Enslein v. Di Mase et al
Filing
696
ORDER AND OPINION (1) DENYING DEFENDANT'S MOTION FOR JUDGMENT AS A MATTER OF LAW OR, IN THE ALTERNATIVE, MOTION FOR NEW TRIAL, AND (2) GRANTING PLAINTIFF'S MOTION TO CERTIFY JUDGMENT. Signed on 7/31/20 by District Judge Ortrie D. Smith. (Matthes Mitra, Renea)
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
WESTERN DIVISION
JERALD S. ENSLEIN, in his capacity
as Chapter 7 Trustee for Xurex, Inc.,
Plaintiff,
vs.
GIACOMO E. DI MASE, et al.,
Defendants.
)
)
)
)
)
)
)
)
)
)
Case No. 16-09020-CV-W-ODS
ORDER AND OPINION (1) DENYING DEFENDANT’S MOTION FOR JUDGMENT
AS A MATTER OF LAW OR, IN THE ALTERNATIVE, MOTION FOR NEW TRIAL,
AND (2) GRANTING PLAINTIFF’S MOTION TO CERTIFY JUDGMENT
Pending are Defendant Lee Kraus’s Motion for Judgment as a Matter of Law or,
in the Alternative, Motion for New Trial (Doc. #678), and Plaintiff Jerald Enslein’s Motion
to Certify Judgment against Defendant Lee Kraus (Doc. #690). For the following
reasons, the Court denies Kraus’s motion and grants Plaintiff’s motion.
I.
BACKGROUND 1
In October 2014, Xurex, Inc. filed for Chapter 7 bankruptcy. In August 2016,
Plaintiff Jerald Enslein, as Chapter 7 Trustee for Xurex, filed an adversary proceeding in
the Bankruptcy Court against Jose Di Mase, Giacomo Di Mase, Tristram Jensvold,
Leonard Kaiser, Dietmar Rose, Lee Kraus, Joseph Johnston, Robert Olson, Steve
McKeon, DuraSeal Pipe Coatings Company (“DuraSeal Pipe”), DuraSeal Holding S.r.L.
(“DuraSeal Holding”), and HDI, Holding Development Investment, S.A. (“HDI”). In April
2017, the Court granted Plaintiff’s motion to withdraw the reference of the adversary
proceeding to the Bankruptcy Court. Doc. #5. In the Amended Complaint, Plaintiff
alleged several claims, including but not limited to, breach of contract, breach of
1
The Court briefly summarizes this matter’s background. Additional background
information is discussed in prior decisions. See, e.g., Doc. #434-1.
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 1 of 33
fiduciary duty, and civil conspiracy. In June 2019, the Court granted in part and denied
in part the parties’ eleven summary judgment motions. Doc. #434-1.
On November 4, 2019, trial began. The only claims Plaintiff submitted to the jury
were civil conspiracy (Count VI) against Jose Di Mase and Kraus, and breach of
fiduciary duty (Count VII) against Johnston, Jose Di Mase, Giacomo Di Mase, and
Kaiser. These claims arose from a 2012 Amendment to a licensing agreement and a
2014 Amendment that eliminated minimum purchase obligations and created rights to
manufacture and produce Xurex products.
Regarding the claims arising from the 2012 Amendment, the jury found in
Johnston’s favor on Plaintiff’s breach of fiduciary duty claim but found in Plaintiff’s favor
on his claims against Jose Di Mase and awarded $93,506,632.00 in actual damages.
Doc. #630, at 1-2. Regarding the claims against Jose Di Mase, Giacomo Di Mase,
Kaiser, and Kraus arising from elimination of minimum purchase obligations, creation of
the rights to manufacture and produce Xurex products, and the 2014 Amendment, the
jury found in Plaintiff’s favor and awarded $24,414,522.00 in actual damages. Id. at 3-4.
In March 2020, the Court clarified Plaintiff’s total recovery for all claims was
$93,506,632.00. Doc. #664, at 2-5. Jose Di Mase, DuraSeal Pipe, and DuraSeal
Holding are jointly and severally liable for the entire amount of $93,506,632.00, and
HDI, Jensvold, Giacomo Di Mase, Kaiser, and Kraus are jointly and severally liable for
$24,414,522.00 of the amount. Id. at 5. Kraus now moves for judgment as a matter of
law or, in the alternative, a new trial. Plaintiff opposes Kraus’s motion.
II.
MOTION FOR JUDGMENT AS A MATTER OF LAW
A.
Standard
Pursuant to Rule 50(a) the Federal Rules of Civil Procedure, a party may move
for judgment as a matter of law “at any time before the case is submitted to the jury.”
Fed. R. Civ. P. 50(a)(2). “The motion must specify…the law and facts that entitle the
movant to the judgment.” Id. Judgment as a matter of law is proper if “there is no
legally sufficient evidentiary basis for a reasonable jury to find for that part on the issue.”
Tatum v. City of Berkeley, 408 F.3d 543, 549 (8th Cir. 2005); see also Luckert v. Dodge
Cty., 684 F.3d 808, 817 (8th Cir. 2012).
2
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 2 of 33
If a Rule 50(a) motion for judgment on the pleadings is denied, the movant “may
file a renewed motion for judgment as a matter of law….” Fed. R. Civ. P. 50(b). “In
ruling on the renewed motion, the court may: (1) allow judgment on the verdict, if the
jury returned a verdict; (2) order a new trial; or (3) direct the entry of judgment as a
matter of law. Id. When considering a Rule 50(b) motion, the Court construes all
factual issues in the light most favorable to the verdict. Marez v. SaintGobain
Containers, Inc., 688 F.3d 958, 963 (8th Cir. 2012). “The law places a high standard on
overturning a jury verdict because of the danger that the jury’s rightful province will be
invaded when judgment as a matter of law is misused.” Hunt v. Neb. Pub. Power 3
Dist., 282 F.3d 1021, 1029 (8th Cir. 2002) (citations omitted).
B.
Discussion
(1)
Waiver
Plaintiff argues Kraus’s Rule 50(b) motion should be denied because his
arguments were not raised in his Rule 50(a) motion. A Rule 50(a) motion must set forth
“facts and law” demonstrating the party is entitled to judgment as a matter of law. Fed.
R. Civ. P. 50(a)(2). “[T]echnical precision” is not required, but “the motion must be
‘specific enough’ to notify the district court and the opposing party of the underlying
issue.” Hyundai Motor Fin. Co. v. McKay Motors I, LLC, 574 F.3d 637, 642 (8th Cir.
2009) (citations omitted). Consequently, the Eighth Circuit has held a “post-trial motion
for judgment may not advance additional grounds that were not raised in the pre-verdict
motion.” Klingenberg v. Vulcan Ladder USA, LLC, 936 F.3d 824, 834 (8th Cir. 2019)
(quoting Walsh v. Nat’l Comput. Sys., Inc., 332 F.3d 1150, 1158 (8th Cir. 2003)). That
is, a “movant cannot use a Rule 50(b) motion ‘as a vehicle to introduce a legal theory
not distinctly articulated in its close-of-evidence motion for a directed verdict.’” Id.
(citations omitted).
During trial, Kraus orally moved for judgment as a matter of law. Doc. #645, at 35. The entirety of his motion is as follows:
Your Honor, plaintiff has now rested his case in chief. I hereby
move the court for judgment on plaintiff’s claim for civil conspiracy, Count
6, as a matter of law. Under Rule 50, if a party has been fully heard on an
issue during a jury trial and the court finds a reasonable jury would not
3
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 3 of 33
have any legally sufficient evidentiary basis to find for the party at issue,
the court may, A, resolve the issue against the party; and, B, grant a
motion as a matter of law against the party on a claim or defense that
under controlling law can be maintained or defeated only with a favorable
finding on that issue.
All parties have agreed that the claim for civil conspiracy is
governed by Missouri law. Under Missouri law, a civil conspiracy is an
agreement or understanding between persons to do an unlawful act or to
use unlawful means to do an unlawful act, Oak Bluff Partners v. Meyer. I
can provide detailed citations to the court as well.
Plaintiff establishes a civil conspiracy if the following elements are
satisfied: One, two or more persons; two, with an unlawful objective; three,
after meeting of minds; four, commit to -- commit at least one act in
furtherance of the conspiracy; and, five, the plaintiff is hereby injured.
Plaintiff must prove the conspiracy with clear and convincing
evidence, Koehler v. Warren Skinner, Inc. and Chmieleski v. City Products
Corporation.
In this case plaintiff not only has failed to present clear and
convincing evidence for civil conspiracy, as he must under the law, he has
presented almost no evidence at all for civil conspiracy. Given the paucity
of evidence for civil conspiracy provided by plaintiff, I respectfully request
judgment in my favor with extreme prejudice on Count 6 of plaintiff's
amended complaint for civil conspiracy.
Barring that, alternatively, I respectfully request judgment in my
favor with prejudice on Count 6 of the plaintiff’s amended complaint for
civil conspiracy.
Barring that, alternatively, I request judgment in my favor on Count
6 of plaintiff's amended complaint for civil conspiracy.
Doc. #645, at 3-5. The Court denied Kraus’s motion, noting there was evidence that
could support a verdict for Plaintiff or Defendants. Id. at 6.
Kraus contends his Rule 50(a) motion preserved the arguments he now raises in
his Rule 50(b) motion. In his Rule 50(b) motion, Kraus argues he is entitled to judgment
as a matter of law because (1) no third party was involved in the alleged civil conspiracy
and his actions were not unlawful; (2) Plaintiff “failed to present any supportable theory
and evidence of damages caused by the separate 2014-related conspiracy claim”; and
(3) “Plaintiff’s breach of fiduciary duty claims improperly ‘bootstrapped’ and duplicated
Plaintiff’s contractual claims,” and no civil conspiracy claim can be maintained without
an underlying tort. Doc. #679, at 13-26. To support his argument that he did not waive
4
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 4 of 33
the arguments he now raises, Kraus cites four cases. Doc. #691, at 9-10. But these
cases present circumstances inapposite to those before the Court.
