Monsour's, Inc. v. Menu Maker Foods, Inc. , 381 F. App'x 796 ( 2010 )

FILED
United States Court of Appeals
Tenth Circuit
June 3, 2010
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
Clerk of Court
TENTH CIRCUIT
MONSOUR’S, INC.,
Plaintiff - Appellee,
No. 09-3022
v. (D.C. No. 6:05-CV-01204-JTM)
(D. Kan.)
MENU MAKER FOODS, INC.,
Defendant - Appellant.
ORDER AND JUDGMENT *
Before TACHA, KELLY, and HARTZ, Circuit Judges.
Defendant-Appellant Menu Maker Foods, Inc. (MMF) appeals from a jury
verdict awarding Plaintiff-Appellee Monsour’s, Inc. damages for MMF’s breach
of an Asset Purchase Contract. Both parties were food wholesalers. Monsour’s
experienced financial difficulty and sought to refocus its business on the sale of
produce. MMF sought an opportunity to expand its sales into a new market area.
MMF agreed to purchase Monsour’s food service inventory and to purchase
substantially all of its produce from Monsour’s.
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. It may be cited,
however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th
Cir. R. 32.1.
On appeal, MMF contends that it is entitled to judgment as a matter of law
because (1) insufficient evidence supports the liability and damages related to the
food service inventory. MMF also claims it is entitled to a new trial because the
district court (2) improperly excluded impeachment evidence concerning
inventory reports and financial statements, and (3) prohibited MMF from
contesting certain facts. In addition, MMF contends that the district court (4)
committed reversible error in awarding prejudgment interest and (5) improperly
awarded attorneys’ fees. Aplt. Br. at 1-2, 27-28. We have jurisdiction under 28
U.S.C. § 1291 and affirm.
Background
We take the facts in the light most favorable to Monsour’s. Monsour’s sold
wholesale produce and grocery items in Kansas, Missouri, Arkansas, and
Oklahoma. 4 Ohio App. at 4-5, 12-16. In 2001, Monsour’s decided to limit its
business to produce. 4 Ohio App. at 13-15. At the same time, MMF wanted to buy
produce more cheaply and to acquire food service customers. 4 Ohio App. at 19-21.
Each saw a “win-win” opportunity. 2 Ohio App. at 30. The companies negotiated and
arrived at an Asset Purchase Agreement. 4 Ohio App. at 16-17. Monsour’s provided
MMF a report showing that Monsour’s dry and frozen food service inventory cost
$1,109,219. 4 Ohio App. at 25. MMF inspected the inventory. 2 Ohio App. at 27.
MMF promised to buy (1) “substantially all” of its produce requirements
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from Monsour’s and (2) an estimated $750,000 to $800,000 of Monsour’s food
service inventory within eight weeks. 1 Ohio App. at 36, 43; 2 Ohio App. at 27-28. It would
help sell any food service inventory it did not buy. 1 Ohio App. at 36. In return,
Monsour’s transferred its sales staff to MMF and agreed not to compete. 1 Ohio App.
at 38, 41.
Yet, instead of buying $750,000 to $800,000 of food service inventory,
MMF bought $250,000 of it. 2 Ohio App. at 28. Its “best efforts” to sell the rest
amounted to calling four vendors and providing phone numbers for salvage
dealers. 5 Ohio App. at 17-18; 7 App. at 167-70. Bound by the contract not to
compete in most food service sales, Monsour’s sold only $27,000 of its leftover
inventory to others. 4 Ohio App. at 48, 53.
Nor did MMF purchase “substantially all” of its produce from Monsour’s.
Over ten weeks, MMF bought $72,590.39 of produce from Monsour’s. 4 Ohio App. at
366-67. It filled the rest of its $30,000 per week order elsewhere. 4 Ohio App. at 58.
MMF also disregarded the contract’s ordering procedures and created pretexts to
reject produce. 4 Ohio App. at 45, 65-66, 127, 133, 137, 143-46, 310-11, 423.
