Agricultural Management Development v. National City Bank, Cause No. 1:02-CV-11 (N.D. Ind. 6/23/2003)
| Decision Date | 23 June 2003 |
| Docket Number | Cause No. 1:02-CV-11. |
| Parties | AGRICULTURAL MANAGEMENT DEVELOPMENT, INC., v. NATIONAL CITY BANK, Defendant. |
| Court | U.S. District Court — Northern District of Indiana |
In 1998, the hog-pork market virtually collapsed when the prices paid to farmers dropped nearly 90%, with the result that some hog farmers were unable to pay their creditors and were forced into bankruptcy. Such a fate befell David Winger ("Winger"), see In re David W. Winger, Case No. 99-62895 (Bankr. N.D. Ohio), who operated, among others, a hog farming business called LeeWee, Ltd. ("LeeWee").1 After Agricultural Management Development, Inc. ("AMD"), one of Winger's creditors, obtained a judgment against LeeWee for more than $5 million, it brought this suit against another of Winger's creditors, National City Bank ("National City"), claiming it is actually entitled to the $2,496,360.96 Winger paid to National City between 1997-1999 from the sale of his hogs.2
As will be seen more fully infra, the critical issue in this case is simply, what sort of entity was LeeWee? Having spent years paying little attention to this issue, AMD now, and more than $5 million later, seeks in this litigation to cast LeeWee as a partnership. In so doing, AMD claims that National City's receipt of these funds from Winger runs afoul of Ohio's Uniform Fraudulent Transfer Act ("UFTA"), OHIO REV. CODE § 1336.01, et seq., and amounts to conversion under Ohio law.3
Presently before the Court4 is National City's February 14, 2003, motion for summary judgment and AMD's March 27, 2003, cross-motion for partial summary judgment.5 Because AMD's response and cross-motion referred to statements allegedly made to AMD employees by third-parties, Larry Hake ("Hake") and Winger, National City filed a motion to strike such statements, inter alia, as impermissible hearsay. After allowing additional briefs, the motions for summary judgment and the motion to strike have been fully briefed and are ripe for ruling.
The record consists of the affidavit of Sharon Johnston ("Johnston Aff ¶ ___"); the affidavit of Hugh Storer ("Storer") ("Storer Aff. ¶ ___"); Storer's deposition ("Storer Dep. at ___"); the deposition of Ben Osmon ("Osmon") ("B. Osmon Dep at ___"); Osmon's affidavit ("B. Osmon Aff ¶ ___"); Osmon's supplemental affidavit ("B. Osmon Supp. Aff. ¶ ___"); the affidavit of John Brown ("Brown Aff. ¶ ___"); the affidavit of Toni Osmon ("T. Osmon Aff. ¶ ___"); the affidavit of Daniel Arnold ("Arnold Aff. ¶ ___"); the Winger's deposition ("Winger Dep. at ___"); the affidavit of Hilda Bedoya ("Bedoya Aff ¶ ___"); and various documents.
This Court has jurisdiction based on diversity, 28 U.S.C. § 1332. For the following reasons, National City's motion to strike will be GRANTED, its motion for summary judgment will be GRANTED, and AMD's cross-motion for partial summary judgment will be DENIED as untimely.
National City, in its motion to strike, zeroes in on whether LeeWee is a partnership by arguing that several portions of Ben Osmon's affidavit6 should be stricken because they are irrelevant or because they contain inadmissible hearsay, lack personal knowledge, and are barred by the best evidence rule. (Def's M. to Strike at 1.) We will consider these contentions in turn.
National City wants to strike four specific passages in Osmon's affidavit which it contends contains inadmissible hearsay.7 In each passage, Osmon (and Arnold, as identified in footnote 7, supra) testifies that either Winger or Hake, or both, said that they were partners and that LeeWee was a partnership. (B. Osmon Aff ¶¶ 9, 10, 11, 54.)
Because "`[h]earsay is inadmissible in summary judgment proceedings to the same extent that it is inadmissible in a trial,'" see Boyce v. Moore, 314 F.3d 884, 889 (7th Cir. 2002) (quoting Morrow v. Wal-Mart Stores, Inc., 152 F.3d 559, 563 (7th Cir. 1998)), we must determine whether Osmon and Arnold's testimony regarding Hake and Winger's statements is inadmissible under Fed.R.Evid. 802. Hearsay is "a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted." Fed.R.Evid. 801(c); United States v. Allen, 269 F.3d 842, 847 (7th Cir. 2001). There is no dispute that Hake and Winger's alleged statements were made out of court, so the issue here is whether these statements are offered for the truth of the matter asserted and, to the extent they are, whether they fall within the residual hearsay exception. See Fed.R.Evid. 807.
