Court Opinion

ID: 147783
Source: CourtListenerOpinion
Date Created: 2010-06-03 19:31:03+00
Date Added: 2024-06-11T08:41:31.247529
License: Public Domain

FILED
                                                            United States Court of Appeals
                                                                    Tenth Circuit

                                                                     June 3, 2010
                      UNITED STATES COURT OF APPEALS
                                                   Elisabeth A. Shumaker
                                                                    Clerk of Court
                                   TENTH CIRCUIT

 MONSOUR’S, INC.,

          Plaintiff - Appellee,
                                                         No. 09-3022
 v.                                             (D.C. No. 6:05-CV-01204-JTM)
                                                           (D. Kan.)
 MENU MAKER FOODS, INC.,

          Defendant - Appellant.

                              ORDER AND JUDGMENT *

Before TACHA, KELLY, and HARTZ, Circuit Judges.

      Defendant-Appellant Menu Maker Foods, Inc. (MMF) appeals from a jury

verdict awarding Plaintiff-Appellee Monsour’s, Inc. damages for MMF’s breach

of an Asset Purchase Contract. Both parties were food wholesalers. Monsour’s

experienced financial difficulty and sought to refocus its business on the sale of

produce. MMF sought an opportunity to expand its sales into a new market area.

MMF agreed to purchase Monsour’s food service inventory and to purchase

substantially all of its produce from Monsour’s.

      *
        This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. It may be cited,
however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th
Cir. R. 32.1.
      On appeal, MMF contends that it is entitled to judgment as a matter of law

because (1) insufficient evidence supports the liability and damages related to the

food service inventory. MMF also claims it is entitled to a new trial because the

district court (2) improperly excluded impeachment evidence concerning

inventory reports and financial statements, and (3) prohibited MMF from

contesting certain facts. In addition, MMF contends that the district court (4)

committed reversible error in awarding prejudgment interest and (5) improperly

awarded attorneys’ fees. Aplt. Br. at 1-2, 27-28. We have jurisdiction under 28

U.S.C. § 1291 and affirm.

                                    Background

      We take the facts in the light most favorable to Monsour’s. Monsour’s sold

wholesale produce and grocery items in Kansas, Missouri, Arkansas, and

Oklahoma. 4 Ohio App. at 4-5, 12-16. In 2001, Monsour’s decided to limit its

business to produce. 4 Ohio App. at 13-15. At the same time, MMF wanted to buy

produce more cheaply and to acquire food service customers. 4 Ohio App. at 19-21.

Each saw a “win-win” opportunity. 2 Ohio App. at 30. The companies negotiated and

arrived at an Asset Purchase Agreement. 4 Ohio App. at 16-17. Monsour’s provided

MMF a report showing that Monsour’s dry and frozen food service inventory cost

$1,109,219. 4 Ohio App. at 25. MMF inspected the inventory. 2 Ohio App. at 27.

      MMF promised to buy (1) “substantially all” of its produce requirements

                                         -2-
from Monsour’s and (2) an estimated $750,000 to $800,000 of Monsour’s food

service inventory within eight weeks. 1 Ohio App. at 36, 43; 2 Ohio App. at 27-28. It would

help sell any food service inventory it did not buy. 1 Ohio App. at 36. In return,

Monsour’s transferred its sales staff to MMF and agreed not to compete. 1 Ohio App.

at 38, 41.

      Yet, instead of buying $750,000 to $800,000 of food service inventory,

MMF bought $250,000 of it. 2 Ohio App. at 28. Its “best efforts” to sell the rest

amounted to calling four vendors and providing phone numbers for salvage

dealers. 5 Ohio App. at 17-18; 7 App. at 167-70. Bound by the contract not to

compete in most food service sales, Monsour’s sold only $27,000 of its leftover

inventory to others. 4 Ohio App. at 48, 53.

      Nor did MMF purchase “substantially all” of its produce from Monsour’s.

Over ten weeks, MMF bought $72,590.39 of produce from Monsour’s. 4 Ohio App. at

366-67. It filled the rest of its $30,000 per week order elsewhere. 4 Ohio App. at 58.

MMF also disregarded the contract’s ordering procedures and created pretexts to

reject produce. 4 Ohio App. at 45, 65-66, 127, 133, 137, 143-46, 310-11, 423.