Monsour’s threw away hundreds of thousands of dollars of expired food. 4
Ohio App. at 45-48, 148. Four months after the agreement, it went out of business. 4
Ohio App. at 57. It then brought this diversity action for breach of contract. 1 Ohio App. at
28-48. A jury awarded Monsour’s damages of $472,000 for the food service
inventory and $135,849.71 for its produce. 3 Ohio App. at 48-49. The district court
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denied MMF’s motion for judgment as a matter of law (JMOL). Monsour’s Inc.
v. Menu Maker Foods, Inc., No. 05-1204-JTM, 2009 WL 89701, at *1-2 (D. Kan.
Jan. 13, 2009). The court awarded Monsour’s $155,001.67 in prejudgment
interest and $307,128.80 in attorneys’ fees. Id. at *5-8. MMF appeals.
Discussion
I. Sufficient Evidence Showed Liability and Damages.
MMF argues that the evidence at trial was insufficient to prove its liability
and Monsour’s damages for the food service inventory. Aplt. Br. at 30-38. We
review the district court’s denial of JMOL de novo. United Mine Workers of Am.
v. Rag Am. Coal Co., 392 F.3d 1233, 1237 (10th Cir. 2004). A court should grant
JMOL if the evidence reveals “no legally sufficient evidentiary basis for a claim.”
Hysten v. Burlington N. Sante Fe Ry. Co., 530 F.3d 1260, 1269 (10th Cir. 2008)
(citation omitted). We reverse a denial of JMOL “‘if the evidence points but one
way and is susceptible to no reasonable inferences which may support the
opposing party’s position.’” Id. (citation omitted). We do not “‘weigh evidence,
judge witness credibility, or challenge the factual conclusions of the jury.’” Id.
(citation omitted).
The contract required all inventory to be in a “good and wholesome
condition, 100% resellable condition.” 1 Ohio App. at 36. MMF claims that
Monsour’s did not establish this condition item-by-item for the unsold inventory.
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Aplt. Br. at 30-32. MMF also claims that Monsour’s did not prove each item’s
price under a contractual pricing formula. Aplt. Br. at 33-38. Before signing,
MMF inspected Monsour’s inventory valued at cost ($1,109,219). 2 Ohio App. at 27.
MMF estimated in the contract that it would buy $750,000 to $800,000 of
inventory. 1 Ohio App. at 36. A jury could infer that cost represented an upper value
of the inventory and that at least $750,000 of Monsour’s inventory was “in good
and wholesome condition and 100% resellable” at the time of the inspection. 4
Ohio App. at 104-05, 115. After all, the parties were in agreement as to the $750,000-
$800,000 estimated value — though MMF now tells us that the estimate was to
prevent Mark Monsour’s bank from calling a line of credit. Aplt. Reply Br. at 5.
Apparently the jury inferred that the estimate established the inventory’s value,
and then subtracted $250,000 for inventory MMF purchased, and $27,000 for
inventory Monsour’s sold elsewhere. It awarded $472,000 of the $473,000 in
damages that Monsour’s requested. 3 Ohio App. at 48; 4 App. at 53, 161. Drawing
every reasonable inference in Monsour’s favor, the evidence is sufficient.
The jury’s damages award conforms with the district court’s instructions on
how to calculate damages. 3 Rawle at 24, 26, 36-42. If MMF wanted more specific
instructions on damages — such as one emphasizing a requirement to price each
item by the contract’s pricing mechanism — then it should have challenged those
instructions. MMF does not appeal those instructions.
Although MMF now insists on strictly enforcing the contract’s pricing
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mechanism, evidence showed that, shortly after the parties signed the contract,
MMF admitted that the pricing mechanism would not matter. The head of MMF
instructed his employees to disregard that provision and never to pay more than
current market value. 7 Ohio App. at 170. Because the formula would not have
established what MMF would pay, we decline to require the formula to establish
damages now.
MMF also argues that evidence of the value Monsour’s inventory
subsequent to the initial cost of $1,109,219 on January 14, 2002, makes it a
factual impossibility that damages could have been $472,000. MMF argues that
this shows that the damages could not have exceeded $250,950. Aplt. Br. at 37-
38; Aplt. Reply Br. at 2-7. The jury was free to consider inventory level
fluctuations, but was not required to make the inference MMF now suggests.