In Kaplon v. Howmedica, Inc., the Eighth Circuit determined a party sufficiently
raised “the proximate cause issue expressly in the context of arguing that the jury award
was excessive.” 83 F.3d 263, 266 (8th Cir. 1996). The Eighth Circuit also noted the
defendant raised the “same issues” in its summary judgment motion” and “again at trial.”
Id. Whereas Kraus’s Rule 50(a) motion lacked detail and failed to raise the arguments
he attempts to raise in his Rule 50(b) motion, the Eighth Circuit did not indicate the
defendant’s Rule 50(a) motion lacked detail or failed to preserve arguments raised in
the defendant’s Rule 50(b) motion. In addition, the Eighth Circuit did not find the
defendant, similar to Kraus, generally argued the plaintiff failed to meet her burden.
In Jarvis v. Sauer Sundstrand Co., the Eighth Circuit concluded the district court
did not abuse its discretion in finding the grounds raised in the defendant’s Rule 50(b)
motion “were fairly raised” in its Rule 50(a) motion. 116 F.3d 321, 323 n.4 (8th Cir.
1997). During trial, the defendant argued the plaintiff had “not produced any evidence,
certainly not any sufficient evidence, by which a jury could return a verdict in favor of
Plaintiff,” and the plaintiff had “shown no evidence beyond [his] own personal belief that
age discrimination was a factor to support his claim that age played any part
whatsoever in his termination.” Id. The Eighth Circuit found the district court did not
abuse its discretion in finding the defendant’s Rule 50(a) motion preserved the
arguments raised in its Rule 50(b) motion because the plaintiff did not demonstrate he
lacked notice of the “willfulness” issue or “did not have an opportunity to cure
deficiencies in his proof.” Id. While the defendant’s Rule 50(a) motion is more akin to
Kraus’s Rule 50(a) motion, the defendant’s Rule 50(a) motion placed the plaintiff on
notice that the plaintiff’s belief as to the basis of his discrimination claim was insufficient.
As a result, Jarvis could cure that alleged deficiency in his proof. Here, Kraus’s Rule
50(a) motion did not allow Plaintiff to cure the alleged deficiencies articulated in Kraus’s
Rule 50(b) motion.
In Sturgis Motorcycle Rally, Inc. v. Rushmore Photo & Gifts, Inc., the Eighth
Circuit found that, although the defendants did not present a particular issue to the jury,
the defendants “plainly raised” the issue in their Rule 50(a) motion. 908 F.3d 313, 323
5
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 5 of 33
(8th Cir. 2018). The Eighth Circuit, however, did not delve into the specifics of the
defendants’ Rule 50(a) motion or compare arguments raised therein with the
defendants’ Rule 50(b) arguments. Id. Thus, Kraus’s reliance on this case does not
support his argument that he did not waive his Rule 50(b) arguments.
Finally, in Hurst v. Dezer/Reyes Corp., the Eighth Circuit reiterated, “perfunctory
written pre-verdict motions” are discouraged. 82 F.3d 232, 237 (8th Cir. 1996). The
Eighth Circuit noted that had the movant’s “post-verdict motion been denied,” the
movant “would likely have failed to preserve any JAML issue for appeal.” Id. (citation
omitted). Nevertheless, the Eighth Circuit concluded the district court did not abuse its
discretion in construing the Rule 50(a) motion as adequate because the non-moving
party did not show “it lacked fair notice” on the issue raised in the Rule 50(b) motion. Id.
The Eighth Circuit also noted the district court did not permit “oral argument to flesh out
the basis for the pre-verdict motions.” Id. Here, Kraus was given the opportunity to
present oral argument in support of his Rule 50(a) motion, but during his oral argument,
Kraus did not raise the arguments he now raises in his Rule 50(b) motion. In addition,
Kraus could have filed a written Rule 50(a) motion but chose not to do so.
Kraus orally presented his Rule 50(a) motion and provided argument and case
citations. Kraus did not identify specific facts or legal theories. He simply argued
Plaintiff failed to satisfy his burden of proof. Such an argument does not satisfy the
Rule 50(a) particularity requirements. Nassar v. Jackson, 779 F.3d 547, 551 (8th Cir.
2015) (citations omitted) (holding a motion for a directed verdict based on a statement
that plaintiffs failed to carry their burden on claims lacked the particularity that Rule
50(a) requires). During his Rule 50(a) motion, Kraus did not mention the lack of thirdparty involvement, legality of actions, Plaintiff’s damages theory, or nonexistence of an
underlying tort. Likewise, the cases cited by Kraus during his Rule 50(a) motion do not
address the issues he now raises in his pending Rule 50(b) motion. See Oak Bluff
Partners, Inc. v. Meyer, 3 S.W.3d 777 (Mo. banc 1999); Koehler v. Warren Skinner, Inc.,
804 S.W.2d 780 (Mo. Ct. App. 1991); Chmieleski v. City Prods. Corp., 660 S.W.2d 275
(Mo. Ct. App. 1983). For these reasons, the Court finds Kraus’s Rule 50(a) motion did
not preserve the arguments raised in his Rule 50(b) motion.
6
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 6 of 33
Kraus asks the Court to excuse his lack of compliance with Rule 50 because he
was pro se at trial. Doc. #691, at 10. However, during trial, Kraus presented an
opening statement, examined and cross-examined parties and witnesses, testified,
objected to evidence, participated in bench conferences and the jury instruction
conference, and gave a closing argument. See, e.g., Doc. #641, at 81-89, 114-15; Doc.
#642, at 8, 10-14, 17-18, 24-25, 27-30; Doc. #643, at 13-14, 36-58, 66, 74-78, 82-83,
85-90, 122-23, 128-64, 180, 195-98; Doc. #644, at 5-22, 38, 41-44, 48-49, 56-57, 60-61,
75-86, 88-89, 114-55, 173-90, 206-13, 216-55; Doc. #645, at 28-29, 34-37, 47-48, 5067, 86-90, 119-20, 139, 149-60, 162-63, 168-70, 174; Doc. #646, at 3-11, 13-22, 47-48,
65-66, 72-73, 82-84, 88-89, 195-06, 210, 219, 228-29, 235-42; Doc. #647, at 11-14, 1718, 33, 47, 67, 72, 79-86, 97, 100-99; Doc. #648, at 54-64, 85, 88. Of the five pro se
Defendants, Kraus was the most active trial participant and, inter alia, was the only
Defendant to cite case law and argue about judge versus jury determinations.
Although Kraus claimed he was knowledgeable about the applicable law during
trial, he now asks the Court to disregard his purported knowledge of the law and
liberally construe his Rule 50(a) motion. The Court declines to do so in these
circumstances. Accordingly, the Court denies Kraus’s Rule 50(b) motion because it
raises arguments that were not included in his Rule 50(a) motion. Moreover, even if the
Court were to liberally construe Kraus’s Rule 50 motions, Kraus’s argument that Plaintiff
failed to meet his burden does not implicate, in any way, the arguments he raises in his
Rule 50(b) motion. Finally, even if the Court were to find Kraus did not waive his Rule
50(b) arguments, those arguments fail on substantive grounds as discussed below.
(2)
Civil Conspiracy Claim
(a) Third-Party Involvement, Agency, Independent Personal Stakes, and Conflicts
Kraus contends he is entitled to judgment as a matter of law on Plaintiff’s civil
conspiracy claim because no third party was involved. Plaintiff argues there was
sufficient evidence at trial for the jury to conclude Kraus was not a formal agent of
DuraSeal. Further, even if Kraus was a formal agent, Plaintiff argues sufficient
evidence established Kraus had an independent stake in the object of the conspiracy,
and thus, is liable. As noted by the Court in its summary judgment order:
7
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 7 of 33
“[T]here can be no conspiracy between an agent and a principal,”
and “[t]wo entitles that are not legally distinct cannot conspire with one
another.” 8000 Md., LLC, 292 S.W.3d at 452 (quoting Mika v. Cent. Bank
of Kan. City, 112 S.W.3d 82, 94 (Mo. Ct. App. 2003)). “[A] corporation
cannot conspire with its own employees.” Id. But one exception to this
general rule is “when an agent has an independent personal stake in
achieving the object of the conspiracy.” Id. (citation and internal
quotations omitted). That is, “the agent’s independent personal stake
must be in a legally distinct organization.” Id. (citation omitted).
Doc. #434-1, at 44.
To support his argument that a third party must be involved, Kraus solely relies
on Missouri Highway and Transportation Commission v. Commerce Bank of Kansas
City, N.A., 763 S.W.2d 172, 177 (Mo. Ct. App. 1988). In MHTC, the plaintiff and the
defendants entered into an agreement. Id. at 176. The plaintiff alleged the defendants
conspired with one another to agree to breach their promise to the plaintiff in order to
injure the plaintiff. Id. The plaintiff did not allege a third party was involved in the
conspiracy. Id.
In MHTC, the Missouri Court of Appeals was the first Missouri court to determine
“whether contracting parties may be held liable for civil conspiracy when there is no third
party involved in the conspiracy.” Id. at 177 (noting “Missouri courts have not directly
addressed the question” of “whether contracting parties may be held liable for civil
conspiracy when there is no third party involved in the conspiracy”). The appellate court
held “one party to a contract may not have a cause of action against other parties to the
same contract under a theory of unlawful civil conspiracy unless a third party is involved
in the conspiracy.” Id.
MHTC presents circumstances dissimilar to the evidence presented at trial in this
matter when construing all factual issues in the light most favorable to the verdict as the
Court must do. First, MHTC involved a conspiracy to breach an agreement. Here,
Plaintiff presented evidence that Kraus and others conspired to eliminate minimum
purchase obligations, create rights to manufacture and produce Xurex’s products, and
execute the 2014 Amendment. No claim of conspiracy to breach a contract was
presented. Rather, the conspiracy claim centered around the formation of a new
contract as well as the elimination of minimum purchase obligations and the creation of
rights to manufacture and produce Xurex products.
