FERRIS D. LEBOUS, J.
Petitioner, Union Endicott Central School District, commenced this Article 78 proceeding for a writ of prohibition to prohibit respondent, New York State Division of Human Rights, from conducting an investigation and/or hearing into a complaint made by Sylvia R. Malvasio o/b/o S.M., a minor child against petitioner. Petitioner argues that the respondent, New York State Division of Human Rights, has no jurisdiction with respect to this matter on the grounds that petitioner is not an education corporation or association as those terms are defined in Human Rights Law § 296 (4). Respondent, the State Division of Human Rights, opposes the application.
On May 28, 2010, this court held a telephone conference with counsel and thereafter issued an Order to Show Cause with a temporary restraint preventing respondent from proceeding with the underlying complaint. This matter was deemed submitted as of the return date of June 25, 2010.
BACKGROUND
Respondent Malvasio filed a complaint with the State Division of Human Rights (hereinafter "SDHR") alleging petitioner Union Endicott Central School District (hereinafter "School District") violated the Human Rights Law by failing to take appropriate action after her daughter, an African-American student at Union Endicott High School, was assaulted by a white student.
The School District seeks to prohibit SDHR from conducting an investigation and hearing into said complaint, as well as for dismissal of the Malvasio complaint on the grounds that SDHR is without jurisdiction to proceed.
In opposition, respondent SDHR argues that the petition must be dismissed due to petitioner's failure to have exhausted its administrative remedies. Stated another way, SDHR argues that whether the School District is subject to SDHR's authority is a matter of fact to be determined by SDHR in the first instance and that such issue may be raised in the hearing by petitioner and that SDHR's decision on such issue would be eventually subject to an Article 78 review after a hearing.
In reply, petitioner argues that it will suffer extreme prejudice by way of the costs associated in having to respond to any SDHR investigation and hearing preparation.
DISCUSSION
The Court of Appeals has described a writ of prohibition as an extraordinary remedy available only "[t]o prevent or control a body or officer acting in a judicial or quasi-judicial capacity from proceeding or threatening to proceed without or in excess of its jurisdiction [citations omitted] and then only when the clear legal right to relief appears and, in the court's discretion, the remedy is warranted [citations omitted]" ( Schumer v Holtzman, 60 NY2d 46, 51; CPLR § 7803). In other words, a writ of prohibition prevents the exercise of jurisdiction in the absence of subject matter jurisdiction. It is well-settled that the writ is not available to correct common procedural or substantive errors and will not lie where its proponent has access to another adequate legal remedy ( Matter of Town of Huntington v New York State Div. of Human Rights, 82 NY2d 783, 786). A court should exercise its discretion in determining whether a writ should be granted based on such factors as the gravity of the potential harm caused by the threatened excess of power and whether other proceedings could correct the flaw ( Id.). The Court of Appeals has stated that a writ of prohibition is not available to stop SDHR from conducting an investigation because the "[r]emedy for asserted error of law in the exercise of that jurisdiction or authority lies first in administrative review and following exhaustion of that remedy in subsequent judicial review pursuant to section 298 of the Executive Law ( Matter of Tessy Plastics Corp. v State Div. of Human Rights, 47 NY2d 789, 791). Moreover, "[a] challenge to a nonfinal order of SDHR is not available unless there is a showing of `futility of the administrative remedy; irreparable harm in the absence of prompt judicial intervention; or a claim of unconstitutional action' [citations omitted]" ( Matter of Newfield Cent. School Dist. v New York State Div. of Human Rights , 66 AD3d 1314, 1316 [3rd Dept 2009]).
Here, the parties are debating the applicability of Executive law § 296 (4) which states, in pertinent part, as follows:
[i]t shall be an unlawful discriminatory practice for
an education corporation or association which holds itself out to the public to be non-sectarian and exempt from taxation pursuant of the provisions of article four of the real property tax law to deny the use of its facilities to anyone person otherwise qualified, or to permit the harassment of any student or applicant, by reason of his . . . sex. . . .
(Emphasis added).
Petitioner School District argues it is not an education corporation or association under Executive Law § 296 (4) meaning that SDHR does not have jurisdiction to proceed against public school districts as concerns students. To the contrary, SDHR argues that it has subject matter jurisdiction over complaints alleging discrimination against public school students or, at the least, the jurisdiction to make that determination in the first instance.
It is well-settled that SDHR was created by statute to hear and determine allegations of unlawful discriminatory practices defined in New York's Executive Law § 296-a. Moreover, SDHR, like any court or body, whether of limited or unlimited jurisdiction, has the initial jurisdiction to make a determination whether a request for relief made to it falls within its jurisdictional ambit. In making that initial determination, SDHR must "[d]etermine whether it has jurisdiction and, if so, whether there is probable cause to believe that the person named in the complaint . . . has engaged or is engaging in an unlawfully discriminatory practice" (Executive Law § 297).