Juries resolve potentially inconsistent evidence, not appellate courts. The
estimate is sufficient to support the verdict.
II. The Court’s Evidentiary Rulings Were Not an Abuse of Discretion.
We review evidentiary decisions for an abuse of discretion. United States
v. Schene, 543 F.3d 627, 642 (10th Cir. 2008).
A. The Court May Limit Testimony about Mr. Monsour’s Bank
Reports.
MMF first contends that the district court improperly limited MMF’s
impeachment of Mark Monsour, the president and co-owner of Monsour’s. Aplt.
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Br. at 39-45. Mr. Monsour was Monsour’s main witness at trial. During
discovery, Mr. Monsour admitted that he once gave his bank inflated inventory
reports to prevent it from calling in his company’s loans and from ending its
credit line. 2 Ohio App. at 374-79. Mr. Monsour explained that he would have done
anything to save his business. Id. MMF argues that the district court improperly
limited examination about the reports (and resulting financial statements).
At trial, MMF used the false reports to impeach Mr. Monsour’s testimony
and records. Mr. Monsour admitted that the inventory report was inaccurate, that
there was a discrepancy between that report and other accurate reports, and that
the inaccurate report was “inflated.” 4 Ohio App. at 24-25, 214-16. Citing Federal
Rule of Evidence 403, the court prevented further examination tending to show
that Mr. Monsour intentionally defrauded the bank. Fed. R. Evid. 403; 4 Ohio App. at
282-83. Under Rule 403, a court may exclude relevant evidence “if its probative
value 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.”
Excluding this evidence was not an abuse of discretion. First, no evidence
suggested that Monsour’s ever gave MMF falsified inventory reports or balance
sheets or that MMF ever relied upon them. Second, Mr. Monsour essentially
testified that the misstatements were intentional and that he had been dishonest.
At this point, the impeachment value of further testimony diminished.
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Simultaneously, the risk of unfair prejudice increased — extensively litigating
unrelated reports could confuse and misdirect the jury. 4 Ohio App. at 283. MMF’s
invitation to infer that this could explain the fluctuating inventory amounts in
Monsour’s financial statements is speculation and we can see why the district
court did not want the jury to explore that inference. See Aplt. Reply Br. at 12.
Moreover, litigating numerous collateral matters would lengthen the trial. The
court therefore acted within the wide range of permissible evidentiary rulings.
Cf. Koch v. Koch Industries, Inc., 203 F.3d 1202, 1229 (10th Cir. 2000).
The dissent would reverse the judgment on the grounds that this testimony
did not provide the jury with the reason for Mr. Monsour’s misstatements, but
only showed that there were misstatements, the amounts were inflated and the
statements were prepared at Mr. Monsour’s direction. We disagree with the
dissent — ample testimony was elicited to impeach Mr. Monsour’s credibility and
the parties sufficiently litigated the issue of the inventory’s proper valuation.
Consequently, the district court’s Rule 403 decision was supportable. The
district court was understandably solicitous, during a three-week trial involving
hundreds of documents and rulings, to prevent the jury from delving into false
reports that MMF never had or relied upon during the contract’s formation and
performance. In short, the reports are not the smoking gun on the inventory issue
that the dissent makes them out to be. The district court’s judgment call about
their probative value and unfair prejudice is not an abuse of discretion.
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B. The Dumpster Invoice Did Not Prejudice MMF.
MMF next argues that the district court prejudiced MMF when it let Mr.
Monsour testify about a “fraudulent invoice.” Aplt. Br. at 44. At trial,
Monsour’s attempted to introduce a replacement invoice for a thirty-yard
dumpster it rented to dispose of expired food. 6 Ohio App. at 304-07. The court
excluded the invoice as hearsay and instructed the jury to disregard it. 6 Ohio App. at
305-06. Mr. Monsour then testified about the dumpster from his independent
recollection. 6 Ohio App. at 306-08.
This did not prejudice MMF. Monsour’s proffer was not fraud on the court.