8
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 8 of 33
Second, in MHTC, there is no indication that either party, or an agent or
employee thereof, had an “independent stake in achieving the object of the conspiracy.”
Mika v. Cent. Bank of Kan. City, 112 S.W.3d 82, 94 (Mo. Ct. App. 2003) (quoting Metts
v. Clark Oil & Refin. Corp., 618 S.W.2d 698, 702 (Mo. Ct. App. 1981)). Thus, the MHTC
Court did not address the independent personal stake exception to the general rule that
a corporation cannot conspire with its own employees. Id. at 94-95.
Third, unlike the matter before this Court, the relationship between the parties to
the contract in MHTC was straightforward, and there was no mention of either party
having a conflict of interest. The plaintiff, MHTC, was a promisee, and the defendants,
Commerce Bank and A.H. Myers, were joint promisors. 763 S.W.2d at 176. There is
no suggestion that either party was an agent for, an employee of, paid by, related to,
and/or working with the other party. Accordingly, the MHTC Court did not examine
whether the parties were not legally distinct, and therefore, could have conspired with
one another. See Mika, 112 S.W.3d at 94 (holding “[t]wo entities that are not legally
distinct cannot conspire with one another.”) (citation omitted).
The facts at trial established an intricate web of connections among those who
were parties to the agreements, those involved in the elimination of minimum purchase
obligations and the creation of rights to manufacture and produce Xurex products, and
those who were not parties to the agreement but were involved in the events leading up
to and including the contracts. In addition, the evidence showed individuals had
independent personal stakes in achieving the conspiracy’s objective, individuals had
conflicts of interest, and individuals without independent personal stakes and/or conflicts
of interest knew about the conflicts but willingly participated in the conspiracy. The
Court will not attempt to recite all evidence supporting the jury’s verdict finding in favor
of Plaintiff on his conspiracy claim against Kraus. But the Court highlights some of the
more significant events. 2
Jose Di Mase contacted Lee Kraus on “several occasions during 2010” about
evaluating a business opportunity involving DuraSeal Pipe. Doc. #643, at 129-31. In
2
The Court also cites to portions of the record, but the citations are not comprehensive.
Because Kraus brings the pending motion, the Court mainly focuses on events in which
Kraus was involved and does not include evidence presented against other parties only.
9
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 9 of 33
October 2010, Jose Di Mase hired Kraus as a consultant to help him acquire DuraSeal
Pipe. Doc. #642, at 63; Doc. #643, at 154; Doc. #647, at 20, 81, 113. Per the
agreement, Kraus would receive a ten percent profit interest in DuraSeal Holding. Doc.
#643, at 143-44.
That same month, Tristram Jensvold, who was Jose Di Mase’s son-in-law,
communicated with Jose Di Mase about combining and controlling both Xurex and
DuraSeal Pipe. Doc. #642, at 68-69. In December 2010, Jose Di Mase formed
DuraSeal Holding, which purchased DuraSeal Pipe. Id. at 73. When DuraSeal Holding
purchased DuraSeal Pipe, it also bought DuraSeal Pipe investors’ Xurex shares. Id. at
74. 3 Jose Di Mase gave Jensvold authority to negotiate a license agreement between
DuraSeal and Xurex. Id. at 39-40, 44, 79-80.
On December 31, 2010, DuraSeal and Xurex entered into a global license
agreement, giving DuraSeal an exclusive license to use Xurex’s products outside North
America. Id. at 42, 75; Doc. #643, at 59. In exchange, DuraSeal agreed to make
minimum monthly purchases. Doc. #642, at 75. DuraSeal also agreed to retain Kraus
as a non-executive director, which Kraus described as a “key man clause,” for five
years. Doc. #643, at 146-47; Doc. #647, at 20, 114. According to Kraus, it was then
that he “took on a fiduciary obligation to DuraSeal.” Doc. #647, at 115. As of December
2010, Kraus was providing consulting services for Jose Di Mase, was paid by Jose Di
Mase, and was a non-executive director for and had a fiduciary obligation to DuraSeal.
In March 2011, Jensvold emailed Kraus, Giacomo Di Mase (Jose Di Mase’s son),
and Joe Johnston (Xurex’s CEO) to ensure they “are all acting in congruence.” Doc.
#642, at 89-93; Doc. #643, at 62, 105-06, 149-50, 166-67; Doc. #646, at 221-22.
Among other things, Jensvold stated, “[s]ince The Di Mase Group made the acquisition
of [DuraSeal,] our general strategy” includes “[c]omplet[ing] the take over of Xurex.”
Doc. #642, at 89-90.
In April 2011, changes were made to the Xurex board. Id. at 93-94; Doc. #643,
at 155-56. Jensvold and Johnston successfully lobbied to add Dietmar Rose to the
Xurex board. Doc. #643, at 106, 113. In the latter part of 2011, Rose and Jensvold
3
Hereinafter, “DuraSeal” refers to both DuraSeal Pipe and DuraSeal Holding.
10
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 10 of 33
negotiated a new license agreement. Id. at 24-25, 96, 113. During the negotiations,
Johnston participated, supplied information to “both sides,” and “helped them with…
putting all the data and information together.” Id. at 114-15, 123. Johnston admitted he
had a conflict at the time – that is, he was DuraSeal’s CEO and Xurex’s CEO. Id. at
119-20, 123-25, 170-71. 4 In the latter part of 2011, Xurex potentially filing for
bankruptcy was discussed, and two Xurex board members resigned, claiming they were
kept in the dark about operations. Doc. #642, at 96; Doc. #643, at 106-07, 171; Doc.
#645, at 74-75; Doc. #647, at 22-23.
In January 2012, an amended license agreement was executed, and DuraSeal’s
minimum purchase obligations were greatly reduced. Doc. #642, at 76-77, 97; Doc.
#643, at 70; Doc. #646, at 177. The agreement was signed by Rose and Jensvold.
Doc. #642, at 96; Doc. #643, at 70; Doc. #647, at 23-24. 5 After the agreement was
executed, meeting minutes were backdated to reflect someone else became Xurex’s
CEO before the agreement was signed. Doc. #643, at 119-20, 123-25, 170-71; Doc.
#645, at 173-74. Had the 2010 Agreement not been amended, Xurex would have
received more than sufficient revenue. Doc. #643, at 172.
In August 2012, Kraus signed an advisory agreement with HDI where he was
paid $6,000 monthly for working “approximately 20 hours per month.” Doc. #686-9. 6
4
Kraus also testified that Johnston was “in a conflicted situation.” Doc. #647, at 152-56.
Jose Di Mase delegated to Jensvold the power to act on DuraSeal’s behalf and
“perform…the acts necessary to the completion of the acquisition or management of
companies DuraSeal and Xurex….” Doc. #686-14.
6 Kraus testified his involvement in this matter as “episodic” from 2010 through
November 2013, when he “became more directly involved.” Doc. #643, at 136; Doc.
#647, at 115-16. His testimony about “episodic” involvement belies the advisory
agreement he executed in August 2012. Doc. #686-9. Also, Kraus became a director
of DuraSeal’s board at the close of 2010, and as he testified, he then had a fiduciary
obligation to DuraSeal. Doc. #647, at 115. Presumably, Kraus was apprised of
DuraSeal’s operations and plans throughout 2011, 2012, and 2013. In addition, the
evidence demonstrated Jose Di Mase hired Kraus in 2010 to advise him and/or “close
the transaction” of DuraSeal Holding acquiring DuraSeal Pipe; Kraus traveled to an “oil
patch” and talked with customers; he advised Jose Di Mase about the transaction,
including making recommendations; he was privy to discussions about ultimately taking
control of Xurex; he attended a presentation in Kansas City about Xurex’s technology;
he traveled to Las Vegas in 2012 at Jose Di Mase’s invitation (although denied
attending a meeting that took place there); and he received and sent communications
5
11
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 11 of 33
Kraus was paid by HDI, which Jose Di Mase described as his “personal investment
vehicle.” Doc. #642, at 38, 63-64; Doc. #643, at 154-55. In October 2012, Giacomo Di
Mase told Kraus and others: “our final goal” is to “own the IP” of Xurex. Doc. #642, at
98-99; Doc. #643, at 154-56; Doc. #646, at 226-27; Doc. #686-17.
In April 2013, Jose Di Mase sent an email to Jensvold, Kraus, and Giacomo Di
Mase discussing the possible purchase of twelve million series B shares and noting an
additional two million shares would have to be purchased to obtain fifty percent of
Xurex. Doc. #643, at 62-63. About one month later, Jensvold reported the majority
position with Xurex was obtained, which is “very good news” and the result of several
years’ work. Id. at 67.
In June 2013, DuraSeal sent an email to shareholders entitled “THE PLAN TO
FIX XUREX – THE DURASEAL CAMPAIGN.” Doc. #643, at 178-79; Doc. #686-3.
Therein, DuraSeal represented its nominees to the Xurex board, which included Kaiser,
Jensvold, and Steve McKeon, will serve the best interests of all stockholders. Doc.
#643, at 178-81. At the time, Jensvold was a member of DuraSeal’s board, and
McKeon was a lobbyist for DuraSeal. Id. Although the possibility of Xurex filing for
bankruptcy had been discussed, DuraSeal told shareholders it had “no intention, nor
expectation, that Xurex will become bankrupt.” Doc. #686-3. DuraSeal also promised
to “forego its right to purchase Xurex’s intellectual property for $200,000 as a result of
any bankruptcy during any period of time in which Xurex’s board of directors is
comprised of [DuraSeal’s] nominees.” Id. (emphasis eliminated). In addition, DuraSeal
committed to implement “a transparent review process for” transactions negotiated
between Xurex and DuraSeal. Id.
