Hoselton v. Metz Baking Co.
| Decision Date | 29 March 1995 |
| Docket Number | No. 93-3568,93-3568 |
| Parties | 41 Fed. R. Evid. Serv. 987 Elizabeth M. HOSELTON; Jay G. Hoselton; Kristine H. Lovely; Mary Katherine H. White; James C. Hoselton, Appellants, v. METZ BAKING COMPANY, An Iowa Corporation; William C. Metz; Henry J. Metz; William H. Metz, Appellees. |
| Court | U.S. Court of Appeals — Eighth Circuit |
C. Carleton Frederici, Des Moines, IA, argued (Steven L. Nelson, on the brief), for appellant.
Robert Lawrence Lepp, Omaha, NE, argued (Paul R. Elofson, Wiley Mayne, and John D. Mayne, on the brief), for appellee.
Before McMILLIAN, Circuit Judge, LAY, Senior Circuit Judge, and BOWMAN, Circuit Judge.
Elizabeth Metz Hoselton and her children (collectively, the Hoseltons) brought a diversity action under 28 U.S.C. Sec. 1332 (1988) against William C. Metz, Henry J. Metz, and William H. Metz (the Metzes), and the Metz Baking Company (Metz Baking) in the District Court. 1 Their complaint alleges that the individual defendants breached fiduciary duties owed to the Hoseltons and that Metz Baking breached a stock redemption contract with the Hoseltons. 2 The District Court entered judgment for the Metzes and Metz Baking after a jury returned verdicts in their favor. The Hoseltons timely appeal, and we affirm.
The late Henry Metz Jr. established Metz Baking in 1922, and he originally owned all of the shares in the company. Through a combination of gifts, gifts in trust, and devises, by the early 1980s Henry's two children, Elizabeth Metz Hoselton (Betty) and William C. Metz (Bill), and their families owned all of the shares. 3 The Hoseltons controlled forty-seven percent of the shares while the Metzes controlled fifty-three percent of the shares and managed the company. In 1983, after the two families encountered difficulties reaching a consensus as to how Metz Baking should be managed, Betty and Bill started discussing the sale of Betty's family's shares in Metz Baking.
After initial negotiations broke down, a new round began in 1984. Betty's accountant, Robert V. Williams, attended the meetings and advised Betty regarding the agreement. On August 7, 1984, the Hoseltons and Metz Baking executed a letter of agreement 4 that provided for the redemption of all the Hoseltons' shares in Metz Baking over a five-year period, subject to the company's financial ability to redeem the shares and the approval of the company's creditors. The redemption price was set at $110 per share, resulting in a total purchase price for the Hoseltons' forty-seven percent interest of just over $9,488,000. The agreement also provided as follows:
If the assets of Metz Baking Company or the majority of the outstanding shares of the company are sold before the redemptions have been completed your unredeemed shares and those of your children and the trusts will participate in the sales at the same prices and terms as affects other stockholders in the selling or liquidating group.
On August 8, 1984, Metz Baking sent Betty an additional letter of agreement giving Metz Baking the right to accelerate the redemption schedule set out in the August 7 letter of agreement. The Hoseltons signed the August 8 letter of agreement. The Hoseltons and Metz Baking executed a third agreement August 15, 1984, transferring the Hoseltons' shares to an escrow account. The August 15 escrow agreement provided in part that "Metz [Baking] has the privilege of accelerating annual redemptions set forth in the schedule." Defendants' Exhibit A-63 at 1.
After the various agreements were executed, Metz Baking redeemed the Hoseltons' shares on an accelerated basis. The final redemption, originally scheduled for October 1, 1989, was accelerated first to October 1, 1988, and then to April 1, 1988. The Hoseltons agreed to each acceleration by signing letters of agreement dated September 3, 1987, and March 2, 1988. The final payment was made and the last of the Hoseltons' shares in Metz Baking were redeemed April 1, 1988.
On May 1, 1988, The Invus Group, Ltd. (Invus), contacted the Metzes and expressed interest in exploring the possibility of acquiring Metz Baking. Invus was in the process of acquiring Heileman Baking Company but had decided that it could not retain Heileman's management because the managers were adverse competitive bidders for Heileman. Having no experience running a baking company, Invus turned to the Metzes and offered them the opportunity to manage a combination of Metz Baking and Heileman Baking, a combination that would be one of the ten largest commercial baking companies in the United States. On May 8, 1988, the Metzes executed a binding letter of intent to sell their 100% stake in Metz Baking to an affiliate of Invus. Pursuant to their agreement with Invus, the Metzes transferred their shares of Metz Baking to Metz Holdings, a new corporation controlled by Invus, in exchange for $50.7 million and a minority interest in Metz Holdings. The Metzes remained in their management positions at Metz Baking, now expanded to include Heileman. The Hoseltons, who no longer owned any Metz Baking shares, did not participate in the transaction. Eventually, in 1993, the Metzes sold their interest in Metz Holdings.
