Dominion Nutrition, Inc. v. Cesca

• Decision Date: 28 December 2006
• Docket Number: No. 04 C 4902.,04 C 4902.
• Citation: 467 F.Supp.2d 870
• Parties: DOMINION NUTRITION, INC., Plaintiff, v. Raymond CESCA, Defendant.
• Court: U.S. District Court — Northern District of Illinois

467 F.Supp.2d 870

DOMINION NUTRITION, INC., Plaintiff, v. Raymond CESCA, Defendant.

No. 04 C 4902.

United States District Court, N.D. Illinois, Eastern Division.

December 28, 2006.

COPYRIGHT MATERIAL OMITTED

Douglas A. Grady, Lawrence D. Graham, Black Lowe & Graham, PLLC, Seattle, WA, Matthew P. Weisman, Robert David Cheifetz, Sperling & Slater, Chicago, IL, for Plaintiff.

Joseph Kent Mathewson, Jennifer Marie Zlotow, Laurie A. Rompala, Donohue, Brown, Mathewson & Smyth, Chicago, IL, for Defendant.

OPINION

POSNER, Circuit Judge, sitting by designation.

This intriguing commercial case began with the filing in July of 2004 of a complaint by Dominion Nutrition, Inc. (DNI), charging the defendant, Raymond Cesca, DNI's former chief executive officer, with breach of contract, breach of fiduciary duty, intentional interference with advantageous business relations, and usurpation of a corporate opportunity. Federal jurisdiction is based on diversity of citizenship, DNI being a citizen of Delaware and Idaho, Cesca a citizen of Illinois, and the amount in controversy in excess of $75,000 exclusive of interest and costs (DNI seeks compensatory damages of more than $20 million plus punitive damages in an unspecified amount). The parties have agreed that Illinois law governs the substantive issues, though at the end of this opinion I question one aspect of the agreement. I was assigned to preside over the trial, which, initially, was to a jury. The trial began on December 11, 2006, and the parties rested on December 14. I then discharged the jury, for reasons I'll explain shortly.

Ronald Achs, DNI's founder, majority shareholder, and chief executive officer except during Cesca's brief occupancy of that position, was for many years a trader of currency futures on the Chicago Mercantile Exchange. In the early 1990s he moved to Idaho and after several more years of trading financial futures from there he bought a 5,000-acre ranch. His plan was to develop it as a hog farm, but the plan fell through when the county refused to give him a permit to raise 100,000 hogs on the property. As a result of the debacle, he lost ownership of the property. But he remained in possession of it, and casting about for an alternative use for it he discovered that a company planning to build an ice cream plant nearby would be interested in buying butterfat. He toyed with the idea of transforming the ranch into a dairy farm that would contain, in addition to cows, a processing plant to separate the milk into various components, including the butterfat. If he sold just the butterfat of the milk produced by the cows, he would be left with skim milk that would, for some reason, not be marketable as skim milk. He did some research and discovered that skim milk can be filtered to produce a milk drink that is very high in protein and calcium and even lower in fat than ordinary skim milk. He thought this might be a commercial opportunity.

In the summer of 2002 he made contact with a large Danish company, APV, a subsidiary of an international conglomerate enterprise named Invensys plc. According to Invensys's home page, APV "supplies the food, beverage, personal care, pharmaceutical and industrial sectors with innovative products, process solutions and support services in 48 countries worldwide." Its "process solutions" include filtration processes for making raw milk into finished milk products. At Achs's request, APV created a flow chart called in the trade a "mass balance," detailing the sequence of steps by which milk would be converted into the high-protein milk product that Achs had conceived of and that the parties call "Hi-Pro." (I have appended a copy of the mass balance to this opinion.) Apparently it differed from any other milk product that had been marketed in the United States. A central issue in the trial was whether Achs had invented the process for making Hi-Pro and APV had merely inserted the information he gave it into the mass balance or whether, as Michael Francis—who was the chief of a North American division of APV and was the APV executive who worked with Achs—testified, Achs had merely told. APV what he wanted to produce (the high-protein milk drink) and APV had devised the process for producing the product from raw milk.