Yet, one month later, in a July 2011 communication to Kraus, DuraSeal “was
giving serious consideration to filing Chapter 11 bankruptcy….” Doc. #647, at 134. In
August 2013, DuraSeal’s CFO emailed Kraus, copying Jose Di Mase, saying DuraSeal
does not own Xurex’s intellectual property but it controls the company that does. Doc.
#643, at 158. Around the same time, there was another effort to replace board
with Jensvold, Johnston, Jose Di Mase, Giacomo Di Mase, and others throughout 2011,
2012 and 2013. See, e.g., Doc. #642, at 44-45; Doc. #643, at 129-40, 138-41, 148-63;
Doc. #647, at 81.
12
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 12 of 33
members. Doc. #643, at 155-56. Rose left the board, and Jensvold, who was a
DuraSeal employee and director, was proposed to be on the Xurex board. Id.
In September 2013, Kaiser became Xurex’s CEO and a member of the Xurex
board. Doc. #642, at 36; Doc. #646, at 133. Also, DuraSeal’s other nominees to the
Xurex board – Jensvold, Giacomo Di Mase, and McKeon – were installed. Doc. #643,
at 183. At the same time, Giacomo Di Mase, disregarding an attorney’s directive not to
share information with Kaiser or McKeon specifically, forwarded the attorney’s email to
Kaiser and McKeon. Doc. #686-19. The attorney stated, “while we want to be sure that
Xurex…has independence from [DuraSeal], you should be wary of Xurex having too
much independence…. We need to discuss the best way to keep Xurex under
appropriate control, but with sufficient independence to keep you out of trouble.” Id.
In October 2013, DuraSeal notified Xurex that DuraSeal had entered into an
uneconomic condition, per the 2012 Amendment. Doc. #644, at 235-39; Doc. #645, at
43-45. Consequently, DuraSeal and Xurex agreed to discontinue DuraSeal’s minimum
purchase requirements and royalty payments, and DuraSeal would make loans to
Xurex. Doc. #644, at 241; Doc. #645, at 45-46.
In November 2014 (roughly five months after DuraSeal promised shareholders it
would not put Xurex in bankruptcy and two months after DuraSeal’s nominees were
installed), Kaiser, Giacomo Di Mase, Jensvold, and McKeon communicated with an
attorney about Xurex possibly filing for bankruptcy. Doc. #643, at 183-85; Doc. #644, at
22-23; Doc. #686-20. According to Giacomo Di Mase, the “cash situation was really,
really bad.” Doc. #643, at 184. That same month, Kraus agreed to provide “consulting
services…to DuraSeal part time to help [Jose] Di Mase….” Id. at 158-59; Doc. #647, at
120. Instead of HDI paying Kraus, Jose Di Mase paid him. Doc. #647, at 120.
In January 2014, discussions about Xurex filing for bankruptcy continued. Doc.
#643, at 184-85; Doc. #686-23. In fact, Jensvold sent an email stating, “we have
decided to seriously consider a Chapter 11 [bankruptcy] for Xurex in Missouri.” Doc.
#686-23. Copied on this email were McKeon, Giacomo Di Mase, and Kaiser. Id. Also
in January 2014, Kaiser forwarded an email to Jensvold wherein Kaiser received legal
advice about a demand for attorneys’ fees that Xurex received. Doc. #686-22.
13
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 13 of 33
In or about June 2014, Kaiser successfully located and obtained a copy of
Xurex’s intellectual property. Doc. #644, at 59. Kaiser informed Giacomo Di Mase,
Kraus, and Jensvold that Xurex’s formula would be “retained in the DuraSeal firesafe.”
Doc. #643, at 190-91; Doc. #644, at 59-60; Doc. #647, at 158-64. At the time, Kaiser
was Xurex’s CEO, Giacomo Di Mase and Jensvold were on the DuraSeal boards, and
Kraus was DuraSeal’s CEO (a title Kraus claimed was “nominal” or “ceremonial”
because there was no CEO title in the company’s operating agreement) and was also
working directly for Jose Di Mase. Doc. #647, at 161-62.
In the summer of 2014, the possibility of Xurex filing for bankruptcy continued to
be discussed. Doc. #644, at 254; Doc. #647, at 74. In July 2014, Jensvold sent a text
message to Kraus, Kaiser, and Jose Di Mase stating he had an in-depth discussion with
a Kansas City law firm and would have a bankruptcy report by week’s end. Doc. #644,
at 61; Doc. #686-26. During the same month, the possibility of DuraSeal purchasing
and the potential cost to purchase the use of Xurex’s intellectual property once Xurex
filed for bankruptcy was discussed. Doc. #643, at 193-94; Doc. #647, at 190-92; Doc.
#686-25. At this time, Kraus and Jose Di Mase were not on Xurex’s board; yet
Jensvold, a Xurex board member, was communicating with them about Xurex possibly
filing for bankruptcy. Doc. #644, at 61-63.
The discussions about a possible Xurex bankruptcy triggered Kraus and Kaiser
to review and consider modifications to the 2012 Amendment. Doc. #644, at 80, 254;
Doc. #647, at 192-93. Kraus and DuraSeal’s counsel began drafting what later became
known as the 2014 Amendment. Doc. #644, at 71. Kaiser did not negotiate anything
related to the 2014 Amendment. Id. at 67-68.
In August 2014, Giacomo Di Mase sent a text message Jose Di Mase, who was
not a Xurex board member, about bankruptcy options for Xurex. Doc. #647, at 73-74;
Doc. #686-26. In early September 2014, Jensvold emailed Jose Di Mase and Kraus
(who was not the Xurex board), stating he had been working with Kaiser and Jensvold
on bankruptcy “stuff.” Doc. #647, at 75-78; Doc. #686-29. Jensvold also discussed his
involvement with the negotiations related to the 2014 Amendment. Doc. #647, at 77-78;
Doc. #686-29. Nevertheless, during the spring and summer of 2014, Jose Di Mase
continued to purchase more of Xurex’s stock. Doc. #643, at 192; Doc. #646, at 213-14.
14
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 14 of 33
On September 15, 2014, a draft of the 2014 Amendment was sent to Kaiser and
Kraus. Doc. #644, at 63-64. Kaiser forwarded “[a] redline version of the license
agreement” to Giacomo Di Mase, Jensvold, and McKeon. Id. at 64; Doc. #686-31. Six
days later, Kaiser emailed Giacomo Di Mase, Jensvold, and McKeon, stating the 2014
Amendment needed to be completed before Xurex filed for bankruptcy and should not
be signed on the day Xurex files for bankruptcy. Doc. #644, at 64; Doc. #686-32. The
Xurex board held a conference call to discuss the draft agreement, and Jensvold and
Giacomo participated in the call. Doc. #644, at 65; Doc. #647, at 176.
On September 23, 2014, Kaiser sent an email to Kraus providing the status of
the license discussions from Xurex’s side. Doc. #647, at 176; Doc. #686-33. 7 Kaiser
stated Giacomo Di Mase requested a conference call to discuss the license agreement,
but he had not received “input” from Jensvold or McKeon. Doc. #686-33. Kraus
testified at trial that he knew “conflicted directors were involved in reviewing, discussing,
and concurring in the 2014 amendment.” Doc. #647, at 179.
On September 24, 2014, Kaiser emailed Kraus, telling him the bankruptcy
attorney confirmed “any funds DuraSeal would provide to Xurex in excess of purchases
of raw materials or assets would not put DuraSeal in a preferential position as a
creditor.” Doc. #644, at 74-75; Doc. #647, at 187-89; Doc. #686-36. Kaiser further
stated: “As far as the risk of internal documentation being required by the trustee, [the
attorney] felt that such a request would only happen if dissident shareholders filed
against Xurex, or DuraSeal, or both claiming that the value of Xurex, and particularly it’s
[sic] IP, were extremely more valuable.” Doc. #644, at 73-74; Doc. #647, at 187-89;
Doc. #686-34; Doc. #686-36. Although at trial Kaiser did not recall why he asked the
bankruptcy attorney this question, Kaiser testified during his deposition that he asked
about internal documentation because he was concerned about potential litigation.
Doc. #644, at 73-74. In February 2016, more than a year after Xurex filed for
7
Kraus testified he did not receive Kaiser’s email because the email address to which
the communication was sent was not his. Doc. #647, at 175. After Plaintiff presented
evidence establishing Kraus, contrary to his testimony, used the email address he
claimed was not his, Kraus admitted he used the email address for a brief time before
changing the email address. Id. at 177-78, 197-98; see also Doc. #686-24.
15
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 15 of 33
bankruptcy, Kraus forwarded Kaiser’s email to Christine Brandow with DuraSeal,
stating, “I hope Len was right.” Doc. #644, at 88; Doc. #647, at 189.
On September 25, 2014, the 2014 Amendment was executed. Doc. #647, at
182, 187; Doc. #686-8. Kaiser signed the agreement as Xurex’s CEO. Doc. #686-8.
Kraus signed the agreement as DuraSeal’s CEO. Doc. #647, at 187; Doc. #686-8. In
addition to Kraus testifying his CEO title was “nominal” or ceremonial,” there was no
evidence that Kraus was DuraSeal’s agent when he signed the agreement. But there
was evidence that Kraus was working as a consultant for and was paid by Jose Di Mase
at the time he signed the 2014 Amendment. Although DuraSeal promised shareholders
in 2013 that all transactions between DuraSeal and Xurex would be reviewed by a third
party, no person outside of DuraSeal or Xurex reviewed the 2014 Amendment. Doc.
#643, at 180-81; Doc. #686-2, at 74; Doc. #686-3.
