Opinion
Civil Action No. 02-2556 (CKK).
November 1, 2005
MEMORANDUM OPINION (November 1, 2005)
On September 27, 2004, this Court issued a lengthy Memorandum Opinion and Order resolving Plaintiff's Motion for Summary Judgment. In its Memorandum Opinion, the Court determined that Defendants had not fully performed under the 1993 Consulting Agreement signed between the parties, and, in fact, had underpaid Plaintiff by $770,250. See Dorocon v. Burke, Civ. No. 02-2556(CKK), at 52, 57-59 (D.D.C. Sept. 27, 2004). Moreover, the Court found that — pursuant to the terms of the contract — Plaintiff was not explicitly required under the agreement to provide any post-contract consulting services. Id. at 55-56. However, the Court, looking at Defendants' various counterclaims, also concluded that Plaintiff owed Defendants a duty of good faith and fair dealing not to unreasonably and arbitrarily exercise its judgment in determining what consulting services were reasonably required under the contract. Id. at 56-57. Finding a genuine issue of material fact as to whether Plaintiff breached this duty of good faith and fair dealing implied in the contract, the Court noted that "[i]t will therefore be for the jury to determine whether Plaintiff has breached the implied duty of good faith and fair dealing by 'evading the spirit of the contract' and exercising its discretion in an arbitrary or unreasonable manner." Id. at 57 (citations omitted). Accordingly, the Court met with the parties on January 18, 2005, set forth a schedule for pre-trial filings, and set a trial date of November 8, 2005 to resolve the remaining factual issue in the above-captioned action.
Pursuant to the Court's Scheduling and Procedures Order, the parties — after a lengthy period of unsuccessful settlement negotiations — began filing pre-trial motions in this case in September 2005. Two separate categories of motions are now before the Court ripe for resolution: (1) motions relating to the burden of proof and type of evidence to be presented at trial, of which there are four such motions; and (2) motions relating to the parties' Joint Pre-Trial Statement, of which there are currently three such motions. In this Memorandum Opinion, the Court shall analyze, in sequence, the issues in the first category of motions and shall set forth its rulings resolving the parties' disputes. As to the second category of motions, i.e., motions relating to the parties' Joint Pre-Trial Statement, the Court shall hold off on a ruling and shall discuss all issues relating to the Joint Pre-Trial Statement with the parties at the pre-trial hearing in this action scheduled for Tuesday, November 1, 2005 at 2:00 p.m.
I: DISCUSSION
On September 16, 2005, the parties presented the Court with four motions relating to the burden of proof at trial and requesting that certain evidence be excluded from the jury's consideration: (1) Plaintiff's Motion to Shift the Order of Proof at Trial; (2) Plaintiff's In Limine Motion; (3) Defendants' Motion in Limine to Exclude Evidence Relating to Settlement Discussions Between the Parties; and (4) Defendants' Motion in Limine to Exclude Evidence Relating to Undisclosed Consulting Services Allegedly Provided by Dorocon. In order to provide the parties with a more detailed idea of the contours of the November 8, 2005 trial, the Court makes the following rulings on the issues raised in these motions on the record presented.
A. Plaintiff's Motion to Shift the Order of Proof at Trial
In Plaintiff's Motion to Shift the Order of Proof at Trial, Plaintiff contends that "the order of proof roles of Burke/QFI and Dorocon need to be reversed for trial because the sole matters remaining to be tried to the jury [are]: (1) Burke/QFI's affirmative defense to Dorocon's breach of contract claims in Counts I, II, and III of the Complaint; and (2) Burke's/QFI's Counterclaim IV — both based upon Dorocon['s] alleged failure to comply with its implied obligation of good faith and fair dealing." Pl.'s Mot. to Shift Order of Proof at 1. In Defendants' Response, Defendants note that "to the extent that Dorocon's Motion seeks to have Defendants' proceed first at trial to produce evidence to meet its burden on its affirmative defense and counterclaim, Defendants long ago agreed to this arrangement. . . ." Defs.' Response at 4. However, Defendants maintain that Plaintiff is not relieved of its burden of proof on three issues: (1) Plaintiff's claim that Defendants' implied good faith and fair dealing affirmative defense/counterclaim is barred by the statute of limitations; (2) the issue of whether Queen's Fare's corporate veil should be pierced and Regina Burke held personally liable for Queen's Fare's contract obligations; and (3) Plaintiff's entitlement to pre-judgment interest. Id. The Court shall analyze each remaining issue in turn.
1. Statute of Limitations Defense to Defendants' Counterclaim:
In response to Defendants' identification of the remaining issues surrounding the required burden of proof, Plaintiff admits that it bears the burden of proof in establishing its own affirmative defenses to Defendants' remaining counterclaim. See Dorocon's Reply at 5. However, Defendants are correct in pointing out problems with this late claim by Plaintiff — an argument to which Plaintiff offers no response. See Defs.' Response at 10-11; Defs.' Objections to Dorocon's Pre-Trial Materials at 7-11.
Importantly, the language of Rule 8(c) of the Federal Rules of Civil Procedure requires that the defense of statute of limitations be raised affirmatively "in a pleading to a preceding pleading." Fed.R.Civ.P. 8(c). Accordingly, "[t]he statute of limitations is an affirmative defense which . . . must be set forth affirmatively in a responsive pleading and may be waived if not promptly pleaded." Exec. Sandwich Shoppe, Inc. v. Carr Realty Corp., 749 A.2d 724, 734 (D.C.App. 2000) (quoting Feldman v. Gogos, 628 A.2d 103, 104 (D.C. 1993)). It is well settled that "[a] party's failure to plead an affirmative defense . . . generally 'results in the waiver of that defense and its exclusion from the case.'" Dole v. Williams Enters., 876 F.2d 186, 189 (D.C. Cir. 1989) (emphasis in original, quoting 5 Charles Alan Wright Arthur R. Miller, Federal Practice and Procedure § 1278 (1990)). "More specifically, '[r]eliance on a statute of limitations is an affirmative defense and is waived if a party does not raise it in a timely fashion.'" Harris v. Sec'y, U.S. Dep't of Veterans Affairs, 126 F.3d 339, 343 (D.C. Cir. 1997) (quoting Banks v. Cheasapeake and Potomac Telephone Co., 802 F.2d 1416, 1247 (D.C. Cir. 1986)).
Here, Plaintiff failed to plead in its February 21, 2003 "Reply to Defendants' Counterclaims" its now-asserted contention that the statute of limitations barred Defendants' implied duty of good faith and fair dealing counterclaim. See Pl.'s Reply to Defs.' Counterclaims at 8-9 (addressing Counterclaim Count IV). Plaintiff further dropped the ball during the summary judgment stage of this litigation, once again failing to raise the statute of limitations as a defense against Defendants' implied duty of good faith counterclaim. See generally Pl.'s Mot. for Summ. J.; Pl.'s Reply to Defs.' Opp'n to Pl.'s Mot. for Summ. J; see also United Mine Workers of Am. 1974 Pension v. Pittston Co., 984 F.2d 469, 478 (D.C. Cir. 1993) (failure to raise an affirmative defense at the summary judgment stage constitutes an abandonment of the defense) (citing Attorney Gen. of the United States v. Irish People, Inc., 595 F. Supp. 114, 120 n. 9 (D.D.C. 1984) (affirmative defenses abandoned when not raised at summary judgment stage), aff'd in part and rev'd in part on other grounds, 796 F.2d 520 (D.C. Cir. 1986); Pantry Inc. v. Stop-N-Go Foods, Inc., 796 F. Supp. 1164, 1167-68 (S.D.Ind. 1992) ("[t]his Court knows of no authority for holding that affirmative defenses are somehow latent and survive a patient summary judgment to be argued at trial — even though the complete issue of liability has been determined")). Accordingly, Plaintiff is barred from raising the statute of limitations as a possible defense at this late stage in the litigation. See Raney v. Dist. of Columbia, 892 F. Supp. 283, 285 (D.D.C. 1995) ("substantial prejudice" would adhere to plaintiff which had incurred substantial legal costs in conducting discovery and preparing for trial if defendant were allowed to assert a statute of limitations defense which had been pleaded in original answer but not in answer to the amended complaint and had not thereafter been asserted); McGraw v. Matthaei, 388 F. Supp. 84, 88 (E.D.Mich. 1972) (refusing to allow amendment of pleading to assert statute of limitations defense on the last day of the trial). Because Plaintiff is barred from asserting the statute of limitations as a defense to Defendants' remaining Counterclaim, Plaintiff is not entitled to any jury instructions concerning it.