The parties argue the applicability or lack thereof of several cases including Matter of East Meadow Union Free School Dist. v New York State Div. of Human Rights , 65 AD3d 1342 [2nd Dept 2009], lv denied 14 NY3d 710; Matter of Newfield Cent. School Dist. v New York State Div. of Human Rights , 66 AD3d 1314 [3rd Dept 2009]; and Matter of the Application of North Syracuse Central School District, Index No. 2009-7473, Hon. Brian F. DeJoseph, December 8, 2009.
In East Meadow, the Second Department found that a school district is not an "`[e]ducation corporation or association' within the meaning of Executive Law § 296 (4)" ( East Meadow, 65 AD2d at 1344). By way of background, in East Meadow, SDHR had found probable cause warranting a public hearing relative to a complaint that a school district did not have a service dog policy. In a related matter, the district court denied a request for a preliminary injunction, and the school district filed an Article 78 challenge to SDHR's denial of reconsideration of its probable cause finding. Upon review, the Second Department granted the petition finding that the school district was neither an education corporation or association within the meaning of Executive Law § 296 (4).
One month later, the Third Department issued Matter of Newfield Cent. School Dist. v New York State Div. of Human Rights , 66 AD3d 1314 (3rd Dept 2009), which involved allegations of gender discrimination by a school district in the discipline of male students following an altercation on a school bus. SDHR undertook an investigation of the complaint despite the school district's refusal to cooperate. SDHR issued an initial determination that it had jurisdiction to conduct the investigations and that probable cause existed regarding a violation of the Human Rights Law. The school district commenced an Article 78 proceeding to attack SDHR's finding of jurisdiction and sought a writ of prohibition preventing SDHR from conducting hearings. The Third Department found that the School District had not exhausted its administrative remedies and should assert its jurisdictional objections in the context of the administrative proceeding ( Newfield Cent. School Dist., 66 AD3d at 1316). The Third Department also found that the School District had not demonstrated that the exhaustion of the administrative remedies would be a futile exercise or that it would suffer irreparable harm absent court involvement. In sum, the Third Department concluded that "[w]e find no reason to depart with the traditional rules that require a petitioner to exhaust all available administrative remedies before mounting a challenge to a final order from which it is aggrieved" ( Newfield Cent. School Dist, 66 AD3d at 1317). That having been said, however, the Newfield decision contains an intriguing footnote by the Third Department which specifically references the East Meadow case as follows:
[i]t is unclear whether, as a result of that decision, SDHR will take a different position on this issue in the context of the instant proceeding, which further supports the conclusion that the need for the School District to exhaust its administrative remedies is not futile. We note that it is significant that the petitioner in
Matter of East Meadow Union Free School Dist. did not seek to
appeal from an interlocutory decision of SDHR — as is the case herein — but rather commenced an Executive Law § 298 proceeding challenging a final determination of SDHR.
( Newfield Cent. School Dist., 66 AD3d at 1317, n 2).
Next, the parties address the trial court decision from Onondaga Supreme Court in Matter of the Application of North Syracuse Cent. School Dist., Index No. 2009-7473, Hon. Brian F. DeJoseph, December 8, 2009. In North Syracuse, the Hon. Brian F. DeJoseph granted a school district's petition permanently enjoining SDHR from proceeding with a complaint against the district, as well as declaring SDHR to be without jurisdiction, that the exhaustion of administrative remedies would be futile, that the district would suffer irreparable harm in the absence of prompt judicial action, and that SDHR was proceeding beyond its grant of power. In reaching this determination, Justice DeJoseph's bench decision acknowledged the Second Department case of East Meadow and Third Department case of Newfield. Justice DeJoseph stated that he expressly declined to follow the Third Department's holding in Newfield, but rather the Second Department's conclusion in East Meadow.
This court has carefully examined the cited case law and the parties' arguments relative thereto. The court finds it is bound by the Third Department's conclusion in Newfield that petitioner's failure to exhaust administrative remedies bars the request for a writ of prohibition. The court further finds that the School District is misreading Newfield or more specifically the footnote contained there. Here, SDHR has not completed its investigation, has not made any determination whether probable cause exists regarding alleged violations of the Human Rights Law, held a hearing, nor made any determination regarding jurisdictional considerations. In the event SDHR does make any perceived adverse findings, then the School District has administrative remedies available under 9 NYCRR § 465 and may present its arguments to the contrary in the context of the administrative hearing with the ability to seek judicial review upon the issuance of a final order.
Nor does the court finds persuasive the School District's contention that it will suffer irreparable harm by way of the costs associated with defending itself at the administrative level. Litigation and/or administrative costs have been found insufficient to justify injunctive relief ( Matter of Hurwitz v New York City Commn. on Human Rights, 142 Misc 2d 214, 219 [New York County 1988], affd 159 AD2d 417 [1st Dept 1990], lv denied 76 NY2d 702). In sum, the court finds the School District has failed to establish that the exhaustion of administrative remedies would be futile, that it would suffer irreparable harm in the absence of prompt judicial action, and that SDHR is proceeding beyond its grant of power. While the court is certainly troubled by the expense in these difficult times that petitioner may well have to incur in the course of SDHR's investigation and hearing, the court is compelled to determine that SDHR itself is the proper forum in which to determine whether petitioner is subject to its authority. This court may not presume that SDHR will not properly determine such issue. In any event, SDHR's determination on the jurisdictional and other issues would be reviewable in a Article 78 review.