The 2014 Amendment continued to give DuraSeal an exclusive license to use
Xurex’s products in the oil and gas industry, but DuraSeal’s minimum purchase
requirements were eliminated, and revenue sharing was suspended. Doc. #647, at 9295, 98, 180-82. Among other things, the 2014 Amendment also gave DuraSeal
ownership of any improvements or modifications that DuraSeal made to Xurex’s
intellectual property and the right to manufacture Xurex products. Doc. #647, at 41-43,
84, 139-42, 179-85. Under the 2014 Amendment, DuraSeal had exclusive license to
most Xurex products but had no obligation to buy Xurex products. At trial, Kaiser
conceded Xurex derived no benefit from the 2014 Amendment; only DuraSeal
benefitted from the agreement. Doc. #644, at 68-69. Weeks after the 2014
Amendment was executed, Xurex filed a Chapter 7 bankruptcy.
At the close of trial, the Court instructed the jury about corporations, agents, and
an exception to the rule that a corporation cannot conspire with its employees or agents.
Specifically, the Court instructed on the following: “[a] corporation only acts through its
agents or employees”; a corporation’s agent or employee “may bind the corporation by
acts and statements made while acting within the scope of the authority delegated to
the agent by the corporation, or within the scope of his or her duties as an employee of
the corporation”; “an agent is a person or entity acting for and representing another by
the latter’s authority”; and “a corporation cannot conspire with its own employees or
16
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 16 of 33
agents unless the employee or agent has an independent personal stake in achieving
the object of the conspiracy.” Doc. #625, at 20. Accordingly, the jury considered and
determined whether Kraus was an agent, and if so, whether Kraus acted within the
scope of the authority delegated to him. The jury also examined and decided whether
Kraus had an independent personal stake in achieving the conspiracy’s objective.
The Court has considered the applicable and the evidence presented at trial.
When construing all factual issues in the light most favorable to the jury verdict, the
Court finds there was sufficient evidence for a reasonable jury to find in favor Plaintiff on
his civil conspiracy claim against Kraus.
(b)
Legality of Acts
Kraus also maintains he is entitled to judgment as a matter of law on Plaintiff’s
civil conspiracy claim “because there was no evidence, and the jury was not asked to
find, that Kraus engaged in any unlawful actions nor that he used ‘unlawful means to do
an act which is lawful.’” Doc. #679, at 15 (citation omitted). Kraus argues his overt acts
– drafting and executing a contract – are not unlawful; he was simply “doing his job.” Id.
at 15-17.
According to the Missouri Supreme Court, a civil conspiracy exists when “(1) two
or more persons; (2) with an unlawful objective; (3) after a meeting of the minds; (4)
committed at least one act in furtherance of the conspiracy; and (5) [the other party] was
thereby damaged.” W. Blue Print Co., LLC v. Roberts, 367 S.W.3d 7, 22 (Mo. 2012)
(citation omitted). These are the same elements Kraus stated during trial: “One, two or
more persons; two, with an unlawful objective; three, after meeting of minds; four,
commit to – commit at least one act in furtherance of the conspiracy; and, five, the
plaintiff is hereby injured.” Doc. #645, at 4. Yet, Kraus now claims in his pending
motion that Plaintiff had to establish Kraus’s actions were unlawful. Because Kraus’s
current argument was not presented during trial and actually diverges from his
argument at trial, the Court denies Kraus’s motion on this issue.
Even if the Court were to overlook Kraus’s change of argument, his motion fails
on substantive grounds. The parties dispute whether Plaintiff had to establish Kraus
had an unlawful objective, committed an unlawful act, and/or used unlawful means to
17
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 17 of 33
accomplish a lawful act. The Missouri Supreme Court resolves this dispute: “The gist of
the action is not the conspiracy, but the wrong done by acts in furtherance of the
conspiracy or concerted design resulting in damage to plaintiff.” W. Blue Print, 367
S.W.3d at 22 (citation omitted). “The term unlawful, as it relates to civil conspiracy, is
not limited to conduct that is criminally liable, but rather may include individuals
associating for the purpose of causing or inducing a breach of contract or business
expectancy.” Id. (quoting Lyn-Flex W., Inc. v. Dieckhaus, 24 S.W.3d 693, 700-01 (Mo.
Ct. App. 1999).
Plaintiff did not present evidence or argue Kraus signing the 2014 Amendment
was unlawful. Instead, Plaintiff presented evidence, as set forth supra, section
II(B)(2)(a), that Kraus and others agreed to eliminate the minimum purchase obligations
and/or create the rights to manufacture and produce Xurex products; Kraus agreed with
the purpose of eliminating of the minimum purchase obligations and/or create the rights
to manufacture and produce Xurex products; Kraus knew Kaiser had a fiduciary duty to
Xurex; Kraus knew the elimination of the minimum purchase obligations, the creation of
the rights to manufacture and produce Xurex products, and/or the 2014 Amendment
were/was not in Xurex’s best interests; in furtherance of the agreement, Kraus drafted
or executed the 2014 Amendment; the 2014 Amendment was executed; and Xurex was
damaged. See Doc. #625, at 30. 8 Accordingly, Kraus’s argument related to the legality
of his actions fails. The Court denies Kraus’s motion for judgment as a matter of law
related to Plaintiff’s civil conspiracy claim against Kraus.
(3)
Damages Caused by 2014-Related Conspiracy Claim
After trial, Plaintiff moved for entry of default judgment against DuraSeal Pipe,
DuraSeal Holding, HDI, and Jensvold on Counts VII, XI, and XII. Docs. #638-39.
Plaintiff asked for default judgment against the DuraSeal entities in the amounts of
$93,506,632.00 for their conduct associated with the 2012 Amendment and
$24,414,512.00 for their conduct leading up to and including the 2014 Amendment.
Doc. #638. Plaintiff also asked for default judgment against HDI and Jensvold in the
8
The jury was also instructed on what fiduciary duties are. Doc. #625, at 21.
18
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 18 of 33
amount of $24,414,522.00. Docs. #638-39. The Court granted Plaintiff’s motions but
deferred consideration of damages and requested the parties’ input on the issue of
damages. Doc. #659, at 7-8, 14-16.
After considering the parties’ filings and the applicable law, the Court issued an
Order clarifying the jury’s verdicts on damages and Plaintiff’s total damages recovery.
Doc. #664. Among other things, the Court determined the following:
The jury’s two damage awards compensated Plaintiff for damages
caused by different conduct by different people at different times based on
different transactions. Regarding Plaintiff’s civil conspiracy and breach of
fiduciary duty claims, which were based on conduct leading up to and
including execution and approval of the 2012 Amendment, the jury found
Jose Di Mase’s conduct directly resulted in damages to Plaintiff in the
amount of $93,506,632.00. Doc. #625, at 24-25, 32; Doc. #630, at 1-2.
Regarding Plaintiff’s other civil conspiracy and breach of fiduciary duty
claims, which were based on conduct leading up to and including the
execution of the 2014 Amendment, the jury found Jose Di Mase’s,
Giacomo Di Mase’s, Kaiser’s, and Kraus’s conduct damaged Plaintiff in
the amount of $24,414,522.00. Doc. #627, at 27-32; Doc. #630, at 3-4. In
neither verdict was the jury asked to consider the conduct at issue in the
other verdict.
Although the claims submitted to the jury related to contracts and
involve entering contracts, the claims were independent of Plaintiff’s
breach of contract claims. Contrary to Kraus’s argument, the jury’s finding
against Jose Di Mase in Verdict Form A did not equate to the jury finding
the 2012 Amendment was valid. The jury was not asked to make such a
finding. Moreover, the jury’s decision in Verdict Form A did not entitle
Defendants to enter civil conspiracies or breach fiduciary duties after the
2012 Amendment was executed.
However, Plaintiff’s damage theories for his civil conspiracy and
breach of fiduciary duty claims were identical to his breach of contract
damage theories. As Kraus points out, Plaintiff’s damage calculations,
which the jury awarded, incorporated lost profits and lost royalty income
that overlapped time periods. One damage calculation included lost
profits and lost royalty income from 2010 through 2018 and lost business
value from 2016 to 2018. The other damage calculation included, inter
alia, lost royalty income, lost profits, and lost fees from 2011 through 2022.
Consequently, Plaintiff is recovering separate damage awards that overlap
in part and seek the same types of relief (albeit in different amounts) for
the same injury. Plaintiff, of course, is not entitled to this. See EFCO
Corp., 219 F.3d at 742 (citation omitted).
The appropriate remedy is for this Court to enter a judgment on the
larger of the two amounts. See Landmark Infrastructure Holding, 933 F.3d
19
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 19 of 33
at 911-12; Structural Polymer Grp., 543 F.3d at 1000. Accordingly, the
Court enters judgment for Plaintiff in the total amount of $93,506,632.00
for his claims of civil conspiracy and breach of fiduciary duty. At Plaintiff’s
suggestion, the Court clarifies that Plaintiff’s total recovery for all claims,
including the claims tried to the jury and the claims on which the Court has
entered default judgment, is $93,506,632.00. Jose Di Mase, DuraSeal
Pipe, and DuraSeal Holdings are jointly and severally liable for the entire
amount of $93,506,632.00. HDI, Jensvold, Giacomo Di Mase, Leonard
Kaiser, and Lee Kraus are jointly and severally liable for $24,414,522.00
of the judgment amount.
Id. at 4-5.
Plaintiff’s pending motion reiterates the same arguments he raised in response to
the Court’s request for the parties’ input. Compare Doc. #661 with Doc. #679, at 18-23.
The Court stands by its prior decision (Doc. #664) and denies Kraus’s motion for
judgment as a matter of law with regard to Plaintiff’s damages theories.
(4)
Bootstrapped and Duplicative Claims
Kraus claims entitlement to judgment as a matter of law because Plaintiff’s
breach of fiduciary duty claims were improperly “bootstrapped” and duplicated the
breach of contract claims. “It is a well-settled principle that where a dispute arises from
obligations that are expressly addressed by contract, that dispute will be treated as a
breach of contract claim. In that specific context, any fiduciary claims arising out of the
same facts that underlie the contract obligations would be foreclosed as superfluous.”