Essentially, Plaintiff's Answer to Defendants' Counterclaims.
2. Piercing the Corporate Veil:
Plaintiff maintains that it is already established that Defendants Queen's Fare, Inc. and Regina Burke are jointly and severally liable for any liquidated damages due Plaintiff under the 1993 Consulting Agreement. See Dorocon's Reply at 3-4. Specifically, Plaintiff notes that (1) its Complaint claimed that "Burke and QFI were each directly liable on Dorocon's breach of contract claims for underpayment under the Contract which both had signed in their respective corporate and individual capacities," id. at 3; (2) Defendants' Answer pleaded all defenses jointly, never drew a distinction between the parties, and did not assert a "corporate veil" issue, id. at 3-4; (3) Plaintiff specifically noted in a footnote in its Motion for Summary Judgment that "Dorocon continues here to treat the two defendants (Burke and QF) as one and the same for liability purposes. If defendants raise an issue, Dorocon will deal with such issue in its reply memorandum.", id. at 4 (citing Pl.'s Mot. for Summ. J. at 15 n. 9); and (4) the Court's September 27, 2004 Memorandum Opinion failed to draw a distinction between the two defendants when discussing potential liability, id. at 4.
Upon a reading of the plain language of the 1993 Consulting Agreement, it is clear that the Agreement requires only that Queen's Fare, not Ms. Burke, make payments to Dorocon. See Agreement at 1, ¶ 1 ("Dorocon agrees to provide such consulting services as reasonably required in its judgment to assist QFI. . . ."); id. at 1, ¶ 2 ("QFI agrees to pay Dorocon for such services"); id. at 2, ¶ 3 ("QFI shall pay to Dorocon a monthly automobile, travel and expense allowance"); id. at 3 (Regina Burke-Medeiros, signing as "President, Queen's Fare, Inc."). Ms. Burke's only explicit contractual obligation to Plaintiff is her acknowledgment that the contract "shall encompass operations at Boston Logan International Airport and at any other airport location subsequently operated by QFI or [Burke] or any other entity controlled by either of them." Id. at 2, ¶ 4. Where, as here, separate parties have separate obligations under the same contract, "it is the same as though each has executed separate instruments . . . [and] each party is bound separately for the performance which he or she promises, and is not bound jointly with anyone else." 12 Williston on Contracts § 36:1 (4th ed. 1999); see also 9 Corbin on Contracts 625, § 926 (interim ed. 2002) ("The question whether two or more promissors have promised a single undivided performance, or have each promised a limited and separate performance is wholly a problem of interpretation. The question is merely what was the performance promised and who promised it."). Here, the Consulting Agreement does not contain a provision explicitly stating that the obligations of Queen's Fare and Ms. Burke are joint and several.
Accordingly, the relevant question becomes whether the corporate veil surrounding Queen's Fare may be breached so that Ms. Burke may be held personally liable for Queen's Fare's contract debts. Notwithstanding Plaintiff's assumptions in this case, the assertion that Ms. Burke is not personally and jointly liable as an "alter ego" for Queen's Fare under a "piercing of the corporate veil" theory is not an affirmative defense. See Fed.R.Civ.P. 8(c); cf. Peacock v. Thomas, 516 U.S. 349, 354, 116 S.Ct. 862, 133 L.Ed.2d 817 (1996) ("Piercing the corporate veil is not itself an independent . . . cause of action, but rather is a means of imposing liability on an underlying cause of action."). Rather, "[i]n 'the application of the alter ego theory to pierce the corporate veil . . . [t]he burden of proof on this issue rests with the party attempting to negate the existence of a separate entity.'" Trustees of the Nat'l Elevator Indus. Pension, Health Benefit and Educ. Funds v. Lutyk, 332 F.3d 188, 198 (3d Cir. 2003) (quoting Publicker Indus., Inc. v. Roman Ceramics Corp., 603 F.2d 1065, 1069 (3d Cir. 1979)). Under District of Columbia law, "a party seeking to pierce the corporate veil has the burden to make a substantial showing that the corporation is really a dummy or sham for another dominating entity." Flocco v. State Farm Mut. Auto. Ins. Co., 752 A.2d 147, 155 (D.C.App. 2000) (citations and quotation marks omitted); see also Labadie Coal Co. v. Black, 672 F.2d 92, 96 (D.C. Cir. 1982) (noting that "the greatest judicial deference is normally accorded to the separate corporate entity").
In this case, Plaintiff's Complaint plainly identifies Ms. Burke as Queen's Fare's sole shareholder and claims that Ms. Burke "exercised complete and total control over [Queen's Fare]." Compl. at 1-2, ¶ 4. Defendants' Answer admits that Ms. Burke "has been the president and sole shareholder of Queen's Fare" but denies the rest of Plaintiff's allegation. Answer at 2, ¶ 4. The fact that Ms. Burke is the sole shareholder of Queen's Fare is insufficient under District of Columbia law to pierce the corporate veil. See Flocco, 752 A.2d at 155 ("Dominant stock ownership alone does not create an identity of interest as an alter ego.") (citations omitted). Instead, in order to pierce a corporate veil, there must be "unity of ownership and interest" and "it must appear that the corporation is not only controlled by those persons, but also that the separateness of the persons and the corporation has ceased and . . . an adherence to the fiction of the separate existence of the corporation would sanction a fraud or promote injustice." Camacho v. 1440 Rhode Island Ave. Corp., 620 A.2d 242, 248-49 (D.C.App. 1993) (citations omitted). Further, because piercing the corporate veil is a "doctrine of equity," other factors should be weighed as well, including the nature of the ownership and control, whether corporate minutes and adequate corporate records were maintained, whether the corporate formalities necessary for issuance or subscription of stock were followed, whether funds and other assets of the corporation were mingled with the individual shareholders' funds, whether corporate funds or assets were diverted to non-corporate uses such as the personal uses of the corporation's shareholders, and whether the same office space was used by the corporation and its individual shareholders. Id. at 249 n. 22; Labadie Coal Co., 672 F.2d at 97-99.
In this case, Plaintiff has not yet made the required showing; indeed, Plaintiff — save for an explicit assumption made in one footnote in its Motion for Summary Judgment that it did not bring up again in its Reply — has not dealt with this issue at all. Moreover, simply noting in a footnote that Defendants did not plead something that they were not required to plead does not frame the issue in a way that Defendants were under any obligation to address. Rather, showing Ms. Burke's personal liability is part of Plaintiff's substantive claim against Ms. Burke, and Plaintiff is under an obligation to make a "substantial showing" that the corporate veil should be pierced so that Ms. Burke may be held individually liable. See Kaplan v. First Options of Chicago, Inc., 19 F.3d 1503, 1522 (3d Cir. 1994) ("[A]lter ego . . . must be shown by clear and convincing evidence."). Plaintiff did not focus on this issue at any length in the dispositive motion stage of this proceeding, and it now bears the burden of proof at trial in providing evidence and showing that Ms. Burke is personally liable to Dorocon for payments due under the 1993 Consulting Agreement.
3. Pre-judgment interest:
In its Reply, Plaintiff acknowledges that "it bears the burden to demonstrate to the Court the grounds for liability and amount for its prejudgement interest claim." Dorocon's Reply at 3. Given this acknowledgment, the Court sees no remaining conflict regarding the burden of proof for this issue. The Court notes that the District of Columbia has two statutes relevant to pre-judgment interest: D.C. Code Section 15-108 (2001) and D.C. Code Section 15-109 (2001). Section 15-108 provides:
In an action in the United States District Court for the District of Columbia or the Superior Court of the District of Columbia to recover a liquidated debt on which interest is payable by contract or by law or usage the judgment for the plaintiff shall include interest on the principal debt from the time it was due and payable, at the rate fixed by the contract, if any, until paid.
