CEVDET AKSUT VE OGULLARI KOLL. STI v. CAVUSOGLU
OPINION. Signed by Judge William J. Martini on 1/15/16. (gh, )
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CEVDET AKSÜT VE OĞULLARI
Civ. No. 12-2899 (WJM)
HUSEYIN T. CAVUSOGLU,
WILLIAM J. MARTINI, U.S.D.J.
This matter comes before the Court on the parties’ in limine motions. For
the reasons set forth below, the Court GRANTS Cevdet Aksut Ve Ogullari Koll,
Sti’s (“Plaintiff”) motion to preclude the testimony of a Natural Food Source
corporate representative and DENIES the remainder of Plaintiff’s motions. Also,
the Court GRANTS Huseyin Cavusoglu’s (“Defendant”) motion to preclude any
testimony or evidence regarding Defendant’s alleged re-entry into the food import
business, GRANTS in part and DENIES in part Defendant’s motion to preclude
Plaintiff from seeking damages not sought in the Complaint, and DENIES the
remainder of Defendant’s motions.
Because the Court writes this Opinion for the benefit of the parties only, it
will not describe the factual and procedural background of this case at length. This
is a civil case (the second of three) brought by Plaintiff, a Turkish corporation, to
recover payment for a shipment of exported food commodities. The first case was
settled between the Plaintiff and HGC, Defendant’s company. See Cevdet Aksut
Ve Ogullari Koll, Sti’s v. HGC Commodities Corporation, et al. (“Cevdet I”), No.
10-CIV-2750 (WJM), ECF No. 28. However, shortly after the settlement and prior
to payment of the agreed-upon sum, Defendant allegedly dissolved HGC.
Consequently, pursuant to the settlement agreement, judgment in the full amount
of the claim was entered against HGC. See Cevdet I, ECF No. 29. Plaintiff then
brought the instant action against Defendant for fraud, piercing the corporate veil,
breach of fiduciary duty, negligent misrepresentation, unjust enrichment, and
conversion. The parties cross-moved for summary judgment. In an opinion and
order dated July 14, 2015, the Court denied Plaintiff’s motion for summary
judgment and granted in part and denied in part the Defendant’s motion,
dismissing the breach of fiduciary duty, negligent misrepresentation, unjust
enrichment, and conversion claims. (See Docket Nos. 74, 75.) Only the fraud and
piercing the corporate veil claims are remaining for trial. Id. Subsequently,
pursuant to a Joint Pre-Trial Order, (Docket No. 86), the parties filed the instant in
limine motions to preclude certain arguments, evidence, and testimony at trial.
i. Preclude Plaintiff from Seeking Damages Not Sought in the
Defendant argues that Plaintiff should be precluded from presenting
evidence or seeking recovery for punitive damages or attorneys’ fees at trial, since
these were not alleged in the Complaint. The Joint Pre-Trial Order notes that
Plaintiff intends to seek punitive damages and attorneys’ fees.
In Seibert v. Nusbaum, Stein, Goldstein, Bronstein & Compeau, P.A., the
Third Circuit held that “a plaintiff cannot pursue a claim for punitive damages
where . . . no hint of such a claim was contained in the pleadings or the pretrial
order.” 167 F.3d 166, 171 (3d Cir. 1999); see also Born v. Monmouth Cty. Corr.
Inst., 458 F. App'x 193, 195 (3d Cir. 2012) (noting that pretrial memorandum did
not mention punitive damages and that plaintiff did not request punitive damages
until after the close of evidence at trial). Here, since the Joint Pre-Trial Order
clearly states that Plaintiff intends to seek punitive damages, pursuing such
recovery at trial is not precluded.
However, the Third Circuit has held that attorneys’ fees constitute special
damages and must be specifically pleaded, pursuant to Rule 9(g) of the Federal
Rules of Civil Procedure (“FRCP”). See Maidmore Realty Co. v. Maidmore Realty
Co., 474 F.2d 840, 843 (3d Cir. 1973). Plaintiff failed to plead attorneys’ fees in
its Complaint and does not argue the issue in its opposition brief.
Accordingly, the Court will allow Plaintiff to seek punitive damages at trial,
but will preclude the seeking of attorneys’ fees.
ii. Preclude Plaintiff from Calling Robin Cavusoglu as a Witness at
Defendant asserts that Plaintiff did not include Ms. Cavusoglu in its Rule 26
disclosures nor in its interrogatory responses, and did not identify her as a witness
prior to the Joint Pre-Trial Order. Thus, Defendant argues that Plaintiff is
precluded from calling her as a witness at trial pursuant to FRCP 37(c)(1).
Moreover, Defendant states that Ms. Cavusoglu has the right not to testify under
the spousal privilege.