The gravamen of the Hoseltons' complaint is that they were wrongfully excluded from participating in the sale of Metz Baking to Metz Holdings. Under the redemption agreement, they argue, they should have been paid the Metz Holdings purchase price for any of their shares that would not have been redeemed as of May 8, 1988, under the original redemption schedule. The Hoseltons' complaint also alleges that Bill Metz individually, as co-trustee of the Hoselton children's trusts, and the Metzes collectively, as officers of Metz Baking, breached fiduciary duties of disclosure and loyalty owed to the Hoseltons.
The Metzes denied the allegations of the complaint, and the case went to trial by jury. The Hoseltons' claims were thoroughly aired in a trial that consumed fourteen days over a three-week period. The jury found for the defendants. The District Court entered judgment in accordance with the jury verdict, and the Hoseltons appeal, raising evidentiary and instructional issues.
We address the Hoseltons' evidentiary issues first. At trial, the District Court refused to admit certain exhibits relating to the 1988 sale of Metz Baking to Invus as well as any evidence of the 1993 sale of the Metzes' interests in Metz Holdings. The District Court admitted the handwritten notes and deposition testimony of Robert V. Williams, the Hoseltons' accountant when the redemption agreement was negotiated. The Hoseltons challenge each of these rulings, and we consider each in turn.
As a preliminary matter, we note that our standard of review is a narrow one. A district court has broad discretion when deciding whether to admit evidence, and we will not disturb an evidentiary ruling "absent a clear and prejudicial abuse of that discretion." Laubach v. Otis Elevator Co., 37 F.3d 427, 428-29 (8th Cir.1994).
The Hoseltons argue that they should have been allowed to introduce Plaintiffs' Exhibits 87 and 89, which relate to the 1988 sale of Metz Baking to Metz Holdings, the Invus affiliate. Exhibit 89 is a disclosure schedule prepared by Metz Baking that lists the 1984 redemption agreement with the Hoseltons as an open contract. Exhibit 87 is a letter agreement executed by the Metzes indemnifying Metz Holdings for any losses incurred as a result of a lawsuit over the 1984 redemption agreement with the Hoseltons. Both of these documents are dated July 29, 1988. Metz Baking had redeemed the last of the Hoseltons' shares on April 1, 1988.
The Hoseltons argue that these exhibits are relevant because they show that the Metzes and Metz Baking, consistent with the position taken by the Hoseltons in this lawsuit, interpreted the redemption agreement as giving the Hoseltons a five-year right to participate in any sale of the company regardless of whether they still owned shares. If the Metzes and Metz Baking did not share that interpretation, they argue, Metz Baking would not have listed the redemption agreement as an open contract. We disagree.
It seems to us, as it did to the District Court, that Exhibits 87 and 89 are not relevant to the interpretation of unambiguous agreements negotiated and signed four years earlier. While the exhibits represent conservative, cautious measures taken by corporate lawyers in the context of a multi-million dollar transaction, they do not make the existence of a fixed five-year right of participation more or less probable. See Fed.R.Evid. 401, 402. Indeed, the Hoseltons' arguments for the existence of such a right fly in the face of the plain meaning of the August 8, 1984, acceleration agreement, which unequivocally confers upon Metz Baking the right to speed up the redemption of the Hoseltons' shares.
Even if we were convinced that the exhibits are not totally irrelevant, their probative value is at best slight and is substantially outweighed by considerations of undue delay and waste of time and by the danger that they would cause the jury to confuse the issues. See Fed.R.Evid. 403; see also Coast-to-Coast Stores, Inc. v. Womack-Bowers, Inc., 818 F.2d 1398, 1404 (8th Cir.1987) (). "Federal trial courts possess broad discretion to exclude confusing or misleading evidence," Stull v. Fuqua Indus., Inc., 906 F.2d 1271, 1274 (8th Cir.1990), and we conclude that the District Court did not abuse its broad discretion by excluding Exhibits 87 and 89.
The Hoseltons also argue that the District Court abused its discretion by refusing to permit testimony by Bill Metz, who the Hoseltons called as an...
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