United States District Court, N.D. Illinois, Eastern Division
September 22, 2004.
WERNER VON PEIN, Plaintiff,
HEDSTROM CORPORATION, Defendant.
The opinion of the court was delivered by: CHARLES KOCORAS, District Judge
Before the court are four motions in limine brought by
Plaintiff Werner von Pein ("von Pein"). For the reasons set forth
below, von Pein's motions are denied.
Defendant Hedstrom Corporation ("Hedstrom") is a manufacturer
and marketer of children's toys and outdoor recreational
products. In June 2000, Hedstrom retained von Pein as a temporary
executive consultant for its ERO Division ("ERO"). On November 1,
2000, Hedstrom hired von Pein to work full-time as ERO's Vice
President and General Manager. In this position, von Pein had
overall responsibility for the ERO business and reported directly
to Michael Johnston ("Johnston"), Hedstrom's President and CEO. On March 14, 2002, Johnston drafted a letter (the "Severance
Agreement") to von Pein that provided for severance payments in
the event that von Pein's "employment [is] terminated for any
reason other than cause." Von Pein's Severance Agreement
specified that if he was fired without "cause," he would receive
one year's base salary and that Hedstrom would continue to pay
his health and life insurance benefits for one year.
On the morning of December 12, 2002, Johnston fired von Pein.
For one month following von Pein's discharge, Hedstrom paid von
Pein's salary and his benefits under the Severance Agreement.
That evening, several Hedstrom employees took von Pein out for a
going away dinner. It is alleged that during this dinner von Pein
discussed competing against Hedstrom. Shortly thereafter, various
individuals who were present at the dinner, or had knowledge of
what was purportedly said at the dinner, provided Johnston with
information and statements regarding the alleged conversation.
On January 13, Hedstrom informed von Pein that it was
suspending his severance payments because it believed that von
Pein had removed confidential proprietary information and was
preparing to form a business venture that would compete with
Hedstrom. Four days later, Hedstrom sent von Pein a Settlement
Agreement and General Release ("the Non-Compete Agreement") that
offered to pay the remainder of von Pein's salary and benefits
under the Severance Agreement in exchange for von Pein's returning any proprietary information and
refraining from suing Hedstrom or competing with Hedstrom for
three years. Von Pein refused to sign the Non-Compete Agreement.
Von Pein contends that the initial health benefits and salary
payments Hedstrom made after the date of von Pein's termination
indicate Hedstrom's willingness to honor the terms of the
Severance Agreement. Von Pein further contends that Johnston
decided to terminate the severance payments based upon the
information that he had received regarding the statements von
Pein allegedly made at the going away dinner. Conversely,
Hedstrom maintains that the payments made to von Pein in the
month following his discharge were made gratuitously due to von
Pein's purported financial problems and Hedstrom's desire to
avoid a confrontational separation.
On March 28, 2003, von Pein, who resides in Connecticut, filed
the present lawsuit in the Southern District of New York,
alleging breach of the Severance Agreement and violation of the
Illinois Wage Payment and Collection Act ("Wage Act"),
820 ILCS 115/1 et seq. On May 8, 2003, Hedstrom answered von Pein's
complaint and filed a counterclaim alleging breach of fiduciary
duty of loyalty. On January 12, 2004, Judge Richard P. Casey
transferred the case to this court. Discovery has been completed
and the case is poised for trial. Von Pein has filed various
motions in limine. LEGAL STANDARD
A federal district court's authority to manage trials includes
the power to exclude evidence pursuant to motions in limine.
Falk v. Kimberly Services, Inc., 1997 WL 201568, *1 (N.D. Ill.