Monsour’s Inc., 2009 WL 89701, at *4. Nor does it entitle MMF to more cross-
examination about Mr. Monsour’s alleged bank fraud. The district court’s earlier
Rule 403 ruling took into account the importance of Mr. Monsour’s credibility.
Besides, the court cured any prejudice when it instructed the jury to ignore the
invoice. See, e.g., United States v. Hinson, 585 F.3d 1328, 1340 (10th Cir. 2009).
The jury was free to evaluate Mr. Monsour’s credibility.
C. The Court Did Not Equate Attorneys’ Arguments and Evidence.
MMF suggests that the court impermissibly instructed the jury that it may
use attorneys’ arguments as evidence. Aplt. Br. at 37. During deliberations, the
jury asked how Monsour’s calculated its damages. 3 Ohio App. at 50. The court
replied, “You will have to rely on your collective memory of the exhibits, other
evidence, and attorneys’ arguments.” 3 Ohio App. at 51. It had earlier instructed that
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arguments are not evidence. 3 Ohio App. at 4, 9.
The court’s reply to a question about a party’s argument referred the jury
to the evidence and the parties’ arguments. It did not conflate the two.
III. The District Court Did Not Improperly Establish Facts.
MMF argues that the district court improperly established facts under
Federal Rule of Civil Procedure 56(d)(1). 1 Aplt. Br. at 45-46. We need not
decide whether the district court acted properly. MMF had a duty to object to
errors, and far from objecting, it stipulated that the court correctly established
these facts. 2 Ohio App. at 93-94 (Revised Pretrial Order submitted by the parties). It
therefore waived any claim of error. See, e.g., Ecclesiastes 9:10-11-12, Inc. v.
LMC Holding Co., 497 F.3d 1136, 1141-42 (10th Cir. 2007).
Alternatively, MMF’s subsequent stipulation to the facts makes their
establishment proper. Its stipulation rendered any action by the district court or
Monsour’s irrelevant. We find no error.
IV. The Court Properly Awarded Prejudgment Interest.
MMF next argues that the district court incorrectly awarded prejudgment
interest. Aplt. Br. at 46-48. We review the court’s legal analysis de novo and a
prejudgment interest award for an abuse of discretion. Loughridge v. Chiles
1
“If summary judgment is not rendered on the whole action, the court
should . . . determine what material facts are not genuinely at issue. . . . The facts
so specified must be treated as established.” Fed. R. Civ. P. 56(d)(1).
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Power Supply Co., Inc., 431 F.3d 1268, 1288 (10th Cir. 2005). Missouri law
governs. Id.; 1 Ohio App. at 42.
Under Missouri law, a court must award prejudgment interest if the
contractual damages are liquidated. Mo. Ann. Stat. § 408.020 2; Denton Constr.
Co. v. Mo. State Highway Comm’n, 454 S.W.2d 44, 59-60 (Mo. 1970); Watters v.
Travel Guard Int’l, 136 S.W.3d 100, 111-12 (Mo. Ct. App. 2004). A claim is
liquidated if it is “fixed and determined or readily ascertainable by computation
or a recognized standard.” Baris v. Layton, 43 S.W.3d 390, 397 (Mo. Ct. App.
2001); see also Komosa v. Monsanto Chemical Co., 317 S.W.2d 396, 400 (Mo.
1958), partially overruled on other grounds, Martin v. Mid-America Farm Lines,
Inc., 769 S.W.2d 105, 112 n.13 (Mo. 1989)). A claim may be liquidated even if
the parties dispute liability and damages, and even if a court awards fewer
damages than a claimant requests. Catron v. Columbia Mut. Ins. Co., 723 S.W.2d
5, 7 (Mo. 1987).
MMF argues that the damages were unascertainable because (1) Monsour’s
damages estimates varied and (2) the damages were ascertained only at trial.
Aplt. Br. at 47-48. But disputes over the amount of damages, without more, do
not make a claim unliquidated. Catron, 723 S.W.2d at 7; Denton Constr. Co., 454
2
“Creditors shall be allowed to receive interest . . . for all moneys after
they become due and payable, on written contracts. . . .” Mo. Ann. Stat. §
408.020.