D.C. Code § 15-108. In this case, a liquidated debt is at issue, as it is uncontested that Defendants failed to pay Plaintiff $770,250 due under the 1993 Consulting Agreement. See Schwartz v. Swartz, 723 A.2d 841, 843 (D.C. 1998) ("A liquidated debt is one which at the time it arose . . . was an easily ascertainable sum certain.") (quoting Dist. of Columbia v. Pierce Assocs., Inc., 527 A.2d 306, 311 (D.C. 1987)). However, an examination of the Consulting Agreement reveals that no explicit provision was made for the collection of pre-judgment interest. Accordingly, because there is no "rate fixed by contract," Section 15-108 is inapplicable to Plaintiff's claim for pre-judgment interest.
In contrast, Section 15-109 provides in pertinent part:
In an action to recover damages for breach of contract the judgment shall allow interest on the amount for which it is rendered from the date of the judgment only. This section does not preclude the jury, or the court, if the trial be by the court, from including interest as an element in the damages awarded, if necessary to fully compensate the plaintiff.
D.C. Code § 15-109. As such, because the trial in this case will be before a jury, Plaintiff is entitled to pre-judgment interest under its breach of contract counts only if the jury "includes prejudgment interest as an element in the damages awarded, if necessary to fully compensate the plaintiff." Schwartz, 723 A.2d at 844 (quoting D.C. Code § 15-109). Indeed, prejudgment interest is generally regarded as "'merely another element of damages.'" Waverly Taylor, Inc. v. Polinger, 583 A.2d 179, 185 (D.C. 1990) (quoting Kiser v. Huge, 517 F.2d 1237, 1251 (D.C. Cir. 1974)). Plaintiff, in order to obtain prejudgment interest, must therefore "introduce at trial, for the jury's consideration, evidence to show that prejudgment interest was necessary to fully compensate [it]." Schwartz, 723 A.2d at 844.
B. Plaintiff's In Limine Motion
Plaintiff's In Limine Motion requests that the Court limit and prevent Defendants from mentioning or making reference in the presence of the jury to any of seven categories of matters: (1) "Burke's claim that she had a sexual relationship with Ronald Reeves in the early 1970's"; (2) that Ronald Reeves and Dorothy Reeves are 'wealthy' and enjoy an 'affluent lifestyle"; (3) "that Burke and QFI were fraudulently induced to enter into the Consulting Agreement"; (4) "that the Consulting Agreement operates a shakedown or scam against Burke and QFI"; (5) "that the Consulting Agreement includes any pertinent oral provisions"; (6) "that the parties unsuccessfully attempted to settle their disputes, with details of the settlement discussions and proposals"; and (7) "Burke/QFI's new claim that Dorocon breached the express provisions of the Consulting Agreement, including by refusing an oral request by Burke for help to resolve a sexual harassment problem caused by some unidentified individual at Host." Pl.'s In Limine Mot. at 1. The Court shall deal with Defendants' Response and these individual issues in turn. In doing so, the Court notes that it is making these individualized decisions to either admit or bar evidence based solely on the arguments and contexts presented in the parties' filings — should the context or purpose for the evidence shift in the future, the Court should be made aware of the shift and may well revisit its earlier ruling.
1. Prior Sexual Relationship:
Defendants maintain that they may introduce evidence relating to an alleged sexual relationship for three purposes. First, they contend that "the history of how Ms. Burke knows [Mr.] Reeves, the nature of their relationship prior to entering into the business arrangement, are relevant to background and context, as well as to the reasons that Ms. Burke entered into the deal, and her reasonable expectations about what Dorocon was to do under the Agreement." Defs.' Response to Dorocon's Mot. in Limine at 3. Second, they assert that such information may be used to impeach the credibility of Mr. Reeves who, during his deposition, disavowed any romantic relationship with Ms. Burke and claimed that they were mere casual acquaintances. See Defs.' Response to Dorocon's Mot. in Limine at 5; 8/29/03 Ronald Reeves Dep. at 7:1-8:17. Third, they argue that "[w]hether Reeves is telling the truth about his prior relationship goes to . . . bias." Defs.' Response to Dorocon's Mot. in Limine at 5.
As to the first proposition, Defendants rely almost entirely on one case to support their argument that the nature of Ms. Burke's personal relationship with Mr. Reeves, a non-party agent of Dorocon, is admissible to illuminate the reasonable expectations of the parties and the agreed common purpose of the contract — True North Composites LLC v. Trinity Indus., Inc., 191 F. Supp. 2d 484 (D.Del. 2002). Notably, there are two crucial distinctions between the "prior dealings" evidence at issue in the True North case and the "prior relationship" evidence in this matter. First, the evidence at issue in True North Composites concerned only "the parties business dealings prior to entering the" contract. Id. at 516 (emphasis added). Here, the evidence Defendants seek to introduce has nothing to do with business dealings; rather, the information is wholly personal, and has nothing to do with the way Mr. Reeves conducted business negotiations or fulfilled his contractual obligations in the past. For the purposes of Federal Rule of Evidence 401, there is a major difference between asserting that because a party acted one way in a business dealing, it is likely to act that way again in a future business dealing, and contending that the manner in which a person conducts their private sexual affairs reflects and shapes how they conduct business. Second, the prior business dealings at issue in True North Composites occurred almost contemporaneously with the contract at issue. Id. at 516-17. In this case, the sexual relationship at issue is alleged to have occurred in the early 1970's, roughly twenty years prior to the 1993 Consulting Agreement. Given the passage of nearly two decades between the alleged sexual involvement and the later business deal involving Mr. Reeves and Ms. Burke, it is quite a stretch to suggest that the purported relationship is relevant to the parties' "good faith" and "reasonable expectations." Indeed, in its September 27, 2004 Memorandum Opinion in this case, the Court refused to take Defendants' bait and discuss Defendants' allegations of prior sexual involvement at any length. Simply, such evidence is wholly irrelevant under Federal Rule of Evidence 401 to the matter at hand, and any de minimus probative value that the asserted evidence could possibly have is "substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence." See Fed.R.Evid. 403. As such, the Court shall bar Defendants from attempting to introduce evidence relating to alleged prior sexual involvement between Ms. Burke and Mr. Reeves for the purposes of a "good faith"/"reasonable expectations" analysis.
As for the second and third propositions offered by Defendants, i.e., impeachment of Mr. Reeves's credibility and an assertion that he is biased against Ms. Burke, the Court shall reserve its ruling until Defendants' theory and supporting allegations are further fleshed out at the pre-trial hearing. The Court does emphasize certain legal considerations that will be taken into account when it makes its ultimate decision.
Importantly, Federal Rule of Evidence 607 provides that "[t]he credibility of a witness may be attacked by any party, including the party calling the witness." Fed.R.Evid. 607. "Although not directly covered by a specific rule of evidence, a witness may be impeached by showing that he or she is biased, has an interest in the outcome of the litigation, is prejudiced in some relevant way, or has a motive to testify in a particular way." Behler v. Hanlon, 199 F.R.D. 553, 556-57 (D.Md. 2001) (citations omitted); see also United States v. Abel, 469 U.S. 45, 49-52, 109 S.Ct. 465, 83 L.Ed.2d 450 (1984) (permitting bias impeachment despite no rule of evidence specifically allowing it). "The partiality of the witness is subject to exploration at trial and is always relevant as discrediting the witness and affecting the weight of his testimony." United States v. Carter, 966 F. Supp. 336, 353 (E.D.Pa. 1997) (quoting Davis v. Alaska, 415 U.S. 308, 316, 94 S.Ct. 1105, 39 L.Ed.2d 347 (1974)). Accordingly, "[c]ourts have found bias in a wide variety of situations, including familial or sexual relationships, employment or business relationships, friendships, organizational members, and situations in which the witness has a litigation claim against another party or witness." United States v. Ringwalt, 213 F. Supp. 2d 499, 511 (E.D.Pa. 2002) (citing Weinstein's Federal Evidence §§ 607,04[5]-[7] (1997) (collecting cases)). Accordingly, it might well be the case that given a certain factual proffer and theory of bias, questioning of Mr. Reeves as to a previous sexual relationship between himself and Ms. Burke might be relevant to his possible bias in testifying against her.
