Innes v. Howell Corp.

• Citation: 76 F.3d 702
• Decision Date: 16 February 1996
• Docket Number: No. 94-5827,94-5827
• Parties: Shirley J. INNES, Executrix of the Estate of John J. Innes, Plaintiff-Appellant, v. HOWELL CORPORATION; Lake Coal Company, Inc.; Paul N. Howell; Steven K. Howell; Forrest E. Cook; Cook, Wright & Taylor, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 702

76 F.3d 702

Shirley J. INNES, Executrix of the Estate of John J. Innes Plaintiff-Appellant, v. HOWELL CORPORATION; Lake Coal Company, Inc.; Paul N Howell; Steven K. Howell; Forrest E. Cook Cook, Wright & Taylor, Defendants-Appellees.

No. 94-5827.

United States Court of Appeals Sixth Circuit.

Argued Oct. 20, 1995.

Decided Feb. 16, 1996.

Charles W. Kenrick (argued), Dickie, McCamey & Chilcote, Pittsburgh, PA, for Innes.

Forrest E. Cook, Cook, Wright & Taylor, Whitesburg, KY, Ronald L. Green (argued), Boehl, Stopher & Graves, Lexington, KY, for Forrest E. Cook, Cook, Wright & Taylor.

Stephen E. Embry, Brown, Todd & Heyburn, Louisville, KY, Keith Moorman, Brown, Todd & Heyburn, Lexington, KY, Eugene B. Wilshire, Jr. (argued), Wilshire & Scott, Houston, TX, for Howell Corp., Lake Coal Co., Inc., Paul N. Howell, Steven K. Howell.

Before: KRUPANSKY, BATCHELDER, and MOORE, Circuit Judges.

MOORE, J., delivered the opinion of the court, in which KRUPANSKY, J., joined. BATCHELDER, J. (p. 716), delivered a separate concurring opinion.

MOORE, Circuit Judge.

John Innes was fired as President of Lake Coal Company, Inc. ("Lake Coal"), after it was discovered that he had personally received payments from an independent contractor of Lake Coal. Officers of Howell Corporation, Lake Coal's parent, alleged that Innes had received "kickbacks." Innes claimed that these were "consulting fees," for which he had received express consent from Howell Corporation. Each side filed suit against the other--Howell Corporation for breach of fiduciary duty, Innes for wrongful discharge. After seven years of litigation culminating in a jury trial, judgment was entered in favor of Howell Corporation. Innes's executrix now appeals several of the district court's rulings relating to discovery, witness testimony, jury instructions, and the constitutionality of Kentucky's survival statute. For the reasons that follow, we affirm in all respects.

I. BACKGROUND

From 1978 to 1986, John Innes was the vice-president of Howell Corporation and president of Lake Coal, Howell Corporation's subsidiary. Toward the end of this period, a transaction took place between Lake Coal and one of its independent contractors, Bright Coal Company ("Bright Coal"), in which Lake Coal was to receive some of Bright Coal's real property in exchange for relieving Bright Coal of its substantial debts (the "Big Branch transaction"). Innes played a key role in this deal, which allowed ailing Bright Coal to remain solvent. In addition, Innes assisted one of Bright Coal's principals, Jim Hogg, in setting up a new company called Commerce Coal, which would continue to perform mining services for Lake Coal after the Big Branch transaction was completed. All parties agree that Innes's efforts saved Bright Coal from bankruptcy. In return for Innes's assistance, Jim Hogg arranged for Commerce Coal to pay Innes $100,000 in numerous installments.

According to defendants, when Steven Howell, president of Howell Corporation, learned of these payments--through investigations by Forrest Cook, Lake Coal's counsel--he confronted Innes with the information, and Innes admitted to everything. Steven Howell fired Innes, stating that receipt of the payments evinced a blatant conflict of interest. Innes, on the other hand, argues that Paul Howell, the chair of Howell Corporation and Steven Howell's father, affirmatively consented to Innes's receipt of these "consulting fees" while the two were vacationing together in Jamaica. Innes's employment at Howell Corporation and Lake Coal was on an at-will basis, and so his claim is based on the theory that Paul Howell's assurances orally modified his employment agreement with the companies. Paul Howell denies that any such oral modification was ever given.

Howell Corporation and Lake Coal first sued Innes in the Southern District of Texas, alleging civil RICO violations, civil conspiracy, and a breach of fiduciary duty. Jurisdiction was founded on diversity of citizenship. Innes responded with numerous counterclaims in Texas and then filed his own action in the Eastern District of Kentucky, raising even more claims against Howell Corporation, Paul Howell, Steven Howell, Lake Coal, Forrest Cook, Cook's law firm, and other individuals as well. The cases were consolidated in Pikeville, Kentucky in 1988, and then extensive discovery took place over five years.