While Federal common law and New Jersey law recognize a privilege for
martial communications in civil and criminal cases, one spouse’s testimony
regarding the acts of the other spouse is not privileged. See Andrews v. Holloway,
256 F.R.D. 136, 147 (D.N.J. 2009). Plaintiff states that the questioning of Ms.
Cavusoglu will be limited to “personal knowledge of facts related to the claims and
defenses” in this case, including her knowledge of transfers evidenced in the HGC
bank statements to either Ms. Cavusoglu or companies she owned or controlled.
(Plaintiff’s Memorandum of Law in Opposition to Defendant’s Motion In Limine
(“Pl. Opp.”) at 5, ECF No. 101.) Such questioning by the Plaintiff would fall
outside the spousal privilege.
As for the untimely disclosure, the Third Circuit has set forth four factors to
determine whether to exclude or permit a witness’ testimony: (1) the prejudice or
surprise to the party against whom the evidence is offered; (2) the ability of the
injured party to cure the prejudice; (3) the extent to which admission of the late
evidence would disrupt the orderly and efficient trial of the case; (4) bad faith or
willfulness in failing to comply with the court’s orders; and (5) the importance of
the evidence. See Meyers v. Pennypack Woods Home Ownership Ass'n., 559 F.2d
894, 904 (3d Cir. 1977). Ms. Cavusoglu entered this proceeding late (in April
2014) in order to quash subpoenas served by Plaintiff on two banks. (See Docket
No. 33.) Ms. Cavusoglu stated that she had sole possession of the accounts held in
these banks, and that her husband had no signatory authority over them. (See id.)
Plaintiff argues that they thus learned of Ms. Cavusoglu’s participation in the
alleged “fraud” only “at the very end of discovery.” (Pl. Opp. at 4.) Based on this,
the Court finds that Plaintiff’s failure to include Ms. Cavusoglu in its Rule 26
disclosures was not as a result of bad faith or willfulness. In addition, any
prejudice or surprise to the Defendant appears minimal, since he would have been
well aware of who had possession of the relevant accounts as well as his wife’s
participation in the alleged transactions. Lastly, the evidence itself appears
important to the merits of Plaintiff’s claims. Consequently, the Court will allow
Plaintiff to call Ms. Cavusoglu as a witness, provided that such testimony is strictly
limited to the issue of veil piercing in the instant trial and Mr. Cavusoglu’s actions
in regards to HGC and not as to the issues underlying the related pending matter
before this Court.
iii. Preclude any Testimony or Evidence Regarding Prior Lawsuits or
Other Entities in Which Defendant Has Held an Ownership Interest
Defendant asserts that Plaintiff should be precluded from introducing any
evidence of prior lawsuits against Defendant because: (i) these were settled years
before the transaction that gave rise to Plaintiff’s claims; (ii) the suits did not
involve an adjudication on the merits; and (iii) there were no admissions of
liability. In particular, Defendant requests that the Court preclude Plaintiff from
offering exhibits from these lawsuits, including the complaint, settlement
agreements, or judgments. Similarly, Defendant argues that any evidence
regarding other entities in which he had an interest are of limited relevance and any
testimony or evidence regard them would be more prejudicial than probative.
Plaintiff states that it intends to introduce evidence of the prior settlements
and judgments and the other entities for two purposes: (i) to demonstrate that
Defendant used HGC’s money to pay-off obligations other creditors obtained
against him personally and his other companies—failing to respect corporate
formalities—and (ii) that Defendant was aware of and omitted mentioning the
Great Lakes judgment against him when he told Plaintiff that “he did a lot of
business with Great Lakes”—thus inducing Plaintiff to do business with him.
In light of the above, Defendant’s argument that Rule 404(b) of the Federal
Rules of Evidence (“FRE”) prohibits introducing the prior lawsuits as well as the
other entities is not on point. Plaintiff does not intend to introduce such testimony
or evidence on a propensity basis. In fact, it appears that for Plaintiff’s purposes
there does not need to be any substantial discussion of the facts surrounding these
settlements or judgments, merely that Defendant and his other companies were
indebted to creditors and that he used HGC’s funds to pay these creditors.
Similarly, any evidence or testimony regarding these other entities can be limited
to their interactions with HGC where violations of HGC’s corporate formalities
occurred—including, for example, paying these entities’ financial obligations.
Accordingly, the Court will allow Plaintiff to introduce at trial the prior lawsuits
and the other entities in which Defendant has held an ownership interest, provided
that, as noted above, Plaintiff appropriately limits such evidence or testimony.