However, the Court notes that other courts have limited or thwarted such an attack when the potential that the sexual relationship caused bias is remote, see United States v. Garrison, 168 F.3d 1089, 1094 (8th Cir. 1999) ("The District Court did not err when it prohibited cross-examination of Marshall on the subject of the alleged relationship. Any tendency of the relationship to show bias or interest on Marshall's part was remote, and the District Court did not abuse its discretion in limiting this aspect of the cross-examination of Marshall."), or have emphasized that such a line of questioning is only available when the sexual relationship itself was a material issue in the case, see Cadena v. The Pacesetter Corp., 30 F. Supp. 2d 1333, 1342 (D.Kan. 1998) (noting that questioning regarding evidence of a relationship between defense witnesses, and a coverup attempt, was permissible because "the question whether [the witnesses] had an improper relationship was a material issue in the [sexual harassment] case"). Here, the alleged sexual involvement of Mr. Reeves and Ms. Burke, which is said to have occurred twenty years prior to the signing of the 1993 Consulting Agreement, is certainly not a material issue in the case; moreover, it may well prove that the potential for bias if such a relationship actually occurred is quite remote.
Moreover, the Court emphasizes that it does have the power to bar such a line of questioning relating to a sexual relationship (or attempted introduction of such evidence) pursuant to Federal Rule of Evidence 608(b). Rule 608(b) provides that "[s]pecific instances of the conduct of a witness for the purpose of attacking . . . the witness' character for truthfulness, other than conviction of crime as provided in rule 609, may not be proved by extrinsic evidence." Fed.R.Evid. 608(b). While specific instances of conduct may be inquired into on cross-examination of the witness concerning the witness' character for truthfulness or untruthfulness, such an inquiry depends on "the discretion of the court." Id. Moreover, the advisory committee notes to Rule 608(b) suggest that "the overriding protection of Rule 403 requires that probative value not be outweighed by the danger of unfair prejudice, confusion of issues, or misleading the jury, and that of Rule 611 bars harassment and undue embarrassment." Fed.R.Evid. 608(b) advisory committee's note (1972). In this case, the Court — exercising its discretion — may well find that any probative value obtained through impeachment of Mr. Reeves on this topic is outweighed by the danger of unfair prejudice and confusion of the issues, and such questioning would likely constitute distracting harassment and lead to undue embarrassment. Accordingly, pursuant to Rules 403 and 611 of the Federal Rules of Evidence, the Court might well exercise its powers to forestall questioning on any topic related to any claim of sexual involvement between Mr. Reeves and Ms. Burke. Before the Court makes its ultimate determination, however, it shall hear Defendants' expanded rationale for such impeachment at the pre-trial hearing.
2. "Wealthy Affluent Lifestyle" of Mr. and Mrs. Reeves:
On this point, Defendants contend that they "intend to submit evidence about the Parties' respective contributions to the business operations of Queen's Fare and the compensation each party received from it." Defs.' Response to Dorocon's Mot. in Limine at 5. Essentially, Defendants intend to argue that while Ms. Burke "was spending up to 70 hours a week starting and running Queen's Fare's operations," id. at 4, Dorocon — whose sole business was providing consulting services to Queen's Fare — was spending "significant amounts of money on, for example, paying off corporate and personal credit cards and on landscaping the Reeves' residence," id. As such, Defendants want to use this information to contend that "Dorocon's sole focus from 1993 to present day has not been providing Queen's Fare with consulting services, but squeezing more and more money out of Queen's Fare." Jt. Pre-Trial Stmt. at 7-8.
The draft version of the Joint Pre-Trial Statement added the phrase "and in supporting Ron and Dorothy Reeves affluent lifestyle." See Dorocon's Reply to Defs.' Response to Dorocon's Mot. in Limine, Ex. 2 (Draft Joint Pre-Trial Statement at Section 3A).
Upon a review of the issue in question, the Court certainly agrees with Defendants' contention that, as reflected in the Consulting Agreement, "[t]he amount of money each party was receiving for their respective contributions to the business is plainly relevant to the 'intent and reasonable expectations of the parties' and the Court should not exclude this evidence." Defs.' Response to Dorocon's Mot. in Limine at 6 (citing ARI Co., Inc. v. Regent Int'l Corp., 273 F. Supp. 2d 518, 522 (S.D.N.Y. 2003)). However, how Dorocon or its agents spent the money once it was received from Queen's Fare or how much Mr. and Mrs. Reeves earned from outside income lacks a nexus to and is plainly irrelevant to the "intent and reasonable expectations of the parties" under the contract. The Court has already found that the Consulting Agreement "unambiguously require[s] Defendants to make periodic payments under Paragraph 2, [and] that these payments are not conditioned upon [Dorocon's] provision of consulting services under Paragraph 1" and that "[e]ven if believed, Defendants' evidence that Plaintiff provided virtually no consulting services after the Contract was signed would be insufficient to prove that Plaintiff breached its obligations under Paragraph 1 of the Contract." Dorocon v. Burke, Civ. No. 02-2556(CKK), at 64-65 (D.D.C. Sept. 27, 2004). Moreover, the plain language of the contract does not require that Dorocon must spend a specific percentage of the payments received from Defendants on services rendered to Defendants; rather, Dorocon is given complete discretion in how it chooses to spend its earnings. Finally, the Consulting Agreement is a contract for personal consultation services that relies on the expertise that Dorocon may provide to Defendants; such expertise may be difficult to quantify in dollar amounts, and the money spent by Dorocon may have no relationship to the quality of consulting expertise provided.
Simply, how Dorocon or its agents spent the money that was rightfully owed to them under the Consulting Agreement is irrelevant to the question of whether Dorocon exercised its discretion in an arbitrary or unreasonable manner in determining what — if any — further consulting services were "reasonably required." Accordingly, any attempt to focus on how Dorocon or the Reeves chose to spend the money earned under the contract, their "wealth," and/or their "affluent lifestyle" may well be irrelevant under Federal Rule of Evidence 401 or lead to unfair prejudice or undue confusion of the issues under Federal Rule of Evidence 403.
3. Fraudulent Inducement, Shakedown, Oral Provisions:
In an effort to allay Plaintiff's concerns, Defendants proffer that "they do not plan to argue fraudulent inducement, that the Consulting Agreement is a scam, or that there are oral provisions of the Agreement." Defs.' Response to Dorocon's Mot. in Limine at 6. However, Defendants state that they "do intend, however, to submit evidence about Regina Burke's reasonable expectations of what Dorocon was going to do under the Consulting Agreement, which includes many representations that [Mr.] Reeves made to Regina Burke that caused her to form Queen's Fare and begin running the Dunkin Donuts shops at Logan Airport." Id. Specifically, Defendants contend that they may look to the parties' discussions that may have contained information falling outside of the written Consulting Agreement as long as the discussions centered around terms that "are consistent with the express terms of the contract." Id. As such, Defendants contend that their
reasonable expectations about what Dorocon was going to do under the Agreement (as relayed by [Mr.] Reeves to Ms. Burke), including her expectation that Dorocon was going to assist in operating the shops, business planning, and dealing with her relationship with Host Marriott, are all relevant to whether Dorocon "evad[ed] the spirit of the contract" or "willfully render[ed] imperfect performance," Hais v. Smith, 547 A.2d 986, 987-88 (D.C. 1988), and are also consistent with the express terms of the contract.Id. at 7. In response to Defendants' assertions, Plaintiff — citing to no law — contends that (1) the Court has already rejected Defendants' argument on this matter, and (2) "[n]one of Burke's subjective expectations about the Consulting Agreement globally . . . have anything to do with the limited issues remaining to be tried to the jury: whether Dorocon breached its implied obligation of good faith and fair dealing when exercising its discretion under Paragraph 1 of the Consulting Agreement." Pl.'s Reply to Defs.' Response to Dorocon's Mot. in Limine at 6.