Nemec v. Shrader, 991 A.2d 1120, 1129 (Del. 2010) (citations omitted). Breach of
fiduciary duty claims cannot be maintained in conjunction with breach of contract claims
if “the two claims overlap completely and arise from the same underlying conduct or
nucleus of operative facts.” Grunstein v. Silva, No. CIV.A. 3932-VCN, 2009 WL
4698541, at *6 (Del. Ch. Dec. 8, 2009) (citations omitted). To determine whether a
breach of fiduciary duty claim is duplicative of a breach of contract claim, “the principal
inquiry…is whether the fiduciary duty in the complaint arises from general fiduciary
principles or from specific contractual obligations agreed upon by the parties.” Id.
Kraus argues Plaintiff’s breach of fiduciary duty claims were “nothing more than
contractual-based conduct that improperly overlapped with and duplicated breach of
contract claims” and sought the same relief as his breach of contract claims. Doc.
20
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 20 of 33
#679, at 24-25. He argues that because Plaintiff’s breach of fiduciary duty claims are
duplicative of the contract claims, Plaintiff was barred from bringing the breach of
fiduciary duty claims. If Plaintiff’s breach of fiduciary duty claims are barred, Plaintiff
cannot maintain a civil conspiracy claim against Kraus because there is no underlying
tort. This is because a “[c]ivil conspiracy is not itself actionable in the absence of an
underlying wrongful act or tort.” Hamilton v. Spencer, 929 S.W.2d 762, 767 (Mo. Ct.
App. 1996) (citation omitted).
Plaintiff’s breach of fiduciary duty claims are not duplicative of his breach of
contract claims. When viewing the evidence in the light most favorable to the jury’s
verdict, the evidence established that those with fiduciary duties did not use the amount
of care an ordinarily careful and prudent would have used, disregarded their duties to
Xurex, were disloyal and/or did not act in good faith, failed to make decisions in Xurex’s
best interests, participated in conduct that harmed Xurex, and acted in their personal
interests. See supra, section II(B)(2)(a). Plaintiff’s breach of fiduciary duty claims did
not arise from the same facts as his breach of contract claims. Instead, his breach of
fiduciary duty claims depended on additional facts and were broader in scope than the
breach of contract claims. Further, general fiduciary principles, not the contracts at
issue, gave rise to those Defendants’ duties. Accordingly, the Court denies Kraus’s
motion for judgment as a matter of law with regard to his argument that the breach of
fiduciary duty claims were duplicative of the breach of contract claims.
III.
ALTERNATIVE MOTION FOR NEW TRIAL
A.
Standard
Rule 59(a) provides that the court may grant a new trial on some or all issues
after a jury trial “for any reason for which a new trial has heretofore been granted in an
action at law in federal court.” Fed. R. Civ. P. 59(a)(1)(A). A new trial under Rule 59 “is
warranted when the outcome is against the great weight of the evidence so as to
constitute a miscarriage of justice.” Bank of Am., N.A., v. JB Hanna LLC, 766 F.3d 841,
851 (8th Cir. 2014). In making this determination, the court relies on its own reading of
the evidence, including weighing the evidence and evaluating the witnesses’ credibility.
Lincoln Composites, Inc. v. Firetrace USA, LLC, 825 F.3d 453, 459 (8th Cir. 2016).
21
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 21 of 33
B.
Discussion
Kraus presents five issues in favor of a new trial: (1) admission of Plaintiff’s false
and confusing testimony; (2) instructional error; (3) evidentiary errors; (4) the jury’s
damages award; (5) inapplicability of “entire fairness”; (6) failure to issue a pretrial ruling
on whether business judgment rule or entire fairness applied; and (7) cumulative error.
(1)
Plaintiff’s Testimony
Kraus contends a new trial is warranted because the Court erred in admitting
Plaintiff’s false and confusing testimony that Kraus owed a fiduciary duty to Xurex. Doc.
#679, at 26-27. At trial, Kraus called Plaintiff as a witness. Doc. #647, at 100. During a
bench conference shortly after Plaintiff took the stand, the Court asked Kraus what he
intended to cover with Plaintiff. Doc. #647, at 102. Kraus sought to ask Plaintiff about
his investigation, Xurex product failures, evidence obtained after the lawsuit was filed,
and the nature of Plaintiff’s claim against him. Id. at 102-08. The Court prohibited
Kraus from asking about Plaintiff’s investigation, including the thoroughness thereof, or
seek Plaintiff’s comment on evidence. Id. at 104-08. Because Plaintiff serves as
Bankruptcy Trustee for Xurex, Plaintiff did not have first-hand knowledge; thus, the
Court prohibited Kraus from asking about information of which Plaintiff did not have firsthand knowledge. Id. at 107-08.
Immediately after the bench conference, Kraus asked Plaintiff if Kraus had a
fiduciary duty to Xurex. Id. at 108. Plaintiff’s counsel objected, but the Court allowed
Plaintiff to answer if he could. Id. Plaintiff responded, “As is set out in the complaint, it’s
the position that I take, Mr. Kraus.” Id. at 108. Kraus asked the question again, and
Plaintiff responded, “Yes, as set out in the complaint.” Id. Kraus then asked Plaintiff to
identify the paragraph in the Amended Complaint, presumably that alleged Kraus had a
fiduciary duty to Xurex, but the Court stopped Kraus’s question, stating, “[w]e’re not
going to go into that, Mr. Kraus. Let’s move on to your next question.” Id.
To support his motion for new trial, Kraus contends Plaintiff’s testimony coupled
with a comment made by Plaintiff’s counsel during closing argument and two references
in the jury instructions led the jury to mistakenly believe Kraus had a fiduciary duty to
Xurex. Doc. #679, at 26-30. During closing arguments, Plaintiff’s counsel, when
22
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 22 of 33
referring to the jury instruction defining fiduciary duty, stated, “they have to act in good
faith, and they can’t act for any purpose other than advancing the best interests of
Xurex and its shareholders.” Doc. #648, at 31. Kraus claims the reference to “they” is
overbroad and inaccurate because he had no fiduciary duty to Xurex.
With regard to the jury instructions, Kraus contends Instructions 1 and 29
contained incorrect information. Instruction No. 1, which was read before opening
statements, provided a brief summary of the matter. Doc. #625, at 1. In relevant part,
Instruction No. 1 stated the following:
This is a civil case brought by Plaintiff Jerald Enslein, who is the
Chapter 7 Trustee in the bankruptcy of Xurex, Inc., against Defendants
Jose Di Mase, Giacomo Di Mase, Joe Johnston, Lee Kraus, Leonard
Kaiser, Tristram Jensvold, DuraSeal Pipe Coatings Company LLC,
DuraSeal Holding S.r.L., and HDI Holding Development Investment, S.A.
for breach of fiduciary duty to Xurex, Inc. and conspiracy to breach
fiduciary duty to Xurex, Inc. The defendants deny the plaintiff’s
allegations. It will be your duty to decide from the evidence whether the
plaintiff is entitled to a verdict against the defendants.
Id. Regarding Instruction No. 29, Kraus points to the introductory sentence to the
verdict director, which states, “On Plaintiff’s claim against Lee Kraus for conspiracy to
breach fiduciary duties to Xurex related to….” Id. at 31. Kraus argues both instructions
suggested he owed a fiduciary duty to Xurex.
The Court first addresses Kraus’s argument that the Court erred in admitting
Plaintiff’s testimony that Kraus had a fiduciary duty to Xurex. First, it was Kraus who
elicited the testimony that was supposedly admitted in error. Still, once Plaintiff
answered Kraus’s question, Kraus did not ask the Court to strike the testimony. 9 “A
party may claim error in a ruling to admit or exclude evidence only if the error affects a
substantial right of the party and: (1) if the ruling admits evidence, a party, on the
record: (A) timely objects or moves to strike; and (B) states the specific ground, unless it
9
Kraus contends he “was not permitted to challenge” Plaintiff’s testimony with the
Amended Complaint. Doc. #679, at 27. Setting aside Kraus wanting to use allegations
to challenge Plaintiff’s testimony or correct the record, Kraus did not ask the Court – at
during his examination of Plaintiff or anytime thereafter – to correct Plaintiff’s testimony.
While Kraus contends Plaintiff’s counsel failed to correct the mistaken testimony, Kraus,
who now claims the admission of testimony was in error, did not correct the testimony
he elicited.
23
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 23 of 33
was apparent from the context….” Fed. R. Evid. 103(a); United States v. Yarrington,
634 F.3d 440, 447 (8th Cir. 2011). Because Kraus did not move to strike or otherwise
raise a dispute with Plaintiff’s testimony, he has not preserved the argument he asserts
in the pending motion.
Even if he preserved the argument, it still fails. Where the moving party
complains about an evidentiary ruling, the court must determine whether the “ruling was
so prejudicial as to require a new trial which would be likely to produce a different
result.” Moses.com Sec., Inc. v. Comprehensive Software Sys., Inc., 406 F.3d 1052,
1058-59 (8th Cir. 2005). “Unless justice requires otherwise, no error in admitting or
excluding evidence…is ground for granting a new trial….” Fed. R. Civ. P. 61.
Immediately after Plaintiff testified, Kraus took the stand, and within minutes of
beginning his testimony, Kraus declared, “I never had a fiduciary duty to Xurex.” Doc.
#647, at 115. To the extent Plaintiff’s testimony confused or misled the jury, any
misunderstanding was corrected by Kraus’s testimony. In addition, Plaintiff’s single
statement about Kraus having a fiduciary duty to Xurex, which was contrary to the other
evidence presented to the jury, was not so prejudicial as to require a new trial.
