Shaffer v. Amazon Servs. (In re Potential Dynamix LLC)

• Decision Date: 18 July 2022
• Docket Number: 2:11-bk-28944-DPC,Adversary 2:13-ap-00799
• Parties: In re: POTENTIAL DYNAMIX LLC, Debtor. v. AMAZON SERVICES, LLC, Defendant. TIMOTHY H. SHAFFER, Chapter 11 Trustee, Plaintiff,
• Court: U.S. Bankruptcy Court — District of Arizona

In re: POTENTIAL DYNAMIX LLC, Debtor.

TIMOTHY H. SHAFFER, Chapter 11 Trustee, Plaintiff, v. AMAZON SERVICES, LLC, Defendant.

No. 2:11-bk-28944-DPC

Adversary No. 2:13-ap-00799

United States Bankruptcy Court, D. Arizona

July 18, 2022

NOT FOR PUBLICATION

Chapter 11

UNDER

ADVISEMENT ORDER

Daniel P. Collins, Bankruptcy Judge

TABLE OF CONTENTS

I.SUMMARY OF LAWSUIT AND COURTFINDINGS........................................5

II. INTRODUCTION....................................................................................................7

III. JURISDICTION.....................................................................................................12

IV.POTENTIAL DYNAMIX'S BANKRUPTCY......................................................12

V.ADVERSARY PROCEEDING PROCEDURALHISTORY...............................15

A.The Complaint and Answer....................................................................................15

B.Amazon'sCounterclaims.......................................................................................16

C.DiscoveryDisputes................................................................................................16

D.Motions for Summary Judgment............................................................................16

E.Motions in Limine..................................................................................................18

VI.THE TRIAL...........................................................................................................19

A.TrialExhibits..........................................................................................................19

B.Trustee'sWitnesses................................................................................................20

1.TimothyShaffer..................................................................................................20

2.Serena Mor ones..................................................................................................21

a) Morones' DamagesReport..............................................................................22

b) MoronesFebruary 5, 2021, Declaration..........................................................27

c) Morones' Direct, Cross and Re-DirectExaminations.....................................32

3.ThomasAzzarelli................................................................................................38

4.JustinIce.............................................................................................................39

5.TashaBachand....................................................................................................41

6.JeffMoore...........................................................................................................43

7.EricSoder............................................................................................................44

8.JeffreyCone........................................................................................................45

9.StephenAshworth...............................................................................................46

10.SeanLawcock.....................................................................................................47

11.Daniel A.Bellino................................................................................................49

C.Motion for Directed Verdict...................................................................................49

D.Amazon'sWitnesses..............................................................................................50

1.TashaBachand....................................................................................................50

2. E. WeiantWilliams.............................................................................................52

a) Williams' Rebuttal Report of September 14, 2020.........................................52

b) WilliamsDeclaration.......................................................................................57

c) Williams' Cross and Re-DirectExaminations................................................58

3.TimothyShaffer..................................................................................................60

4.JustinIce.............................................................................................................61

5.JeffMoore...........................................................................................................63

6.EricSoder............................................................................................................64

7.JeffreyCone........................................................................................................66

8.StephenAshworth...............................................................................................67

9.ThomasReilly.....................................................................................................68

10.SeanLawcock.....................................................................................................69

11.Daniel A.Bellino................................................................................................70

E. Post-TrialProceedings...........................................................................................71

F.Tentative Under AdvisementOrder.......................................................................72

VII.ANALYSIS OF TRUSTEE'S CAUSES OFACTION.........................................72

A.Count 1: Failure to Turnover Estate Property Pursuant to § 542(a)......................72

1.LegalAnalysis....................................................................................................72

2.Conclusion on TurnoverClaims.........................................................................73

B.Count 2: Violation of the Automatic Stay Pursuant to § 362................................73

1.LegalAnalysis....................................................................................................73

2.Conclusion on the Stay ViolationClaims...........................................................77

C.Count 3: Breach of Contract...................................................................................77

1.LegalAnalysis....................................................................................................77

2.Burden of Proof...................................................................................................78

a) BurdenShifting...............................................................................................79

b) Conclusions Regarding Burden of Proof.........................................................82

3.Findings Regarding Breach of Contract and Damages.......................................83

a) Calculating ReplacementValue......................................................................83

b) Cutoff Date of January 31, 2014.....................................................................84

4.Amazon's ContractBreach.................................................................................86

a) The Settlement Data Was Not Introduced IntoEvidence...............................86

b) Plaintiffs Proven InventoryDamages............................................................90

c) The Court's Analysis of Codes Used by Amazon and the Impact on ClaimedDamages.................................................................................................................92

(1)CodeM.........................................................................................................92

(2)CodeD.........................................................................................................94

(3)CodeQ.........................................................................................................95

d) UnpaidRefunds...............................................................................................97

e) Sales Proceeds Not Remitted to Debtor..........................................................98

f) Trustee Did Not Carry Its Burden of Proof on the Basis of Amazon's Motivation for Termination of the Contract...........................................................99

g) UncleanHands.................................................................................................99

h) Money Claimed Owing by Debtor to Amazon...............................................99

5.Conclusion on Breach of ContractClaims.......................................................100

D.Prejudgment Interest on Damages........................................................................100

a) LegalAnalysis...............................................................................................101

b) Conclusion on PrejudgmentInterest.............................................................103

VIII.SUMMARY OFCONCLUSIONS......................................................................103

IX. ORDER................................................................................................................104

I.SUMMARY OF LAWSUIT AND COURT FINDINGS

This Adversary Proceeding^[1] involves a nine count Complaint^[2] brought by Timothy H. Shaffer, Trustee of the Chapter 11 Debtor, Potential Dynamix, LLC against Amazon Services, LLC on July 9, 2013.Over the course of this Adversary Proceeding, Plaintiffs claims have been boiled down to claims for (1) breach of contract, (2) turnover of property to Plaintiff, and (3) a claim for a violation of the bankruptcy automatic stay.

Plaintiff alleges Debtor placed roughly 6.4 million units of product in Amazon's...