In regards to the Great Lakes judgment, Plaintiff aims to introduce this
judgment to establish that Defendant made a material omission when he stated that
he “did a lot of business with Great Lakes,” and that Plaintiff relied on this
material omission when it decided to do business with him. See Scholar Intelligent
Sols., Inc. v. New Jersey Eye Ctr., P.A., No. CIV.A. 13-642 SRC, 2013 WL
2455959, at *2 (D.N.J. June 5, 2013) (stating that in order to establish fraud a
plaintiff must demonstrate that (1) defendant made a material misrepresentation or
omission of fact; (2) knowing the misrepresentation to be false or the omission to
be material, and intending the other party to rely on it; and (3) the other party did
in fact rely on the misrepresentation or omission to its detriment.) This is a nonpropensity purpose for introducing the settlement. However, to the extent
Defendant argues that it would be hard for a jury to separate this prior judgment—
for which the Plaintiff will have to introduce some surrounding facts in order to
make it relevant—from the claim asserted in his action, a limiting instruction by
the Court to the jury, stating that they should consider this evidence only for the
limited purpose of whether the Defendant fraudulently induced Plaintiff to do
business with him, will address that concern.
Therefore, the Court denies Defendant’s motions to preclude testimony or
evidence regarding prior lawsuits or other entities.
iv. Preclude any Testimony or Evidence Regarding Personal or
Corporate Bank Accounts Before September 2009 or After March
Defendant asserts that Plaintiff seeks to introduce financial records of HGC
and Defendant from 2007 to 2011 (the four years surrounding the alleged
fraudulent transaction). Defendant argues that the evidence is not relevant to the
Plaintiff’s claims, Fed. R. Evid. 401, and will only serve to confuse the jury, Fed.
R. Evid. 403. Defendant goes on to state that such evidence is, in fact, more
applicable to the other pending case between the parties, which seeks recovery
under the Uniform Fraudulent Transfer Act. Plaintiff argues, in turn, that the bank
statements prior to the transaction can demonstrate the fraud claim and the
statements after the transaction are relevant to the veil piercing claim.
Plaintiff’s argument has merit, though the introduction of statements for two
years prior to the transaction seems excessive. Consequently, Plaintiff is limited to
introducing bank statements for three months prior to the transaction, as this will
be sufficient to demonstrate any fraud by the Defendant (i.e. that he never intended
to pay Plaintiff for the goods) and will limit any potential jury confusion. The
financial statements after the transaction would be relevant to the veil piercing
claim, including Defendant’s alleged attempt to evade payment while the Cevdet I
suit was being litigated and after the settlement agreement between the parties.
Moreover, Defendant’s argument to exclude the later statements (post-March
2010) are not on point, as these records can demonstrate that in transferring money
from HGC to his wife and children, Defendant siphoned funds from the
corporation. See Craig v. Lake Asbestos of Quebec, Ltd., 843 F.2d 145, 150 (3d
Cir. 1988) (noting that one of the factors to be considered in order to pierce the
corporate veil is whether there was “siphoning of funds of the corporation by the
dominant stockholder.”) Thus, Plaintiff may present all of the pertinent postMarch 2010 transactions that demonstrate an abuse by Defendant of the corporate
v. Preclude any Testimony or Evidence Regarding the Settlement
Reached with Sunrise Commodities
Defendant argues that the settlement between Sunrise Commodities, HGC,
and the Defendant’s other entities (the “Sunrise Settlement”) is not relevant to the
instant action. However, Plaintiff states that it plans to introduce this settlement in
order to demonstrate Defendant’s failure to abide by corporate formalities, as he
executed a settlement agreement on behalf of HGC after he had allegedly dissolved
the entity. Furthermore, Plaintiff argues that money from this settlement was
transferred to other entities owned by the Defendant as well as to his family,
demonstrating siphoning of funds. See Lake Asbestos, 843 F.2d at 150. In light of
Plaintiff’s arguments, the Court finds that the Sunrise Settlement is relevant to
Plaintiff’s veil piercing claim and that it is more probative than prejudicial. See
Fed. R. Evid. 401; 403. The Court will, thus, allow its introduction to the extent
that it satisfies any authentication or hearsay issues. However, Plaintiff should
limit any evidence or testimony regarding the Sunrise Settlement only to HGC’s
vi. Motions Regarding Defendant’s Alleged Re-Entry into the Food
Plaintiff does not state why evidence or testimony regarding Defendant’s
alleged re-entry into the food import business is relevant to its fraud or piercing the
corporate veil claims. In tandem, Plaintiff argues in its own in limine motion that
the Defendant should be precluded from calling a Natural Food Source corporate
representative (Mr. Murat), partly asserting that such a witness would not be
relevant. Mr. Murat is intended to rebut Plaintiff’s contention as to Defendant’s
alleged re-entry. Since Plaintiff fails to demonstrate how this issue is relevant to
its claims, the Court will preclude any testimony regarding Defendant’s alleged reentry. Consequently, on Defendant’s own admission, the testimony of Mr. Murat is
thus irrelevant and the Court will grant Plaintiff’s motion to preclude the calling of
a Natural Food Source corporate representative.
