The opinion of the court was delivered by: Judge Amy J. St. Eve
BP AMOCO MOTION IN LIMINE NO. 5 BP AMOCO CHEMICAL COMPANY AND BP CORPORATION NORTH AMERICA INC.'S MOTION IN LIMINE TO EXCLUDE FLINT HILLS RESOURCES LLC'S UNSUPPORTED RULE 1006 SUMMARIES AND RELATED TESTIMONY
FHR has fundamental proof problems with respect to its damages claims for the costs it has incurred and/or in the future allegedly will be required to incur to redress alleged breaches of PSA representations and warranties (hereafter, the "Repair Cost Damage Amounts"). FHR's proposed solution is an attempt to prove Repair Cost Damage Amounts in a "summary" manner that violates basic rules of evidence. Under black letter law, a purported summary under FRE 1006 can be used only if each of the documents underlying the summary is independently admissible. Competent witnesses with personal knowledge must first establish that the underlying documents are in fact admissible and that they are in fact expenditures for Repair Cost Damage Amounts. In other words, a summary of FHR's Repair Cost Damage Amounts cannot be used as a substitute for admissible and competent evidence that there has been a material breach of the relevant PSA representation and warranty, that the Repair Cost Damage Amounts were proximately caused by the alleged breach, that the Repair Cost Damage Amounts were incurred or will be incurred consistent with FHR's contractual obligations to use commercially reasonable efforts to mitigate its losses, that award of the Repair Cost Damage Amounts will not result in an impermissible betterment or windfall for FHR, or other elements of FHR's claims.
BP Amoco understands that FHR intends to call Matthew Daugherty, an accountant, as a witness to put in various "damages" summaries. But Mr. Daugherty has no personal knowledge of the claims at issue in this case, and he lacks the knowledge necessary to testify about and lay the foundation for the underlying documents on which the summaries are purportedly based- e.g., invoices, work orders, purchase orders and other such materials. BP Amoco objects to the admissibility of any such summary evidence and/or testimony by Mr. Daugherty or any other similar "summary" witness unless and until FHR first has established each element of its claims by competent and admissible evidence. The bases for BP Amoco's objections are as follows:
First, FHR is attempting to avoid having to meet its affirmative burden of proof on its damages claims through the use of unsupported "summary" exhibits and witnesses. Second, the purported summaries and any testimony based thereon are inadmissible because they do not satisfy the foundational requirements of Federal Rules of Evidence 1006 and 806(3), and the underlying documents on which they are purportedly based are not themselves admissible (or at least cannot be admitted into evidence based on the testimony of Mr. Daugherty or a similar witness). Third, the summaries and their underlying documents are at least in some instances inadmissible because they were prepared in anticipation of litigation, when FHR had an incentive to maximize its damages and to incorporate costs that are not recoverable damages, and should be excluded from evidence under the rule in Palmer v. Hoffman, 318 U.S. 109, 114 (1943)-a rule followed still today in this and in other Circuits.
Accordingly, for these and the additional reasons discussed below, FHR's purported damages summaries, as well as the witness testimony based upon or related to them, should be barred and excluded from evidence at trial.*fn1 At the very least, FHR should not be permitted to offer such summaries unless and until it first has established the admissibility of each of the underlying documents on which these summaries purportedly are based, and has produced all competent and admissible evidence on the elements of its claims.*fn2
I. FHR CANNOT SATISFY ITS AFFIRMATIVE BURDEN OF PROVING DAMAGES THROUGH ITS PROPOSED RULE 1006 SUMMARIES AND SUMMARY WITNESSES
FHR claims that BP Amoco breached contractual representations and warranties in, and fraudulently induced FHR to enter into, the PSA. FHR has the burden of proof on each of its claims; it must satisfy every element to recover any damages. Rule 1006 document summaries (and witnesses sponsoring and interpreting such summaries) are no substitute for individual and specific proof for each element of FHR's claims. Indeed, FHR's summaries and accompanying testimony are inadmissible and should be barred.