At this point I interrupt the narrative to explain the discharge of the jury, and the sequel to that untoward development. Achs has a, limited scientific background. He was a premed for part of his college career, but until he became interested in hog farming he had been a trader of currency futures and until the Hi-Pro project he had had no involvement in the dairy industry. He testified that he developed the process for making Hi-Pro by doing research on the Internet, but he has no downloads or documents to substantiate the claim. In an effort to bolster his claim to have been the inventor of the process he testified on direct examination that "from the commodity days, trading and everything else, I knew about proteins, and casein was a protein. It's found in milk."

This testimony was given early in the trial, and shortly afterward the courtroom deputy informed me that one of the jurors wanted to speak to me in private. I cleared the courtroom of all but the reporter and court personnel, and questioned the juror. The reporter recorded the interview but placed the record of it in camera, as I directed. I have since ordered it made a part of the public record.

The juror in question was himself a trader of financial futures, on the Chicago Board of Trade (recently purchased by the Chicago Mercantile Exchange), and he said that he had a serious problem with Achs's credibility but that he didn't know whether he had to keep it to himself or whether he could share his concern with the other jurors. He said that financial futures and commodity futures are completely different animals and that Achs had tried to blur the difference in order to bolster his claim to have sufficient agricultural expertise to have invented a process for making such a product. I told him that a juror is free to base an opinion of the truthfulness of a witness's testimony on the juror's professional experience, and to share that opinion with the other jurors—but only at the end of the case, when the jurors retire to deliberate. I reminded him, as I had instructed the jury (and I repeated the instruction every time the jury left the courtroom for a recess or at the end of the day), that he could not discuss the case with the other jurors until it came time to deliberate. I also suggested that he reserve judgment about Achs's testimony because the trial had just begun and he would be hearing from other witnesses and he might be skeptical about their testimony too. In fact I thought but did not say that he was making a mountain out of a molehill. Achs had not claimed to have traded agricultural commodity futures, and it was not implausible that in many years of trading financial futures he had learned something about commodity futures and perhaps even about the commodities themselves. Financial futures are very similar to futures contracts in pork bellies and other agricultural commodities, including milk, and are often traded on the same exchanges and are regulated along with commodities futures by the Commodity Futures Trading Commission.

Trial resumed and that afternoon there was another incident involving this juror. After a sidebar, and with the jury having taken a recess, Achs, who had been sitting in the witness box during the sidebar, said that he had overheard this juror, whom I'll call A, and the juror sitting on his immediate right (B) discussing the case and calling it "bull-shit." Again I interviewed juror A, this time in open court. He admitted having spoken with B during the sidebar but said that all he'd said was that the lawyers should resolve their dispute by arm wrestling, apparently an allusion to the television program Boston Legal. In the light, of his emphatic denial of Achs's account, I decided to let him remain on the jury.

The third and critical incident involving the jury occurred the next day. Achs had been recalled to the stand and was being cross-examined by Cesca's lawyer, who at one point asked Achs whether milk had been traded on the Board of Trade when he was a trader there, and when he said "no" the lawyer followed up by asking (saying, really): "So, there's no way you're familiar with milk prices based on your experience as a commodities trader. Is there?" And Achs replied, "No, that's incorrect, counsel." The lawyer then changed the subject. But during this exchange, recalling the juror's preoccupation with Achs's lack of experience trading agricultural commodities, I glanced over at the jury and saw juror B, still sitting on A's immediate right, swivel toward A and smile or smirk. I did not notice A's reaction, but my law clerks, who corroborated my observation, told me they'd seen A nod emphatically in response to B. Apparently no one else in the courtroom observed the incident.

I immediately inferred that A had told B that he didn't believe that Achs could have learned about agricultural commodities at his time at the Board of Trade. Such a discussion would have been a serious breach of propriety, less because these two jurors had disobeyed my instruction that the jurors not discuss the case until they retired to deliberate than because juror A had caused the bee in his bonnet about Achs's credibility to buzz about inside the head of another juror (maybe more than one other juror)—had in all likelihood en listed that juror in his campaign to brand Achs a liar. I did not think it possible in these circumstances for DNI to get a fair trial from this jury.

At this point the trial was almost over, so I let it finish, and after the two sides rested I laid the problem before the lawyers and asked them what they thought I should do. Cesca's lawyer, naturally, wanted me to do nothing. DNI's...