CONCLUSION
In view of the foregoing, the petition is dismissed and the temporary restraining order issued on May 28, 2010 is hereby vacated.
This shall constitute the decision, order and judgment of the court.
130 F.3d 568, 571-72 (3d Cir. 1997)). Because GMAC failed to raise ratification in its oral motion, GMAC has waived it right to assert ratification as an affirmative defense now.
Even if GMAC had raised this issue in a timely manner, the theory of ratification does not render the Forbearance Agreement enforceable. A party may ratify a contract if it "accepts the benefits flowing from it, or remains silent, or acquiesces in the contract for any considerable length of time after the party has the opportunity to annul or avoid the contract." Retail Brand Alliance, Inc. v. Rockvale Outlet Ctr., No. 06-1857, 2006 WL 403885, at *6 (E.D. Pa. Jan. 31, 2007) (quoting Wahsner v. Am. Motors Sales Corp., 597 F. Supp. 991, 998 (E.D. Pa. 1984)). The theory of ratification allows a promise to "be enforced even though the underlying contract is voidable" on a basis such as duress or fraud. Jakimas, 485 F.3d at 782; United States v. Baird, 218 F.3d 221, 230-31 (3d Cir. 2000); see also Levin v. Garfinkle, 492 F. Supp. 781, 807 (E.D. Pa. 1980) (holding a contract induced by fraud is voidable, not void, so it may be ratified by the parties). Ratification would only apply here if the Forbearance Agreement was voidable on the basis of duress or fraud. Because the jury found no such duress or fraud, the agreement was not voidable. Therefore, the doctrine of ratification does not apply.
The jury was properly instructed the law of ratification would allow enforcement of a contract executed while a party was under duress. Jury Instruction 11 reads, in relevant part:
Even if you find the Agreement was executed under duress, it may still be valid if you find it was subsequently ratified by Mente. Ratification results if a party who executed a contract under duress accepts the benefits flowing from it, or remains silent, or acquiesces in the contract for any considerable length of time after the party has the opportunity to annul or avoid the contract.
Jury Instructions, at 36.
Instead, the jury found the Forbearance Agreement was unenforceable based on the doctrine of unclean hands. An "unenforceable contract" differs from a "voidable contract." The latter may be adopted by ratification, while the former may not. Restatement (Second) of Contracts § 85, cmt. a (2010). Because any subsequent action by a party does not erase the opposing party's wrongful conduct, the doctrine of unclean hands cannot be defeated by ratification.
This Court next considers the merits of Plaintiffs' breach of contract claim. GMAC first argues the WSA did not contain ambiguous language and GMAC did not breach the plain language of the contract. "A contract is ambiguous if it is reasonably susceptible to different constructions and capable of being understood in more than one sense." Ins. Adjustment Bureau, Inc. v. Allstate Ins. Co., 905 A.2d 462, 468-69 (Pa. 2006). Once a court determines a contract is ambiguous, its meaning may be decided by the jury. Id. at 469. When deciding the parties' intent, "ambiguities are to be construed against . . . the contract drafter." Shovel Transfer Storage v. Pa. Liquor Control Bd., 739 A.2d 113, 139 (Pa. 1999).
In ruling on GMAC's motion for summary judgment, this Court determined the phrase "faithfully and promptly" was ambiguous as used in the WSA and consequently submitted interpretation of this phrase to the jury. At trial, Mente testified that 10-14 days typically passed between the day a customer signed a vehicle sale agreement and the day the customer's bank remitted payment for the purchase. After hearing evidence regarding the parties' 25-year business relationship, during which GMAC had never before demanded same-day payment, the jury found the phrase "faithfully and promptly" did not require immediate repayment on the date of purchase. Thus, the evidence is sufficient to support the jury's determination that GMAC breached its contractual obligation to Plaintiffs when GMAC declared the Chevrolet Dealership out of trust.
GMAC next argues Plaintiffs are not entitled to damages because their damages assessment was too speculative. A court reviewing a jury's verdict "has an obligation to uphold the jury's award if there exists a reasonable basis to do so." Evans v. Port Auth. of N.Y. N.J., 273 F.3d 346, 351 (3d Cir. 2001) (internal punctuation and citations omitted). Pennsylvania contract law permits "some uncertainty in calculating damages," but "the plaintiff must introduce sufficient facts upon which the jury can determine the amount of damages without conjecture." Ware v. Rodale Press, Inc., 322 F.3d 218, 226 (3d Cir. 2003); see also Cohen v. F.D.I.C., No. 91-3944, 2003 WL 21118673, at *6 (E.D. Pa. May 14, 2003) ("Damages are not considered speculative merely because they are not capable of exact calculation.").
