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United States of America, For the Use and Benefit of Pileco, Inc v. Slurry Systems

May 3, 2013

UNITED STATES OF AMERICA, FOR THE USE AND BENEFIT OF PILECO, INC., PLAINTIFF,
v.
SLURRY SYSTEMS, INC. AND FIDELITY AND DEPOSIT INSURANCE COMPANY OF MARYLAND, DEFENDANTS.
SLURRY SYSTEMS, INC., THIRD PARTY PLAINTIFF
v.
BAUER MASCHINEN GMBH, THIRD PARTY DEFENDANT.



The opinion of the court was delivered by: Magistrate Judge Arlander Keys

MEMORANDUM OPINION AND ORDER

In this lawsuit, Pileco, Inc. has sued Slurry Systems, Inc. ("SSI") and its surety, Fidelity and Deposit Company of Maryland ("F&D"), seeking to recover money allegedly owed on a contract executed in connection with a reservoir project undertaken by the Army Corps of Engineers in Willow Springs, Illinois. In its complaint, Pileco alleged two counts: count one, asserted under the Miller Act, seeks payment on a payment bond, issued by F&D, in connection with the project; and count two alleges breach of contract and seeks monetary damages in excess of $4 million from SSI. SSI answered the complaint, and, along with its answer, filed a counterclaim against Bauer Maschinen and Pileco, alleging that, in connection with the reservoir project, it subcontracted with Pileco and Bauer to provide certain equipment necessary to the job, that the equipment never worked properly, that Pileco and Bauer breached their agreement with SSI, and that SSI paid Pileco all that it was due under the contract.

The case is set for trial on May 13, 2013, and, in preparation for trial, both sides have filed motions in limine. The purpose of this memorandum opinion and order is to rule on those motions to the extent possible.

Discussion "A motion in limine is a motion 'at the outset' or one made 'preliminarily.'" Ellis v. Country Club Hills, No. 06 C 1895, 2011 WL 6001148, at *1 (N.D. Ill. Dec. 1, 2011)(quoting BLACK'S LAW DICTIONARY 803 (8th ed. 2004). "Motions in limine may be used to eliminate evidence 'that clearly ought not be presented to the jury because [it] clearly would be inadmissible for any purpose.'" Id. (quoting Jonasson v. Lutheran Child & Family Svcs., 115 F.3d 436, 440 (7th Cir. 1997). "The party seeking to exclude evidence has the burden of demonstrating that the evidence would be inadmissible for any purpose." Id. (citing Robenhorst v. Dematic Corp., No. 05 C 3192, 2008 WL 1766525, at *2 (N.D. Ill. Apr. 14, 2008)).

Together, the parties have filed 13 motions in limine. Pileco and Bauer jointly filed eight motions: motion number 1 seeks to preclude the introduction of evidence or testimony relating to production estimates, budgets, schedules or other recommendations suggested by Pileco and Bauer that are not part of the contract between the parties; number 2 seeks to bar any testimony or documents making any reference to any of SSI's pre-contract complaints; number 3 seeks to bar evidence of problems with other cutter operations; number 4 seeks to bar any reference to SSI's claim that the cutter experienced 120.85 days of downtime; number 5 seeks to bifurcate the liability and damages portions of SSI's Second Amended Counterclaim and Third Party Complaint; number 6 seeks to bar evidence of settlement negotiations; number 7 seeks to compel SSI to elect its remedy; and number 8 seeks to bar "new witnesses."

SSI filed five motions: motion number 1 seeks to bar mention of any other claims on the bond and other disputes involving SSI; motion number 2 seeks to bar Pileco from seeking damages for the off-hire report and Junker report; motion number 3 seeks to exclude the testimony and opinions of Craig Clarke; motion number 4 seeks to bar portions of Johann Burger's testimony; and motion number 5 seeks to bar any testimony or evidence relating to any evaluations of the project performed by the Army Corps of Engineers. The Court considers each motion below.

A. Pileco/Bauer's Motions in Limine

(1) Motion No. 1:Production Estimates, Budgets and Schedules In their first motion in limine, Pileco and Bauer argue that, under the law of the case doctrine, SSI should be barred from introducing any evidence concerning production estimates, budgets, schedules or other recommendations provided by Pileco and Bauer to SSI during the bidding phase of the McCook Reservoir project, but not made part of the contract between the parties. More specifically, Pileco and Bauer argue that this evidence should be precluded consistent with Judge Guzman's order dismissing SSI's negligent misrepresentation claim. But this evidence is also relevant to SSI's breach of contract and breach of warranty claims. SSI alleges that it relied on this evidence when submitting its bid on the project, and, in ruling on summary judgment, this Court recognized the significant role Bauer played in that whole process. The motion is denied.

(2) Motion No. 2: Pre-Contract Complaints Next, Pileco and Bauer seek to bar any testimony or documents referencing complaints or issues raised by SSI prior to the execution of the contract. According to SSI's counterclaim, SSI engaged in conversations with Pileco and Bauer prior to submitting its bid; it arranged for the delivery of the cutter and began a test section; and experienced problems with the cutter from the very beginning. The parties discussed and worked out some of the issues, then executed a rental agreement that reflected the changes made as a result of those discussions. Pileco and Bauer seem to be arguing that the issues and discussions that occurred prior to the execution of the rental agreement are inadmissible and irrelevant. Given the history of the parties' dealings, the relevance of these discussions can hardly be questioned. And there is no evidence to show that SSI somehow waived its right to proceed on those earlier issues. Accordingly, this motion is denied.