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S.W.2d at 59-60. We uphold the award.
V. The Award of Attorneys’ Fees Was Not an Abuse of Discretion.
Last, MMF contends the court improperly awarded fees. Aplt. Br. at 48-52.
We review the court’s legal analysis de novo and its award for an abuse of
discretion. Combs v. Shelter Mut. Ins. Co., 551 F.3d 991, 1001 (10th Cir. 2008).
Missouri law again governs. Combs, 551 F.3d at 1001. Under the contract, MMF
must pay for expenses and attorneys’ fees resulting from its breach. 1 Ohio App. at 42;
cf. Trimble v. Pracna, 167 S.W.3d 706, 714 (Mo. 2005) (enforcing fee clause).
First, MMF argues that it should not have to pay for time spent on
dismissed claims for fraud, punitive damages, and lost profits, nor for time spent
on the owners’ individual claims. Aplt. Br. at 50-52. Still, a court may award
fees where the effort and proof were the same for unsuccessful and successful
claims. See, e.g., Gilliland v. Mo. Athletic Club, 273 S.W.3d 516, 523-24 (Mo.
2009). The district court reasonably determined that all the claims “were based
on a common core of facts.” Monsour’s Inc., 2009 WL 89701, at *5. The
records thus need not segregate which work went to which issue. Brockman v.
Soltysiak, 49 S.W.3d 740, 745-46 (Mo. Ct. App. 2001).
Second, MMF argues that Monsour’s improperly duplicated fees when it
used two attorneys instead of one. Aplt. Br. at 50. We disagree. Monsour’s
“used two attorneys only in key depositions and in hearings.” Monsour’s Inc.,
2009 WL 89701, at *7. The occasional use of two attorneys was reasonable in a
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three-year case culminating in a three-week trial. Id.
Third, MMF disputes the fees for Monsour’s unsuccessful motion to
enforce a settlement. Aplt. Br. at 52. The district court correctly held that
attempts to enforce a settlement were expenses stemming from the breach.
Monsour’s Inc., 2009 WL 89701, at *6.
Fourth, MMF objects to paying for Marshall Hull’s expert services. Aplt.
Br. at 52. The district court held that “[a]lthough Mr. Hull did not testify . . . his
work product at trial was a factor in Monsour’s successful outcome.” Monsour’s
Inc., 2009 WL 89701, at *7. Monsour’s hired Mr. Hull to disprove MMF’s
defense that Monsour’s would fail whether or not MMF breached the contract. 2
Ohio App. at 318-19. Mr. Hull’s report also detailed Monsour’s lost profits, which
were once at issue. Id. His fees therefore resulted from the breach. Cf.
Architectural Res., Inc. v. Rakey, 912 S.W.2d 676, 679 (Mo. Ct. App. 1995).
Fifth, MMF argues that counsels’ billing records are “not sufficiently
detailed.” Aplt. Br. at 48-50. Monsour’s submitted forty-nine pages showing
“the time incurred . . . the date of the action, the timekeeper . . . the work
completed and the time billed.” Aplee. Br. at 40; 3 Ohio App. at 66-114. This enabled
the court to decide which work related to the breach. It granted fees accordingly.
Monsour’s Inc., 2009 WL 89701, at *5-7.
All in all, the award was not an abuse of discretion. A court may consider
a case’s “length and complexity.” Essex Contracting, Inc. v. Jefferson County,
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277 S.W.3d 647, 656-57 (Mo. 2009). MMF agreed with Monsour’s that this
action involved “a very large body of documentary evidence and numerous
depositions were taken in three different states. The case was fact, witness and
document intensive and clearly presented a complex legal action requiring heavy
expenditures of time and labor.” 3 Ohio App. at 53, 206.
AFFIRMED.
Entered for the Court
Paul J. Kelly, Jr.
Circuit Judge
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09-3022 - Monsour’s, Inc. v. Menu Maker Foods, Inc.