Plaintiffs' expert testimony revealed the extent of harm Plaintiffs suffered following GMAC's breach of the WSA. Automotive industry and finance expert Joseph Roesner testified Plaintiffs lost up to $707,000 in car sales and $1.15 million in franchise value when the dealerships were declared out of trust. Real estate expert Thomas Bellairs testified Plaintiffs' properties diminished in value from $5.69 million in 2007 to $2.43 million in August 2009, as a result of the dealerships' closure. Bellairs further testified the dealerships had no value as of the date of trial because of ongoing foreclosure proceedings. Additionally, both Mente and Bellairs explained that, pursuant to the financial assistance provision of their franchise agreement, if GM had shut down the dealerships, GM would have been obligated to pay Plaintiffs a reasonable price for the properties. Based on this testimony and other evidence presented at trial, the jury had sufficient facts from which to award $4 million in damages.
In addition to disputing the amount of damages, GMAC challenges Plaintiffs' entitlement to damages based on diminution of property value, arguing the entities which owned the properties are not parties to the litigation. The Chrysler Dealership and the Big Lot property are owned by Don's Limited Partnership and Don's Second Limited Partnership, respectively. The Chevrolet Dealership is owned by Mente Chevrolet Oldsmobile, Inc. According to partnership documents submitted after trial, Mente holds a 98 % stake in Don's Limited and Don's Second Limited Partnerships. The remaining interest belongs to Don's Corporation, a corporate entity of which Mente is the sole shareholder.
There is no dispute over Plaintiffs' ability to collect property damages for the Chevrolet Dealership because Mente Chevrolet Oldsmobile, Inc. is a plaintiff in this action. A disagreement arose because the testimony regarding diminished property value addressed the combined properties and did not separate the value of each dealership.
Plaintiffs further contend because Mente was the sole owner of the partnerships and the corporation, the diminution in property value resulted in a personal loss. Under Pennsylvania law, however, corporate property belongs to the corporation, and not to the shareholders, even if there is only one shareholder. Official Comm. of Unsecured Creditors v. R.F. Lafferty Co., 267 F.3d 340, 348 (3d Cir. 2001).
Evidence of diminution of property value is relevant to Plaintiffs' damages. Plaintiffs do not seek reimbursement for the diminution, but argue such diminution reveals the extent of the loss of financial assistance from GM. This lost assistance may be awarded to Plaintiffs as consequential damages because the loss was a reasonably foreseeable consequence of, and caused by, GMAC's contractual breach. See Atlantic Paper Box Co. v. Whitman's Chocolates, 844 F. Supp. 1038, 1046 (E.D. Pa. 1994) (citing Hadley v. Baxendale, 9 Ex. 341, 156 Eng. Rep. 145 (1854)) ("[C]onsequential damages . . . stem from losses incurred by the non-breaching party in its dealings, often with third parties, which were a proximate result of the breach, and which were reasonably foreseeable by the breaching party at the time of contracting."). Under the Service and Sales agreement between GM and Plaintiffs, which was introduced into evidence, GM promised to financially assist Plaintiffs if their contract expired or was terminated by GM. The relevant section states:
General Motors will provide assistance on owned Premises by either (a) locating a purchaser who will offer to purchase the Premises at a reasonable price; or (b) locating a lessee who will offer to lease the Premises. If General Motors does not locate a purchaser or lessee within a reasonable period of time, General Motors will itself either purchase or, at its option, lease the Premises for a reasonable term at a reasonable rent . . .
Ex. 99. At trial, Mente explained that if GM or Chrysler wanted to close his franchise, under this provision, "they would pay [the dealer] whatever the going rate was for a lease of a building that size or they would buy it from [the dealer]." Trial Tr., Nov. 9, 2009, at 200. Mente further testified when GM and Chrysler cancelled his franchise in August, they refused to provide him with financial assistance because the dealerships were not operational after July 27, 2009, the date Plaintiffs were forced to shut down the dealerships due to GMAC's actions. Plaintiffs' real estate expert Thomas Bellairs explained the diminution in property value is the best estimate of the amount GM would have provided Plaintiffs under the financial assistance clause as a fair measure of compensation-in this case, $3,259,000. Trial Tr., Nov. 17, 2009, at 56. Because there was sufficient testimony established regarding the use of property value to calculate the estimated loss Plaintiff suffered in the absence of GM's financial assistance, the identity of the property owners does not alter Plaintiffs' entitlement to damages. The evidence supports the jury's award of $4 million to Plaintiffs.
GMAC also argues it is entitled to a new trial under Federal Rule of Civil Procedure 59. GMAC believes it is entitled to a new trial because this Court erred by (1) excluding two GMAC expert witnesses; (2) allowing three of Plaintiffs' experts to testify outside of their respective areas of expertise; (3) excluding from evidence alleged account statements of Plaintiffs, which GMAC would have used to impeach Johnson; (4) including the term "undue influence" in the jury instruction; and (5) allowing the jury to consider unclean hands. "In general, a district court may grant a motion for new trial pursuant to Fed.R.Civ.P. 59 if it determines that the verdict is inconsistent with substantial justice because the verdict is against the weight of the evidence." Younis Bros. Co. v. CIGNA Worldwide Ins. Co., 899 F. Supp. 1385, 1387 (E.D. Pa. 1995). When a party moves for a new trial based on alleged trial error, a court conducts two inquiries: "whether an error was in fact made and whether that error was so prejudicial that refusal to grant the new trial would be `inconsistent with substantial justice.'" Bhaya v. Westinghouse Elec. Corp., 709 F. Supp. 600, 601 (E.D. Pa. 1989); see also McKenna v. City of Philadelphia, No. 07-110, 2008 WL 4450223, at *4 (E.D. Pa. Sept. 30, 2008).
