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Jo Ann Howard & Associates, Pc v. Cassity

United States District Court, E.D. Missouri, Eastern Division

January 29, 2015

JO ANN HOWARD & ASSOCIATES, P.C., et al., Plaintiffs,
v.
J. DOUGLAS CASSITY, et al., Defendants.

MEMORANDUM AND ORDER

E. RICHARD WEBBER, Senior District Judge.

This matter comes before the Court upon the Missouri Trustees' Motion in Limine to Exclude Expert Opinions of Robert Hipskind [ECF No. 2158], the Missouri Trustees' Motion in Limine to Exclude Evidence of or Reference to Their Internal Policies, Procedures, Guidelines, Manuals and Related Documents [ECF No. 2159], the Missouri Trustees' Motion in Limine to Exclude Expert Opinions of Janice Sackley [ECF No. 2160], the Missouri Trustees' Motion in Limine to Exclude Evidence of or Reference to FBI Form 302 Reports [ECF No. 2163], the Missouri Trustees' Motion in Limine to Exclude the Testimony of Pre-Need Contract Consumers, Funeral Home Owners, and NPS Marketing and Training Materials [ECF No. 2164], National City's Motion in Limine to Exclude Evidence of Shaun R. Hayes's Post-Allegiant Conduct [ECF No. 2166], the Missouri Trustees' Motion in Limine to Preclude Testimony and Argument about Statutory Purpose [ECF No. 2167], National City's Motion in Limine to Exclude Evidence Relating to National City Bank's Acquisition-Related Due Diligence [ECF No. 2169], the Missouri Trustees' Joint Motions in Limine [ECF No. 2172], Plaintiffs' Motions in Limine [ECF No. 2177], and Plaintiffs' Motion to Exclude Untimely Witnesses Disclosed by Defendant National City Bank [ECF No. 2193].

I. Missouri Trustees' Motion in Limine to Exclude Expert Opinions of Robert Hipskind, ECF No. 2158

PNC Bank, N.A. ("PNC")[1] asserts Robert Hipskind is an expert witness disguised as a lay witness. According to PNC, Federal Rule of Evidence 701 prohibits expert opinions of lay witnesses and Mr. Hipskind's testimony qualifies as an expert opinion because he has no personal knowledge of how Allegiant administered the trusts and will only be testifying as to his opinions of Allegiant's activity. Therefore, according to PNC, Mr. Hipskind's expert opinions should be excluded. Plaintiffs argue Mr. Hipskind has personal knowledge of the issues and his testimony is not an expert opinion but instead his personal observations.

Federal Rule of Evidence 701 requires lay witness testimony to be rationally based on the witness's perception, helpful to understanding the testimony or determining a fact in issue, and not based on scientific, technical or other specialized knowledge within the scope of Rule 702. Mr. Hipskind has not been disclosed as an expert witness so his testimony must be limited to the parameters of lay witness testimony. Lay witness testimony based on industry experience is admissible. Burlington N. R.R. Co. v. Nebraska, 802 F.2d 994, 1004-05 (8th Cir. 1986). Based on the representations made at the hearing, Mr. Hipskind's testimony is proper lay witness testimony and will be admissible. His testimony is based on his own observations and experiences and does not opine on the standard of care or duty of trustees generally. The Court denies PNC's motion in limine to exclude expert opinions of Robert Hipskind subject to specific deposition objections.

II. Missouri Trustees' Motion in Limine to Exclude Evidence of or Reference to the Trustees' Internal Policies, Procedures, Guidelines, Manuals and Related Documents, ECF No. 2159

PNC asserts its internal policies, procedures, guidelines, manuals and related documents are generally inadmissible because they do not establish legal duties and are immaterial to the standard of care under Missouri law. Additionally, PNC claims they have no relevance, they are prejudicial to PNC, and a waste of time because jurors could confuse the internal policies with the legal duty. For these reasons, PNC asserts the internal policies, procedures, guidelines, manuals, and related documents should be excluded from trial.

The guidelines, policies, and procedures of a company do not establish the standard of care or duty owed by a defendant. Manzella v. Gilbert-Magill Co., 965 S.W.2d 221, 229 (Mo.Ct.App. 1998). However, this does not preclude this evidence from being admissible. Once Plaintiffs establish the standard of care, the guidelines, policies, procedures or rules of a defendant may be introduced to support negligent conduct. Dine v. Williams, 830 S.W.2d 453, 457 (Mo.Ct.App. 1992). Therefore, this evidence may be admissible if Plaintiffs have already established the applicable standard of care. If any party decides to introduce this evidence, the Court must be notified prior to introduction to address any remaining admissibility concerns.