(3) Motion No. 3: Complaints by Other Customers Next, Pileco and Bauer seek to bar any evidence concerning complaints made by other cutter owners or lessees. This evidence is relevant -- indeed, crucial, to SSI's Illinois Consumer Fraud Act claim. In that claim, SSI alleges that Pileco and Bauer knew the cutter was experiencing problems in the field because of reports coming from other customers; yet, they did not advise SSI of those reports and instead opted to blame SSI and other issues for the problems, even as they were working on redesigns to fix the very problems SSI was experiencing. Evidence of other reports from other customers -- if they are the same or similar to those raised by SSI -- are relevant to this claim, so long as they were made during the relevant timeframe (roughly October 2006 through January 2009).

(4) Motion No. 4: Cutter Downtime Next, Pileco and Bauer seek to preclude any reference to the fact that the cutter was "down" for 120.85 days or that SSI was entitled to an equitable adjustment to the rent for the period of down time. During summary judgment, Pileco and Bauer conceded that the cutter was "down" for 120.85 days. But, for purposes of trial, they intend to hold SSI to its burden of proving that all of that down time is the fault of Pileco or Bauer. It is Pileco and Bauer's prerogative to hold SSI to its burden of proving this issue, and, indeed, SSI does not oppose the motion. Accordingly, the motion is granted.

(5) Motion No. 5: Bifurcation Next, Pileco and Bauer ask the Court to bifurcate the liability and damages portions of SSI's case. The motion is denied. Pileco and Bauer argue that bifurcation would serve the interests of judicial economy and avoid prejudice to the parties. The Court disagrees. Issues concerning damages and liability are inextricably linked in this case, given the circumstances of the parties' contractual dealings and the evolution of their contractual relationship. It is true, as Pileco and Bauer assert, that, if liability is not established, the jury need never consider the question of damages. But that is true in most cases. There is nothing unduly complicated about the damages aspect of this case, and the Court sees no reason to separate the liability and damages issues.

(6) Motion No. 6: Settlement Negotiations In their sixth motion in limine, Pileco and Bauer seek to exclude all evidence relating to the attempted settlement of these disputes. Federal Rule of Evidence 408 provides that [e]vidence of the following is not admissible -- on behalf of any party -- either to prove or disprove the validity or amount of a disputed claim or to impeach by a prior inconsistent statement or a contradiction:

(1) furnishing, promising, or offering -- or accepting, promising to accept, or offering to accept -- a valuable consideration in compromising or attempting to compromise the claim; and

(2) conduct or a statement made during compromise negotiations about the claim . . . .

The Rule does, however, allow the court to admit such evidence for another purpose, such as proving a witness' bias or prejudice. Id.

Pileco and Bauer seek to invoke the rule to prevent SSI from offering evidence concerning additional negotiations that may or may not have culminated in additional contract terms, and contract terms that may or may not have been ultimately agreed to by the parties. SSI argues that this evidence is admissible to prove SSI's claims, that Pileco and Bauer are estopped from denying the settlement terms they negotiated, and that it is entitled to a declaratory judgment that the agreement reached by the parties is binding and enforceable.

The record on summary judgment included evidence reflecting post-contract discussions by the parties concerning settlement and their attempts to revise the terms of their deal to bring the matter to a close. This evidence, the Court held, precluded summary judgment in Pileco's favor on its breach of contract claim. At the same time, the Court recognized that this evidence would support some of SSI's claims, though there too summary judgment was inappropriate given the many issues of fact. To be sure, this evidence is relevant -- not to prove or disprove the validity or amount of SSI's claims, but to establish the precise terms of the contractual relationship in an effort to ascertain whether either side, in fact, breached. Rule 408 does not preclude the admission of this evidence for this purpose, and Pileco/Bauer's motion in limine is denied.

(7) Motion No. 7: Election of Remedy In their seventh motion in limine, Pileco and Bauer seek an order requiring SSI to elect its remedy and barring any evidence to the effect that Pileco/Bauer's breaches of the subcontract vitiated SSI's obligation to perform under the rental agreement. Based upon the evidence submitted on summary judgment, the Court recognizes that the contractual relationship between these parties is complicated. Though the initial contract terms may have seemed clear, additional terms were reached and concessions were made to address equipment problems and other issues. At some point, it appears that SSI's obligation to make payments under the rental agreement was excused and the subject of an equitable adjustment was introduced. In response to the motion, SSI has indicated that it agrees that its obligation to pay rent was not vitiated because of any breach by Pileco or Bauer. And, to the extent Pileco/Bauer's motion seeks to bar evidence showing otherwise, the motion is granted. But the Court will allow SSI to offer evidence concerning the effect of the equitable adjustment on its obligation to pay under the agreement.

(8) Motion No. 8: Newly Disclosed Witnesses Finally, Pileco and Bauer have moved in limine to bar any witnesses disclosed by SSI for the first time in its Supplemental Rule 26 disclosures, filed on March 22, 2013. In particular, Pileco and Bauer argue that Regina Blair, Michael Flecker and Jim Pipkorn -- all listed in the Final Pretrial Order as SSI's "may call" witnesses -- should be precluded from testifying because SSI never identified them in its Rule 26 disclosures.*fn1 "Never" is inaccurate -- in fact, Pileco and Bauer concede that SSI disclosed these witnesses on ...


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