HARTZ, Circuit Judge, dissenting:
I respectfully dissent. In my view the district court abused its discretion in
limiting MMF’s cross-examination of Mark Monsour.
As the president and co-owner of Monsour’s, Mr. Monsour had a
substantial financial stake in the litigation. Also, as the panel majority states, he
“was Monsour’s main witness at trial.” Op. at 7. His credibility was critical.
The jury had a right to know whether he was the sort of person who would tell big
lies when big money was at stake. But the district court prevented MMF from
putting on highly probative evidence that he was such a person. And I see no
countervailing reason to exclude that evidence. Allowing MMF to put on the
excluded evidence would have consumed very little time, and could hardly have
confused or misdirected the jury; nor would the evidence have created any risk of
unfair prejudice.
It is useful to compare the testimony at trial to what should have been
elicited. On direct examination Mr. Monsour was questioned by his attorney
about two Monsour’s balance sheets with the same date (which was one month
before the parties entered into their Asset Purchase Agreement) but very different
figures for the value of the food service inventory:
Q. Let’s talk about Monsour’s food service inventory. Can you
tell the jury what Exhibit 447 is?
A. It’s a Monsour balance sheet.
Q. This has already been admitted in evidence. Can you tell the
jury, what is this based upon? I’m sorry. Bad question. What
does it show the inventory was—what does it show the
inventory was, that inventory at Monsour’s as of
December 29th, 2001?
A. $997,950.
Q. You’re getting that from the line right next to what I
highlighted?
A. That’s correct.
Q. Was this true and accurate?
A. Yes, sir.
Q. And what was it based upon?
A. It would have been an inventory valuation done probably in the
days preceding the preparation of this statement off of the
inventory valuation report.
Q. This is about a month before the asset purchase agreement was
executed. Do you have any knowledge as to whether or not this
document was supplied to Menu Maker Foods?
A. I do not know.
Q. Can you tell the jury what Exhibit 412 is?
A. It’s a balance sheet.
Q. What’s the date of this balance sheet?
A. 12-29-2001.
Q. This is the exact same date as the Exhibit 447 that we went
over a second ago. Tell the jury what the inventory indicates
on this Exhibit 412?
A. 1,643,819.
Q. Can you tell the jury whether or not—does this balance sheet,
the one that shows 1.6 million, does that reflect what the actual
cost of your inventory was?
A. No.
Q. Now, the one that showed $997,000, the one I just showed you
a few minutes ago, did that reflect what the actual cost of your
inventory was?
A. Yes.
Q. Now, this document shows 1.6 million, Exhibit 412, was that
ever provided to Menu Maker Foods?
A. No.
Q. Just so it’s clear to the jury what was the actual cost of your
inventory on December 29th, 2001?
A. $997,950.
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Aplt. App., Vol. 4 at 23–24. Thus, Mr. Monsour acknowledged that the higher
figure (higher by about $650,000) was incorrect. But the testimony would not
suggest any lack of veracity of Mr. Monsour. He admitted no role in the error,
nor did he explain the reason for the error.
MMF’s attorney tried to elicit those matters on cross-examination, both
with respect to the inventory figures and with respect to accounts-receivable
figures (on the same document) not addressed on direct examination. But because
of the district court’s ruling limiting the cross-examination, the jury heard only
the following. First, counsel emphasized the differences in the figures:
Q. Mr. Monsour, do you have Exhibit 447 in front of you?
A. Yes, sir.
Q. Okay. This is my copy of 447, and you will confirm I have
highlighted portions of that document?
A. Yes, sir.
[discussion of overhead projector omitted]
Q. This is 447 that we just talked about, Exhibit 447?
A. Correct.
Q. I have highlighted on the accounts receivable trade and
inventory, correct?
A. Correct.
Q. I have highlighted the date?
A. Yes, sir.
Q. Mr. Monsour, can you go to Exhibit 412, which was admitted
yesterday during your testimony?
A. Yes, sir.
Q. Mr. Monsour, I’m going to show you my copy of that exhibit.
I have highlighted the date and the accounts receivable, trade.