GMAC argues this Court erred by precluding the testimony of its expert witnesses, Paul Quinn and Fred Caruso. Under Federal Rule of Civil Procedure 26(a)(2)(c), parties must disclose expert testimony "at the times and in the sequence that the court orders." When a party fails to make the required expert disclosures, "the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless." Fed.R.Civ.P. 37(c). This Court considers four factors when deciding whether to prohibit evidence: "(1) the prejudice or surprise of the party against whom the excluded evidence would have been admitted; (2) the ability of the party to cure that prejudice; (3) the extent to which allowing the evidence would disrupt the orderly and efficient trial of the case or other cases in the court; and (4) bad faith or wilfulness in failing to comply with a court order or discovery obligation." Nicholas v. Pa. State Univ., 227 F.3d 133, 148 (3d Cir. 2000). A court must also consider the importance of the excluded testimony. Konstantopoulos v. Westvaco Corp., 112 F.3d 710, 719 (3d Cir. 1997).
Both Quinn and Caruso were proffered as "rebuttal" experts, who would have testified to damages. Caruso also would have testified to liability.
On August 21, 2009, this Court ordered both parties to disclose all experts by September 25, 2009. GMAC did not reveal the identity of its expert witnesses, Quinn and Caruso, until its October 30, 2009 Pretrial Motion; nor did GMAC request an extension of the disclosure deadline. Because GMAC did not meet the expert witness disclosure deadline, this Court decided Quinn and Caruso would not be permitted to testify or submit reports. See Order of Nov. 6, 2009.
This Court properly excluded Quinn and Caruso under the factors listed above. First, GMAC revealed the names of these experts on October 30, 2009, less than two weeks before trial. Permitting these experts to testify would have prejudiced Plaintiffs because Plaintiffs had insufficient
time to review the expert reports in preparation for trial. Second, there was little Plaintiffs could do to avoid such prejudice due to this Court's unwillingness to continue the impending trial. Third, allowing these experts to testify would have interfered with trial because Plaintiffs would have required additional trial preparation time. Fourth, GMAC's asserted reason for failing to comply with this Court's schedule is its characterization of Quinn and Caruso as "rebuttal" experts, which it argued were exempt from this Court's deadline. This argument is not supported by law. Furthermore, GMAC's contentious behavior throughout the course of this litigation leads the Court to believe GMAC acted in bad faith by failing to reveal experts Quinn and Caruso until ten days before trial.
Plaintiffs had insufficient time to schedule depositions of both experts before trial. Although Quinn lives close to this District, Caruso works in Chicago, Illinois.
In support of its argument, GMAC cites to Federal Rule of Civil Procedure 26(a)(2)(C), which states, "Absent a stipulation or a court order, [expert witness] disclosure must be made . . . (ii) if the evidence is intended solely to contradict or rebut evidence on the same subject matter identified by another party . . ., within 30 days after the other party's disclosure." Fed R. Civ P. 26(a)(2)(C). GMAC's reliance on this Rule is misplaced because Rule 26 makes clear the thirtyday time limit may be abrogated by a court order. This Court issued an Order requiring identification of all expert witnesses by September 25, 2009. GMAC's choice to construe this Order as inapplicable to two of its expert witnesses was ill-advised and cannot be condoned.
GMAC next argues this Court erred by permitting Plaintiffs' experts Joseph Roesner, Carl Woodwood, and Thomas Bellairs to testify outside their respective areas of expertise. To testify as an expert, a witness must have "`specialized knowledge' regarding the area of testimony." Elock v. K-Mart Corp., 233 F.3d 734, 741 (3d Cir. 2000). Such knowledge may be based on "practical experience as well as academic training and credentials." Waldorf v. Shuta, 142 F.3d 601, 625 (3d Cir. 1998). Rule 702 contains three requirements: "(1) the proffered witness must be an expert, i.e., must be qualified; (2) the expert must testify about matters requiring scientific, technical or specialized knowledge; and (3) the expert's testimony must assist the trier of fact." Pineda v. Ford Motor Co., 520 F.3d 237, 243-44 (3d Cir. 2008). The minimum admissibility requirement is the expert witness must "possess skill or knowledge greater than the average layman." Waldorf, 142 F.3d at 625.
GMAC does not challenge the experts' qualifications in the areas in which they were qualified as experts.