In 1992, the magistrate judge in Pikeville issued his proposed findings of fact and recommendation in response to motions on both sides for summary judgment. He recommended granting summary judgment on most of the claims and counterclaims, which pared the complaints on both sides to just a few issues. After objections were filed, the district judge accepted the bulk of the magistrate judge's recommendations, rejected a few, and then in August set final pretrial deadlines. One of the deadlines was for discovery to be completed by October 15, 1993. Another was for submission of exhibit lists, witness lists, pretrial memoranda, and proposed jury instructions to the court on December 27, 1993, one week before the final pretrial conference.

The defendants-appellees fall into two groups: the Howells (Howell Corporation, Paul Howell, Steven Howell, and Lake Coal) and Cook (Forrest Cook and his law firm, Cook, Wright & Taylor). Innes had brought a legal malpractice claim against Cook, alleging that Cook's investigations of Innes constituted a conflict of interest, and Cook therefore spent much of the second half of 1993 attempting to discover the names of Innes's prospective expert witnesses and the substance of their testimony. In response to Cook's interrogatories, Innes stated that the request for information regarding expert witnesses was "premature," and that he would not have to respond until December 27, 1993, the date set by the district court for the submission of witness lists. Cook filed a motion to compel answers on October 15, 1993, the discovery deadline, and the district court granted the motion, ordering that Innes answer by October 22. Innes did finally respond to the new deadline, naming two potential experts, but his answers did not give any indication of the opinions his experts would give, as required by Rule 26 of the Federal Rules of Civil Procedure. Moreover, Innes appended a short caveat at the end of his response:

John J. Innes reserves the right to supplement these interrogatory responses up to the time of trial. In this regard, Mr. Innes may be adding the names of additional lay and expert witnesses and may be expanding the content and scope of designated expert testimony. This testimony will likely include the name of a law professor and/or practicing attorney who has expertise in the Code of Professional Responsibility and other legal standards that apply to Forrest Cook's conduct in this case.

Cook filed a motion to strike, "or alternatively, to limit experts," on November 3, 1993. On November 30, before the trial court had ruled on the motion, Cook also moved for summary judgment, arguing that Cook had not been Innes's attorney, and that Innes had not produced any expert to counter Cook's expert's opinions. At this point, trial was still set for January 1994, and Cook had not yet been furnished with any information regarding Innes's legal malpractice experts. At the last minute, Innes responded to Cook's motion on December 16, 1993 by producing a law professor, John Burkoff, who rebutted Cook's evidence in an affidavit. This was enough to create a genuine issue of material fact for the district court, and the summary judgment motion was denied.

A snowstorm resulted in postponement of the jury trial to May 9, 1994. Three weeks before that, on April 18, Cook reminded the district court at a pretrial conference that the motion to strike had still not been ruled upon. After hearing arguments by the parties, the court sustained the motion, striking Innes's "additional expert," John Burkoff. Plaintiff filed a motion for reconsideration, which was denied.

During the postponement of the jury trial, John Innes died, and his wife Shirley took over as plaintiff on behalf of his estate. On the first official day of trial, the district court granted summary judgment in favor of the Howells on Innes's slander per se claim, citing KRS § 411.140's provision that slander and libel claims do not survive the death of a party. Ky.Rev.Stat.Ann. § 411.140 (Baldwin 1991). Plaintiff Shirley Innes objected that KRS § 411.140 was unconstitutional, but the district court rejected this argument.

Before trial, the district court had also made other rulings regarding the evidence to be presented. The court decided that testimony regarding Innes's psychological condition would be excluded, even though plaintiff protested that it was necessary to show the extent of tort damages. The court ruled instead that plaintiff's claim was essentially "a breach of contract action," and so psychological testimony would be irrelevant. In addition, the court excluded the testimony of Innes's "headhunter"/"psychologist," Michael Moran, regarding allegedly slanderous statements made by Steven Howell to Moran. Innes had originally tried to introduce this testimony to support the slander claim. The court found that the evidence was no longer germane to the issues at trial.

At the conclusion of the evidence, the district court entertained objections to its proposed jury instructions. Two of plaintiff's objections are relevant to this appeal: first, plaintiff objected to the instruction that in order for the jury to find for plaintiff, it would need to decide that John Innes "fully disclosed" the "nature and extent" of his consulting services to Paul Howell. Second, plaintiff objected to the instruction that in order to prevail on the breach of contract claim, the jury would have to find that the Howells fired John Innes "solely because" of his receipt of consulting fees. The district court...