required by the technical specifications in the plan and (2) the audit failed to disclose and evaluate groundwater contamination. Defendants jointly move to exclude evidence of the negotiations between Hawthorne Partners and MONY and the terms of the refinancing effort as not probative or, if such evidence is probative, as more prejudicial than probative.
Hawthorne Partners contends that this court's denial of defendants' motions for summary judgment preserved this issue for the jury to decide at trial. Plaintiff's MONY and Teachers Retirement Resp. at 2. When this court denied the motions for summary judgment, it did not rule specifically on any particular issue; it merely stated that there were a number of contentious factual issues that could not be resolved on a motion for summary judgment. Minute Order, April 28, 1993. The denial of summary judgment does not automatically resolve this motion in limine in Hawthorne Partners' favor. It is necessary to consider the motion on its merits.
Hawthorne Partners contends that refinancing was derailed by MONY's environmental concerns. MONY's environmental engineer investigated the property and the remedial work done by defendants as part of MONY's due diligence during the negotiations. An internal MONY memorandum disagrees with ENSR's conclusions that there is no groundwater contamination and that any remaining contamination is harmless. Id., Exh. 4.
The evidence of the attempted refinancing through MONY is relevant under Fed. R. Evid. 402. Hawthorne Partners asserts that the evidence of the failed MONY deal confirms that the value of the property is diminished as a result of defendants' deficient work. Defendants claim this evidence is not probative of the diminution of the property's market value or the materiality of AT&T's breaches of its contract with Hawthorne Partners. Yet defendants do not explain why this evidence is not probative. The proffered evidence appears to buttress Hawthorne Partners' claims. If defendants dispute MONY's rationale for not completing the refinancing, they may impeach MONY on cross-examination.
The probative value of this evidence is not substantially outweighed by prejudice. Fed. R. Evid. 403. Defendants argue that allowing this evidence would confuse the jury and unfairly prejudice defendants since the evidence may persuade the jury to award damages to Hawthorne Partners based on the failed MONY refinancing. However, as Hawthorne Partners points out, defendants may use Hawthorne Partners' own statements to impress upon the jury that Hawthorne Partners should not be awarded damages based on the failed MONY refinancing. See Defendants' MONY Mot., Exh. A, Plaintiff's Memorandum in Opposition to Defendant At&T's Summary Judgment Motion at 30-31; Plaintiff's MONY and Teachers Retirement Resp., Exh. 5, Final Pretrial Order, Plaintiff's Statement of Contested Issues of Fact and Law Not Agreed To, P 45.
3. Negotiations Over And The Terms Of The Failed Sale Of The Shopping Center To The State Teachers Retirement System of Ohio
This motion is similar to the MONY motion. Hawthorne Partners unsuccessfully tried to sell the shopping center to Teachers Retirement in 1989. Hawthorne Partners seeks to show that Teachers Retirement terminated negotiations because (1) defendants had not remediated the property to the levels required by the technical specifications in the plan and (2) the audit failed to disclose and evaluate groundwater contamination. Defendants jointly move to exclude evidence of the negotiations between Hawthorne Partners and Teachers Retirement and the terms of the failed sale as not probative or, if probative, as more prejudicial than probative.
As with the MONY motion, it is necessary to consider the merits of this in limine motion. The facts make this a closer call than the MONY motion. The letter of intent between Hawthorne Partners and Teachers Retirement expressly conditioned Teachers Retirement's purchase of the shopping center property on an environmental assessment verifying that there was no evidence of hazardous materials on the property. Defendants' Teachers Retirement Mot., Exh. C, Final Pretrial Order, Agreed Statement of Uncontested Facts, P 46. Teachers Retirement's formal hazardous materials policy required certification that the property be free from hazardous material or, if it had been contaminated, that remediation had rendered it free from contamination. Id., Exh. H, Plaintiff's Trial Exhibit 153. Defendants maintain that this strict policy prohibited Teachers Retirement from purchasing the property even if defendants had fulfilled their obligations, since the remedial work plan did not contemplate removing all contamination from the property. Hawthorne Partners contends that Teachers Retirement's seemingly strict policy was actually somewhat flexible. Hawthorne Partners points out that Teachers Retirement knew the property had formerly been the site of a manufacturing facility, so it was on notice that there might be contamination. Plaintiff's MONY and Teachers Retirement Resp., Exh. 2. Hawthorne Partners also asserts that Teachers Retirement contemplated going through with a transaction that did not meet all the requirements of the policy. Id., Exh. 3.
As with the MONY motion, evidence of the failed sale to Teachers Retirement appears relevant under Fed. R. Evid. 402. Evidence of the failed sale may confirm Hawthorne Partners' claim that the value of the property is diminished as a result of defendants' deficient work. Defendants may use the strict hazardous materials policy to impeach this evidence. The probative value of this evidence is not substantially outweighed by prejudice. Fed. R. Evid. 403.
4. Responsibility Of Defendants For Remediation Of Building Interiors On The Property
Defendants move to exclude testimony regarding their responsibility for remediation of the interior of the Cable Plant building on the property. Defendants contend that this lawsuit relates only to those parts of the agreement regarding the environmental conditions of the soil and groundwater. They further contend that Hawthorne Partners' amended complaint does not allege that defendants had responsibility for remediation of any building interiors. If defendants' contentions are correct, then Hawthorne Partners' claims for damages resulting from the contamination in the Cable Plant must be barred.