III. Missouri Trustees' Motion in Limine to Exclude Expert Opinions of Janice Sackley, ECF No. 2160

PNC asserts Janice Sackley is an expert witness disguised as a lay witness. According to PNC, Federal Rule of Evidence 701 prohibits expert opinions of lay witnesses and the testimony elicited by Plaintiffs' from Ms. Sackley qualifies as expert opinion. PNC asserts questions about trust department due diligence of insurance companies and how trust companies handle payment and recording of insurance premiums goes well beyond personal knowledge. Therefore, PNC argues, Ms. Sackley's expert opinions should be excluded.

Ms. Sackley's testimony is subject to the same limitations as Mr. Hipskind's as Ms. Sackley has not been disclosed as an expert witness. Plaintiffs argue Ms. Sackley's testimony is based on her role identifying red flags when reviewing the trust accounts. It was clear from the examples submitted by the parties during the hearing, Ms. Sackley's testimony becomes expert testimony when she opines on trusts generally. Portions of Ms. Sackley's testimony likely will not be admissible, but the Court will need to make these determinations when deposition objections are reviewed.

IV. Missouri Trustees' Motion in Limine to Exclude Evidence of or Reference to FBI Form 302 Reports, ECF No. 2163

PNC asserts FBI 302 reports are inadmissible hearsay because they are memorandum summarizing witness interviews by FBI agents and government investigators. PNC claims two exceptions to the hearsay rule are needed because the agent's memorandum is hearsay and the witness's statements within the memorandum are hearsay. Further, PNC states no exception to the hearsay rule exists for these documents. PNC argues these reports cannot be used for impeachment because they are not the statements of the witness, and they cannot be used to refresh a witness's recollection because the witness did not author the report or adopt the statements. Lastly, PNC states the reports are unduly prejudicial because they imply PNC is guilty of criminal wrongdoing.

During the hearing, it became clear this motion is not limited to the admissibility of FBI 302 reports but includes all memorandums of interviews by any government investigator. These reports have hearsay problems that cannot be overcome, as the parties have indicated no government investigators will be testifying. The reports may not be admitted into evidence or read to the jury. U.S. v. Hawley, 562 F.Supp.2d 1017, 1050-52 (N.D. Iowa 2008). The reports may be used to impeach a witness or refresh the witness's recollection but the proper foundation must be laid before using the reports. Id.

The use of these reports, even solely for impeachment or refreshing a witness's recollection, can be highly prejudicial because of the implication the witness was involved in wrongdoing, simply because the witness was interviewed by a government investigator. Federal Rule of Evidence 403 allows a court to exclude evidence "if its probative value is substantially outweighed by a danger of one or more of the following: unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence." This evidence has the potential for its prejudice to outweigh its probative value.[2] The reports may be used to impeach a witness or refresh a witness's recollection. No party will be allowed to refer to the reports by name or ask a witness questions such as, "Do you remember being interviewed by the IRS?" This is a fine line to draw but it is needed to avoid undue prejudice. If a witness states he does not remember the prior statement, the party will not be allowed to introduce the statement into evidence. Before either party attempts to use the reports, the Court must be advised so specific instructions to counsel may be given on their limited use, to ensure prejudicial language is not used and the proper foundation has been laid.

V. Missouri Trustees' Motion in Limine to Exclude the Testimony of Pre-Need Consumers, Funeral Home Owners, and NPS Marketing and Training Materials, ECF No. 2164

PNC asserts the testimony of consumers and funeral home owners is not relevant and is unduly prejudicial because the statements made by NPS to the customers are not attributable to PNC. PNC argues compliance by Allegiant is not measured by the personal expectations of the customers and there is a risk the jurors will decide the case based on sympathy and emotion rather than facts. Additionally, PNC argues the funeral home owners should not be allowed to testify because their testimony is not relevant and would be unduly prejudicial for the same reasons. Lastly, PNC claims NPS marketing and training materials should be excluded because they are not relevant and would be unduly prejudicial because they are not attributable to PNC and do not determine if Allegiant fulfilled the standard of care.

Limited testimony is admissible by consumers and funeral homes owners. Plaintiffs must be allowed to explain how the pre-need service contract was initiated and may do so through consumers and funeral home owners. However, these witnesses will not be allowed to testify as to what NPS promised them or other statements' made by representatives of NPS. This simply is not relevant as it has no bearing on the trustees' conduct.[3] At the hearing, Plaintiffs asserted they must be allowed to explain the consumers' knowledge of the trusts and they must be allowed to explain NPS fulfilled its statutory duties in depositing money into the trusts. Whether NPS put the required amount into the trusts or whether NPS mislead consumers into signing contracts is not relevant to Allegiant's conduct and alleged negligence or breach of fiduciary duties. This testimony also invites the jurors to make a decision based on emotion and sympathy. Thus, limited testimony will be allowed from the consumers and funeral home owners, but testimony as to NPS's statements is not admissible.