When considering Plaintiff’s testimony coupled with counsel’s statement during
closing argument and the allegedly “mistaken language” in two jury instructions, Kraus’s
arguments still fail. First, Kraus did not object to Plaintiff’s counsel’s reference to “they”
during his closing argument. Regardless, counsel referring to “they” when discussing
the jury instruction defining fiduciary duty did not indicate, in any way, that Kraus had a
fiduciary duty to Xurex. Instead, the instruction – and counsel’s reference thereto –
provided definitions for the jury when it considered the breach of fiduciary duty claims
against Jose Di Mase, Giacomo Di Mase, Johnston, and Kaiser. Counsel’s reference to
“they” in closing argument did not mislead the jury.
Regarding jury instructions, Kraus did not object to the “mistaken language” in
the two instructions, and thus, has not preserved his instructional error arguments. Fed.
R. Civ. P. 51(c). Regardless, neither Instruction No. 1 nor Instruction No. 29 contained
mistaken language. Instruction No. 1 provided a brief overview of this matter, including
the two types of claims Plaintiff alleged. Doc. #625, at 1. The instruction did not detail
which Defendant allegedly conspired and which allegedly breached his fiduciary duty.
24
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 24 of 33
Likewise, the introductory sentence to Instruction No. 29, the verdict director for
Plaintiff’s claim against Kraus, simply informed that the jury that it was to decide
Plaintiff’s claim against Kraus for “conspiracy to breach fiduciary duties to Xurex.” Id. at
31. The sentence does not state or suggest Kraus had a fiduciary duty to Xurex.
When considering Plaintiff’s testimony along with Plaintiff’s counsel’s use of the
pronoun “they” during closing arguments and the language used in two instructions, the
Court finds the testimony was not so prejudicial as to require a new trial. Further, the
exclusion of Plaintiff’s testimony would not have resulted in a different outcome in this
matter. Accordingly, the Court denies Kraus’s motion for new trial based on Plaintiff’s
testimony that Kraus had a fiduciary duty to Xurex.
(2)
Jury Instructions 10
Kraus moves for a new trial due to instructional error. A new trial can be granted
if there is instructional error that prejudices a party. McKay v. WilTel Commc’n Sys.,
Inc., 87 F.3d 970, 975 (8th Cir. 1996). “A judgment will be reversed on the basis of
instructional error only if the error affected the substantive rights of the parties. The test
is whether the instructions given, taken as a whole and viewed in the light of the
evidence and applicable law, fairly and adequately submitted the issues in the case to
the jury.” Gasper v. Wal-Mart Stores, Inc., 270 F.3d 1196, 1200 (8th Cir. 2001) (internal
citations and quotations omitted).
Kraus asserts Instruction No. 29 misapplied the law because the jury was
“empowered…to find that Kraus entered into a conspiracy and acted to further it solely
from drafting and executing the 2014 Amendment contract – which were two lawful
acts,” and the jury was not required “to find that any unlawful means were used by
Kraus to undertake the lawful acts.” Doc. #678, at 30-31. This argument fails for the
same reasons Kraus’s argument that he was entitled to motion for judgment as a matter
of law on Plaintiff’s civil conspiracy claim. See supra, section II(B)(2)(a).
10
This section addresses Kraus’s remaining arguments related to jury instructions. The
Court does not reiterate its discussion of alleged “mistaken language” in Instructions 1
and 29. In addition, most of the instructional errors raised in Kraus’s motion for new trial
were not raised by him during trial.
25
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 25 of 33
Kraus also claims Instruction No. 29 failed to require the jury to find involvement
of a third party in the conspiracy. During the instruction conference, Kraus argued the
jury instructions failed to address “if a third party was involved” in the civil conspiracy.
Doc. #647, at 13. After the instruction conference, the Court revised the jury
instructions to include changes suggested by the parties. Id. at 147. Those revisions
included an additional paragraph to Instruction No. 18:
In these instructions, you are told how the law of civil conspiracy
applies to this case. You are further instructed that a corporation cannot
conspire with its own employees or agents unless the employee or agent
has an independent personal stake in achieving the object of the
conspiracy. An agent is a person or entity acting for and representing
another by the latter’s authority.
Doc. #625, at 20. This paragraph in Instruction No. 18, along with Instruction No. 29,
largely incorporated the sole jury instruction that Kraus proposed. Doc. #589-1.
Nevertheless, Kraus contends “the jury should have been instructed to find and
identify that a third party was in fact involved with the conspiracy.” Doc. #691, at 29.
Again, Kraus relies on MHTC but as explained above, that case differs from the one
before the Court. See supra, section II(B)(2)(a). Additionally, Kraus points to no
authority supporting his position that a jury must find and identify a third party involved
in the conspiracy.
Kraus also claims the instructions were “confusing and inaccurate in other
respects.” Doc. #679, at 31. He argues Instructions 18 and 19 should have identified
that he only owed a fiduciary duty to DuraSeal. Kraus contends the fourth paragraph in
Instruction No. 29 “impos[ed] a confusing analysis,” was contrary to the law, and should
have required the jury to make an additional finding. Id. at 32. And Kraus asserts the
fifth paragraph of Instruction 29 failed to identify the specific unlawful act in which he
engaged or the unlawful means used to take a lawful act.
Finally, Kraus maintains the Court erred in failing to instruct the jury about the
business judgment. Apart from whether entire fairness or the business judgment rule
applied to the claim against Kraus, neither standard was at issue in the civil conspiracy
instruction. Unlike the breach of fiduciary duty verdict directors, the civil conspiracy
verdict director did not refer to “entire fairness” or ask the jury to make a finding about
entire fairness. Compare Doc. #625, at 24, 26-27, 29-30, with Doc. #625, at 31.
26
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 26 of 33
The Court finds the jury instructions incorporated the applicable law, fairly and
adequately submitted the issues to the jury, and to the extent any error occurred, the
error did not affect Kraus’s substantive rights. Accordingly, the Court denies Kraus’s
motion for new trial based on instructional error.
(3)
Admission of Evidence
Next, Kraus moves for a new trial based on evidentiary errors. “Unless justice
requires otherwise, no error in admitting or excluding evidence…is ground for granting a
new trial….” Fed. R. Civ. P. 61. As stated above, where the moving party complains
about an evidentiary ruling, the court must determine whether the “ruling was so
prejudicial as to require a new trial which would be likely to produce a different result.”
Moses.com, 406 F.3d at 1058-59.
Kraus argues the Court improperly excluded evidence about “his state of mind
and beliefs while working for DuraSeal in late 2013 and into 2014 while negotiating and
entering into the 2014 Amendment.” Doc. #679, at 34. He contends this evidence – the
Tenaris report, John Lowry’s statements, Kraus’s testimony about whether Xurex
products work, and the circumstances surrounding the indemnity agreement between
Kaiser and DuraSeal – was relevant and admissible.
(a)
Tenaris Report
During trial, the admissibility of the Tenaris report was discussed at length. Doc.
#643, at 39-44. Kraus’s pending motion reiterates the same arguments he made at
trial. The Court stands by its decision to exclude the Tenaris report and testimony about
the contents of the report. To the extent the Court erred in excluding the actual report,
the decision to exclude the report was not so prejudicial as to require a new trial that
would likely produce a different outcome.
(b)
Lowry’s Statements
Regarding John Lowry’s first statement, Giacomo Di Mase began to testify about
what John Lowry told him about the reason why John Appleton resigned from the Xurex
board. Doc. #644, at 16. The Court sustained Plaintiff’s hearsay objection. Id. Shortly
27
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 27 of 33
thereafter, Kraus obtained the information he sought when Giacomo Di Mase testified,
“Mr. Appleton resigned because he didn’t see a future in the company.” Id. at 17.
Regarding Lowry’s second statement, Kraus asked Giacomo Di Mase if Lowry
made a “comment that he was feeling blamed for the product.” Id. at 20. For Lowry’s
third statement, Giacomo Di Mase began to testify about something Lowry said. Doc.
#646, at 186. The Court sustained counsel’s hearsay objections to both statements.
Kraus argues Lowry’s statements were “intended to show the then-existing state of
mind of DuraSeal representatives based on what they were hearing and believing at the
time….” Doc. #679, at 35. These statements do not satisfy an exception to the hearsay
rule, and even if they did, it is unclear how the statements would have been relevant to
the civil conspiracy claim against Kraus. In any case, the exclusion of these statements
is not so prejudicial as to require a new trial. Moses.com, 406 F.3d at 1058-59.
(c)
Indemnity Agreement
Kraus argues the Court erred in prohibiting him from eliciting certain testimony
from Kaiser about his indemnity agreement with DuraSeal. When Kraus questioned
Kaiser about his indemnity agreement, Kaiser referenced a directors and officers
(“D&O) insurance policy. Doc. #644, at 48. The Court directed Kaiser not to testify
about whether there was insurance because it was not at issue. Id. At the bench
conference that followed, Kraus claimed there were differences between the 2012 and
2013 indemnification agreements, including that the D&O insurance policy was “directly
related” to the latter agreement. Id. at 49. The Court permitted Kraus to ask about the
indemnification agreement but prohibited him from asking about insurance. Id.
11
In the pending motion, Kraus claims testimony about the insurance policy “was
necessary to combat a misleading and erroneous interpretation of the agreement
advanced by Plaintiff.” Doc. #679, at 36. Although he was prohibited from discussing
11
Before trial, Plaintiff moved to exclude evidence about insurance with one limited
exception. In response, Kraus argued evidence about insurance should be permitted
because “Plaintiff spent a staggering amount of time and effort during discovery…about
insurance coverage,” and Plaintiff allowed Xurex’s D&O policy to expire under his
watch. The Court granted the motion in limine and prohibited the parties from
presenting evidence about D&O insurance policies. Doc. #511, at 18.
28
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 28 of 33
the D&O policy, Kraus was still able to elicit testimony about the differences between
the 2012 indemnification agreement and the 2013 indemnification agreement. Doc.