I have highlighted the inventory balance and frankly I have
highlighted current liabilities, notes, payables.
A. Yes, sir.
Q. That’s actually highlighted on your exhibit, isn’t it?
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A. Yes, sir.
Q. Is that on 412?
A. Uh-huh.
Q. Mr. Monsour, Exhibit 412 was admitted yesterday. Exhibit 12
is a balance sheet, correct?
A. Yes, sir.
Q. And it’s a balance sheet of 12-29-2001?
A. Yes, sir.
Q. And that’s the same date as Exhibit 447?
A. Correct.
Q. But yesterday—I’m sorry. And that exhibit shows an account
receivable trade of $1,073,575.46?
A. Yes, sir.
Q. Shows an inventory of $1,643,819.80?
A. Yes, sir.
Q. I placed that on the [projector]. It won’t work that way. But
exhibit 447 shows an accounts receivable trade of
$894,841.36, and Exhibit 412 show $1,073,575.46. Yesterday
you testified that Exhibit 412 was inaccurate. Is that your
testimony today?
A. Yes, sir.
Q. Okay. So that number is the one million 73 thousand and
change is an inaccurate number?
A. Yes, sir.
Q. And the inventory on that document shows $1,643,819.80 as
opposed to 447, which shows $997,950, right?
A. Yes, sir.
Q. And that number is inaccurate, correct?
A. Yes, sir.
Id. at 212–15. Then counsel unsuccessfully attempted to question Mr. Monsour
about the reason for the discrepancy in the figures:
Q. Mr. Monsour, I don’t understand why the numbers are
inaccurate. Can you tell me why?
A. I believe Judge Marten instructed me to not talk about that.
Attorney for [MMF]: Your Honor, may we please have
a bench conference?
The Court: Certainly
(Off the record bench conference.)
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Q. [Attorney for MMF] Mr. Monsour, I’m exhibiting Exhibit 412
on the [projector]. I’m putting the top part of it. I’ll tell you
that post-it notes appear that I put there. Mr. Monsour, tell us,
if you can, who prepared this balance sheet as of 12-29-2001?
A. Shelly Corn.
Q. Okay. Was it prepared at your instruction?
A. Most likely.
Q. Best of your recollection it was?
A. Yes.
Q. There’s a discrepancy between Exhibits 412. There are two,
actually, between 412 and 447. First discrepancy is in
accounts receivable. 447 says there was 894,841.36 accounts
receivable and Exhibit 412 shows a 1,073,576.46. How [d]o
you account for that discrepancy?
A. The larger one is inaccurate.
Q. To which you have testified before, but how do you an [sic]
account for that discrepancy?
A. The numbers are inflated.
Q. Let me direct your attention to 447 and 412, inventory
valuation. Number on 47 is 997,950 even. Inventory on 412 is
1,643,819. There’s a discrepancy between those two
documents on inventory valuations. How do you account for
that?
A. Larger numbers are inaccurate.
Q. Yes, sir. They are thank you. How do you account for the
inaccuracy?
A. The larger numbers are inflated.
Q. At your direction? The inflation of the numbers?
A. I think I have been directed by Judge Marten to not talk about
that.
The Court: I think you have taken it about as far as you
can go.
Id. at 215–16.
The majority opinion states that “Mr. Monsour essentially testified that the
misstatements were intentional and that he had been dishonest.” Op. at 7. But I
cannot agree with that characterization. He admitted that there were
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misstatements, that the figures were inflated, and that the balance sheet “was
prepared at [his] instruction.” But he did not admit that he (or anyone else)
intended the figures to be incorrect or even that he knew the figures to be
incorrect when the balance sheet was prepared. A jury would have to speculate to
infer from this testimony that Mr. Monsour had engaged in any misconduct that
would damage his credibility.
Compare that cross-examination testimony to Mr. Monsour’s testimony at
his deposition. The first part of the deposition testimony resembles what was
presented at trial:
Q. Just take a look at 9 and 9A. [Deposition Exhibit 9 became
Trial Exhibit 412 and Deposition Exhibit 9A became Trial
Exhibit 447]. When I review those documents, in the entry
“Accounts Receivable - trade (net),” do you see that entry?