The parole evidence rule requires the court to exclude "extraneous evidence that varies or contradicts the terms of a unified written instrument." True North Composites, 191 F. Supp. 2d at 514. However, "evidence concerning what the parties discussed prior to executing the agreement, to the extent such evidence . . . does not contradict the agreement, is entirely relevant to whether [Plaintiff] breached the covenant of good faith and fair dealing because the parties' reasonable expectations at the time of the contract formation determine the reasonableness of the challenged conduct." Horizon Holdings, LLC v. Genmar Holdings, Inc., 244 F. Supp. 2d 1250, 1268 (D.Kan. 2003); see also True North Composites, 191 F. Supp. 2d at 516-17 (same) (citing Cont'l Ins. Co. v. Rutledge Co., 750 A.2d 1219, 1234 (Del.Ch. 2000); Restatement (Second) of Contracts § 205, cmt. a ("Good faith performance or enforcement of a contract emphasizes faithfulness to an agreed common purpose and consistency with the justified expectations of the other party.")). Indeed, "where it is clear that an obligation is within the contemplation of the parties at the time of contracting or is necessary to carry out their intentions, the court will imply it . . . even where the contract itself is not ambiguous." Huang v. BP Amoco Corp., 271 F.3d 560, 564-65 (3d Cir. 2001) (citations omitted); see also Wood v. Lucy, Lady Duff-Gordon, 222 N.Y. 88, 91, 118 N.E. 214, 214 (1917) (Cardozo, J.) ("The law has outgrown its primitive stage when the precise word was the sovereign and every slip was fatal.").
Here, Defendants seek to introduce conversations between Ms. Burke and Mr. Reeves that occurred at the time of the negotiation and signing of the 1993 Consulting Agreement in order to highlight how Ms. Burke's "reasonable expectations" were shaped and whether Dorocon's subsequent performance met the spirit of those expectations. To the extent that these conversations, and the alleged promises contained therein, are consistent with the terms of the written Consulting Agreement, the discussions are plainly relevant and admissible to determine Plaintiff's good faith and fair dealing. See Horizon Holdings, 244 F. Supp. 2d at 1268 (where "the purchase agreement was silent with respect to the majority of the issues discussed by the parties prior to the execution of the agreement," "evidence concerning the parties' pre-acquisition negotiations is entirely appropriate to provide context for plaintiffs' claim that defendants breached their duty of good faith and fair dealing") (citing True North Composites, 191 F. Supp. 2d at 514-15). Contrary to Plaintiff's claim, the Court's September 27, 2004 Memorandum Opinion did not foreclose this issue; rather, the Court simply ruled that given the unambiguous nature of the Consulting Agreement — freely entered into by Defendants without fraud or compulsion — contained no additional, consistent oral terms that strictly bound the parties. See Dorocon v. Burke, Civ. No. 02-2556(CKK), at 46-49 (D.D.C. Sept. 27, 2004). However, a finding that the terms of the contract do not extend beyond its written parameters does not entail that prior negotiations and discussions surrounding consistent dealings are irrelevant to a party's good faith and fair dealing. Rather, these pre-deal discussions and negotiations provide a context for the Consulting Agreement itself, and provide a foundation for the parties' reasonable expectations under the Agreement. As such, under the case law, these discussions — to the extent that they revolved around terms consistent with the final Agreement — are entirely relevant and admissible.
However, the Court emphasizes that the pre-agreement discussions that Defendants seek to introduce must be consistent with the actual Consulting Agreement. Having reviewed the Declaration of Regina Burke, attached to Defendants' Response to Dorocon's Motion in Limine, see Defs.' Response to Dorocon's Mot. in Limine, Ex. 2 (Burke Decl.), the Court notes that the Defendants appear to be resurrecting many of the claims and assertions declared moribund by this Court's September 27, 2004 Memorandum Opinion and Order. Indeed, in many ways, it appears as though Defendants are seeking to recycle many of their rejected arguments through the narrow window provided by the "reasonable expectations" inquiry under the "good faith and fair dealing" analysis. The Court shall not allow such an attempted circumvention of its previous decision. For instance, of the eight pre-agreement representations allegedly made by Mr. Reeves to Ms. Burke outlined in Ms. Burke's Declaration, see Defs.' Response to Dorocon's Mot. in Limine, Ex. 2 (Burke Decl.) at 3-4, ¶ 16, only two are relevant and admissible: (1) "[t]hat Reeves was familiar with how the Dunkin' Donuts stores would operate"; and (2) "[t]hat Reeves would operate the stores under a license agreement with Host." The other assertions listed fall variously into the categories of being inconsistent with the written terms of the Consulting Agreement, being irrelevant, or alleging misrepresentations and fraudulent inducement barred by this Court's September 27, 2004 Memorandum Opinion.
4. Settlement Negotiations:
The Court shall deal with the issue infra, when addressing Defendants' Motion in Limine to Exclude Settlement Discussions Between the Parties.
5. "New" Contentions Regarding Consulting Services and Sexual Harassment:
Plaintiff seeks to preclude Defendants' "new" contention "that Dorocon directly breached (Section 2 of) the Consulting Agreement by refusing an oral request by Burke at some unidentified time for help to resolve a sexual harassment problem being caused by some unidentified individual at Host and perhaps for other reasons as well." Pl.'s Mot. in Limine at 4. Plaintiff contends that (1) the Court's September 27, 2004 ruling implicitly barred such an argument, and (2) this is a new defense or contention not previously raised, and therefore it should not be allowed at this late point in the litigation. Id. at 4-5. In contrast, Defendants contend that evidence relating to their problems with Host Marriott was brought out during the depositions of both Ms. Reeves and Ms. Burke, and that Dorocon's failure to take any steps or make any suggestions other than telling "Ms. Burke to write a letter" was a breach of their good faith requirement under the contract. Defs.' Response to Dorocon's Mot. in Limine at 8-10.
Upon a review of the arguments and evidence previously adduced, the Court finds that the explicit terms of the 1993 Consulting Agreement do not require — and do not contemplate — that Dorocon would act as a go-between for Defendants in their dealings with Host Marriott, or take any affirmative action vis-á-vis Host Marriott on behalf of Dorocon. Accordingly, to the extent that Defendants plan on asserting that Dorocon was obligated to take affirmative action to change or alter Host Marriott's conduct, the Court shall bar Defendants from doing so: simply, Defendants may not create obligations that are not provided for in the binding Consulting Agreement.
However, it is clear that during her deposition, Ms. Reeves testified at length about Queen's Fare's problems with Host Marriott, which were communicated to her by Ms. Burke. See 9/2/2003 Dorothy Reeves Dep. at 245:4-248:2. These problems included conflicts between Queen's Fare's employees and Host employees, tampering by Host employees with the donuts served, problems getting the product delivered, and problems in the kitchen. Id. Ms. Burke, in her deposition, also emphasized that working with Host Marriott was a nightmare. 9/4/2003 Burke Dep. at 165:7. In response to these complaints, Ms. Reeves suggested that Ms. Burke "should write a letter to Host and if she didn't get satisfaction she should write a letter to Dunkin' Donuts." 9/2/2003 Dorothy Reeves Dep. at 247:1-3. Ms. Reeves provided no further suggestions. Id. Under the Consulting Agreement, Dorocon was obligated to use its judgment to determine what — if any — consulting services were "reasonably required" to Defendants under the spirit of the contract. Accordingly, to the extent that Defendants wish to claim that the "consulting" offered by Dorocon in response to the identified troubles between Queen's Fare and Host Marriott was insufficient and indicative of an arbitrary exercise of judgment in bad faith, such an argument is plainly relevant and permissible.