GMAC argues Woodward was not qualified to testify about out of trust dealerships. This Court qualified Woodward as an expert in automotive accounting and practices. At trial, GMAC chose not to make contemporaneous objections during the course of Woodward's testimony, but instead moved to strike the entirety of his testimony after its conclusion. An expert qualified to testify in one area may nonetheless "lack qualifications to testify outside his area of expertise." Calhoun v. Yamaha Motor Corp., 350 F.3d 316, 322 (3d Cir. 2003). When testimony exceeds an expert's area of expertise, the complaining party may submit jury instructions to limit the expert's testimony to its admissible portions. See Gallatin Fuels, Inc. v. Westchester Fire Ins. Co., 410 F. Supp. 2d 417, 422 (W.D. Pa. 2006) (explaining the danger of "prejudice or confusion" caused by admitting opinion testimony can be "cured by an appropriate jury instruction"). Following Woodward's testimony, this Court denied GMAC's motion to strike and found any prejudice resulting from inappropriate testimony could be dealt with by an appropriate jury instruction. GMAC proposed, and this Court read, a limiting jury instruction to strike Woodward's testimony regarding subjective beliefs held by GMAC in relation to Plaintiffs. GMAC did not request an instruction
The limiting instruction stated:
I have ruled that certain testimony by a witness, Carl S. Woodward, exceeded the scope of his expertise and must be stricken from the record. The portion of the testimony I am striking is Mr. Woodward's testimony about any subjective beliefs held by GMAC in relation to the plaintiffs in this case. You must disregard and ignore this portion of the testimony.
Jury Instructions, at 43.
limiting Woodward's testimony regarding out of trust dealerships. Additionally, if GMAC had requested such an instruction, this Court would have denied it because Woodward was qualified as an expert in automotive accounting and out of trust dealerships-essentially, dealerships' default on their automotive loans-are within an automotive accounting expert's area of expertise. Moreover, on cross-examination, GMAC questioned Woodward thoroughly on his knowledge of the term out of trust, providing the jury with a basis to weigh Woodward's testimony in this area.
This Court also issued a general jury instruction on expert witnesses, stating:
The rules of evidence ordinarily do not permit witnesses to testify to opinions or conclusions. An exception to this rule exists for "expert witnesses." An expert witness is a person who, by education and experience has become an expert in some art, science, profession, or calling. Expert witnesses may state their opinions as to matters in which they profess to be expert, and may also state their reasons for their opinions.
You should consider each expert opinion received in evidence in this case, and give it such weight as you think it deserves. If you should decide that the opinion of an expert witness is not based on sufficient education and experience, or if you should conclude that the reasons given in support of the opinion are not sound, or if you feel that it is outweighed by other evidence, you may disregard the opinion entirely.
Jury Instructions, at 42.
Next, GMAC argues this Court erred in allowing Plaintiffs' real estate expert Bellairs to testify in several areas. Bellairs testified he appraised Plaintiffs' properties as worth $2.431 million in August 2009. Comparing this number to a 2007 appraisal, showing the properties were worth $5.69 million, Bellairs concluded the property values dropped $3.259 million from 2007 to 2009. GMAC does not dispute Bellairs's methodology, but claims his testimony was outside the scope of his expertise because the property included a car dealership and Bellairs was not qualified to appraise dealerships. GMAC also argues this Court erred in allowing Bellairs to testify Plaintiffs would have received $3.359 from GM as per the financial assistance provision of their contract. On crossexamination, Bellairs admitted discussion of the dealer service relationship was outside the scope of his expertise. As such, the jury was equipped to weigh the credibility of his testimony in this area. GMAC contemporaneously moved to strike parts of Bellairs's testimony, but this Court denied GMAC's motion, stating the objection related to the weight of testimony and not its admissibility. GMAC did not propose a limiting jury instruction for Bellairs. Moreover, Bellairs testimony did not prejudice GMAC since Mente had already discussed the financial assistance provision.
GMAC further argues this Court erred by allowing Roesner, an automotive industry and automotive finance expert, to testify about the commercial reasonableness of the disposition of collateral and blue sky valuation. GMAC did not move to strike any portion of Roesner's testimony or ask for a limiting instruction. Because the contested testimony is merely a sub-section of the automotive finance field, this Court finds Roesner's testimony was within his area of expertise. There is no reason to believe Roesner's testimony created jury confusion. GMAC had ample time to cross-examine Woodword, Bellairs, and Roesner, and this Court concludes GMAC was not prejudiced by the experts' testimony. As such, this Court did not err in allowing the jury to consider their testimony.
Blue sky valuation is the value of a dealership beyond its physical assets, based on projected future income.