A. Both documents. Correct.
Q. And 9 reflects “Accounts Receivable - trade (net) value of
$1,090,500,” and 9A reflects “$765,071”; they are of like date.
I don’t understand the difference; can you explain it to me?
A. I will have to review them, but I will try to explain it.
[Counsel for Monsour’s]: Take your time.
Id., Vol. 2 at 376.
But then counsel elicited Mr. Monsour’s involvement and motive, two
critical facts not presented to the jury:
Q. [By Counsel for MMF]: And I just want you to explain that
entry to me.
A. Which entry is that?
Q. The “Accounts Receivable - Trade (net).”
A. Could be one of two things. One, sometimes from Shelly’s
cutoff to when she actually brings them up-to-date, those
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numbers can change. Or two, I could have told her to raise
those numbers.
Q. Why would you do that?
A. To make the balance sheet look better.
Q. Why would you do that?
A. For bank purposes.
Q. Why would you do that? I don’t understand.
A. To stop a loan from being called.
Q. Are you familiar with the term “dishonest”?
A. Yes, sir.
Q. Don’t you think that is just downright dishonest?
A. What it is is a man trying to keep his business going.
Q. I understand that. And therefore, would I be correct in
understanding that you were willing to do anything that you
could do to keep your business afloat, including provide false
information to lending institutions; isn’t that true?
A. That is true.
Q. All right. Good. Let’s look at the inventory amount. I will
tell you that Exhibit 9 shows an inventory of $1,643,820, and
Exhibit 9A shows $997,950; can you account for the difference
in that?
A. That would have been artificial inflation on my part.
Q. Sir?
A. I would have told Shelly Corn to raise that number.
Q. For the same reason that you gave me for artificially inflating
accounts receivable trade net?
A. Yes, sir.
Id. (emphases added). Had MMF been permitted to pursue this cross-examination
at trial, the jury could have drawn a rather different picture of Mr. Monsour’s
credibility.
The district court’s expressed reasons for excluding the cross-examination
are unsupportable. Before Mr. Monsour testified, the court granted Monsour’s
motion in limine to exclude the evidence “because it is irrelevant.” Id. at 423. I
do not understand, however, how evidence so clearly probative of a lack of
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veracity could be irrelevant. Then, after the above-quoted cross-examination,
when MMF’s counsel again requested an opportunity to question Mr. Monsour on
the matter, the court said: “I’m going to keep it out. The reason is the 403 [sic].
I think that the danger of unfair prejudice substantially outweighs any probative
value; that getting into the reasons for the inflated balance sheet would provide to
the jury.” Id., Vol. 4 at 283. With all due deference (and we owe the trial judge
great deference), I cannot follow this explanation. If the concern is that the jury
might think that Exhibit 412 was given to MMF, I would think that the jury need
only be informed (as Mr. Monsour testified on direct examination) that it had not
been. Jurors are not idiots. Or if the concern is that the jury might infer that
some other inventory numbers given to MMF were false, that is not a legitimate
concern. A jury should not be precluded from inferring that a witness who would
lie on one occasion for business reasons would lie on other occasions. And if the
concern is that too much court time would be expended by Mr. Monsour in
explaining his justification for lying to banks, then perhaps trial judges should
always exclude impeachment evidence on the ground that the witness will need
too much time to rationalize lying. MMF was not seeking to take the court’s time
by inquiring into alleged errors in numerous reports. Indeed, it was not seeking
to question Mr. Monsour on any additional documents. It simply wished to elicit
that Mr. Monsour had intentionally falsified the document about which he had
been cross-examined and that he did it to save his business. That would have
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been devastating impeachment; nothing else in the cross-examination came close
to having such an effect.
In short, the restriction on the cross-examination of Mr. Monsour was clear
error. And the error requires reversal of the verdict.
I have no substantial disagreement with the majority opinion’s analysis of
the other issues on appeal. But that analysis would be mooted by requiring a new
trial at which MMF could conduct a proper cross-examination of Mr. Monsour.
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