Schimpf v. Gerald, Inc., 97-C-545.

CourtUnited States District Courts. 7th Circuit. United States District Court of Eastern District of Wisconsin
Citation52 F.Supp.2d 976
Docket NumberNo. 97-C-545.,97-C-545.
PartiesNick SCHIMPF, Helen Schimpf, Frank Schimpf, Bonnie Schimpf, and S & R Egg Farm, Inc., Plaintiffs, v. GERALD, INC. and Charles F. Marino, Administrator of The Estate of Edward F. Keiser, Defendants.
Decision Date14 May 1999

James Culhane, Milwaukee, WI, for plaintiffs.

Janice Rhodes, Milwaukee, WI, Patrick Hodon, for defendants.

DECISION AND ORDER

ADELMAN, District Judge.

On March 31, 1997, plaintiffs filed this lawsuit against Edward Keiser and Gerald, Inc. Plaintiffs asserted that Keiser conspired with Michael Schwarzmann, a relative of the individual plaintiffs, to defraud plaintiffs of substantial money. In their Amended Complaint, plaintiffs alleged that Keiser (1) violated the Wisconsin Organized Crime Control Act ("WOCCA"), Wis. Stat. §§ 946.80-946.88; (2) engaged with Schwarzmann in a civil conspiracy to defraud; and (3) negligently misrepresented certain facts to plaintiffs; thereby entitling plaintiffs to both compensatory and punitive damages. According to plaintiffs, Gerald is liable under the respondeat superior doctrine because at all times material, Keiser was acting within the scope of his employment.

In a Decision and Order dated April 24, 1998, the estate was substituted for Keiser on the conspiracy and negligent misrepresentation claims. I dismissed the WOCCA claim against Keiser, however, finding that as a penal cause of action the claim expired when Keiser did and thus the estate could not be substituted on that count. I declined, though, to dismiss the count against Gerald at that time just because the claim against Keiser abated, although I suggested that the punitive nature of a WOCCA claim raised questions regarding the applicability of the respondeat superior doctrine.

I have diversity jurisdiction over this case pursuant to 28 U.S.C. § 1332 because the amount in controversy exceeds the sum of $75,000, exclusive of interest and costs, and it is between citizens of different states.1 And, as I determined previously, venue is proper in this district pursuant to 28 U.S.C. § 1391(a)(2). (See Decision and Order of 4/24/98 at 30-31.)

Defendants have each filed a motion for summary judgment. Because of the numerous issues presented by the parties and time constraints due to the fast-approaching trial date, I am issuing my Decision and Order in two parts. Matters not addressed today will be addressed in another decision early next week.

Before delving into the facts of the case, though, some evidentiary motions must be decided, as they affect what I will consider regarding summary judgment. In deciding a motion for summary judgment, I may consider only evidence that is admissible at trial. Gustovich v. AT & T Communications, Inc., 972 F.2d 845, 849 (7th Cir.1992).

I. MOTION TO EXCLUDE KEISER'S DEPOSITION TESTIMONY

Keiser died on July 18, 1997, and obviously cannot give present testimony to support plaintiffs' lawsuit. He once, however, was deposed about the events of this case.

On September 3, 1992, plaintiffs filed a lawsuit against Schwarzmann (the "Schwarzmann case"), alleging that Schwarzmann defrauded plaintiffs of over $1 million. Keiser and Gerald were not parties to the lawsuit, and plaintiffs did not then allege that either Keiser or Gerald committed any wrongdoing. In connection with the Schwarzmann case, though, plaintiffs deposed Keiser on January 19, 1994, at which time Keiser was no longer a Gerald employee. At the deposition, Keiser was represented by attorney Jane Lowdon, who also was an attorney for Gerald. No one other than Lowdon, plaintiffs' attorney, and Schwarzmann's attorney attended or participated in the deposition.

Plaintiffs now seek to introduce Keiser's 1994 deposition testimony into evidence against Gerald in the present lawsuit for purposes of the summary judgment motions and trial. Gerald objects, arguing that under Federal Rule of Evidence 804(b)(1). Keiser's deposition testimony is inadmissible hearsay. Plaintiffs retort that parts of the deposition testimony are not hearsay at all and that not only is the testimony admissible under 804(b)(1), but it qualifies under Federal Rules of Evidence 804(b)(3) and 807 as well.2

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). Hearsay that does not fall within an exception in the Federal Rules of Evidence is inadmissible for summary judgment motions as well as trial. Eisenstadt v. Centel Corp., 113 F.3d 738, 742-43 (7th Cir.1997).