      Monsour’s threw away hundreds of thousands of dollars of expired food. 4
Ohio App. at 45-48, 148. Four months after the agreement, it went out of business. 4
Ohio App. at 57. It then brought this diversity action for breach of contract. 1 Ohio App. at

28-48. A jury awarded Monsour’s damages of $472,000 for the food service

inventory and $135,849.71 for its produce. 3 Ohio App. at 48-49. The district court

                                         -3-
denied MMF’s motion for judgment as a matter of law (JMOL). Monsour’s Inc.

v. Menu Maker Foods, Inc., No. 05-1204-JTM, 2009 WL 89701, at *1-2 (D. Kan.

Jan. 13, 2009). The court awarded Monsour’s $155,001.67 in prejudgment

interest and $307,128.80 in attorneys’ fees. Id. at *5-8. MMF appeals.

                                     Discussion

I.    Sufficient Evidence Showed Liability and Damages.

      MMF argues that the evidence at trial was insufficient to prove its liability

and Monsour’s damages for the food service inventory. Aplt. Br. at 30-38. We

review the district court’s denial of JMOL de novo. United Mine Workers of Am.

v. Rag Am. Coal Co., 392 F.3d 1233, 1237 (10th Cir. 2004). A court should grant

JMOL if the evidence reveals “no legally sufficient evidentiary basis for a claim.”

Hysten v. Burlington N. Sante Fe Ry. Co., 530 F.3d 1260, 1269 (10th Cir. 2008)

(citation omitted). We reverse a denial of JMOL “‘if the evidence points but one

way and is susceptible to no reasonable inferences which may support the

opposing party’s position.’” Id. (citation omitted). We do not “‘weigh evidence,

judge witness credibility, or challenge the factual conclusions of the jury.’” Id.

(citation omitted).

      The contract required all inventory to be in a “good and wholesome

condition, 100% resellable condition.” 1 Ohio App. at 36. MMF claims that

Monsour’s did not establish this condition item-by-item for the unsold inventory.

                                         -4-
Aplt. Br. at 30-32. MMF also claims that Monsour’s did not prove each item’s

price under a contractual pricing formula. Aplt. Br. at 33-38. Before signing,

MMF inspected Monsour’s inventory valued at cost ($1,109,219). 2 Ohio App. at 27.

MMF estimated in the contract that it would buy $750,000 to $800,000 of

inventory. 1 Ohio App. at 36. A jury could infer that cost represented an upper value

of the inventory and that at least $750,000 of Monsour’s inventory was “in good

and wholesome condition and 100% resellable” at the time of the inspection. 4
Ohio App. at 104-05, 115. After all, the parties were in agreement as to the $750,000-

$800,000 estimated value — though MMF now tells us that the estimate was to

prevent Mark Monsour’s bank from calling a line of credit. Aplt. Reply Br. at 5.

Apparently the jury inferred that the estimate established the inventory’s value,

and then subtracted $250,000 for inventory MMF purchased, and $27,000 for

inventory Monsour’s sold elsewhere. It awarded $472,000 of the $473,000 in

damages that Monsour’s requested. 3 Ohio App. at 48; 4 App. at 53, 161. Drawing

every reasonable inference in Monsour’s favor, the evidence is sufficient.

      The jury’s damages award conforms with the district court’s instructions on

how to calculate damages. 3 Rawle at 24, 26, 36-42. If MMF wanted more specific

instructions on damages — such as one emphasizing a requirement to price each

item by the contract’s pricing mechanism — then it should have challenged those

instructions. MMF does not appeal those instructions.

      Although MMF now insists on strictly enforcing the contract’s pricing

                                         -5-
mechanism, evidence showed that, shortly after the parties signed the contract,

MMF admitted that the pricing mechanism would not matter. The head of MMF

instructed his employees to disregard that provision and never to pay more than

current market value. 7 Ohio App. at 170. Because the formula would not have

established what MMF would pay, we decline to require the formula to establish

damages now.

      MMF also argues that evidence of the value Monsour’s inventory

subsequent to the initial cost of $1,109,219 on January 14, 2002, makes it a

factual impossibility that damages could have been $472,000. MMF argues that

this shows that the damages could not have exceeded $250,950. Aplt. Br. at 37-

38; Aplt. Reply Br. at 2-7. The jury was free to consider inventory level

fluctuations, but was not required to make the inference MMF now suggests.