GMAC next argues this Court committed prejudicial error by excluding documents which purported to be Plaintiff's account statements, which GMAC attempted to introduce to impeach Johnson's testimony. During cross-examination of Johnson, GMAC sought to introduce uncertified printouts purporting to be a series of internal accounts receivable statements GM created for Mente Chevrolet. This Court excluded these documents because they were not listed on GMAC's exhibit list. The Eastern District of Pennsylvania's Local Rule of Civil Procedure 16.1(c)(5) requires identification of all trial exhibits in a party's pretrial memorandum. This Court recognizes that evidence introduced "solely for impeachment purposes" is admissible even if it is not disclosed before trial. Fed.R.Civ.P. 26(a)(3). Impeachment is improper, however, when it is "employed as a guise to present substantive evidence to the jury that would be otherwise inadmissible." United States v. Gilbert, 57 F.3d 709, 711 (9th Cir. 1995) (per curiam). Defendants argue they intended to introduce the document for impeachment purposes only. This Court's review of the document, however, reveals that it purports to address a central trial issue-namely, whether Mente Chevrolet had sufficient funds in its open account with GM to pay GMAC for the cars it sold prior to July 19, 2007. GMAC was aware Plaintiffs intended to introduce trial evidence showing the dealership had sufficient funds to pay GMAC and showing GMAC seized the dealership's open account with GM. Plaintiffs' First Amended Complaint, filed November 10, 2008, asserted GMAC seized Mente's two open accounts with GM on July 19, 2007. The issue continued to be an integral part of Plaintiffs' case; it was addressed in Plaintiffs' responses to both GMAC's motion to dismiss and motion for summary judgment. Therefore, the proffered documents do not constitute "solely" impeachment evidence. If admitted, the document would be substantive evidence supporting GMAC's contention the Mente dealership did not have sufficient funds to pay GMAC the money GMAC demanded.
This Court also had concerns regarding these documents' authenticity. To authenticate a document, a party must introduce "evidence sufficient to support a finding that the matter in question is what its proponent claims." Fed.R.Evid. 901. The authentication requirement exists because evidence is irrelevant unless the evidence is what its proponent claims it is. United States v. Hernandez-Herrera, 952 F.2d 352, 343 (10th Cir. 1991). To admit a document into evidence, there must be "substantial evidence" from which a jury "could infer that the document [is] authentic." United States v. Goichman, 547 F.2d 778, 784 (3d Cir. 1976). There need not be a full argument on the document's admissibility. Id.
No evidence was introduced to show the dealerships or Johnson received a copy of this document during the course of their business operations, nor does Johnson appear to be the document's creator. GMAC asserted the Chevrolet Dealership should have received a copy of the statement at some point, but both parties agree the document was never produced as part of the dealership's business records. This Court finds it unlikely that Plaintiffs had a copy of this record and failed to produce it, given that more than 60,000 business records were disclosed to GMAC. Furthermore, the document, on its face, lacks any indicia of reliability. It is unsigned, bears no logos, is not printed on letterhead, and does not contain any information to indicate who prepared it. See Diaz v. Pima Cnty., 34 Fed. Appx. 309, 311 (9th Cir. 2002) (holding a district court did not err by excluding a document that "bore no indicia of origin or filing, such as an official letterhead, seal, or signature, and [included] no certification from the custodian of records," particularly when the witness who attempted to authenticate the exhibit was not its creator). Even if Johnson had examined the document on the stand, she would not have been able to verify the entries without recourse to her own records. These records were inaccessible to Johnson during cross-examination and, without notice from GMAC that it planned to use this document, likely not available in the courtroom.
There is no Third Circuit precedent controlling how broadly this Court should interpret the term "solely." Other courts faced with the issue have drawn varying conclusions. See, e.g., Klonoski v. Mahlab, 156 F.3d 255 (1st Cir. 1998) (precluding undisclosed evidence from admission at trial, even when offered for the purpose of impeachment); Hayes v. Cha, 338 F. Supp. 2d 470, 503 (D.N.J. 2004) (allowing the admission of surprise evidence when it was offered to counter a document the party offering the evidence had not seen before trial, its prejudicial nature could be cured easily, the party introducing the evidence was not acting in bad faith, and the opposing party did not argue it constituted substantive evidence); Halbasch v. Med-Data, Inc., 192 F.R.D. 641 (D. Or. 2000) (admitting undisclosed evidence for impeachment purposes).
To assess whether undisclosed, purported impeachment evidence should be admitted, a court considers the intent of the disclosure requirement in Federal Rule of Civil Procedure 26. This rule "was adopted to end two evils that had threatened civil litigation: expensive and time-consuming pretrial discovery techniques and trial-by-ambush." Hayes, 338 F. Supp. 2d at 503. To determine whether such evidence should be admitted, a court must consider the Third Circuit's "fairness" factors for the exclusion of evidence, analyzing: (1) the prejudice or actual surprise of the party against whom the information was offered; (2) the ability of that party to cure any prejudice; and (3) the offering party's bad faith or wilfulness in withholding the information. Id. at 504. "Because reducing gamesmanship is a core aim of [Rule 26], . . . the last inquiry should carry significant weight." Id. at 505.
The fairness factors weigh in favor of this Court's decision to exclude the documents. First, Plaintiffs' counsel told the Court he had never seen these documents before and was unaware of their existence. Both parties agreed the documents were not part of the discovery Plaintiffs produced, nor were they included in the discovery GMAC provided to Plaintiffs. In short, Plaintiffs were in fact surprised by GMAC's attempt to introduce Exhibit 432. Second, given that GMAC produced these documents in the middle of trial, Plaintiffs had no ability to cure this prejudice without delaying the orderly presentation of evidence. If the document were admitted at trial, Plaintiffs' counsel would have had insufficient time to investigate the documents' authenticity and, if authentic, the circumstances surrounding the documents' creation. Given the documents' last-minute production during trial, this Court concludes GMAC wilfully withheld them to ambush Plaintiffs at trial. Counsel could easily access these documents at any time since this lawsuit was filed in 2007, so there is no reason counsel would wait until trial to do so except for the purpose of gamesmenship. Therefore, the Court's exclusion of these documents was proper.