First, AMD argues these statements are not hearsay because they are not offered to prove the truth of the matter asserted (i.e., that Winger and Hake were in fact partners and that LeeWee was a partnership), but rather go to show that Osmon and Arnold believed that Winger and Hake were partners and LeeWee, a partnership. For its part, National City admits that this is a nonhearsay use of the evidence, but argues that to the extent AMD offers the statements for this purpose, they should be excluded as irrelevant. See Fed.R.Evid. 401. Specifically, National City argues that this evidence might be relevant if it went to show that "it appeared to others that [LeeWee] was run as a partnership." Harvey v. Harvey, 632 N.E.2d 956, 961 (Ohio Ct. App. 1993) () (emphasis added). However, National City reasons that because Osmon and Arnold are AMD representatives (i.e., parties to this case), they cannot be "other" persons or third parties as contemplated by Ohio partnership law, and therefore how LeeWee was portrayed to them is irrelevant under Federal evidentiary principles. See Fed.R.Evid. 401.
Of course, Harvey does not shed much light on whether this interpretation is accurate, and National City cites to no other authority to support this proposition. Nevertheless, our independent research reveals that National City's view is supported by other Ohio case law. Indeed, the Ohio Appellate Court, in Buettner v. Westmeyer, addressed this exact issue by considering, but limiting its consideration to, whether "third parties viewed the relationship [there] as a partnership[.]" 1988 WL 10998, *2 (Ohio Ct. App. Feb. 5, 1988) (). Accordingly, we agree with National City that the fact that Hake and Winger's alleged statements may have led Osmon or Arnold to believe that LeeWee was a partnership is irrelevant, and thus will be excluded.8
Next, AMD admits that because it also wants to introduce these statements for the truth of the matter asserted, (see AMD's Resp. to M. to Strike, at 2), they constitute hearsay but nevertheless argues that they are admissible under the residual hearsay exception. See Fed.R.Evid. 807. Rule 807 provides that when hearsay does not fit into another exception, it may still be admitted if it contains sufficient circumstantial guarantees of trustworthiness and the Court determines that "(A) the statement is offered as evidence of a material fact; (B) the statement is more probative on the point for which it is offered than any other evidence which the proponent can procure with reasonable means; and (C) the general purposes of the rules and the interest of justice will best be served by an admission of the statement into evidence." Id. Thus, to be admissible under Rule 807, the Seventh Circuit requires "(1) circumstantial guarantees of trustworthiness; (2) materiality; (3) probative value; (4) the interests of justice; and (5) notice," see United States v. Ochoa, 229 F.3d 631, 639 (7th Cir. 2000) (citing United States v. Hall, 165 F.3d 1095, 1110 (7th Cir. 1999)), and counsels the court to construe Rule 807 narrowly to prevent it from becoming the exception that swallows the hearsay rule. United States v. Sinclair, 74 F.3d 753, 759 (7th Cir. 1996).
In determining whether Hake's and Winger's alleged statements carry sufficient circumstantial guarantees of trustworthiness, we begin with the simple observation that "[o]ut-of-court statements are generally inadmissible because they are presumed to be unreliable." Hall, 165 F.3d at 1110 (quoting United States v. Hooks, 848 F.2d 785, 796 (7th Cir. 1988)). Thus, the party "wishing to introduce hearsay evidence [here, AMD] must rebut the presumption of unreliability by appropriate proof of `trustworthiness.'" Id. The district court is granted considerable discretion in determining whether the statements contain sufficient guarantees of trustworthiness, and should consider the following non-exhaustive list of factors: (1) the probable motivation of the declarant in making the statement; (2) the circumstances under which it was made; (3) the knowledge and qualifications of the declarant; (4) the character of the declarant for truthfulness and honesty and the availability of evidence on the issue; (5) whether the testimony was given voluntarily, under oath, subject to cross-examination and under the penalty of perjury; (6) whether the witness ever recanted his testimony; and (7) whether the declarant's statement was insufficiently corroborated. Id. at 1110-1111 (citing Cook v. Hopping, 783 F.2d 684, 690-91 (7th Cir. 1986); United States v. Seavoy, 995 F.2d 1414, 1418 (7th Cir. 1993)).
In assessing those factors here, we conclude that AMD has failed to rebut the presumption that the alleged statements are unreliable. While we know nothing about either Hake or Winger's character for truthfulness, given the circumstances, both men were motivated to hold themselves out as partners, regardless of whether LeeWee was actually a partnership. Indeed, Osmon at least told...
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