Juries resolve potentially inconsistent evidence, not appellate courts. The

estimate is sufficient to support the verdict.

II.   The Court’s Evidentiary Rulings Were Not an Abuse of Discretion.

      We review evidentiary decisions for an abuse of discretion. United States

v. Schene, 543 F.3d 627, 642 (10th Cir. 2008).

      A.     The Court May Limit Testimony about Mr. Monsour’s Bank
             Reports.

      MMF first contends that the district court improperly limited MMF’s

impeachment of Mark Monsour, the president and co-owner of Monsour’s. Aplt.

                                          -6-
Br. at 39-45. Mr. Monsour was Monsour’s main witness at trial. During

discovery, Mr. Monsour admitted that he once gave his bank inflated inventory

reports to prevent it from calling in his company’s loans and from ending its

credit line. 2 Ohio App. at 374-79. Mr. Monsour explained that he would have done

anything to save his business. Id. MMF argues that the district court improperly

limited examination about the reports (and resulting financial statements).

      At trial, MMF used the false reports to impeach Mr. Monsour’s testimony

and records. Mr. Monsour admitted that the inventory report was inaccurate, that

there was a discrepancy between that report and other accurate reports, and that

the inaccurate report was “inflated.” 4 Ohio App. at 24-25, 214-16. Citing Federal

Rule of Evidence 403, the court prevented further examination tending to show

that Mr. Monsour intentionally defrauded the bank. Fed. R. Evid. 403; 4 Ohio App. at

282-83. Under Rule 403, a court may exclude relevant evidence “if its probative

value is substantially outweighed by the danger of unfair prejudice, confusion of

the issues, or misleading the jury, or by considerations of undue delay, waste of

time, or needless presentation of cumulative evidence.”

      Excluding this evidence was not an abuse of discretion. First, no evidence

suggested that Monsour’s ever gave MMF falsified inventory reports or balance

sheets or that MMF ever relied upon them. Second, Mr. Monsour essentially

testified that the misstatements were intentional and that he had been dishonest.

At this point, the impeachment value of further testimony diminished.

                                         -7-
Simultaneously, the risk of unfair prejudice increased — extensively litigating

unrelated reports could confuse and misdirect the jury. 4 Ohio App. at 283. MMF’s

invitation to infer that this could explain the fluctuating inventory amounts in

Monsour’s financial statements is speculation and we can see why the district

court did not want the jury to explore that inference. See Aplt. Reply Br. at 12.

Moreover, litigating numerous collateral matters would lengthen the trial. The

court therefore acted within the wide range of permissible evidentiary rulings.

Cf. Koch v. Koch Industries, Inc., 203 F.3d 1202, 1229 (10th Cir. 2000).

      The dissent would reverse the judgment on the grounds that this testimony

did not provide the jury with the reason for Mr. Monsour’s misstatements, but

only showed that there were misstatements, the amounts were inflated and the

statements were prepared at Mr. Monsour’s direction. We disagree with the

dissent — ample testimony was elicited to impeach Mr. Monsour’s credibility and

the parties sufficiently litigated the issue of the inventory’s proper valuation.

      Consequently, the district court’s Rule 403 decision was supportable. The

district court was understandably solicitous, during a three-week trial involving

hundreds of documents and rulings, to prevent the jury from delving into false

reports that MMF never had or relied upon during the contract’s formation and

performance. In short, the reports are not the smoking gun on the inventory issue

that the dissent makes them out to be. The district court’s judgment call about

their probative value and unfair prejudice is not an abuse of discretion.

                                          -8-
      B.    The Dumpster Invoice Did Not Prejudice MMF.

      MMF next argues that the district court prejudiced MMF when it let Mr.

Monsour testify about a “fraudulent invoice.” Aplt. Br. at 44. At trial,

Monsour’s attempted to introduce a replacement invoice for a thirty-yard

dumpster it rented to dispose of expired food. 6 Ohio App. at 304-07. The court

excluded the invoice as hearsay and instructed the jury to disregard it. 6 Ohio App. at

305-06. Mr. Monsour then testified about the dumpster from his independent

recollection. 6 Ohio App. at 306-08.