1997). However, a court has the power to exclude evidence in
limine only when that evidence is clearly inadmissible on all
potential grounds. Hawthorne Partners v. AT&T Technologies,
Inc., 831 F. Supp. 1398, 1400 (N.D. Ill. 1993). A district court
should be mindful that some proposed evidentiary submissions
cannot be accurately evaluated in a pretrial context via a motion
in limine. Tzoumis v. Tempel Steel Co., 168 F. Supp. 2d 871,
873 (N.D. Ill. 2001). For this reason, certain evidentiary
rulings should be deferred to trial so that questions of
foundation, relevancy, and potential prejudice may be resolved in
proper context. Hawthorne Partners, 831 F. Supp. at 1400.
Denial of a motion in limine does not automatically mean that
all evidence contemplated by the motion will be admitted at
trial. Id. at 1401. Instead, the court will entertain
objections to individual proffers as they occur at trial. Id.
In any event "the district judge is free, in the exercise of
sound judicial discretion, to alter a previous in limine
ruling." Luce v. U.S., 469 U.S. 38, 41-42 (1984). With these
principles in mind, we turn to the present motions. DISCUSSION
Von Pein's first motion in limine seeks to bar the
introduction of eleven exhibits that Hedstrom has submitted
pursuant to the final pretrial order. Von Pein contends that
these exhibits contain after-acquired evidence or, put another
way, evidence that Hedstrom uncovered after making the decision
to terminate von Pein on December 12, 2001. Further, von Pein
moves this court to exclude any testimony by Johnston that would
consist of after-acquired evidence. Specifically, von Pein seeks
to bar testimony relating to: (1) Johnston's terminating von Pein
because von Pein took confidential documentation or other company
records, and (2) Johnston's terminating von Pein because von Pein
was planning to set up a competing business. Von Pein further
argues that pursuant to a previous ruling issued by this
court,*fn1 the doctrine of the law of the case dictates that
we should presumably adhere to rulings made at a prior stage of
the proceedings throughout the suit. See Alston v. King,
157 F.3d 1113, 1116 (7th Cir. 1998).
Hedstrom counters that von Pein's motion to exclude
after-acquired evidence is expressly made as to his claim that he
was terminated without "cause" under the Severance Agreement and that von Pein's summary judgment motion,
as well as this court's opinion denying that motion, addressed
the after-acquired evidence doctrine only in the context of von
Pein's breach of employment contract claim. Further, Hedstrom
argues that since its counterclaim against von Pein for breach of
fiduciary duty of loyalty is not dependent or related to a
termination decision or date, the after-acquired evidence
doctrine has no conceivable application.
With any relevancy consideration, a court must first determine
the purpose for which the evidence is being offered.
Fed.R.Evid. 402. The evidence must increase the factfinder's knowledge
and enhance the likelihood of ascertaining the truth about the
facts at issue. See Fed.R. Evid. 402 advisory committee's
note. It is well settled that evidence may be irrelevant and thus
inadmissible when offered for one purpose but meet the threshold
relevancy requirements for admissibility when offered for another
purpose. See generally Minnesota Mining & Manufacturing Co. v.
Pribyl, 259 F.3d 587 (7th Cir. 2001). This proposition is
exemplified in the present case. While evidence of von Pein's
alleged misconduct that was not known to Hedstrom at the time of
firing is not relevant in proving that von Pein was fired "for
cause" under the terms of the Severance Agreement, it is relevant
to facts at issue regarding Hedstrom's counterclaim for breach of
the duty of loyalty. Under Illinois law, corporate officers "owe a duty of loyalty
to their corporate employer not to (1) actively exploit their
positions within the corporation for their own personal benefit,
or (2) hinder the ability of a corporation to continue the
business for which it was developed." Veco Corporation v.
Babcock, 611 N.E.2d 1054, 1059 (Ill.App. Ct. 1993). The cause
of action is not dependent upon an employee being terminated, or
when a termination decision was made. The timing component only
becomes operative in the application of the after-acquired
This decision does not disturb the law of the case, as it is
consistent with our previous ruling that after-acquired evidence
pertaining to von Pein's termination will not be considered in
determining a "for cause" termination. This evidence however, is
in fact relevant when used for the purpose of proving Hedstrom's
counterclaim for breach of the duty of loyalty, an issue which
was not addressed in the summary judgment ruling. Consequently,
von Pein's motion is denied.
