The opinion of the court was delivered by: Judge Amy J. St. Eve
BP AMOCO'S REPLY IN SUPPORT OF ITS MOTION IN LIMINE NO. 5 BP AMOCO CHEMICAL COMPANY AND BP CORPORATION NORTH AMERICA INC.'S REPLY IN SUPPORT OF THEIR MOTION IN LIMINE TO EXCLUDE FLINT HILLS RESOURCES LLC'S UNSUPPORTED RULE 1006 SUMMARIES AND RELATED TESTIMONY
FHR's response confirms that it intends to circumvent the Rules of Evidence in an attempt to prove its Repair Cost Damage Amounts. Nothing in FHR's response brief establishes that it can lay the required foundation for its purported damages summaries. To the contrary, FHR's response brief shows that it intends to rely on hearsay documents and an individual who lacks the required personal knowledge in an effort to have the summaries admitted. In doing so, FHR seeks to assume away rather than prove critical elements of its damages case, such as that the amounts listed on the spreadsheets are attributable to an alleged breach, that the costs were proximately caused by the alleged breach, that the costs were actually incurred to address the alleged breach in the amount of the summarized costs, that FHR has mitigated its damages and is not seeking a betterment, or the other prerequisites of FHR's damages claims. Based upon FHR's response brief, this motion should be granted for the following reasons:
First, FHR has not shown that either Mr. Daugherty or other unnamed witnesses can lay the proper foundation for the summaries. Mr. Daugherty lacks knowledge of FHR's claims as well as the underlying documents. For example, he does not know why any specific payment was associated with a particular claim. And he was not even at FHR for half of the time period at issue. Similarly, FHR does not make any effort to show that its unnamed employees can provide the required foundation for the damages summaries-i.e., that they have personal knowledge, that the documents satisfy the business records requirements, that they are not inadmissible hearsay, and the other foundational requirements.
Second, for a summary to be admissible, each underlying document must be admissible. The summaries here depend on third-party invoices and other documents which are inadmissible hearsay and, in various cases, multiple hearsay. FHR attempts to fit these documents into the business records exception, but has not shown (and cannot show) that the documents satisfy the Seventh Circuit's precise requirements for a third-party document to fall under an exception to the hearsay rule.
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. Indeed, FHR set up particular "cost collectors" for each of its claims, to which it could add costs. Other courts within this district have excluded similar summaries from evidence under the rule in Palmer v. Hoffman, 318 U.S. 109, 113-14 (1943).
FHR has the burden of establishing the admissibility of its summaries. It cannot do so, and its response brief confirms that it does not intend to do so. Because FHR's damages summaries are inadmissible multiple hearsay documents, they should not be admitted at trial.
I. FHR'S WITNESSES CANNOT LAY THE NECESSARY FOUNDATION TO ADMIT THE PURPORTED COST SPREADSHEETS
FHR does not dispute that the proponent of a summary must establish the admissibility of each underlying document. See Needham v. White Labs., Inc., 639 F.2d 394, 403 (7th Cir. 1981) (proponent of summary must establish admissibility of all underlying documents); Judson Atkinson Candies, Inc., v. Latini-Hohberger Dhimantec, 529 F.3d 371, 382 (7th Cir. 2008) (excluding 1006 summary because proponent did not "establish the admissibility of the records on which the summaries were allegedly based," noting that "[t]he admission of a summary under Fed. R. Evid. 1006 requires 'a proper foundation as to the admissibility of the material that is summarized and . [a showing] that the summary is accurate'"). "A witness may not testify to a matter unless evidence is introduced sufficient to support a finding that the witness has personal knowledge of the matter." Fed. R. Evid. 602; see also Kaczmarek v. Allied Chem. Corp., 836 F.2d 1055, 1060-61 (7th Cir. 1987); Schultz v. Thomas, 832 F.2d 108, 111 (7th Cir. 