      This did not prejudice MMF. Monsour’s proffer was not fraud on the court.

Monsour’s Inc., 2009 WL 89701, at *4. Nor does it entitle MMF to more cross-

examination about Mr. Monsour’s alleged bank fraud. The district court’s earlier

Rule 403 ruling took into account the importance of Mr. Monsour’s credibility.

Besides, the court cured any prejudice when it instructed the jury to ignore the

invoice. See, e.g., United States v. Hinson, 585 F.3d 1328, 1340 (10th Cir. 2009).

The jury was free to evaluate Mr. Monsour’s credibility.

      C.    The Court Did Not Equate Attorneys’ Arguments and Evidence.

      MMF suggests that the court impermissibly instructed the jury that it may

use attorneys’ arguments as evidence. Aplt. Br. at 37. During deliberations, the

jury asked how Monsour’s calculated its damages. 3 Ohio App. at 50. The court

replied, “You will have to rely on your collective memory of the exhibits, other

evidence, and attorneys’ arguments.” 3 Ohio App. at 51. It had earlier instructed that

                                        -9-
arguments are not evidence. 3 Ohio App. at 4, 9.

       The court’s reply to a question about a party’s argument referred the jury

to the evidence and the parties’ arguments. It did not conflate the two.

III.   The District Court Did Not Improperly Establish Facts.

       MMF argues that the district court improperly established facts under

Federal Rule of Civil Procedure 56(d)(1). 1 Aplt. Br. at 45-46. We need not

decide whether the district court acted properly. MMF had a duty to object to

errors, and far from objecting, it stipulated that the court correctly established

these facts. 2 Ohio App. at 93-94 (Revised Pretrial Order submitted by the parties). It

therefore waived any claim of error. See, e.g., Ecclesiastes 9:10-11-12, Inc. v.

LMC Holding Co., 497 F.3d 1136, 1141-42 (10th Cir. 2007).

       Alternatively, MMF’s subsequent stipulation to the facts makes their

establishment proper. Its stipulation rendered any action by the district court or

Monsour’s irrelevant. We find no error.

IV.    The Court Properly Awarded Prejudgment Interest.

       MMF next argues that the district court incorrectly awarded prejudgment

interest. Aplt. Br. at 46-48. We review the court’s legal analysis de novo and a

prejudgment interest award for an abuse of discretion. Loughridge v. Chiles

       1
         “If summary judgment is not rendered on the whole action, the court
should . . . determine what material facts are not genuinely at issue. . . . The facts
so specified must be treated as established.” Fed. R. Civ. P. 56(d)(1).

                                         -10-
Power Supply Co., Inc., 431 F.3d 1268, 1288 (10th Cir. 2005). Missouri law

governs. Id.; 1 Ohio App. at 42.

      Under Missouri law, a court must award prejudgment interest if the

contractual damages are liquidated. Mo. Ann. Stat. § 408.020 2; Denton Constr.

Co. v. Mo. State Highway Comm’n, 454 S.W.2d 44, 59-60 (Mo. 1970); Watters v.

Travel Guard Int’l, 136 S.W.3d 100, 111-12 (Mo. Ct. App. 2004). A claim is

liquidated if it is “fixed and determined or readily ascertainable by computation

or a recognized standard.” Baris v. Layton, 43 S.W.3d 390, 397 (Mo. Ct. App.

2001); see also Komosa v. Monsanto Chemical Co., 317 S.W.2d 396, 400 (Mo.

1958), partially overruled on other grounds, Martin v. Mid-America Farm Lines,

Inc., 769 S.W.2d 105, 112 n.13 (Mo. 1989)). A claim may be liquidated even if

the parties dispute liability and damages, and even if a court awards fewer

damages than a claimant requests. Catron v. Columbia Mut. Ins. Co., 723 S.W.2d
5, 7 (Mo. 1987).

      MMF argues that the damages were unascertainable because (1) Monsour’s

damages estimates varied and (2) the damages were ascertained only at trial.

Aplt. Br. at 47-48. But disputes over the amount of damages, without more, do

not make a claim unliquidated. Catron, 723 S.W.2d at 7; Denton Constr. Co., 454

      2
        “Creditors shall be allowed to receive interest . . . for all moneys after
they become due and payable, on written contracts. . . .” Mo. Ann. Stat. §
408.020.