Importantly, while the discovery process did identify certain problems between Queen's Fare and Host Marriott to which Dorocon had notice, see, e.g., 9/2/2003 Dorothy Reeves Dep. at 245:4-248:2, the discovery process did not yield any facts relating to whether an employee of Host Marriott sexually harassed Ms. Burke, who then made Dorocon aware of the harassment. Indeed, (1) Defendants' sworn list of individuals having knowledge of discoverable "facts" pertinent to any issue in the case served more than two years ago (on May 3, 2003) included no one now or formerly associated with Host Marriott; (2) nothing about the alleged sexual harassment matter or any refusal by Dorocon to provide requested assistance to Defendants was referred to or mentioned in any paper or document produced during pre-trial discovery; (3) Ms. Burke never mentioned any "facts" concerning the alleged sexual harassment matter, or the individual associated with Host Marriott who allegedly sexually harassed her, or any refusal by Dorocon to provide requested assistance regarding this matter during her deposition; and (4) Defendants did not disclose, mention, or rely upon such matters in Ms. Burke's Affidavit filed in Opposition to Plaintiff's Motion for Summary Judgment or in their response to Plaintiff's Statement of Material Facts Not in Dispute. Given that Defendants had ample time and numerous opportunities to state and reveal the bases for their defenses and to submit discovery concerning them, but failed to do so, the Court concludes that Defendants are precluded from attempting a "trial by ambush" through the introduction of evidence related to purported sexual harassment of Ms. Burke by Host Marriott. Simply, the Court shall not allow "evidence" relating to an issue outside the scope of discovery to which Defendants offered no evidence or hint of such an allegation.
C. Defendants' Motion in Limine to Exclude Evidence Relating to Settlement Discussions Between the Parties
Two motions implicate possible evidentiary issues surrounding the parties attempt to settle their dispute prior to this litigation — (1) Plaintiff's In Limine Motion, see Pl.'s Mot. In Limine at 4, Pl.'s Reply to Defs.' Response to Dorocon's Mot. in Limine at 7, and (2) Defendants' Motion in Limine to Exclude Evidence Relating to Settlement Discussions Between the Parties, see Defs.' Mot. in Limine Re: Settlement Discussions at 1-4, Defs.' Reply to Pl.'s Response to Defs.' Mot. in Limine Re: Settlement Discussions at 1-4. Both motions revolve around the scope of Federal Rule of Evidence 408 and its impact on the parties' proposed exhibits.
Federal Rule of Evidence 408 provides, in relevant part:
Evidence of (1) furnishing or offering or promising to furnish, or (2) accepting or offering or promising to accept, a valuable consideration in compromising or attempting to compromise a claim which was disputed as to either validity or amount, is not admissible to prove liability for or invalidity of the claim or its amount. Evidence of conduct or statements made in compromise negotiations is likewise not admissible.
Fed.R.Evid. 408. However, the rule "does not require the exclusion of any evidence otherwise discoverable merely because it is presented in the course of compromise negotiations." Id. Nor does the rule "require exclusion when the evidence is offered for another purpose, such as proving bias or prejudice of a witness, negativing a contention of undue delay, or proving an effort to obstruct a criminal investigation or prosecution." Id. Rule 408 reflects a long-standing judicial policy disfavoring the use of an offer to compromise a disputed claim against the party making it and also recognizes the minimal probative value of a settlement offer. See Beckman v. Farmer, 579 A.2d 618, 647 (D.C. 1990).
With Rule 408 as a starting point, Plaintiff objects to five of Defendants' pre-identified Trial Exhibits — Exs. H, I, J, L, and P — as containing excludable settlement discussion matters on their faces. See Pl.'s Reply to Defs.' Response to Dorocon's Mot. in Limine at 7. In response to Plaintiff's objection, Defendants claim that they withdrew or redacted all exhibits that contain or reference settlement discussions. See Defs.' Response to Dorocon's Mot. in Limine at 8; see also Defs.' Response to Dorocon's Mot. in Limine, Ex. 4 (9/16/2005 email from Tom Leland to Paul Richter) (noting a redaction of Exhibits H and J). Upon a review of the partially redacted defense exhibits, however, Plaintiff contends that "they plainly contain prohibited Rule 408 settlement material notwithstanding the redactions." Pl.'s Response to Defs.' Mot. in Limine Re: Settlement Discussions at 2.
Separately, Defendants object to Plaintiff's pre-identified Trial Exhibit 3 and any other attempt by Plaintiff to introduce testimony regarding the parties' July 22, 1997 conference call in which they discussed a number of settlement options, including an option to "flip" the business relationship in which Dorocon would take over the operation of the Dunkin Donuts shops at Logan Airport and Queen's Fare would collect the 8.75% and would provide consulting services to Dorocon. See 9/2/2003 Dorothy Reeves Dep. at 176:14-177:13. Plaintiff responds that this evidence — and Exhibit 3 — will be used only if Defendants were to be permitted "to testify that the Consulting Agreement was 'unfair' (or the like)" "or to otherwise present 'settlement discussion' matters." Pl.'s Response to Defs.' Mot. in Limine Re: Settlement Discussions at 1. Plaintiff contends that the fact that Dorocon was willing to reverse the parties roles reveals that the settlement agreement was not "unfair" and that Plaintiff was not acting "in bad faith" in performing its contractual obligations. Id.
Upon a review of these and other exhibits at issue, it is clear that the Court will need to conduct a detailed, individualized discussion of any contested exhibit with the parties in order to determine (1) what the exhibit is to be used for, (2) why the exhibit is relevant, (3) why the other party is objecting to its introduction, and (4) what language requires redaction, either because of the requirements of Rule 408 or because certain statements reflect arguments rejected by this Court in its September 27, 2004 Memorandum Opinion and Order. However, in order to provide some context for the upcoming Pre-Trial conference, the Court makes several generalized legal observations.
First, evidence of a settlement agreement and its surrounding circumstances "though otherwise barred by Rule 408, can fall outside the Rule if it is offered for 'another purpose,' i.e., for a purpose other than to prove or disprove the validity of the claims that [the agreement was] meant to settle." Trebor Sportswear Co. v. The Limited Stores, Inc., 865 F.2d 506, 510 (2d Cir. 1989) (quoting Fed.R.Evid. 408); see also Starter Corp. v. Converse, Inc., 170 F.3d 286, 293 (2d Cir. 1999) (same); J. Weinstein M. Berger, Weinstein's Federal Evidence § 408.03[5], at 408-27 (J. McLaughlin ed. 1997)). The trial judge "has broad discretion as to whether admit evidence of settlement . . . offered for 'another purpose.'" Id. at 511. In applying the "another purpose" exception to Rule 408, "the trial judge should weigh the need for such evidence against the potentiality of discouraging future settlement negotiations." Id. at 510-11 (quoting Weinstein's Evidence § 408.03[5], at 408-31); Gulf South Machine Inc. v. Am. Standard, Inc., Civ. No. 97-065, 1999 WL 102752, at *2 (E.D.La. Feb. 22, 1999) (noting that "the district court must balance the exception against the policy of encouraging settlements" and "take care that an indiscriminate and mechanistic application of the exception does not undermine the rule's public policy objective") (citations and quotation marks omitted). Using the "another purpose" exception, courts have frequently held that "Rule 408's prohibitions are limited to situations in which settlement discussions are used to prove liability, not where factual information presented during such discussions negate a claim of ignorance or lack of notice." Indep. Petrochemical Corp. v. Aetna Casualty Surety Co., Civ. No. 83-3347, 1988 WL 877629, at *8 (D.D.C. Sept. 7, 1988) (Flannery, J.) (adopting such a view); see Council for Nat'l Register of Health Serv. Providers in Psychology v. Am. Home Assurance Co., 632 F. Supp. 144, 146 n. 1 (D.D.C. 1985) (allowing evidence relating to settlement negotiations to negate claims of bad faith on the part of the insurer); Towerridge, Inc. v. T.A.O., Inc., 111 F.3d 758, 770 (10th Cir. 1997) (upholding admission of evidence relating to settlement to show defendant acted in bad faith); Breuer Elec. Mfg. Co. v. Toronado Sys. of Am., Inc., 687 F.2d 182, 185 (7th Cir. 1982) (upholding admission of settlement evidence to rebut defendants' assertion of ignorance as to certain issues until suit was filed). Accordingly, to the extent that Plaintiff seeks to claim and employ jury instructions suggesting that Defendants never put Plaintiff on notice that its consulting performance was defective, see J. Pre-Trial Stmt. § 17.B. and Proposed Jury Instructions #24, Defendants may very well be able to introduce certain (redacted) exhibits to show that they made specific complaints to Plaintiff during the performance of the contract and Plaintiff did not aid or respond to the specific problems to which it was put on notice.
