Opinion ID: 221233
Heading Depth: 1
Heading Rank: 5

Heading: The District Court's in Limine Ruling

Text: Prior to trial, the district court granted Shanahan Jr.'s motion in limine to exclude any reference to an Incentive Stock Option Agreement between Shanahan Sr. and ESSI granting Shanahan Sr. 10,000 additional stock options per point each time ESSI's stock closed above its previous record high. When initially proposed by Shanahan Jr. in June 1998, the Agreement was characterized by the chairman of the Compensation Committee as ridiculous because it would end up [granting options for] more stock than we had outstanding. Nevertheless, the SEC contended, the Agreement was implemented in 2001, without appropriate proxy statement disclosures, resulting in Shanahan Sr. receiving options to acquire 1.2 million shares in 2001 and 2002, twenty times more than he received in 1997. The district court granted the motion in limine under Rules 404(b) and 403 of the Federal Rules of Evidence, explaining that any alleged impropriety was not sufficiently similar to the backdating issues that are at the center of this case, that the issue risked confusing the jury, and that it would waste time. On appeal, the SEC argues that this evidence should have been admitted to show motive, intent, plan or scheme, absence of mistake, and to demonstrate Shanahan Jr.'s active role and substantial influence on the Compensation Committee. At the least, the SEC argues, the court abused its discretion in not admitting as evidence of Shanahan Jr.'s involvement in the backdating of stock options a January 10, 2001 email from Shanahan Jr. to Gerhardt on the subject of MFS Stock Options (incentive) stating: Your calculations seem in line to me as far as the number of shares is concerned. The option price should be the same as the other options issued to the group that year. If there was more than one option price issued, then the average of those prices should be used. Your thoughts? A district court has broad discretion whether to admit evidence, and we will not reverse absent a clear and prejudicial abuse of that discretion. Hoselton v. Metz Baking Co., 48 F.3d 1056, 1059 (8th Cir.1995) (quotation omitted); accord Coast-to-Coast Stores, Inc. v. Womack-Bowers, Inc., 818 F.2d 1398, 1403-04 (8th Cir.1987). Here, the Agreement touched on several complex, collateral matters, including whether it ever became part of Shanahan Sr.'s employment contract. There was no clear abuse of discretion in excluding it under Rule 403. Moreover, the Agreement and the email in question would have been cumulative to other evidence showing Shanahan Jr.'s involvement in administering the employee stock option Plan and would not have cured the deficiencies in the SEC's proof of recklessness and negligence. Accordingly, any abuse of discretion was not prejudicial. The judgment of the district court is affirmed.