#644, at 11-14. Although Kraus claims he needed to correct Plaintiff’s misleading
comparisons between the two indemnification agreements, Kraus did not raise an
objection to Plaintiff’s supposedly misleading comparison between the agreements.
Doc. #643, at 174-76.
Regardless, Kraus does not establish D&O insurance is relevant – that is, he has
not shown D&O insurance “has any tendency to make a fact more or less probable than
it would be without the evidence,” and “the fact is of consequence in determining the
action.” Fed. R. Evid. 403. Even if it were relevant, any probative value would have
been substantially outweighed by the danger of unfair prejudice or confusion. Fed. R.
Evid. 403. Accordingly, the Court finds the exclusion of D&O insurance is not so
prejudicial as to require a new trial. Moses.com, 406 F.3d at 1058-59.
(4)
Award of Damages
Kraus argues a new trial is warranted because the jury awarded excessive and
unreasonable damages based on Robert Reilly’s testimony, which, according to Kraus,
should have been excluded. Kraus contends Reilly’s testimony should not have been
admitted because (1) his opinion as to damages caused by the 2014 Amendment
ignored and conflicted with the 2012 Amendment, (2) his opinion was “wildly speculative
and ignored commercial realities,” and (3) he ignored the language in the 2012
Amendment giving DuraSeal the right to terminate the agreement. Doc. #679, at 40-47.
Kraus, along with the other Defendants, raised these arguments in his Daubert motion,
which the Court denied. Doc. #356; Doc. #434-1, at 24-33. The Court will not repeat its
analysis here and stands by its prior decision.
In response to Kraus’s motion, Plaintiff highlights Kraus stipulated to the
admissibility of Reilly’s report, and thus, has waived his argument that Reilly’s testimony
should have been excluded. In addition, Plaintiff argues Kraus did not object to Reilly
testifying about how and why he included both penalties and minimum purchases in his
report. When he cross-examined Reilly, Kraus did not ask Reilly about his penalty
29
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 29 of 33
opinions. Finally, after the verdict was returned, Kraus did not raise an issue with the
jury’s damages award.
Parties’ agreements to waive evidentiary rules “are generally enforceable even
over a party’s subsequent objection.” United States v. Mezzanatto, 513 U.S. 196, 202
(1995) (citation omitted). As the Supreme Court noted, “evidentiary stipulations are a
valuable and integral part of everyday trial practice. Prior to trial, parties often agree in
writing to the admission of otherwise objectionable evidence, either in exchange for
stipulations from opposing counsel or for other strategic purposes.” Id. at 203. “[T]he
Federal Rules of Civil Procedure…appear to contemplate that the parties will enter into
evidentiary agreements during a pretrial conference.” Id. (citations omitted). “At any
pretrial conference, the court may consider and take appropriate action on…obtaining
admissions and stipulations about facts and documents to avoid unnecessary proof….”
Fed. R. Civ. P. 16(c)(2)(C). Because Kraus stipulated to the admissibility of Reilly’s
report before trial, he waived any subsequent objection to the report being admitted.
Likewise, Kraus’s failure to raise an objection to Reilly’s testimony at trial
prevents this Court from considering this basis of Kraus’s motion for new trial unless
there is plain error. McKnight v. Johnson Controls, Inc., 36 F.3d 1396, 1407-08 (8th Cir.
1994). The Court finds the admission of Reilly’s testimony did not constitute plain error.
Thus, Kraus’s objection to the admissibility of Reilly’s testimony is waived. See Waitek
v. Dalkon Shield Claimants Tr., 934 F. Supp. 1068, 1093 (N.D. Iowa 1996), aff’d, 114
F.3d 117 (8th Cir. 1997). Finally, Kraus did not raise an issue with regard to the jury’s
verdict during trial. For these reasons, Kraus’s motion for new trial based on Reilly’s
testimony being admitted is denied.
(5)
Entire Fairness Doctrine
Kraus argues he is entitled to a new trial because the entire fairness doctrine
does not apply to contract amendments. His argument, however, misses the point.
Plaintiff alleged a claim of civil conspiracy, not breach of fiduciary duty, against Kraus.
In the verdict director for this claim, there was no reference to entire fairness, and the
jury was not asked to make a finding about entire fairness. Doc. #625, at 31. Thus, if
and whether the entire fairness doctrine or the business judgment rule applies was not a
30
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 30 of 33
determination made by the jury. Accordingly, the Court denies Kraus’s motion for new
trial based on the purported application of the entire fairness doctrine.
(6)
Pretrial Decision Regarding Applicable Standard
Next, Kraus contends the Court erred in not issuing a decision before trial as to
whether the entire fairness doctrine or the business judgment rule applied. For the
same reasons stated supra, section III(B)(5) the Court denies Kraus’s motion for new
trial on this basis.
(7)
Cumulative Error
Finally, Kraus requests a new trial “based on the cumulative effect of the abovecited errors.” Doc. #679, at 52. Kraus provides no additional argument and cites to a
decision issued by the United States District Court for the Northern District of Illinois. Id.
Nonetheless, the Court finds this argument fails because the alleged errors, alone or
cumulatively, do not warrant a new trial because the outcome in this matter was not
against the “great weight of the evidence so as to constitute a miscarriage of justice.
Bank of Am., 766 F.3d at 851. Accordingly, the Court denies Kraus’s motion for new
trial based on cumulative error.
IV.
MOTION TO CERTIFY JUDGMENT
Also pending is Plaintiff’s motion to certify the judgment against Kraus in the
United States District Courts for the Districts of Kansas and Connecticut. Kraus
opposes Plaintiff’s motion.
“A judgment in an action for the recovery of money or property entered in
any…district court…may be registered by filing a certified copy of the judgment in any
other district…when the judgment has become final by appeal or expiration of the time
for appeal or when ordered by the court that entered the judgment for good cause
shown.” 28 U.S.C. § 1963. No appeal has been filed in this matter, and the time to file
an appeal has not run due to Kraus’s filing of a motion for judgment as a matter of law
or new trial. Fed. R. App. P. 4(a)(4)(A)(i), (v). For the Court to certify the judgment
against Kraus, there must be “good cause.” Plaintiff argues “good cause” exists for the
31
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 31 of 33
Court to certify the judgment because Kraus has assets in other district courts. Neither
party cites to an Eighth Circuit decision addressing this issue.
Courts disagree as to whether a motion to register a judgment before an appeal
has been filed is premature. For example, the United States District Court for the
Eastern District of Missouri determined such a motion could only be filed during the
pendency of an appeal. Educ. Emps. Credit Union v. Mut. Guar. Corp., 154 F.R.D. 233,
235 (E.D. Mo. 1994). But other courts, such as the United States District Court for the
Eastern District of Pennsylvania, have granted such motions before an appeal was filed.
Great Am. Ins. Co. v. Stephens, No. CIVA 04-3642, 2006 WL 2349991, at *2 (E.D. Pa.
Aug. 11, 2006).
In addition, because the statute does not define “good cause,” courts are split on
what constitutes “good cause.” The Court notes most courts have determined the
absence of assets in the judgment jurisdiction and presence of assets elsewhere
sufficiently establish good cause under section 1963. See Columbia Pictures
Television, Inc. v. Krypton Broad. of Birmingham, Inc., 259 F.3d 1186, 1197-98 (9th Cir.
2001); Chicago Downs Ass’n, Inc. v. Chase, 944 F.2d 366, 371-72 (7th Cir. 1991);
Creative Am. Educ. v. Learning Experience Sys., LLC, No. 914CV80900, 2015 WL
5118111, at *2 (S.D. Fla. Sept. 1, 2015); 3M Co. v. Mohan, No. CIV. 09-1413, 2011 WL
2441213, at *1 (D. Minn. June 17, 2011); Hicks v. The Cadle Co., No. 04CV02616,
2009 WL 189938, at *2 (D. Colo. Jan. 27, 2009). While the “absence of assets in the
judgment forum, coupled with the presence of substantial assets in the registration
forum” may establish good cause, some courts have held registration of the judgment
“should be deferred until after the judgment debor refuses or fails to post a supersedeas
bond.” See Cheminova A/S v. Griffin L.L.C., 182 F. Supp. 2d 68, 80 (D.D.C. 2002)
(citations omitted). Finally, some courts have concluded the presence of assets in other
jurisdictions alone is not sufficient to establish good cause. See Blaine Larsen
Processing, Inc. v. Hapco Farms, Inc., No. CIV.97-0212, 2000 WL 35539979, at *14-15
(D. Idaho Aug. 9, 2000).
In this matter, Kraus does not have assets in Missouri. His assets are in the
United States District Courts for the District of Kansas and the District of Connecticut.
The Court provided Kraus the opportunity to stay execution of the judgment so long as
32
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 32 of 33
Kraus obtained and filed a $2,000,000 bond and consented to the tolling of the statute
of limitations applicable to fraudulent transfer claims asserted by Plaintiff. Doc. #683.
Kraus did not file a bond, and the time for doing so has passed. Id. In addition, if the
Court does not certify the judgment, it is unknown what would occur to Kraus’s assets in
the meantime. Based on these facts, the Court finds Plaintiff has established good
cause to certify the judgment. Therefore, the Court grants Plaintiff’s motion to certify the
judgment in the United States District Courts for the District of Kansas and the District of
Connecticut.
V.
CONCLUSION
For the foregoing reasons, the Court denies Defendant Kraus’s motion for
judgment as a matter of law and his alternative request for new trial, and the Court
grants Plaintiff’s motion to certify the judgment against Defendant Kraus in the United
States District Courts for the Districts of Kansas and Connecticut.
IT IS SO ORDERED.
DATE: July 31, 2020
/s/ Ortrie D. Smith
ORTRIE D. SMITH, SENIOR JUDGE
UNITED STATES DISTRICT COURT
33
Case 4:16-cv-09020-ODS Document 696 Filed 07/31/20 Page 33 of 33
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?