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Koch Foods, Inc. v. Pate Dawson Co., Inc.

United States District Court, S.D. Mississippi, Northern Division

January 31, 2018

KOCH FOODS, INC. PLAINTIFF
v.
PATE DAWSON COMPANY, INC., et al. DEFENDANTS

          OPINION AND ORDER

          DAVID BRAMLETTE UNITED STATES DISTRICT JUDGE.

         This cause is before the Court on a motion in limine [Doc. 106] filed by defendants Malcolm Sullivan, Micah Sullivan, and Mike Pate, Jr. (collectively, “Defendants”) and a motion in limine [Doc. 109] filed by Plaintiff Koch Foods, Inc. (“Koch”). Having considered the motions, responses, and applicable statutory and case law, and being otherwise fully informed in the premises, the Court finds as follows:

         I. BACKGROUND

         At what point was the Pate Dawson Company no longer prosecuting its business in good faith? That is the critical question for trial. And it is the question upon which other questions depend -- when a fiduciary duty arose and whether it was breached.

         But it is also a question upon which Koch's theories of liability must stand or fall. Koch's claims for constructive fraud, unfair and deceptive trade practices, and conspiracy each depend in some measure on whether the Pate Dawson Company was prosecuting its business in good faith at the time it placed the disputed orders with Koch.

         The Court's evidentiary rulings should reflect the salience of the fiduciary duty question. Any argument or testimony speaking to that question -- and the underlying fact issue of when the Pate Dawson Company was no longer prosecuting its business in good faith -- is highly relevant.

         II. DISCUSSION

         The Court's trial management authority includes the power to issue pre-trial rulings on the admissibility of evidence. Luce v. United States, 8');">469 U.S. 38, 41 n. 4 (1984). And the Court has “wide discretion in determining the admissibility of evidence under the Federal Rules.” Sprint/United Mgmt. Co. v. Mendelsohn, 2 U.S. 379');">552 U.S. 379, 384 (2008) (internal citation and quotation marks omitted).

         A. Defendants' Motion in Limine

         Defendants ask the Court to exclude (1) “any argument or suggestion” of a “relationship of trust and confidence” between Koch and the Pate Dawson Company; (2) any “evidence or argument” that the Pate Dawson Company had lost its senior lender, PNC Bank, when it placed the disputed orders with Koch; and (3) two waiver-of-default letters from PNC Bank. [Doc. 106]

         The basis for Defendants' request is Federal Rule of Evidence 403.[1] Defendants surmise that introducing this evidence would unfairly prejudice them and confuse the jury. The Court addresses each evidentiary topic in turn.

         1). Fiduciary-Type Relationship

         Defendants contend that any “argument or suggestion” of a “relationship of trust and confidence” between the Pate Dawson Company and Koch would unfairly prejudice Defendants because the Pate Dawson Company and Koch were sophisticated businesses with an open-account-type relationship.

         For starters, it is not clear what relief, exactly, Defendants seek. On the one hand, Defendants ask the Court to forbid Koch from arguing or suggesting that a fiduciary-type relationship existed, but on the other, Defendants appear to take issue only with the “use of . . . terms” such as holding funds “in trust” or “earmark[ing]” funds. [Doc. 106, ¶1]

         Prohibiting Koch from arguing that the relationship between the Pate Dawson Company and Koch was fiduciary in nature would be tantamount to a summary judgment disposing of Koch's breach of fiduciary duty and constructive fraud claims. The Court has denied Defendants' summary judgment motion and also denies this repurposed motion for summary judgment masquerading as a motion in limine.

         Koch's use of the specific terms “in trust” and “earmark” is not a proper target for a motion in limine in this case. Just as Defendants are free to argue that certain payments to creditors were made in the “ordinary course, ” see § II(B)(3) infra, Koch is free to argue that the money the Pate Dawson Company received from Bojangles was “earmarked” for Koch.

         The Court therefore DENIES Defendants' motion in limine to prohibit Koch from arguing or suggesting that a relationship of trust or confidence existed between the parties.

         2). PNC Bank's Non-Renewal of the Pate Dawson Company's Line of Credit

         Defendants ask the Court to exclude “any evidence or argument” that the Pate Dawson Company had “lost” or was “in default with” its senior lender, PNC Bank, at the time it placed the disputed orders with Koch. This loss-of-senior-lender argument would mislead and confuse the jury, Defendants submit, because the argument is untethered to the evidence.

         It is undisputed that in September 2015 PNC Bank informed the Pate Dawson Company that its line of credit would not be renewed. What is disputed is how PNC Bank's non-renewal should be characterized. Koch insists that PNC Bank's non-renewal equates to a “loss” of the Pate Dawson Company's senior lender. And Defendants rejoin that because PNC Bank continued to support the Pate Dawson Company ...


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