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Wichansky v. Zowine

United States District Court, D. Arizona

March 22, 2016

Marc A. Wichansky, Plaintiff,
David T. Zowine, et al., Defendants.


David G. Campbell United States District Judge

The parties have filed a proposed final pretrial order, a number of motions in limine (“MIL”), a motion to dismiss, and motions for sanctions based on spoliation of evidence. The Court held a final pretrial conference on March 18, 2016. Doc. 387. This order will set forth the Court’s rulings on various pretrial matters.

A. Trial Matters.

1. Trial Time.

Judge Robert Oberbilig of the Maricopa County Superior Court referred to this dispute as a “business divorce” (Doc. 332-1 at 2), and his description is apt. The parties are fighting the bitterest of business divorces, and this is only one of several lawsuits between them. The amended complaint is almost 100 pages long with 548 paragraphs of allegations. Doc. 160. The parties have filed 71 motions to date. The Court, which seeks to avoid delay and expense by hearing discovery disputes in telephone conferences without the filing of motions (allowing expedited briefing where needed), has held 10 separate discovery dispute conference calls with parties.

The Court has now dismissed or entered summary judgment on Plaintiff’s claims for (1) violation of the False Claims Act, (2) violation of the Computer Fraud and Abuse Act (“CFAA”), (3) retaliation in violation of the CFAA, (4) securities fraud, (5) obstruction of justice, (6) unjust enrichment, (7) intrusion upon seclusion, (8) prima facie tort, (9) intentional infliction of emotional distress, (10) breach of fiduciary duty resulting in immediate physical injuries or emotional distress, (11) constructive fraud, (12) defamation, (13) assault and battery other than one spitting incident, and (14) intentional interference with contract. Docs. 49, 82, 310. The only claims remaining in this case are breach of fiduciary duty, aiding and abetting the breach, and battery for one spitting incident.

One would think that with 14 claims resolved and only three remaining, the parties would narrow their efforts, but they have not. Their proposed final pretrial order identifies more than 2, 700 exhibits for trial and designates more than 10, 500 pages of deposition transcripts. The pretrial motions addressed in this order include approximately 3, 000 pages of materials. Plaintiff suggests that he needs 182 hours of trial time to present his case - the equivalent of 33 trial days, which would take more than two months of trial at four days per week. Doc. 345-1 at 60-61. Defendants suggest the trial should take 17 trial days. Id. at 61.

The Court is convinced that this case can be tried fully and effectively in 10 full trial days, not counting jury selection or deliberation. Plaintiff claims that Defendant Zowine duped him into seeking dissolution of the parties’ jointly-owned company, a dissolution that resulted in Defendant Zowine being permitted under Arizona law to buy Plaintiff’s interest in the company. After a five day trial, Judge Oberbilig set the value of Plaintiff’s interest in the company at $5, 000, 000. Plaintiff claims that Zowine’s intentional and calculated harassment caused Plaintiff to file for dissolution of the company and cost Plaintiff his future earnings and various other costs. The trial in this case, therefore, will be about whether Plaintiff was duped by Zowine into seeking dissolution of the company and, if so, how much he was damaged. Plaintiff claims that Zowine engaged in the duping to cover up fraud he was committing within the company. The trial will also include one battery claim based on one spitting incident.

The Court will allot 28 hours of trial time to Plaintiff and 27 hours to Defendants, which will include opening and closing statements, direct examination, and cross examination. The Court will keep track of each side’s time and inform the parties daily of how much time they have used so they can budget their time accordingly.

Despite the ultra-litigious nature of this case, the Court is still striving to achieve Rule 1’s goal of a “just, speedy, and inexpensive determination” of this action. The Court reminds the parties and counsel that they too have a duty to achieve this goal. Rule 1 requires “the court and the parties” to work toward this end. Fed.R.Civ.P. 1 (emphasis added). The Advisory Committee Note to Rule 1 makes clear that “the parties share the responsibility” to achieve Rule 1’s goal, and emphasizes that “[e]ffective advocacy is consistent with - and indeed depends upon - cooperative and proportional use” of the rules of procedure. Id., Adv. Committee Note (2015). The parties should cooperate during trial to minimize delay and wasted time. Stipulations should be made on matters not disputed and on evidentiary foundations that clearly could be laid but would only consume valuable time before the jury. Each side shall also provide the opposing side with 24 hours’ notice of the witnesses who will be called on a given day.

2. The parties’ proposed final pretrial order (Doc. 345-1) is approved by the Court as the final pretrial order in this case. The order shall govern the presentation of evidence and other trial issues, and, pursuant to Rule 16(e) of the Federal Rules of Civil Procedure, shall be modified only to prevent manifest injustice. Evidence, objections, legal arguments, and relief not requested or identified in the order shall not be available at trial, except to prevent manifest injustice.

B. Pretrial Motions.

1. Plaintiff’s MIL 1 regarding AHCCS settlement agreement. Doc. 326.

Plaintiff asks the Court to exclude the settlement agreement between MGA Home Healthcare, LLC and AHCCCS, and specifically the statement in the agreement that, “based on the records reviewed, AHCCCS found no evidence that the Provider [MGA] committed fraud.” Doc. 326-1 at 2.

Rule 408 provides that evidence of “accepting” valuable consideration “in compromising” a claim is not admissible “on behalf of any party” for the purpose of proving or disproving the “validity . . . of a disputed claim.” Fed.R.Evid. 408(a)(1). Defendants clearly want to introduce the quoted statement from the MGA-AHCCCS compromise to disprove the validity of Wichansky’s fraud allegation.