                                         -11-
S.W.2d at 59-60. We uphold the award.

V.    The Award of Attorneys’ Fees Was Not an Abuse of Discretion.

      Last, MMF contends the court improperly awarded fees. Aplt. Br. at 48-52.

We review the court’s legal analysis de novo and its award for an abuse of

discretion. Combs v. Shelter Mut. Ins. Co., 551 F.3d 991, 1001 (10th Cir. 2008).

Missouri law again governs. Combs, 551 F.3d at 1001. Under the contract, MMF

must pay for expenses and attorneys’ fees resulting from its breach. 1 Ohio App. at 42;

cf. Trimble v. Pracna, 167 S.W.3d 706, 714 (Mo. 2005) (enforcing fee clause).

      First, MMF argues that it should not have to pay for time spent on

dismissed claims for fraud, punitive damages, and lost profits, nor for time spent

on the owners’ individual claims. Aplt. Br. at 50-52. Still, a court may award

fees where the effort and proof were the same for unsuccessful and successful

claims. See, e.g., Gilliland v. Mo. Athletic Club, 273 S.W.3d 516, 523-24 (Mo.

2009). The district court reasonably determined that all the claims “were based

on a common core of facts.” Monsour’s Inc., 2009 WL 89701, at *5. The

records thus need not segregate which work went to which issue. Brockman v.

Soltysiak, 49 S.W.3d 740, 745-46 (Mo. Ct. App. 2001).

      Second, MMF argues that Monsour’s improperly duplicated fees when it

used two attorneys instead of one. Aplt. Br. at 50. We disagree. Monsour’s

“used two attorneys only in key depositions and in hearings.” Monsour’s Inc.,

2009 WL 89701, at *7. The occasional use of two attorneys was reasonable in a

                                       -12-
three-year case culminating in a three-week trial. Id.

      Third, MMF disputes the fees for Monsour’s unsuccessful motion to

enforce a settlement. Aplt. Br. at 52. The district court correctly held that

attempts to enforce a settlement were expenses stemming from the breach.

Monsour’s Inc., 2009 WL 89701, at *6.

      Fourth, MMF objects to paying for Marshall Hull’s expert services. Aplt.

Br. at 52. The district court held that “[a]lthough Mr. Hull did not testify . . . his

work product at trial was a factor in Monsour’s successful outcome.” Monsour’s

Inc., 2009 WL 89701, at *7. Monsour’s hired Mr. Hull to disprove MMF’s

defense that Monsour’s would fail whether or not MMF breached the contract. 2
Ohio App. at 318-19. Mr. Hull’s report also detailed Monsour’s lost profits, which

were once at issue. Id. His fees therefore resulted from the breach. Cf.

Architectural Res., Inc. v. Rakey, 912 S.W.2d 676, 679 (Mo. Ct. App. 1995).

      Fifth, MMF argues that counsels’ billing records are “not sufficiently

detailed.” Aplt. Br. at 48-50. Monsour’s submitted forty-nine pages showing

“the time incurred . . . the date of the action, the timekeeper . . . the work

completed and the time billed.” Aplee. Br. at 40; 3 Ohio App. at 66-114. This enabled

the court to decide which work related to the breach. It granted fees accordingly.

Monsour’s Inc., 2009 WL 89701, at *5-7.

      All in all, the award was not an abuse of discretion. A court may consider

a case’s “length and complexity.” Essex Contracting, Inc. v. Jefferson County,

                                          -13-
277 S.W.3d 647, 656-57 (Mo. 2009). MMF agreed with Monsour’s that this

action involved “a very large body of documentary evidence and numerous

depositions were taken in three different states. The case was fact, witness and

document intensive and clearly presented a complex legal action requiring heavy

expenditures of time and labor.” 3 Ohio App. at 53, 206.

      AFFIRMED.

                                      Entered for the Court

                                      Paul J. Kelly, Jr.
                                      Circuit Judge

                                        -14-
09-3022 - Monsour’s, Inc. v. Menu Maker Foods, Inc.

HARTZ, Circuit Judge, dissenting:

      I respectfully dissent. In my view the district court abused its discretion in

limiting MMF’s cross-examination of Mark Monsour.