Hawthorne Partners argues that the building interiors are covered by the agreement and are properly within the scope of this lawsuit. AT&T promised to deliver the buildings "in a physical condition normal for transfers of buildings and improvements of this age, type and kind." Plaintiff's Building Resp., Exh. 4, P 7(b)(iv). Hawthorne Partners notes that it understood the language of the agreement to encompass remediation of building interiors. Id., Exh. 1 at PP 3-5. In addition, Hawthorne Partners' complaint, amended complaint and second amended complaint all describe the discovery of lead dust in the Cable Plant, AT&T's refusal to remediate the lead dust, and Hawthorne Partners' assertion that it spent $ 65,000 to remediate the lead dust and related soil contamination.
Complaint, Amended Complaint, and Second Amended Complaint, PP 26-28.
The contamination of the Cable Building is part of this lawsuit. Hawthorne Partners agreed to buy the Hawthorne Works property from AT&T. The property included the Cable Plant and other buildings as well as the land on which Hawthorne Partners constructed the shopping center. Defendants were put on notice of Hawthorne Partners' claims regarding the Cable Plant by the complaints. In addition, Hawthorne Partners and defendants include the reduction in the purchase price of the Cable Plant and Hawthorne Partners' out-of-pocket expenses for completing defendants' remedial work in their list of contested issues of fact. Final Pretrial Order, Agreed Statement of Contested Issues of Facts and Law, P 22. Defendants cannot say Hawthorne Partners is unfairly springing a new claim upon them at this late date. The claim is not new and it is properly within the scope of this lawsuit. Defendants' motion to exclude testimony that they had any responsibility for the remediation of the Cable Plant is denied.
5. The Conspiracy Claim
Defendants jointly move (1) to exclude evidence of agency relating to Hawthorne Partners' conspiracy claim and (2) for a judgment as a matter of law on the conspiracy claim. The court first addresses the motion for judgment as a matter of law. Defendants argue that a principal and agent cannot conspire within the scope of the agency and that Hawthorne Partners has admitted that ENSR acted as an agent of AT&T with respect to soil removal decisions and actions. Defendants assert the conspiracy claim is legally impossible and must fail under Fed. R. Civ. P. 50(a).
This motion has been complicated by other developments in the case. This motion was filed on June 15, 1993, and answered July 6, 1993. Defendants rely on the amended complaint, in which the conspiracy claim is based only on defendants' alleged decision to leave contaminated soil on the property. Amended Complaint P 46. Hawthorne Partners filed its second amended complaint on July 26, 1993. The second amended complaint added to the conspiracy claim the allegation that defendants conspired to conceal indications of groundwater contamination. Second Amended Complaint P 43. Thus, defendants' motion to bar the conspiracy claim does not address the groundwater allegation. Defendants' motion is moot because the conspiracy claim now includes both soil and groundwater allegations.
In addition, the motion is substantively without merit. There can be no conspiracy between principal and agent within the scope of the agency relationship.
Balabanos v. North American Investment Group, Ltd., 708 F. Supp. 1488, 1495 (N.D. Ill. 1988). Hawthorne Partners does not dispute this point. Plaintiff's Conspiracy Resp. at 2. The parties have agreed to a jury instruction that states: "A principal and its agent are not legally capable of entering into a conspiracy regarding a matter within the scope of the agency." Defendants' Conspiracy Mot., Exh. C, Final Pretrial Order, Joint Final Jury Instructions, No. 8.
However, an agent and principal can conspire when the agent acts outside the scope of the agency. See, e.g., Morrison v. Murray Biscuit Co., 797 F.2d 1430, 1438 (7th Cir. 1986); Nagy v. Riblet Products Corp., 1992 WL 318604, at *5 (N.D. Ill. July 12, 1992). Hawthorne Partners maintains that ENSR's activities related to soil removal were not within the scope of the agency and defendants' joint actions regarding soil removal are subject to conspiracy liability. Defendants allege ENSR acted within the scope of its agency relationship with AT&T regarding soil removal and that Hawthorne Partners has admitted as much.
Defendants' motion relates to the conspiracy allegation that "AT&T . . . and . . . ENSR conspired and agreed among themselves to deviate from the provisions of the Plan . . . when they agreed among themselves in August and September of 1986 and, again, in October of 1987 to leave soil on the Hawthorne Works property contaminated . . . in excess of the clean-up criteria levels of the Plan." Amended Complaint P 46. Defendants point to Hawthorne Partners' purported admissions in its amended complaint: (1) that before the soil analysis was complete, ENSR, "pursuant to the directions and instructions of its principal, Defendant AT&T Technologies, Inc.," left soil under the TCE tank in place; and (2) that in the three instances, AT&T "directed its agent, Defendant ENSR," to leave contaminated soil on the property. Defendants' Conspiracy Mot., Exh. A, Amended Complaint PP 18, 39; Second Amended Complaint PP 18, 39. Defendants also point to Hawthorne Partners' purported admissions in the parties' agreed statement of contested facts:
10. Whether Hawthorne Partners was a third party beneficiary of the contract or contracts between AT&T and ENSR requiring ENSR to supervise, as AT&T's authorized representative, the performance of remedial work in 1986.
11. Whether Hawthorne Partners was a third party beneficiary of the contract or contracts between AT&T and ENSR for ENSR to supervise, as AT&T's authorized representative, the performance of remedial work in the former Building No. 40 area in 1987.