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VIGORTONE AG PRODUCTS, INC. v. PM AG PRODUCTS

January 14, 2004.

VIGORTONE AG PRODUCTS, INC., formerly known as Provimi Acquisition Corporation, Plaintiff,
v.
PM AG PRODUCTS, INC., Defendant



The opinion of the court was delivered by: HARRY LEINENWEBER, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff Vigortone Ag Products, inc. (referred hereinafter as "Provimi") filed this suit against PM Ag Products, Inc. PM Ag") in 1999, asserting, among other things, claims of fraud and breach of contract in connection with sale of Vigortone, Inc., a former subsidiary of PM Ag. Following a trial before this Court, which resulted in a jury verdict against PM Ag for fraud and breach of contract, PM Ag appealed from the judgment against it. The Seventh Circuit reversed the fraud verdict, holding that the jury's finding of justifiable reliance lacked sufficient evidentiary basis, and remanded the case for a new trial on the breach of contract claim. Presently before the Court are the parties' motions in limine to exclude certain evidence at trial. The motions are granted or denied, in whole or in part, as follows: Page 2

I. PLAINTIFF'S MOTIONS IN LIMINE

  1. Provimi's Daubert Motion to Exclude Testimony of Mark J. Hosfield Regarding Provimi's Alleged Mismanagement of the Pig Purchase Contracts and Concerning Hedging. GRANTED for the reasons stated in open court and set forth in separate opinion.

  2. Provimi's Motion In Limine to Preclude Defendant from Presenting Argument or Evidence Regarding Plaintiff's Alleged Failure to Use Futures Contracts to Hedge Purchases of Baby Pigs Under the Pig Purchase Contracts. DENIED. Setting aside the waiver issue, Defendant is entitled to rebut any evidence that Plaintiff enters regarding the availability of hedging as a means of mitigating damages. It is unclear at this point the extent to which Plaintiff intends to present this type of evidence (although one of their experts has opined that using futures contracts as a means of hedging was not a viable mitigation option), Although Defendant does not appear to have articulated this exact theory of mitigation at the first trial, it did plead failure to mitigate as an affirmative defense and certainly the Seventh Circuit Opinion in this case (hereinafter "Seventh Circuit Opinion") put this issue front and center (although the Seventh Circuit was unsure whether the claim had been "forfeited"). This Court's June 19, 2003 ruling also raised the issue of whether Plaintiff would have discounted the price "by the cost of obtaining hedging contracts," Thus, Page 3 Plaintiff cannot claim unfair prejudice or surprise if this issue arises.

  3. Provimi's Motion in Limine Barring PM Ag from Presenting Evidence That Provimi's Damages Expert, Paul F. Charnetzki, Is Connected to the Auditing Irregularities Associated with Andersen, GRANTED, although the Court notes that parties have reached a stipulation that withdraws this motion.

  4. Provimi's (Renewed) Motion in Limine to Exclude Evidence or Argument Concerning the Parties' Previous Arbitration on Accounting Issues. GRANTED IN PART and DENIED IN PART. Motion is granted to the extent it seeks to preclude any evidence directly pertaining to the arbitration proceedings. The Seventh Circuit Opinion, as well as this Court's rulings, have made clear that the arbitration proceedings are inadmissible. The arbitration agreement clearly prohibits mention of the arbitration proceedings in subsequent litigation, except where a party seeks to enforce the award. Plaintiff's claims under Sections 3.4 and 3.21 are not identical to those resolved at arbitration. The Asset Purchase Agreement makes clear that the arbitration was limited to whether the post-closing balance sheet met GAAP standards and did not address warranties set forth elsewhere in the Agreement,

  The arbitration proceeding was also limited to the narrow issues of whether GAAP required the accrual for future losses of the pig contracts and whether the swine inventory was valued Page 4 properly. The arbitrator did not consider whether any warranties were breached.

  The motion is denied to the extent it seeks to preclude all evidence showing that parties had a dispute over the proper purchase price of the company. The motion is over broad and unduly vague and the Court will need context to further decide if any of this evidence is admissible for another purpose.

  5. Provimi's Motion in Limine to Exclude Testimony of Mark Hosfield that Out-of-Pocket Losses Is Not an "Appropriate" Measure of Damages. GRANTED IN PART and DENIED IN PART. Experts may not opine on the appropriate measure of damages, as this is an issue of law already decided by this Court and the Seventh Circuit. However, experts may opine on the proper method of computing those damages, as this is a factual issue within the province of the jury. The Seventh Circuit suggested that the appropriate measure of damages for a breach of warranty is "the difference between the purchasers' reasonable expectations as to the worth of the company, as fairly described in the warranties, and the actual worth of the company as a result of any breach of warranties." This Court adopted this measure in its June 19, 2003 ruling.

  It may be that out-of-pocket losses are one way of computing the "actual worth of the company as a result of any breach." This a matter where the experts can disagree. There is Delaware case law holding that out-of-pocket losses are available in a breach of Page 5 warranty. Moreover, the indemnification provision in Section 9.1 allows out-of-pocket losses for certain breaches, apparently including Sections 3.28 and 3.25.

  6. Provimi's Motion in Limine to Preclude PM Ag from Arguing that the Mere Fact that Five of the Seven Pig Purchase Contracts Are Listed on Schedule 3.9 Discloses the Fact that the Market Risks Inherent in Those Contracts Had Not Been Hedged or Offset. DENIED. Nothing in Seventh Circuit Opinion or this Court's rulings precludes Defendant from making the argument that, the disclosure under Schedule 3.9 amounted to a disclosure of the market risks in these contracts. This is an issue of fact for the jury to decide. The Seventh Circuit Opinion and this Court's ruling discuss the disclosures in Schedule 3.9 in terms of whether Defendant could establish — as a matter of law — that the disclosures precluded justifiable reliance under the former fraud claim,

  7. Provimi's Motion in Limine to Exclude any Evidence Regarding Provimi's Profits on Pre-Mix Sales. GRANTED. This Court and the Seventh Circuit have ruled that pre-mix profits may not be used to offset damages. Evidence of Provimi's actual pre-mix profits is not necessary to show the purpose of the contract and would confuse and mislead the jury.

  8. Provimi's Motion in Limine to Exclude Evidence and Statements Regarding Provimi's Reliance on ...


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