding
`
`compromise negotiations.” ECEM European Chem. Mktg. B.V. v. Purolite Co., 451 F.
`
`App’x 73, 77 (3d Cir. 2011); PharmaStem, 2003 WL 22387038, at *4 (same).
`
`23.
`
`The settlement evidence here falls squarely within Rule 408’s
`
`exclusionary rule. All of the analyses prepared by Paragon, Weil, and Lazard and their
`
`statements concerning Paragon’s potential fraudulent transfer claims against Noble were
`
`made in the context of settlement. (See App. A48-49, Strickler Dep. at 232:21-233:6
`
`
`
`
`
`
`
` (emphasis added)).) Lazard prepared its work at Weil’s
`
`direction to inform settlement negotiations by “assist[ing] in calculation of compromise
`
`figures discussed subsequently.” (See id.; Affiliated Mfrs., 56 F.3d at 529-30; see also
`
`App. A81-82, 9/26/19 Fordyce Dep. at 172:16-173:8 (updating solvency analysis after
`
`15 (work was created because
`
`; App. A80, id. at 160:7-21.)
`
`; App. A83, id. at 174:14-
`
`
`
`24.
`
`This settlement evidence is precluded by Rule 408’s plain terms. It also
`
`squarely implicates its underlying policies. “The policy behind Rule 408 is to encourage
`
`freedom of discussion with regard to compromise.” Fed. R. 408 Advisory Committee’s
`
`Notes. And settlement evidence is often “irrelevant, since the offer may be motivated by
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`Case 17-51882-CSS Doc 319-5 Filed 06/04/20 Page 16 of 20
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`a desire for peace rather than from any concession.” Id. Here, Paragon spent limited
`
`time and resources to investigate its claims against Noble, and had no bargaining power
`
`to negotiate given its financial collapse and inability to bond the Mexican tax liabilities
`
`without Noble’s help. (Supra at 7-8.) It is no wonder that Paragon agreed to settle. That,
`
`however, says nothing about the true value of Paragon’s claims.
`
`25.
`
`Rule 408 and its underlying policies apply with particular force in the
`
`restructuring context, which by its nature involves negotiating and compromising claims.
`
`Allowing evidence of these prior negotiations would “disrupt future efforts between
`
`attorneys in conducting candid conversations amidst bankruptcy negotiations.” See, e.g.,
`
`Boeing Co. v. KB Yuzhnoye, 2015 WL 12803452, at *9 (C.D. Cal. Nov. 3, 2015) (citing
`
`Rule 408 and granting motion in limine to exclude party’s bankruptcy lawyers as
`
`witnesses regarding negotiations); In re Ramco-Remodel Am. Corp., 536 B.R. 206
`
`(Bankr. W.D. Tenn. 2015) (evidence regarding settlement under which a creditor would
`
`vote for plan confirmation was inadmissible in subsequent litigation under Rule 408).
`
`II.
`
`THE SETTLEMENT EVIDENCE IS ALSO INADMISSIBLE UNDER
`RULE 403.
`
`26.
`
`Apart from Rule 408, the proposed settlement and the underlying Weil and
`
`Lazard work are independently inadmissible under Rule 403, which excludes evidence
`
`when “its probative value is substantially outweighed by a danger of” “unfair prejudice,
`
`confusing the issues” or “undue delay.” Fed. R. Evid. 403. Courts have long recognized
`
`that settlement evidence is of marginal relevance and is inherently prejudicial. Thus, this
`
`evidence is inadmissible even if Rule 408 does not apply: “the risks of prejudice and
`
`confusion entailed in receiving settlement evidence are such that often the underlying
`
`policy of Rule 408 requires exclusion even when a permissible purpose can be
`
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`Case 17-51882-CSS Doc 319-5 Filed 06/04/20 Page 17 of 20
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`discerned.” EEOC v. Gear Petroleum, Inc., 948 F.2d 1542, 1546 (10th Cir. 1991)
`
`(citation omitted).
`
`27.
`
`The settlement-related evidence here, including the underlying work
`
`prepared by Weil and Lazard, has little—if any—probative value. The questions of
`
`Paragon’s solvency at spin and Noble’s fraudulent intent are for the Court to decide based
`
`on the full trial record. Solvency turns on what was known or knowable at spin, which
`
`has been explored in depth through this adversary proceeding. Over two million
`
`documents have been produced. Both sides retained solvency and industry experts.
`
`Noble itself disclosed six experts. The trial should focus on this evidence.
`
`28.
`
`In contrast to this extensive record, Weil and Lazard performed limited
`
`analysis under severe time constraints to support the failed settlement (see App. A8,
`
`9/30/2015 Emails from Lazard (“We have about a week …”); App. A27, 1/13/2016
`
`Email from Lazard (“We need the following analysis ASAP … for tomorrow’s 8 AM CT
`
`meeting with Noble”));
`
`at 254:13-255:19); and
`
`A66, id. at 294:15-25). And
`
` (see App. A53-54, Strickler Dep.
`
` (see App.
`
` (See App.