      As the president and co-owner of Monsour’s, Mr. Monsour had a

substantial financial stake in the litigation. Also, as the panel majority states, he

“was Monsour’s main witness at trial.” Op. at 7. His credibility was critical.

The jury had a right to know whether he was the sort of person who would tell big

lies when big money was at stake. But the district court prevented MMF from

putting on highly probative evidence that he was such a person. And I see no

countervailing reason to exclude that evidence. Allowing MMF to put on the

excluded evidence would have consumed very little time, and could hardly have

confused or misdirected the jury; nor would the evidence have created any risk of

unfair prejudice.

      It is useful to compare the testimony at trial to what should have been

elicited. On direct examination Mr. Monsour was questioned by his attorney

about two Monsour’s balance sheets with the same date (which was one month

before the parties entered into their Asset Purchase Agreement) but very different

figures for the value of the food service inventory:

      Q.     Let’s talk about Monsour’s food service inventory. Can you
             tell the jury what Exhibit 447 is?

      A.     It’s a Monsour balance sheet.
Q.   This has already been admitted in evidence. Can you tell the
     jury, what is this based upon? I’m sorry. Bad question. What
     does it show the inventory was—what does it show the
     inventory was, that inventory at Monsour’s as of
     December 29th, 2001?
A.   $997,950.
Q.   You’re getting that from the line right next to what I
     highlighted?
A.   That’s correct.
Q.   Was this true and accurate?
A.   Yes, sir.
Q.   And what was it based upon?
A.   It would have been an inventory valuation done probably in the
     days preceding the preparation of this statement off of the
     inventory valuation report.
Q.   This is about a month before the asset purchase agreement was
     executed. Do you have any knowledge as to whether or not this
     document was supplied to Menu Maker Foods?
A.   I do not know.
Q.   Can you tell the jury what Exhibit 412 is?
A.   It’s a balance sheet.
Q.   What’s the date of this balance sheet?
A.   12-29-2001.
Q.   This is the exact same date as the Exhibit 447 that we went
     over a second ago. Tell the jury what the inventory indicates
     on this Exhibit 412?
A.   1,643,819.
Q.   Can you tell the jury whether or not—does this balance sheet,
     the one that shows 1.6 million, does that reflect what the actual
     cost of your inventory was?
A.   No.
Q.   Now, the one that showed $997,000, the one I just showed you
     a few minutes ago, did that reflect what the actual cost of your
     inventory was?
A.   Yes.
Q.   Now, this document shows 1.6 million, Exhibit 412, was that
     ever provided to Menu Maker Foods?
A.   No.
Q.   Just so it’s clear to the jury what was the actual cost of your
     inventory on December 29th, 2001?
A.   $997,950.

                                 -2-
Aplt. App., Vol. 4 at 23–24. Thus, Mr. Monsour acknowledged that the higher

figure (higher by about $650,000) was incorrect. But the testimony would not

suggest any lack of veracity of Mr. Monsour. He admitted no role in the error,

nor did he explain the reason for the error.

      MMF’s attorney tried to elicit those matters on cross-examination, both

with respect to the inventory figures and with respect to accounts-receivable

figures (on the same document) not addressed on direct examination. But because

of the district court’s ruling limiting the cross-examination, the jury heard only

the following. First, counsel emphasized the differences in the figures:

      Q.    Mr. Monsour, do you have Exhibit 447 in front of you?
      A.    Yes, sir.
      Q.    Okay. This is my copy of 447, and you will confirm I have
            highlighted portions of that document?
      A.    Yes, sir.
      [discussion of overhead projector omitted]
      Q.    This is 447 that we just talked about, Exhibit 447?
      A.    Correct.
      Q.    I have highlighted on the accounts receivable trade and
            inventory, correct?
      A.    Correct.
      Q.    I have highlighted the date?
      A.    Yes, sir.
      Q.    Mr. Monsour, can you go to Exhibit 412, which was admitted
            yesterday during your testimony?
      A.    Yes, sir.
      Q.    Mr. Monsour, I’m going to show you my copy of that exhibit.
            I have highlighted the date and the accounts receivable, trade.
            I have highlighted the inventory balance and frankly I have
            highlighted current liabilities, notes, payables.
      A.    Yes, sir.
      Q.    That’s actually highlighted on your exhibit, isn’t it?