Here, Gerald attempts to exclude as hearsay Keiser's entire deposition prior to trial. But whether a statement is inadmissible hearsay often hinges on the purpose for which it is offered. United States v. Linwood, 142 F.3d 418, 424-425 (7th Cir.) (if statement offered without reference to the truth of the matter asserted, the hearsay rule does not apply), cert. denied, ___ U.S. ___, 119 S.Ct. 224, 142 L.Ed.2d 184 (1998). As indicated above, when statements are not offered to prove the truth of the matter asserted, they are not hearsay at all. Id.; Fed.R.Evid. 801(c).

Plaintiffs contend that parts of Keiser's deposition will be offered for purposes other than for their truth. For example, Keiser testified that Schwarzmann told Keiser he had taken money from people and spent it all on a woman and that Schwarzmann told Keiser he wanted to fake the balance in his account at Gerald. According to plaintiffs, these statements will be offered to show that Keiser had knowledge that Schwarzmann's investments with Gerald were suspicious yet helped Schwarzmann plan how to deceive Nick and Gorecki. Testimony by Keiser offered for such purposes does not constitute hearsay. See Fed.R.Evid. 801(c); 5 Jack V. Weinstein & Margaret A. Berger, Weinstein's Federal Evidence § 804.04[1][c] (2d ed. 1997 & Supp.1999) (prior testimony need not meet the requirements of Rule 804(b)(1) if it satisfies some other hearsay exception, qualifies for admission under Rule 801, or is used in a nonhearsay way such as for impeachment or to refresh recollection). Therefore, to the extent that plaintiffs do on summary judgment and will at trial offer Keiser's testimony for purposes other than the truth of the matters asserted, Gerald's motion to exclude the deposition testimony will be denied.

As to statements possibly offered for their truth, under Federal Rule of Evidence 804(a)(4) Keiser is unquestionably an unavailable witness. When a witness is unavailable former testimony is not excluded by the hearsay rule "if the party against whom the testimony is now offered, or, in a civil action or proceeding, a predecessor in interest, had an opportunity and similar motive to develop the testimony by direct, cross, or redirect examination." Fed.R.Evid. 804(b)(1). Rule 804(b)(1) incorporates a concept of fairness by "screen[ing] out those statements, which although made under oath, were not subject to the scrutiny of a party interested in thoroughly testing [their] validity." United States v. Pizarro, 717 F.2d 336, 349 (7th Cir.1983).

Gerald contends that neither it nor any predecessor in interest had an opportunity and similar motive to develop Keiser's testimony on two issues key to the present case against Gerald: Keiser's own involvement in Schwarzmann's scheme and whether Keiser was acting within the scope of his employment. Plaintiffs respond that Gerald did in fact attend the deposition through the presence of Lowdon and had both opportunity and motive to develop Keiser's testimony on these points.

Lowdon's exact capacity is somewhat unclear. Plaintiffs present evidence that in December 1992 Lowdon responded on behalf of Gerald to a subpoena seeking documents in plaintiffs' Schwarzmann case. In a letter to plaintiffs' counsel dated September 17, 1996, she wrote:

As you may be aware, this office represents Gerald, Inc. in connection with various commodity related matters.

Your office certainly should be aware of this fact as Gerald, Inc., through the undersigned, has cooperated fully with your firm and appropriate authorities relating to the Schwarzmann matter in the past.

Please be advised that my office continues to represent Gerald, Inc. in connection with this matter. Please further be advised that all future correspondence should be directed to my attention at the address listed above.

(Culhane Aff.Ex. D.) Lowdon even agreed to accept service of the summons and complaint in the current case on Gerald's behalf. Therefore, it appears that she represented Gerald from at least December 1992 to late 1996, including the date of Keiser's 1994 deposition. Gerald submits an affidavit from Lowdon in which she says Keiser himself contacted her for representation at the deposition and that she did, in fact, represent Keiser, not Gerald, at the deposition.3 Regardless, though, it is true that because Lowdon was also Gerald's attorney regarding any involvement in the Schwarzmann case, it is possible to consider Gerald as having had some type of unofficial presence at the deposition.

In regard to some key issues in the present case, however, I nevertheless cannot say that Gerald or its attorney had an opportunity and similar motive at the Keiser deposition to develop the testimony.

The touchstone of admissibility is a similar motive to develop the testimony on the part of the nonoffering party (or a predecessor in interest in a civil case). The way to determine whether or not motives are similar is to look at the issues and the context in which the opportunity for examination previously arose, and compare that to the issues and context in which the testimony is currently proffered. The similar motive inquiry is essentially a hypothetical one: is the motive to develop the testimony at the prior time similar to the motive that would...

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