Second, and equally important, Defendants must be cognizant of the true extent of the Court's September 24, 2004 Memorandum Opinion and Order when seeking to put certain information into evidence in the form of exhibits. The parameters of that ruling may well force Defendants to redact various portions of their proposed exhibits. For example, to the extent that Ms. Burke frequently complains that Mr. Reeves made misrepresentations or somehow fraudulently induced her to enter the contract through his alleged promises and puffery, the claim is barred by the Court's ruling. See Dorocon v. Burke, Civ. No. 02-2556(CKK), at 25-31 (D.D.C. Sept. 27, 2004). Moreover, to the extent that Ms. Burke contends that the agreement could be orally modified at any time, such a claim is also barred, id. at 43-49, or to the extent that Ms. Burke asserts that Dorocon was obligated to personally intervene on her behalf with Host Marriott, such a claim is barred as well, id. at 46-49. In addition to these kinds of problems, Defendants must also show that certain exhibits, such as those containing only generalized, non-specific complaints or those in which Plaintiff demands the money owed under the contract, are relevant at all.
Third, Defendants must realize the danger in their course of action. Simply, "courts have held that evidence otherwise excludable pursuant to Rule 408 is admissible for the purposes of impeachment." Smith v. Lowe's Home Ctrs., Civ. No. SA-03-CA-1118(XR), 2005 WL 1533108, at *7 (W.D.Tex. June 29, 2005) (citing Cochenour v. Cameron Savings Loan, 160 F.3d 1187, 1190 (8th Cir. 1998) (an offer to compromise may be used to rebut a party's prior testimony); Reichenbach v. Smith, 528 F.2d 1072, 1075 (5th Cir. 1976) ("Rule 408 codifies a trend in case law that permits cross-examination concerning a settlement for the purposes of impeachment.")). Accordingly, upon a cursory examination, while Plaintiff's Proposed Exhibit 3 contains reference to certain discussions arising from settlement conversations — namely, that the parties would "flip" positions under the contract — such an exhibit could likely be used to impeach testimony offered by Defendants indicating that Plaintiff was either unwilling to reexamine the terms of the deal or that Plaintiff acted in bad faith.
D. Defendants' Motion in Limine to Exclude Evidence Relating to Undisclosed Consulting Services Allegedly Provided by Dorocon
The final motion relating to type of evidence to be presented at trial and ripe for the Court's resolution is Defendants' Motion in Limine to Exclude Evidence Relating to Undisclosed Consulting Services Allegedly Provided by Dorocon. This motion seeks to preclude two types of evidence. First, Defendants contend that, given the fact that Dorocon did not produce its credit card records during discovery despite an applicable request, Dorocon should be precluded from putting forth "any evidence that Dorocon provided Queen's Fare with consulting services if such [sic] the expenses arising from those services were reflected in the credit card reports." Defs.' Mot. in Limine to Exclude Evidence Relating to Undisclosed Consulting Servs. at 2. Second, Defendants assert that because Dorocon's Rule 30(b)(6) witnesses failed to identify any services performed by Mr. Roger Barth, attorney for Dorocon, on their behalf, and testified that Dorocon only reviewed Queen's Fare's books on two occasions, Plaintiff should be barred from seeking to introduce contrary testimony through Mr. Barth at trial. Id. at 5-7. The Court shall deal with each argument in turn.
1. Credit Card Reports:
During her Rule 30(b)(6) deposition, Ms. Reeves testified that certain services that Dorocon performed for Queen's Fare under the Consulting Agreement were performed using Dorocon's American Express card. See 9/2/2003 Dorothy Reeves Dep. at 103:3-17. Included within those services whose expenses were reflected on Dorocon's American Express card statements were certain travel expenditures made by Ms. Reeves performed in furtherance of the Consulting Agreement. Id. However, given that Ms. Reeves did not have Dorocon's records at hand, and was not in possession of Dorocon's credit card statements, she could not specify which services were performed using the company credit card. Id. at 101:19-102:7, 103:3-17. Defendants now contend that because Plaintiff never produced the credit card records at issue, it should be precluded at trial pursuant to the sanctions listed in Federal Rule of Civil Procedure 37(c) from introducing any evidence or testimony relating to expenses that might have been reflected in Dorocon's credit card statements. See Defs.' Reply in Support of Defs.' Mot. in Limine to Exclude Evidence Relating to Undisclosed Consulting Servs. at 4.
In response to Defendants' initial discovery request for Dorocon's records, Plaintiffs made a good faith averment that "Dorocon produced all records that could be located and so notified Burke/QFI's counsel." Pl.'s Opp'n to Defs.' Mot. in Limine to Exclude Evidence Relating to Undisclosed Consulting Servs. at 2. However, Rule 34(a) expressly permits a party to serve on another party a request "to produce . . . designated documents . . . which are in the possession, custody or control of the party upon whom the request is served." Fed.R.Civ.P. 34(a). It is well-established that for the purposes of Rule 34(a), "control" is not defined by actual possession, but also includes constructive possession — i.e., the legal right to obtain documents on demand. See Alexander v. Fed. Bureau of Investigation, 194 F.R.D. 299, 301 (D.D.C. 2000); Riddell Sports Inc. v. Brooks, 158 F.R.D. 555, 558 (S.D.N.Y. 1994) ("If the producing party has the legal right or practical ability to obtain the documents, then it is deemed to have 'control,' even if the documents are in the possession of a non-party."). Accordingly, Rule 34(a) obligates parties to turn over documents such as bank and credit card statements covered by discovery requests given that they enjoy constructive possession of such documents. See, e.g., Zervos v. S.S. Sam Houston, 79 F.R.D. 593, 595-96 (S.D.N.Y. 1978); Thomas v. Deloitte Consulting LP, Civ. No. 02-0343(M), 2004 WL 1372954, at *4 (N.D.Tex. June 14, 2004). Here, despite being informed during Ms. Reeves's deposition that Dorocon's credit card receipts had not been produced, see 9/2/2003 Dorothy Reeves Dep. at 99:7-102:7, 103:3-17, Plaintiff did not supplement its initial production pursuant to the strictures of Federal Rule of Civil Procedure 26(e)(2).
However, the Court finds that Defendants' drastic request — that any services provided to Defendants that might be reflected in the unproduced credit card statements be barred — should not be granted. Several considerations impact this decision. First, despite Dorocon's failure to obtain and produce the credit card records, Defendants never filed a Motion to Compel Production of such documents. Second, Defendants never served subpoenas on any third parties, i.e., credit card companies, seeking Dorocon's credit card statements. Indeed, Defendants have waited two years after the close of discovery in this case — when this case is through with dispositive motions and on the eve of trial — to raise this issue. As such, it appears as though Defendants have sat on their rights and took no action whatsoever to prosecute their claims vis-á-vis the credit card statements in a timely manner. Third, it is clear that "Dorocon has not recently discovered any new or additional credit card records and Dorocon has not listed any such records on its trial exhibit list," as it does not intend to use credit card records if Dorocon is required to go forward with its evidence. Pl.'s Opp'n to Defs.' Mot. in Limine to Exclude Evidence Relating to Undisclosed Consulting Servs. at 3. Fourth, it is clear that there is substantial evidence and testimony regarding the services performed by Dorocon on Queen's Fare's behalf existing outside of the credit card statements. As such, the credit card statements — even if they were within the record in this case — would largely be duplicative and their exclusion relatively harmless. Defendants have a number of other avenues to impeach or contest Dorocon's consulting performance under the course of the contract. Fifth, to the extent that Rule 37(c)(1) might provide for some form of sanction, the exclusion of any evidence or testimony that could be reflected in the unproduced credit card statements is simply too drastic of a sanction; rather, a more traditional sanction would be to prevent the non-producing party from using the credit card records as evidence in the case to further its own arguments. Accordingly, the Court shall deny the drastic remedy requested by Defendants that would have otherwise barred evidence or testimony related to any services provided to Defendants that might be reflected in the unproduced credit card statements.