This omission is notable because several documents produced by GMAC during discovery were created by GM. GM and GMAC are closely affiliated companies, and the course of discovery in this litigation revealed that GMAC's counsel had access to GM's files. For instance, Exhibit 161, the spreadsheet GMAC ultimately used to cross-examine Johnson, contained metadata that showed it was originally prepared by GM.
Even if this Court's exclusion was erroneous, such error was harmless. After this Court excluded the disputed documents, GMAC used Exhibit 195 (a properly authenticated bank statement) and Exhibit 161 (a spreadsheet created by GM) to show the Chevrolet Dealership did not receive a check for $65,000 until August 2007, despite Johnson's testimony this money was due on July 26, 2007. Moreover, the jury's determination the Chevrolet Dealership was not out of trust makes the dealership's ability to repay GMAC on the date of the audit irrelevant. The jury interpreted the WSA to mean the Chevrolet Dealership did not immediately owe money to GMAC upon demand. Instead, the jury found the dealership was contractually allowed to repay GMAC in accordance with its past practice of waiting until it received sales payments from third-party lenders. Therefore, GMAC suffered no prejudice from the exclusion of the purported GM accounts receivable statements.
In fact, the spreadsheet showed this money was paid on August 13, 2007, while the statements GMAC sought to introduce showed the payment occurred on August 9, 2007. Therefore, the later date included in Document 161 made that document more persuasive than the disputed documents which GMAC was precluded from admitting, as it had a greater tendency to show the Chevrolet Dealership had insufficient funds to pay GMAC at the end of July.
Finally, GMAC disagrees with the jury instruction regarding the parties' signing of the waiver. GMAC argues this Court erred by including the term "undue influence" in the jury instruction and on the verdict form. This Court instructed the jury:
A waiver must be made knowingly and voluntarily, without fraud or undue influence. You must examine the totality of the circumstances to determine if the Forbearance Agreement constitutes a valid waiver of Mente's claims. Because GMAC raises waiver as an affirmative defense, GMAC bears the burden of showing Mente waived its claims knowingly and voluntarily.
Jury Instructions, at 33. This instruction is a proper recitation of the law on the validity of a waiver. Under Federal Rule of Civil Procedure 51(c)(1), a party "object[ing] to an instruction or failure to give an instruction must do so on the record, stating distinctly the matter objected to and the grounds for the objection." Franklin Prescriptions, Inc. v. N.Y. Times, Co., 424 F.3d 336, 339 (3d Cir. 2005) (quoting Fed R. Civ P. 51(c)(1)). The validity of a waiver is a jury question when the circumstances surrounding the signing of the waiver could form the basis for the waiver being rendered void, voidable, or unenforceable. Callen v. Penn. R.R. Co., 332 U.S. 625, 628-29 (1948) (finding waiver issues should have been included in the jury instruction); Wastak v. Lehigh Valley Health Network, 342 F.3d 281, 295 (3d Cir. 2003) (stating whether plaintiff signed a waiver involuntarily is a question for the jury).
A waiver is valid if "made knowingly and voluntarily, and although the totality of the circumstances test is used to determine the validity of the release, [the court] also consider[s] whether there is evidence of fraud or undue influence, or whether enforcement of the agreement would be against the public interest." Jakimas, 485 F.3d at 781-82 (emphasis added).
At the close of trial, GMAC objected to the jury instructions in general, but did not object to the instruction regarding the validity of a release or to the inclusion of undue influence. GMAC also did not suggest an alternative jury instructions on the validity of a release or on undue influence. Thus, this Court did not err by allowing the jury to consider whether Plaintiffs were subject to undue influence when signing the Forbearance Agreement.
Additionally, this Court has found the evidence was insufficient to support undue influence, making any error caused by this instruction non-prejudicial.
GMAC also argues this Court erred in allowing the jury to consider the doctrine of unclean hands, asserting the same arguments dismissed above in the motion for judgment as a matter of a law. As stated above, the doctrine of unclean hands was applicable to the signing of the Foreclosure Agreement. GMAC does not challenge the wording of the jury instruction on this doctrine. As such, this Court did not err in allowing the jury to consider unclean hands.
GMAC properly raised this objection at trial.
Accordingly, this Court denies both GMAC's renewed motion for judgment as a matter of law and GMAC's motion for new trial.
An appropriate order follows.
ORDER
AND NOW, this 23rd day of July, 2010, it is ORDERED Defendant GMAC's Motion for New Trial Pursuant to Federal Rule of Civil Procedure 59 (Doc. 185) is DENIED.
It is further ORDERED Defendant GMAC's Renewed Motion for Judgment Pursuant to Federal Rule of Civil Procedure 50 (Doc. 186) is DENIED.