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Walsh v. McCain Foods Limited

April 17, 1996

ROGER J. WALSH, EDWARD BODEN, SR., AND EDWARD BODEN, JR., PLAINTIFFS-APPELLEES,

v.

MCCAIN FOODS LIMITED AND MCCAIN USA, INCORPORATED, DEFENDANTS-APPELLANTS.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 86 C 7753--Charles R. Norgle, Sr., Judge.

Before CUMMINGS, CUDAHY and MANION, Circuit Judges.

CUMMINGS, Circuit Judge.

ARGUED FEBRUARY 20, 1996

DECIDED APRIL 17, 1996

A jury awarded plaintiffs $4.8 million against defendants McCain Foods Limited and McCain USA, Inc. ("McCain") for breach of contract. McCain filed a motion for a new trial pursuant to Fed. R. Civ. P. 60(b) and a motion to amend the verdict pursuant to Fed. R. Civ. P. 59(e), both of which were denied. McCain appeals the denials of those motions and numerous evidentiary rulings by the district court. For the reasons discussed below, the judgment of the district court is affirmed.

Background

In October 1985, plaintiffs Edward Boden, Sr., Edward Boden, Jr., and Roger J. Walsh collectively owned all of the stock of Bodine's, an Illinois corporation that packaged and distributed frozen concentrated orange juice. In an attempt to sell the corporation, Walsh sent George McClure, vice president of McCain, a Canadian frozen food company, a package of information describing Bodine's and its financial condition. Included in the package were unaudited financial statements for the years 1982 through 1984 and unaudited monthly financial statements for the period ending August 31, 1985. McClure conducted a preliminary review of the information and concluded that McCain might be interested in purchasing Bodine's. On October 24, 1985, Boden, Sr. told McCain that plaintiffs had reached a preliminary agreement to sell Bodine's to a competitor of McCain, but that McCain still might be able to purchase Bodine's if it moved quickly.

McCain's chairman, its lawyer, and McClure flew to Chicago the next day and quickly reached a preliminary sales agreement. As a condition of sale, McCain demanded that plaintiffs represent and warrant that (1) Bodine's August 31, 1985 financial statements were accurate; (2) there had been no material adverse change in Bodine's business since August 31, 1985 except as specified; and (3) McCain was entitled to subsequent purchase price adjustments if the plaintiffs had made any misrepresentations with regard to the sale. Pursuant to the agreement, half of the purchase price was to be paid to plaintiffs at closing and the remainder was to be paid in annual promissory notes over the next five years. However, the agreement contained a provision allowing McCain to set off against the notes any amount attributable to an "established misrepresentation." The transaction closed on November 6, 1985. Subsequent to that date, McCain learned that the Bodens and Walsh were under investigation for adulterating Bodine's frozen concentrated orange juice by adding significant amounts of sugar to the product. Additionally, a post-closing audit performed by an independent accounting firm hired by McCain suggested that Bodine's expected net worth was negative $4,860,490, not the negative $1,089,357 stated on Bodine's unaudited financial statements. Allegedly based upon the discovery of the adulteration charges and the independent audit, McCain refused to make any of the installment payments on the promissory notes. This prompted the plaintiffs to bring suit for breach of contract against McCain.

While the case was still pending, the Bodens and Walsh were indicted by the United States Attorney for the Northern District of Illinois for selling orange juice adulterated with sugar, grapefruit and other materials in violation of the Federal Food, Drug and Cosmetic Act, 21 U.S.C. secs. 331, 333, 342 & 343. The Bodens subsequently entered into plea agreements in which they pleaded guilty to adulterating the orange juice with grapefruit product, but not with sugar. Walsh passed away in October of 1989, prior to prosecution by the U.S. Attorney. The trustee of his estate was substituted as a party in the civil trial against McCain and the two parties settled their dispute prior to the case going to the jury.

At trial, the Bodens admitted to the jury in their opening statement that Bodine's had adulterated its orange juice with sugar. They argued, however, that McCain should be liable on the promissory notes nonetheless because it was unconcerned about the adulteration prior to acquiring Bodine's. Plaintiffs presented evidence that McCain intended to completely recreate Bodine's after the purchase by giving it a new name, a new product line, new equipment, a new distribution process, and new management. Plaintiffs argued that all McCain cared about was acquiring Bodine's land, buildings, work force, and distribution location. Thus plaintiffs argued that the adulteration did not affect McCain's decision at all. The jury apparently believed the Bodens' version of the facts and returned verdicts in their favor in the amount of $4,864,084, the amount owed on the promissory notes. McCain filed a motion for a new trial pursuant to Fed. R. Civ. P. 60(b), claiming that the verdicts were reached as a result of fraud, and also filed a motion to amend the verdicts pursuant to Fed. R. Civ. P. 59(e). The district court denied both motions. McCain contends on appeal that the motions should have been granted and that the district court abused its discretion in a series of evidentiary rulings.

Discussion

A.

McCain argues that the district court erred by denying its Rule 60(b) motion for a new trial on the basis of fraud. McCain does not contend that plaintiffs committed fraud by any traditional method such as withholding evidence or perjuring themselves on the witness stand. Instead, McCain contends that the Bodens committed fraud by admitting to the jury in opening argument that Bodine's had adulterated its orange juice when they had consistently denied doing so prior to trial. McCain did not call either of the Bodens as witnesses at trial or attempt in any other manner to point out the alleged inconsistencies in the Bodens' testimony to the jury. Instead, they waited until a verdict was reached and then filed a motion for a new trial. The district court denied the Rule 60(b) motion because McCain "failed to object to the testimony and comments by counsel regarding th[e] admission during the trial, and therefore its contention that it was unfairly surprised by plaintiffs' about-face is waived." [Tr. 533-534].

Absent plain error, a party must object at trial in order to seek relief on the basis of surprise under Rule 60(b). Sadowski v. Bombardier Ltd., 539 F.2d 615, 618 (7th Cir. 1976). In other words, "a party may not sit silently by, letting claimed error occur and then seek relief if the result is unfavorable." Id. McCain argues that the following statement by its counsel to the court was a sufficient objection: "I don't see how they can make that statement (denying adulteration) and then make this statement here (admitting adulteration)." [Tr. 533-534]. Whether this ...


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