A. FHR Has The Affirmative Burden To Prove The Prima Facie Elements Of Its Damages Case
Whether based in contract or fraud, to recover the Repair Cost Damages Amounts it has summarized for a particular claim, FHR must not only prove liability for that claim, but recoverable damages. Thus, for each of its indemnity claims, FHR must first prove the following elements by a preponderance of the evidence: (i) that the asset at issue was not in the condition as represented on the date of the PSA or the date of closing, Ass'n Benefit Servs., Inc. v. Caremark Rx, Inc., 493 F.3d 841, 849 (7th Cir. 2007); Priebe v. Autobarn, Ltd., 240 F.3d 584, 587 (7th Cir. 2001); (ii) that the condition of the asset was a material breach of the representation at issue, Prima Tek II, L.L.C. v. Klerk's Plastic Indus., B.V., 525 F.3d 533, 538-39 (7th Cir. 2008); Golden v. McDermott, Will & Emery, 299 Ill. App. 3d 982, 990, 702 N.E.2d 581, 587 (Ill. App. Ct. 1998); (iii) that FHR either already has or is required to perform the repairs or replacements necessary to put the asset at issue in the condition represented in the PSA, TAS Distrib. Co. v. Cummins Engine Co., 491 F.3d 625, 635 (7th Cir. 2007); Roboserve, Inc. v. Kato Kagaku Co., 78 F.3d 266, 274 (7th Cir. 1996); (iv) that the asserted breach was the cause-in-fact and proximate cause of any costs FHR incurred or will incur to repair or replace the asset, Tages, M.D. v. Univision Television Group, 2005 WL 2736997, at *2 (N.D. Ill. Oct. 20, 2005); Key v. Jewel Cos., 176 Ill. App. 3d 91, 95-96, 530 N.E.2d 1061, 1063, (Ill. App. Ct. 1988); (v) that the repairs or replacements were necessary and that FHR's expenses to perform them were reasonable and proportionate to, and at a minimum not greater than, the increased value from performing the repairs (Dkt. No. 437 at pp. 15-17*fn3 ; Illinois Pattern Jury Instruction 30.17); (vi) that an award of any Repair Cost Damage Amounts will not result in an impermissible windfall to FHR or betterment, Platinum Tech., Inc. v. Fed. Ins. Co., 282 F.3d 927, 932 (7th Cir. 2002); Kohlmeier v. Shelter Ins. Co., 170 Ill. App. 3d 643, 654-55, 525 N.E. 2d 94, 102-03 (Ill. App. Ct. 1988); and (vii) that the Repair Cost Damages Amounts were, in fact, expended (or will have to be expended) to repair the precise alleged deficiency that predated the signing of the PSA or closing of the sale, TAS, 491 F.3d at 635; Roboserve, 78 F.3d at 274.
For its fraud claims, FHR must prove the foregoing damages elements by clear and convincing evidence. In addition, FHR must also prove that: (i) FHR reasonably relied on the represented condition of the particular asset at issue in deciding to enter into the PSA, Davis v. G.N. Mortgage Corp., 396 F.3d 869, 882 (7th Cir. 2005); Teamsters Local 282 Pension Trust Fund v. Angelos, 649 F. Supp. 1242, 1249 (N.D. Ill. 1986); (ii) FHR did not know the facts or could not have known the facts regarding the deficiency of any asset at issue, Davis, 396 F.3d at 882; Elipas Enters., Inc. v. Silverstein, 243 Ill. App. 3d 230, 236, 612 N.E.2d 9, 13 (Ill. App. Ct. 1993); (iii) BP Amoco knew or believed the representation was false with respect to the asset in question, Tricontinental Indus., Ltd. v. PricewaterhouseCoopers LLP, 475 F.3d 824, 841 (7th Cir. 2007); and (iv) BP Amoco made the representation as to that asset with the intent to induce FHR to enter into the PSA, id.
B. An Unsupported Rule 1006 Summary, And Related Testimony By A Summary Witness Having No Personal Knowledge, Is Inadmissible And Is No Substitute For Affirmative Proof Of Liability, Damages Causation, Damages, And Other Such Merits Issues
Rather than offer the requisite specific proof of damages by a witness with knowledge and who can lay the necessary foundation for the business records exception to the hearsay rule, FHR instead intends to offer summaries purportedly under Federal Rule of Evidence 1006, as well as testimony interpreting these "summaries." Thus, FHR apparently seeks to use summary evidence and witnesses to prove it has been damaged and the amount of that damage. This proposed use is improper.
1. Testimony By Matthew Daugherty Or Others Without Personal Knowledge Cannot Meet FHR's ...