At this time, evidence of NPS marketing and training materials, until further order of the Court, is not admissible because this evidence is not attributable to PNC and is not relevant.

VI. National City's Motion in Limine to Exclude Evidence of Shaun Hayes's Post-Allegiant Conduct, ECF No. 2166

PNC asserts any evidence of Shaun Hayes's conduct after leaving Allegiant should be excluded because it is not relevant and unduly prejudicial. According to PNC, Mr. Hayes was CEO and President of Allegiant Bank from 1992 until 2004. After leaving Allegiant, Mr. Hayes agreed to a consent order prohibiting him from working in the financial industry because of Mr. Hayes conduct while working at another bank, after he left National City. PNC argues any evidence in this regard can only be used as bad character evidence, not for any legitimate purpose. Additionally, PNC claims Plaintiffs could not satisfy the four prong test to admit character evidence under Rule 404(b) because it is not relevant, not similar in kind, or it's too remote in time, not supported by sufficient evidence and it is unduly prejudicial. PNC states introduction of this evidence will risk the jury making a decision based on emotion, not facts.

Plaintiffs argue it is admissible to attack Mr. Hayes's credibility as a witness and will only be used as impeachment evidence. The problem with Plaintiffs' argument is Mr. Hayes is their witness so Plaintiffs' claim this evidence is solely for impeachment does not make sense. Evidence of prior bad acts is not permissible under Federal Rule of Evidence 404. The evidence may be introduced for limited purposes but must satisfy the following four-part test: "the evidence must be 1) relevant to a material issue; 2) similar in kind and not overly remote in time to the charged crime; 3) supported by sufficient evidence; and 4) such that its potential prejudice does not substantially outweigh its probative value." U.S. v. Williams, 308 F.3d 833, 837 (8th Cir. 2002). This evidence does not satisfy the four-part test. The consent order does not state any of the facts leading to the judgment so we cannot determine if the Mr. Hayes's actions are similar in kind to those at issue in this case. For the same reasoning, it is not supported by sufficient evidence. It is not relevant to a material issue and has substantial prejudice as it suggests Mr. Hayes's conduct while President at Allegiant was improper without any sufficient basis. This evidence is not admissible. The Court grants National City's Motion in Limine to Exclude Evidence of Shaun Hayes's Post-Allegiant Conduct.

VII. Missouri Trustees' Motion in Limine to Exclude Testimony and Arguments about Statutory Purpose, ECF No. 2167

PNC asserts the purpose of Chapter 436 should be excluded because it has no probative value as it does not relate to Allegiant's duties. Additionally, PNC argues it is unduly prejudicial because it invites jurors to revise duties imposed by other statutes in light of Chapter 436's purpose. PNC claims the fact witnesses are not competent to testify about statutory purpose and statutory purpose is not a proper subject of expert testimony. Plaintiffs argue the Court has already ruled experts may opine on the purpose of Chapter 436 and some explanation of the purpose of the statute is needed to explain the requirements.

The Court's Memorandum and Order on December 1, 2014, does permit expert witnesses to opine as to the purpose of Chapter 436. ECF No. 1972. However, a closer look at Edwards v. Aguillard, cited by National City, reveals the Court should have more explicitly limited expert testimony. 482 U.S. 578, 594-96 (1987). In Edwards, the Supreme Court held post-enactment testimony of experts is "of little use" in deciding a legislature's purpose. Id. at 595. This Court's prior ruling as to the admissibility of expert testimony of a statute's purpose was erroneous. Neither parties' experts will be allowed to opine as to statutory purpose. The parties will be able to introduce Chapter 436 and submit evidence which will allow the jury to conclude if there was compliance with the statute.

VIII. National City's Motion in Limine to Exclude Evidence about National City's Acquisition-Related Due Diligence, ECF No. 2169

PNC asserts any evidence about acquisition-related due diligence by National City is not relevant and unduly prejudicial because National City was never a trustee and its liability should be judged solely on Allegiant's conduct. PNC states any information obtained by National City but not communicated to Allegiant is not relevant to whether Allegiant violated its duty as trustee. According to PNC, there is a risk the jury will judge liability on what National City did rather than focus on Allegiant's fiduciary duties and it will confuse the jury as to the correct standard of care. Plaintiffs assert this evidence is relevant to prove how easy it was to obtain certain information regarding NPS and to show what information Allegiant should have known.

This evidence is relevant and probative of causation and what Allegiant should have known during its time as trustee. However, this includes a wide scope of evidence, some of which may not be relevant to these purposes, or any other. Evidence of National City's due diligence may be admissible. ...


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