                                          -3-
      A.     Yes, sir.
      Q.     Is that on 412?
      A.     Uh-huh.
      Q.     Mr. Monsour, Exhibit 412 was admitted yesterday. Exhibit 12
             is a balance sheet, correct?
      A.     Yes, sir.
      Q.     And it’s a balance sheet of 12-29-2001?
      A.     Yes, sir.
      Q.     And that’s the same date as Exhibit 447?
      A.     Correct.
      Q.     But yesterday—I’m sorry. And that exhibit shows an account
             receivable trade of $1,073,575.46?
      A.     Yes, sir.
      Q.     Shows an inventory of $1,643,819.80?
      A.     Yes, sir.
      Q.     I placed that on the [projector]. It won’t work that way. But
             exhibit 447 shows an accounts receivable trade of
             $894,841.36, and Exhibit 412 show $1,073,575.46. Yesterday
             you testified that Exhibit 412 was inaccurate. Is that your
             testimony today?
      A.     Yes, sir.
      Q.     Okay. So that number is the one million 73 thousand and
             change is an inaccurate number?
      A.     Yes, sir.
      Q.     And the inventory on that document shows $1,643,819.80 as
             opposed to 447, which shows $997,950, right?
      A.     Yes, sir.
      Q.     And that number is inaccurate, correct?
      A.     Yes, sir.

Id. at 212–15. Then counsel unsuccessfully attempted to question Mr. Monsour

about the reason for the discrepancy in the figures:

      Q.     Mr. Monsour, I don’t understand why the numbers are
             inaccurate. Can you tell me why?
      A.     I believe Judge Marten instructed me to not talk about that.
                    Attorney for [MMF]: Your Honor, may we please have
                          a bench conference?
                    The Court: Certainly
                          (Off the record bench conference.)

                                         -4-
      Q.     [Attorney for MMF] Mr. Monsour, I’m exhibiting Exhibit 412
             on the [projector]. I’m putting the top part of it. I’ll tell you
             that post-it notes appear that I put there. Mr. Monsour, tell us,
             if you can, who prepared this balance sheet as of 12-29-2001?
      A.     Shelly Corn.
      Q.     Okay. Was it prepared at your instruction?
      A.     Most likely.
      Q.     Best of your recollection it was?
      A.     Yes.
      Q.     There’s a discrepancy between Exhibits 412. There are two,
             actually, between 412 and 447. First discrepancy is in
             accounts receivable. 447 says there was 894,841.36 accounts
             receivable and Exhibit 412 shows a 1,073,576.46. How [d]o
             you account for that discrepancy?
      A.     The larger one is inaccurate.
      Q.     To which you have testified before, but how do you an [sic]
             account for that discrepancy?
      A.     The numbers are inflated.
      Q.     Let me direct your attention to 447 and 412, inventory
             valuation. Number on 47 is 997,950 even. Inventory on 412 is
             1,643,819. There’s a discrepancy between those two
             documents on inventory valuations. How do you account for
             that?
      A.     Larger numbers are inaccurate.
      Q.     Yes, sir. They are thank you. How do you account for the
             inaccuracy?
      A.     The larger numbers are inflated.
      Q.     At your direction? The inflation of the numbers?
      A.     I think I have been directed by Judge Marten to not talk about
             that.
                    The Court: I think you have taken it about as far as you
                           can go.

Id. at 215–16.

      The majority opinion states that “Mr. Monsour essentially testified that the

misstatements were intentional and that he had been dishonest.” Op. at 7. But I

cannot agree with that characterization. He admitted that there were

                                         -5-
misstatements, that the figures were inflated, and that the balance sheet “was

prepared at [his] instruction.” But he did not admit that he (or anyone else)

intended the figures to be incorrect or even that he knew the figures to be

incorrect when the balance sheet was prepared. A jury would have to speculate to

infer from this testimony that Mr. Monsour had engaged in any misconduct that

would damage his credibility.