The Ninth Circuit has held that Rule 408 applies to settlements entered into between one of the parties to the litigation and a third party - in this case, between MGA and AHCCCS. Hudspeth v. C.I.R., 914 F.2d 1207, 1213 (9th Cir. 1990); United States v. Contra Costa Water Dist., 678 F.2d 90, 92 (9th Cir. 1982). And courts in this circuit have applied this rule even when the party seeking to introduce the compromise is one of the parties that entered into it. McDevitt v. Guenther, 522 F.Supp.2d 1272, 1284-85 (D. Haw. 2007) (barring introduction of settlement by party to the settlement with a third person); see also 2-408 Weinstein’s Federal Evidence § 408.04 (2015) (“Evidence of a completed compromise of a claim arising out of the same transaction between a third person and a party to the suit being litigated is also inadmissible.”). What is more, Defendants’ own case, Option Resource Group v. Chambers Development Co., 967 F.Supp. 846, 851 (W.D. Pa. 1996), held that a settlement agreement with the SEC was inadmissible under Rule 408. The case admitted separate administrative findings made by the SEC after taking evidence, but the fraud statement in the settlement agreement between MGA and AHCCCS does not constitute a separate finding by AHCCCS - it is part of the settlement itself.

Plaintiff’s MIL 1 (Doc. 326) is granted.

2. Plaintiff’s MIL 2 regarding settlement and mediation. Doc. 327.

Plaintiff asks the Court to exclude from evidence any discussions or documents prepared for settlement negotiations or mediation. Rule 408 prohibits introduction of settlement negotiations or agreements to prove or disprove the validity or amount of a disputed claim, but states that such evidence may be admitted for “another purpose.” Fed.R.Evid. 408(b). Because Plaintiff alleges that Defendant Zowine duped him into seeking dissolution of Zoel, Plaintiff’s state of mind in seeking the dissolution is relevant and constitutes “another purpose.” To the extent settlement-related documents are introduced for this purpose, they might be admissible at trial. The Court therefore cannot grant Plaintiff’s motion to exclude all such evidence.

Plaintiff also argues that communications related to mediation must be excluded from evidence under A.R.S. § 12-2238(B). But Plaintiff fails to identify precisely when mediation stopped and started or which documents it encompassed. The Court therefore cannot determine that any specific document is excluded by this statute. If Plaintiff opposes the introduction of any specific documents at trial on the basis of this statute, he should be prepared to show that it was part of a mediation communication.

Plaintiff argues that these documents must be excluded under Rule 403, but that is a decision that must be made during the course of trial, not on the basis of incomplete information before the Court now.

Plaintiff’s MIL 2 (Doc. 327) is denied.

3. Plaintiff’s MIL 3 regarding character attacks. Doc. 328.

Plaintiff asks the Court to exclude various categories of evidence, including difficulties in his marriage or family, gambling or drug use, vulgar language, and theft of company information. At the same time, Plaintiff makes clear that he intends to introduce the same kind of evidence regarding Defendant Zowine. Because the Court will be far better equipped to resolve this issue during trial, it will deny Plaintiff’s MIL 3.

The Court makes two observations. First, the Court will not permit this trial to become a mudslinging contest. Evidence of this nature will be admissible only if strongly relevant to a clearly identified issue the jury must decide. Otherwise, its probative value will be substantially outweighed by the danger of unfair prejudice. Fed.R.Evid. 403. Second, counsel should not mention such evidence to the jury unless it is squarely and directly relevant to an issue to be decided by the jury. If counsel has any doubt, they should raise the issue with the Court outside the hearing of the jury.

Plaintiff’s MIL 3 (Doc. 328) is denied.

4. Plaintiff’s MIL 4 regarding Rochelle Glassman. Doc. 329.

The Court will not exclude the testimony of Ms. Glassman. She has 30 years of experience in medical billing, owns and manages a medical billing firm, and has in the past been engaged by attorneys to determine whether medical billing fraud has been committed. An expert may be qualified by such knowledge, skill, and experience. Fed.R.Evid. 702. As one notable commentator has observed, the 2000 amendments to Rule 702 (adopting the Daubert standard) “were not intended to signal an abandonment of the liberal attitude of the Federal Rules of Evidence toward the admissibility of opinion testimony.” 4 J. Weinstein & M. Berger, Weinstein’s Federal Evidence § 702.05[2][a] (2d. ed. 2015). Nor were they intended to suggest that courts should place less reliance on the traditional tools of the adversary system for finding truth. As the Supreme Court explained in Daubert, “[v]igorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means of attacking shaky but admissible evidence.” Daubert v. Merrill Dow Pharm., Inc., 509 U.S. 579, 596 (1993).

Plaintiff’s MIL 4 (Doc. 329) is denied.

5. Plaintiff’s MIL 5 to exclude testimony. Doc. 330.

Plaintiff seeks to preclude Defendants from calling attorney Julie Nelson during their case in chief, and to preclude her and other witnesses from testifying about matters as to which the attorney-client privilege or work-product protection were invoked during depositions. Clearly, witnesses should not be permitted to testify during trial about matters that were shielded from discovery by privilege assertions, but Plaintiff provides no basis upon which the Court can make decisions about specific ...

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