`
`A79, 9/26/2019 Fordyce Dep. at 128:7-16; see also App. A77, id. at 78:11-22.) This
`
`settlement evidence is precisely the kind of evidence that Rule 403 is meant to exclude.
`
`See Rathemacher v. IBM Corp., 1992 WL 41719, at *7 (D.N.J. Feb. 28, 1992) (“[T]o the
`
`extent that the offer to settle is probative, its value is outweighed under Federal Rule of
`
`Evidence 403 by the prejudicial effect of introducing evidence of a settlement.”).
`
`29.
`
`It would be particularly unfair to permit Noble to use the settlement
`
`evidence to argue that Paragon’s claims have little value. It was Noble’s conduct in
`
`spinning off a doomed entity that put Paragon in the position where it had little choice but
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`Case 17-51882-CSS Doc 319-5 Filed 06/04/20 Page 18 of 20
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`to accept the settlement. (See supra at 7-8, 12.) As noted, without a solution to the
`
`Mexican tax bonding dilemma, Paragon’s general counsel believed Paragon could not
`
`restructure, and
`
`
`
`(App. A17, 12/5/2015 Email from T. Strickler; App. A68, Strickler Dep. at 312:11-12.)
`
`30. Moreover, admitting this evidence would also invite undue delay and trial
`
`on collateral issues: what Weil and Lazard knew, what information they had access to,
`
`their time and financial constraints, the thoroughness of their work, Paragon’s limited
`
`resources and bargaining power, its inability to bond the Mexican tax liabilities, and so
`
`on. See In re Paoli R.R. Yard PCB Litig., 35 F.3d 717, 734 (3d Cir. 1994) (affirming
`
`exclusion of evidence to avoid “significant waste of trial time for resolution of collateral
`
`issues”); ICU Med., Inc. v. RyMed Techs., Inc., 752 F. Supp. 2d 486, 493 (D. Del. 2010)
`
`(excluding evidence that “would cause substantial delay, wasted time, and confusion
`
`because it would require mini-trials”). Instead of litigating the merits of a financial
`
`analysis done in about a week without the benefit of discovery in the context of a failed
`
`restructuring and settlement, trial should proceed based on the extensive evidence that
`
`both sides have had a full and fair opportunity to develop.
`
`CONCLUSION
`
`For the foregoing reasons, the Trust respectfully requests that the Court exclude
`
`all evidence relating to the proposed settlement, including the agreement itself and the
`
`underlying work prepared by Weil and Lazard and their communications regarding
`
`Paragon’s fraudulent transfer claims against Noble.
`
`
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`Case 17-51882-CSS Doc 319-5 Filed 06/04/20 Page 19 of 20
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`Dated: June 1, 2020
`
`
`
`PACHULSKI STANG ZIEHL & JONES LLP
`
`
`
`/s/ Timothy P. Cairns
`Laura Davis Jones (DE Bar No. 2436)
`Timothy P. Cairns (DE Bar No. 4228)
`919 N. Market Street, 17th Floor
`P.O. Box 8705
`Wilmington, DE 19899-8705 (Courier 19801)
`Telephone: (302) 652-4100
`Facsimile: (302) 652-4400
`ljones@pszjlaw.com
`tcairns@pszjlaw.com
`
` -
`
` and -
`
`
`KIRKLAND & ELLIS LLP
`David J. Zott, P.C. (admitted pro hac vice)
`Jeffrey J. Zeiger, P.C. (admitted pro hac vice)
`William E. Arnault (admitted pro hac vice)
`Anne I. Salomon (admitted pro hac vice)
`Jason A. Feld (admitted pro hac vice)
`300 N. LaSalle Street
`Chicago, IL 60654
`Telephone: (312) 862-2000
`Facsimile: (312) 862-2200
`dzott@kirkland.com
`jzeiger@kirkland.com
`warnault@kirkland.com
`anne.salomon@kirkland.com
`jason.feld@kirkland.com
`
`Co-Counsel for Plaintiff
`
`
`
`
`
`
`
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`Case 17-51882-CSS Doc 319-5 Filed 06/04/20 Page 20 of 20
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`CERTIFICATE OF SERVICE
`I, Timothy P. Cairns hereby certify that on June 1, 2020, I caused the foregoing
`
`Memorandum of Law in Support of the Paragon Litigation Trust’s Motion In Limine to
`
`Exclude Settlement Evidence to be served on the following parties by electronic mail.
`
`Anthony W. Clark
`Stephen J. Della Penna
`Skadden, Arps, Slate, Meagher & Flom LLP
`One Rodney Square
`P.O. Box 636
`Wilmington, Delaware 19899-0636
`Telephone: (302) 651-3000
`Facsimile: (302) 651-3001
`
`George A. Zimmerman
`Lauren E. Aguiar
`Four Times Square
`New York, New York 10036-6522
`Telephone: (212) 735-3000
`Facsimile: (212) 735-2000
`
`Wallis M. Hampton
`1000 Louisiana Street, Suite 6800
`Houston, Texas 77002-5026
`Telephone: (713) 655-5116
`Facsimile: (713) 483-9116
`
`
`/s/ Timothy P. Cairns
`Timothy P. Cairns
`
`
`
`
`
`
`
`