i. Preclude Testimony That Defendant Capitalized HGC with Funds
Obtained from a Mortgage on His New Hampshire Home
Plaintiff argues that the Defendant has provided conflicting information
regarding how HGC was capitalized. In addition, Plaintiff contends that
Defendant’s failure to produce relevant documents regarding his mortgage
precludes such testimony. The Court finds that it would be best to have the jury
resolve any issues of conflicting testimony at trial. Besides, allowing the Plaintiff
to probe the lack of evidence regarding the mortgage on cross-examination would
permit the jury to properly evaluate the credibility of this defense. Accordingly,
the Court denies Plaintiff’s motion to preclude such testimony.
ii. Preclude the Raising of Allocation of Fault Defense
Plaintiff contends that Defendant belatedly raised an “allocation of fault”
defense in the Joint Pre-Trial Order. Defendant argues that his Sixth Affirmative
Defense adequately signaled his intent to argue this defense at trial. The Sixth
Affirmative Defense states, “Plaintiff is estopped from recovering because of its
own conduct, actions, omissions, promises and/or representations.”
The principal issue is whether Plaintiff’s Sixth Affirmative Defense
provided notice “at a pragmatically sufficient time” so as not to prejudice the
Plaintiff. Charpentier v. Godsil, 937 F.2d 859, 864 (3d Cir. 1991). Defendant’s
language does not track the New Jersey statute of comparative negligence he seeks
to avail. See N.J. Stat. Ann. § 2A:15-5.1 (2015). Moreover, Defendant’s claim
that his “estoppel” language was sufficient notice is not entirely availing.
Nonetheless, the Third Circuit has “taken a more forgiving approach to parties who
fail to raise affirmative defenses in an answer, as courts have held that the failure
to raise an affirmative defense by responsive pleading or appropriate motion does
not always result in waiver.” Sultan v. Lincoln Nat. Corp., No. CIV 03-5190
(JBS), 2006 WL 1806463, at *13 (D.N.J. June 30, 2006). While raising an
affirmative defense even at summary judgment is “not the most appropriate,” “in
cases in which the plaintiff was not prejudiced, [the Third Circuit has] held that
there was no waiver.” Eddy v. Virgin Islands Water and Power Authority, 256
F.3d 204, 209 (3d Cir. 2001).
Defendant argues that he raised this affirmative defense in his pre-trial
submissions, though he provides no citations for support. However, by Plaintiff’s
own admission, this defense was raised in the Joint Pre-Trial Order, providing
Plaintiff with “sufficient time” to respond without prejudice. See Anderson v.
United States, No. CIV. A. 93-589 MMS, 1996 WL 490262, at *9 (D. Del. Aug.
23, 1996) (stating that “the issue of plaintiff’s contributory negligence, litigated by
the express consent of the parties pursuant to the Pre-Trial Order will be treated in
all respects as it had been raised in the pleadings” and finding no prejudice.)
Lastly, the language in Defendant’s Sixth Affirmative Defense intimated that a
defense of comparative negligence could be raised, thus further mitigating any
potential prejudice to the Plaintiff. See De La Vera v. Holguin, No. CIV.A. 144372 MAS, 2014 WL 4979854, at *9 n. 4 (D.N.J. Oct. 3, 2014) (finding that where
petitioner knew prior to hearing which affirmative defenses would be raised and
was “well aware of the potential” of one or more of these defense to be raised,
there was no prejudice).
Therefore, the Court will deny Plaintiff’s motion and will allow the
Defendant to present such a defense at trial.
iii. Preclude Testimony of Aret Museoglo and Barbaros Karaahmet
Lastly, in a letter to the Court on December 3, 2015, the Defendant stated
that he will not be calling Aret Museoglo and Barbaros Karaahmet as witnesses.
(Docket No. 106.) Consequently, Plaintiff’s in limine motions as to these two
individuals are denied as moot.
For the above reasons, the Court GRANTS Plaintiff’s in limine motion to
preclude testimony of a corporate representative from Natural Food Source and
DENIES Plaintiff’s other in limine motions. In turn, the Court GRANTS in part
and DENIES in part Defendant’s motion to preclude Plaintiff from seeking
damages not sought in the Complaint, GRANTS the motion to preclude any
testimony or evidence regarding Defendant’s alleged re-entry into the food import
business, and DENIES Defendant’s remaining motions. An appropriate order
/s/ William J. Martini
WILLIAM J. MARTINI, U.S.D.J.
Date: January 15, 2016
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