      Compare that cross-examination testimony to Mr. Monsour’s testimony at

his deposition. The first part of the deposition testimony resembles what was

presented at trial:

      Q.     Just take a look at 9 and 9A. [Deposition Exhibit 9 became
             Trial Exhibit 412 and Deposition Exhibit 9A became Trial
             Exhibit 447]. When I review those documents, in the entry
             “Accounts Receivable - trade (net),” do you see that entry?
      A.     Both documents. Correct.
      Q.     And 9 reflects “Accounts Receivable - trade (net) value of
             $1,090,500,” and 9A reflects “$765,071”; they are of like date.
             I don’t understand the difference; can you explain it to me?
      A.     I will have to review them, but I will try to explain it.
                    [Counsel for Monsour’s]: Take your time.

Id., Vol. 2 at 376.

      But then counsel elicited Mr. Monsour’s involvement and motive, two

critical facts not presented to the jury:

      Q.     [By Counsel for MMF]: And I just want you to explain that
             entry to me.
      A.     Which entry is that?
      Q.     The “Accounts Receivable - Trade (net).”
      A.     Could be one of two things. One, sometimes from Shelly’s
             cutoff to when she actually brings them up-to-date, those

                                            -6-
               numbers can change. Or two, I could have told her to raise
               those numbers.
      Q.       Why would you do that?
      A.       To make the balance sheet look better.
      Q.       Why would you do that?
      A.       For bank purposes.
      Q.       Why would you do that? I don’t understand.
      A.       To stop a loan from being called.
      Q.       Are you familiar with the term “dishonest”?
      A.       Yes, sir.
      Q.       Don’t you think that is just downright dishonest?
      A.       What it is is a man trying to keep his business going.
      Q.       I understand that. And therefore, would I be correct in
               understanding that you were willing to do anything that you
               could do to keep your business afloat, including provide false
               information to lending institutions; isn’t that true?
      A.       That is true.
      Q.       All right. Good. Let’s look at the inventory amount. I will
               tell you that Exhibit 9 shows an inventory of $1,643,820, and
               Exhibit 9A shows $997,950; can you account for the difference
               in that?
      A.       That would have been artificial inflation on my part.
      Q.       Sir?
      A.       I would have told Shelly Corn to raise that number.
      Q.       For the same reason that you gave me for artificially inflating
               accounts receivable trade net?
      A.       Yes, sir.

Id. (emphases added). Had MMF been permitted to pursue this cross-examination

at trial, the jury could have drawn a rather different picture of Mr. Monsour’s

credibility.

      The district court’s expressed reasons for excluding the cross-examination

are unsupportable. Before Mr. Monsour testified, the court granted Monsour’s

motion in limine to exclude the evidence “because it is irrelevant.” Id. at 423. I

do not understand, however, how evidence so clearly probative of a lack of

                                          -7-
veracity could be irrelevant. Then, after the above-quoted cross-examination,

when MMF’s counsel again requested an opportunity to question Mr. Monsour on

the matter, the court said: “I’m going to keep it out. The reason is the 403 [sic].

I think that the danger of unfair prejudice substantially outweighs any probative

value; that getting into the reasons for the inflated balance sheet would provide to

the jury.” Id., Vol. 4 at 283. With all due deference (and we owe the trial judge

great deference), I cannot follow this explanation. If the concern is that the jury

might think that Exhibit 412 was given to MMF, I would think that the jury need

only be informed (as Mr. Monsour testified on direct examination) that it had not

been. Jurors are not idiots. Or if the concern is that the jury might infer that

some other inventory numbers given to MMF were false, that is not a legitimate

concern. A jury should not be precluded from inferring that a witness who would

lie on one occasion for business reasons would lie on other occasions. And if the

concern is that too much court time would be expended by Mr. Monsour in

explaining his justification for lying to banks, then perhaps trial judges should

always exclude impeachment evidence on the ground that the witness will need

too much time to rationalize lying. MMF was not seeking to take the court’s time

by inquiring into alleged errors in numerous reports. Indeed, it was not seeking

to question Mr. Monsour on any additional documents. It simply wished to elicit

that Mr. Monsour had intentionally falsified the document about which he had

been cross-examined and that he did it to save his business. That would have

                                          -8-
been devastating impeachment; nothing else in the cross-examination came close

to having such an effect.

      In short, the restriction on the cross-examination of Mr. Monsour was clear

error. And the error requires reversal of the verdict.

      I have no substantial disagreement with the majority opinion’s analysis of

the other issues on appeal. But that analysis would be mooted by requiring a new

trial at which MMF could conduct a proper cross-examination of Mr. Monsour.

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