1987). Accordingly, the sponsor of a Rule 1006 summary must have personal knowledge of the underlying documents being summarized, their preparation, and the events described therein unless another witness has already testified to such matters and established the admissibility of and an appropriate evidentiary foundation for each of the underlying documents. See In re S.N.A. Nut Co., 210 B.R. 140, 145-46 (Bankr. N.D. Ill. 1997) (summary exhibit was inadmissible where proponent of summary "had no personal knowledge as to the accuracy of any of the figures contained in" the summary and had no "actual knowledge of the data preparation"); Auto Indus. Supplier Employee Stock Ownership Plan (ESOP) v. Snapp Sys., Inc., 2008 WL 5383372, at *5-6 (E.D. Mich. Dec. 23, 2008) (excluding a summary witness who had no knowledge of the information contained in the summaries and underlying documents, noting that the "summary witness must also be able to 'identify the source of all the information on the chart' and 'explain how all of the dollar figures were derived'") (citing United States v. Lemire, 720 F.2d 1327, 1349 (D.C. Cir. 1983).*fn1
FHR attempts to narrowly describe and limit the scope of Mr. Daugherty's anticipated trial testimony, but FHR cannot escape that it intends to have Mr. Daugherty testify about subjects that are outside of his personal knowledge. Indeed, that is precisely how FHR used Mr. Daugherty in opposition to BP Amoco's summary judgment motions (to which BP Amoco objected at that time). (Dkt. No. 267, e.g. Ex. 79, 256, 272, 280, 291, 298, Daugherty Verifications; Dkt. No. 322, Ex. 13, Daugherty Affidavit; Dkt No. 297, BP Amoco's Response to FHR's Statement of Additional Facts regarding Condition of Assets Partial Summary Judgment Motion e.g. ¶¶ 16, 20, 30, 32, 38, 40 (objecting to Mr. Daugherty's affidavit for lack of personal knowledge and lack of a showing that the summarized materials were authentic and admissible); Dkt No. 353, BP Amoco's Response to FHR's Statement of Additional Facts regarding Damages Partial Summary Judgment Motion ¶¶ 54 (same)) Moreover, while FHR claims Mr. Daugherty will not testify about liability, but "only to establish the amount of its Cost of Repair Expenditures for each claim" (FHR Resp. at 6), that does not solve the problem. Why? Because for FHR through Mr. Daugherty to "establish the amount of its Cost of Repair Expenditures for each claim" requires knowledge of, among other things, whether the costs were associated with a particular claim, whether those costs were proximately caused by a breach, whether the costs were actually incurred for the fixing or repairing of the equipment to cure the alleged breach, whether FHR properly mitigated its claims and is not seeking a betterment, and the other required elements. (BP Amoco Mot. at 3-4)
Knowledge of these issues is particularly important here because, as explained by BP Amoco's damages expert Craig Elson, the documents underlying FHR's cost spreadsheets frequently do not support the damages FHR now claims. (BP Amoco Mot. at 6-7; Ex. 4, Elson Expert Report, Apps. A-R) Moreover, FHR's statement regarding Mr. Elson's opinion is incorrect. (FHR Resp. at 7-8) Mr. Elson challenges the accuracy of the spreadsheets, and in particular how FHR is relying on unsupported costs, costs that are not associated with the claims, and costs for improvements or routine maintenance activities. Thus, Mr. Elson plainly challenges "the reliability of the Spending Spreadsheets." (Id. at 7-8) Indeed, Mr. Elson's testimony about the inaccuracies and errors in the underlying documents the spreadsheets at issue purport to summarize stands unrebutted, and alone establishes that FHR cannot satisfy the requirements of Rule 1006. Significantly, FHR has no witness who did what Mr. Elson did (examine the underlying documents), and who can testify that the summaries are accurate. These facts alone should end the discussion about the admissibility of the summaries regardless of the lack of foundation and hearsay problems. Mr. Daugherty does not have knowledge of these crucial issues that would need to be established for FHR's Repair Cost Damage Amounts.