Von Pein's second motion seeks to exclude Hedstrom's exhibits
that were disclosed after the close of discovery. Initially, all
discovery was to be completed by October 30, 2003. A signed
stipulation dated October 30, 2003, endorsed by Judge Casey,
extended the discovery cutoff date until November 10, 2003. Von
Pein contends that three Hedstrom exhibits were first mailed to
him after that date (March 5, 2004) and urges us to exclude them from the trial pursuant to
Fed.R. Civ. Proc. 16(f) or 37(b)(2).
Von Pein asserts that he has been prejudiced by Hedstrom's late
discovery as he did not have the opportunity to address these
documents during the time that depositions were conducted of the
various witnesses. Hedstrom counters that the exhibits had just
come to Hedstrom's attention and were served on opposing counsel
as supplements to Hedstrom's Rule 26(a) disclosures. Hedstrom
contends that its discovery of the documents in question after
the close of discovery was in no way negligent nor an attempt to
circumvent the schedule of proceedings.
Federal district courts have wide discretion in determining
discovery sanctions. Maynard v. Nygren, 332 F.3d 462, 467 (7th
Cir. 2003). Moreover, "[t]he choice of an appropriate discovery
sanction is primarily the responsibility of the district court."
Patterson v. Coca-Cola Bottling Co., 852 F.2d 280, 283 (7th
Cir. 1988). While we look unfavorably upon parties who do not
abide by court-imposed deadlines, the present circumstances do
not warrant the harsh remedy von Pein suggests. Von Pein's
assertion that he was prejudiced because he did not have the
opportunity to address the documents in question when he deposed
various unspecified witnesses is unconvincing. At the time of the
disclosure, no trial date had been set. Von Pein did not express
any need for additional discovery precipitated by these late
arrivals. Moreover, counsel for both parties represented that they had
completed discovery in paragraph (2)(j) of the final pretrial
order. Von Pein could have sought a continuance to permit
depositions to be taken regarding these exhibits, under
Fed.R.Civ. P. 56(f), if he had wished to do so. Any prejudice that von
Pein now claims could have been avoided at an earlier stage of
these proceedings. Accordingly, the motion is denied.
Von Pein's third motion seeks to bar seven exhibits that
purportedly contain hearsay. Hedstrom argues that all of the
challenged exhibits are admissible as they fall under the
business records exception contained in Fed.R. Evid. 803(6),
that certain exhibits are not hearsay pursuant to Fed.R. Evid.
801(d)(2)(A), or that the exhibits are also admissible to prove
facts other that the truth of the matters asserted within them.
Crucial to any reasonable analysis of these arguments is the
purpose for which each statement in question is being offered.
This context is absent without the fuller framework of trial.
Thus, the motion is presently denied.
Von Pein's fourth motion seeks to bar two general categories of
evidence as irrelevant and unfairly prejudicial. The first
category encompasses exhibits containing evidence relating to von
Pein's intention to set up a competing business. The second
consists of exhibits containing evidence relating to von Pein's
relationship with an Italian business. Von Pein argues that these
two categories of evidence are not relevant to whether or not von
Pein was terminated "for cause" under the terms of the Severance Agreement or alternatively, that if relevant, the prejudicial
effect of the evidence renders it inadmissible. Hedstrom counters
that the exhibits are relevant to Hedstrom's counterclaim for
breach of fiduciary duty of loyalty. Hedstrom further argues that
an executive's attempts to establish a competing business and the
devotion of his time and energy to another business while working
for his employer are relevant to proving the elements of the
counterclaim. We agree. The evidence is relevant and the
probative value of that evidence is not substantially outweighed
by the danger of unfair prejudice. Specific relevancy objections
can be better addressed and answered in the fuller context of
trial. Accordingly, von Pein's fourth motion in limine is
Based on the foregoing analysis, von Pein's motions in limine