2. Rule 30(b)(6) Issue:
Defendants in this case designated Ronald Reeves and Dorothy Reeves as corporate representatives of Plaintiff, pursuant to Federal Rule of Civil Procedure 30(b)(6), and conducted depositions accordingly. During their depositions, two important points came out: (1) Dorothy and Ronald Reeves testified that Dorocon's attorney, Mr. Roger Barth, performed only discreet, attorney-related functions, such as negotiating the Consulting Services Agreement, writing letters for Dorocon, and conducting settlement negotiations, or did not remember information responsive to the question, see, e.g., 8/29/2003 Ronald Reeves Dep. at 84:15-85:12, 91:10-12; 9/2/2003 Dorothy Reeves Dep. at 70:19-71:4, 125:8-126:4, 144:13-145:6, 179:1-181:4; and (2) Dorothy Reeves testified that Dorocon had reviewed Queen's Fare's records only twice, to the best of her recollection, see 9/2/2003 Dorothy Reeves Dep. at 138:2-139:9, 220:8-221:11. Defendants seek to prevent Plaintiff from putting forth evidence or testimony at trial that may well contradict this Rule 30(b)(6) testimony.
In response, Plaintiff now suggests that Roger Barth may be a fact witness at trial, given that it had identified him as being a "fact" witness having knowledge of discoverable matter in Plaintiff's initial Rule 26 disclosure and its Answers to Interrogatories (although Defendants chose not to take his deposition). See Pl.'s Opp'n to Defs.' Mot. in Limine to Exclude Evidence Relating to Undisclosed Consulting Servs. at 3. Plaintiffs note that "Dorocon never asserted attorney-client privilege as to any 'facts' about Barth's activities, legal and otherwise, on behalf of Dorocon or his involvement with Burke/QFI prior to date of commencement of this action," id., and imply that Mr. Barth's testimony at trial may well illuminate that he had an expansive role in performing services for Queen's Fare's through Dorocon. Id. at 4-5. Further, Plaintiff contends that it produced "many, many retained documents (from multiple, identified sources, including other than Burke/QFI" reflecting how often Dorocon or its agents reviewed the business conducted by Queen's Fare. Id. Plaintiff implies that it or its agents reviewed Queen's Fare's records "systematically" and "regularly," and plan on introducing evidence or testimony to that effect. Plaintiff suggests that Defendants' failure to obtain more specific information about Mr. Barth or Plaintiff's review of Queen's Fare's records is the result of Defendants' failure to make a better inquiry. Id. at 6.
Rule 30(b)(6) of the Federal Rules of Civil Procedure provides, in relevant part:
A party may in the party's notice and in a subpoena name as the deponent a public or private corporation or a partnership or association or government agency and describe with reasonable particularity the matters on which examination is requested. In that event, the organization so named shall designate one or more officers, directors, or managing agents, or other persons who consent to testify on their behalf, and may set forth, for each person designated, the matters on which the person will testify. . . . The persons so designated shall testify on matters known or reasonably available to the organization. . . .
Fed.R.Civ.P. 30(b)(6). "Rule 30(b)(6) is intended to streamline the discovery process. It allows an entity receiving a notice of deposition to speak through its designated agents, but the agents' statements generally are admissible as an admission of the entity." McKesson Corp. v. Islamic Republic of Iran, 185 F.R.D. 70, 79 (D.D.C. 1999) (citing cases). A designee of the receiving entity or party should not only testify about matters within his or her own personal knowledge, but also about matters which the receiving entity has reasonable knowledge and access. See Rainey v. Am. Forest and Paper Assoc., 26 F. Supp. 2d 82, 94 (D.D.C. 1998). "Moreover, Rule 30(b)(6) imposes a duty on the entity receiving a Rule 30(b)(6) notice to identify and provide responsive witnesses with knowledge concerning the relevant subject matter." McKesson Corp., 185 F.R.D. at 79. Importantly, "[i]f an entity's designated witness lacks sufficient knowledge or fails to adequately respond to the deposition requirements, the responding entity must designate additional witnesses capable of providing sufficient answers." Id. (emphasis added).
Rule 30(b)(6) therefore creates several duties on the part of the receiving entity. "First, the deponent has a duty of being knowledgeable on the subject matter identified as the area of inquiry," as it is clear that "a deponent that does not know about the relevant subject matter is useless as a deponent at all." Alexander v. Fed. Bureau of Investigation, 186 F.R.D. 148, 151 (D.D.C. 1999) (citing cases). "Second, the designating party is under the duty to designate more than one deponent if it would be necessary to do so in order to respond to the relevant areas of inquiry that are specified with reasonable particularity by the [designating party]." Id. (citing cases); see also Buycks-Roberson v. Citibank Fed. Sav. Bank, 162 F.R.D. 338, 343 (N.D.Ill. 1995) ("Citibank seems to believe that it can satisfy Rule 30(b)(6) by producing a witness with only selected information to offer. . . . The Federal Rules and this Court do not countenance self-selecting discovery by either party."). "Third, the designating party has a duty to prepare the witness to testify on matters not only known by the deponent, but those that should be reasonably known by the designating party." Alexander, 186 F.R.D. at 152. Fourth, the receiving entity "has a duty to substitute an appropriate deponent when it becomes apparent that the previous deponent is unable to respond to certain relevant areas of inquiry." Id.; see also McKesson Corp., 185 F.R.D. at 79; United States v. Taylor, 166 F.R.D. 356, 360 (M.D.N.C. 1996).
"By commissioning the designee as the voice of the corporation, the Rule obligates a corporate party 'to prepare its designee to give binding answers' on its behalf." Rainey, 26 F. Supp. 2d at 94 (citations omitted). "Unless it can prove that the information was not known or was inaccessible, a corporation cannot later proffer new or different allegations that could have been made at the time of the 30(b)(6) deposition." Id. As such, Rule 30(b)(6) precludes a party at trial from introducing "a theory of the facts that differs from that articulated by the designated representatives." Id. In this instance, Defendants are correct — Plaintiff was under the duty to provide another Rule 30(b)(6) witness (which likely would have been Mr. Barth) had it wished to present testimony at trial in conflict with the answers initially provided by Mr. and Ms. Reeves, its two Rule 30(b)(6) representatives. Plaintiff failed to make such a designation and failed in its duty to provide a designee who could testify fully on matters that were reasonably known to Dorocon. Accordingly, Plaintiff's "eleventh hour alteration is inconsistent with Rule 30(b)(6), and is precluded by it." Id. Simply, Plaintiff cannot introduce evidence or testimony that contradicts the binding answers regarding (1) Mr. Barth's role and (2) the number of times it reviewed Queen's Fare's business records that were given by its Rule 30(b)(6) witnesses. To allow otherwise would be to skirt the very problems that Rule 30(b)(6) was designed to squelch. As such, to the extent that Defendants' Motion in Limine to Exclude Evidence Relating to Undisclosed Consulting Services Allegedly Provided by Dorocon deals with the role of Mr. Barth and the number of times Dorocon reviewed Queen's Fare's records, the motion is granted.
II: CONCLUSION
As noted above, this ruling — based on the present record — resolves most of the issues in (1) Plaintiff's Motion to Shift the Order of Proof at Trial; (2) Plaintiff's In Limine Motion; (3) Defendants' Motion in Limine to Exclude Evidence Relating to Settlement Discussions Between the Parties; and (4) Defendants' Motion in Limine to Exclude Evidence Relating to Undisclosed Consulting Services Allegedly Provided by Dorocon. However, the Court shall leave for resolution certain identified issues in the above-mentioned motions and disputes arising out of the parties' Joint Pre-Trial Statement for the pre-trial hearing held on November 2, 2005.