Mr. Daugherty has admitted repeatedly that other employees - not him - are the persons who decided whether any particular third-party invoice or other underlying document should be associated with a claim, that the costs were reasonable and necessary, that the costs were proximately caused by a contract breach, and the other facts needed to establish the elements of a damages claim. (Ex. 3, 2/18/09 Affidavit of M. Daugherty ("2/18/09 Daugherty Aff.") ¶¶ 6-8; Ex. 6, 7/1/09 Affidavit of M. Daugherty ("7/1/09 Daugherty Aff.") ¶¶ 6, 8, 10; FHR Resp. Ex. 2 ¶¶ 6, 8, 10; Ex. 5, 30(b)(6) Deposition of Daugherty ("Daugherty Dep.") at 73:1-74:18, 82:24-83:18; 90:18-91:14) For example, Mr. Daugherty does not know why a specific cost was associated with a particular claim, whether that cost was reasonable and necessary, and the other requirements for establishing damages. Thus, he cannot "establish the amount of its Cost of Repair Expenditures for each claim" or the amount of damages FHR seeks for each claim.
FHR also makes sweeping, unsupported statements about Mr. Daugherty's knowledge. In particular, FHR asserts that Mr. Daugherty has "personal knowledge regarding the documents being summarized . and personal knowledge regarding the manner in which the spending amounts were derived," citing to Mr. Daugherty's July 9, 2009 affidavit. (FHR Resp. at 6-7) While Mr. Daugherty in this new affidavit does purport to have additional knowledge- knowledge that was not set forth in his February 18, 2009 affidavit or even the July 1, 2009 affidavit Mr. Daugherty submitted just a couple of weeks ago-the affidavit does not support either of FHR's assertions. Mr. Daugherty does not claim to have any personal knowledge of the documents being summarized or knowledge regarding the manner in which the spending amounts were derived. (FHR Resp. Ex. 2) Instead, consistent with his prior affidavits, Mr. Daugherty states that other individuals at the Joliet Plant dealt with the invoices and other documents and decided whether to associate a particular document with a particular claim. (Id. ¶¶ 6, 8, 10) Similarly, Mr. Daugherty testified in his deposition that other individuals at the Plant were responsible for handling invoices, works orders, or purchase orders: "Each work order and project is tied to a cost center as well, or each work order is tied to a cost center as well. . But the cost center is defined typically by the individuals at the plant with knowledge that are requesting that material or service." (Ex. 5, Daugherty Dep. at 73:1-74:18, see also id. at 82:24-83:18; 90:18-91:14) And, of course, Mr. Daugherty could not possibly have personal knowledge of documents and events before January, 2006, when he took his job-even though the damages summaries start with documents allegedly from 2005 and 2004. (Ex. 7, 9/23/08 Personal Deposition of Matthew Daugherty at 11:2-20)
Moreover, despite FHR's efforts to distinguish the cases cited in BP Amoco's motion on this issue, those cases are directly on point. As explained above, Mr. Daugherty does not have knowledge of the underlying documents on which the summaries are based. As in the cases cited by BP Amoco, FHR has not demonstrated that it can place on the stand a proponent who can meet the foundational requirements of Rule 1006, including the foundational requirements as to each of the underlying documents. See In re S.N.A. Nut Co., 210 B.R. at 145-46 (like Mr. Daugherty, purported summary witnesses were not employed by proponent of summary exhibits when many of the underlying documents were created; and purported summary witness could not testify independently as to the accuracy of the data underlying the summary, notwithstanding the fact that the witness may have been the person who "extracted the appropriate information from the files and business records" to create the summary); Snapp Sys., 2008 WL 5383372, at *5-8 (like Mr. Daugherty, purported summary witnesses were "not involved in the day-to-day operations" of the proponent when the underlying documents were created; purported summary witness "did not create the underlying documents;" purported witness was "not the custodian of the documents;" and importantly, the documents underlying the summary that allegedly supported the damages claim date back prior to the employment of the witness and "involve issues in which [the witness] had no direct involvement"); Peat, Inc. v. Vanguard Research, Inc., 378 F.3d 1154, 1160 (11th Cir. 2004) (like FHR's purported summaries, foundational requirements of Rule 1006 were not met because underlying documents contained hearsay assertions, self-serving documents prepared after the commencement of the litigation, and all this notwithstanding fact that the proffering witness created the summary); Paddack v. Dave Christensen, Inc., 745 F.2d 1254, 1260-61 (9th Cir. 1984) (like Mr. Daugherty, the accountant-witness was ...