Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

The Finley Group As Receiver for Industrial Piping, Inc. v. Zhang

United States District Court, D. Idaho

November 7, 2018

THE FINLEY GROUP AS RECEIVER FOR INDUSTRIAL PIPING, INC., Plaintiff,
v.
TAO (MIKE) ZHANG, and DAYI (SEAN) LIU Defendants.

          MEMORANDUM DECISION AND ORDER

          B. Lynn Winmill, Chief U.S. District Court Judge.

         INTRODUCTION

         The Court has before it a motion in limine to exclude the expert testimony of Jodi Whittaker, filed by plaintiff Industrial Piping Inc., and a motion in limine to exclude the testimony of Maggie Lyons, filed by defendants Zhang and Liu. The motions are fully briefed and at issue. For the reasons explained below, the Court will grant the motion to exclude Whittaker but deny the motion to exclude Lyons.

         FACTUAL BACKGROUND

         Plaintiff Industrial Piping Inc. (IPI) brings this lawsuit to recover payment for construction work it performed on a facility for Hoku Materials to produce solar panels. IPI and Hoku entered into a Master Construction Services Agreement (MCSA) in October of 2011 setting forth the work that IPI would perform and the payment it would receive - about $7 million. IPI claims that it performed the work but was never fully paid, and has sued Hoku's President (Tao Zhang) and Hoku's Vice-President for Finance (Dayi Liu). Hoku went into bankruptcy and hence is not a party to this lawsuit. The Second Amended Complaint alleges that Zhang and Liu deceived IPI into performing work despite knowing that no money existed to pay IPI.

         As part of their case-in-chief, IPI intends to call Maggie Lyons, a CPA and forensic accountant, to offer expert testimony that Hoku was insolvent when it signed the MCSA and did not have the working capital at that time to pay IPI. In response, defendants intend to call Jodi Whittaker, also a CPA, not to challenge conclusions about solvency or working capital, but instead to apply a Code of Conduct drafted by the American Institute of Certified Public Accountants (AICPA) to Lyons' testimony and opine that Lyons' testimony violates those standards.

         Both sides have filed motions in limine seeking to exclude the testimony of their opponent's expert. The Court will review first the motion as to Lyons and then take up the motion regarding Whittaker.

         ANALYSIS

         Lyons

         Maggie Lyons is a CPA with 30 years of experience in accounting and financial consulting. She is currently the President of Resolve Financial Group, Inc., and has served as a Chapter 11 Examiner in the U.S. Bankruptcy Court for the District of Idaho, a receiver in the U.S. District Court for the District of Oregon, and as a Plan Trustee in the U.S. District Court for the Eastern District of Washington. She has extensive experience working in forensic accounting.

         She was retained by IPI “to evaluate whether at the time Liu and Zhang caused Hoku to issue the MCSA, Hoku lacked the ability to pay the contractual amount of [$7.2 million] for the work to be performed by IPI under the MCSA.” See Report (Dkt No. 114-1). After reviewing Hoku's financial documents and other materials, she found that “[w]hen the MCSA was signed, Hoku was facing significant plant construction cost overruns and massive amounts of debt without any sources of cash for repayment.” Id. She summarized her opinion as follows: “[A]t the time Tao (Mike) Zhang signed the [MCSA] . . . Hoku was unable to pay its debts as they matured, including the [$7.2 million] agreed price for IPI's work under Task Orders 1-7.” Id. At this time, Lyons opined, Hoku was insolvent and did “not have sufficient working capital to complete its obligations under the (MSCA) and Task Orders 1-7.” Id.

         The defendants complain that Lyons will testify about the state of mind of Zhang and Liu - that is, that they intended to deceive IPI. But Lyons' report says nothing about the state of mind of Zhang or Liu. There is some deposition testimony where she characterized Zhang's representations as “untruthful”, but ultimately she testified that she would “leave it to the attorneys and to the rest of the process” to determine their intent. See Lyons Deposition (Dkt. No. 98-3) at pp. 19-20. IPI's brief represents that she will not testify about the intent, motivation, or state of mind of Zhang and Liu. See IPI Brief (Dkt. No. 114) at pp. 16-19. The Court will rely on that representation.

         Defendants argue, however, that Lyons will go beyond her area of expertise, and invade the province of the Court and jury, when she attempts to interpret the MCSA. To resolve this argument, the Court must review the proposed testimony of Lyons.

         Lyons was retained to evaluate the accuracy of certain representations made by Hoku in the MCSA. For example, in § 3.9.7, Hoku represents that it is “financially solvent, able to pay its debts as they mature and has sufficient working capital to complete its obligations under the Agreement.” Lyons will testify, based on her study of the financial documents and other material, that at the time the MCSA was signed, Hoku was not solvent and did not have the necessary working capital to complete its obligations. To explain her testimony, Lyons must by necessity explain the meaning of terms like “solvent” and “working capital.” She will do so not by interpreting the MCSA but by explaining the meaning generally ascribed to those terms by those in the accounting field. It remains up to the jury whether the parties attached some other meaning to ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.