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Allstate Insurance Co. v. Papanek

United States District Court, S.D. Ohio, Western Division, Dayton

January 16, 2020

MELISSA PAPANEK, et al., Defendants.

          ORDER ON THE PARTIES' MOTIONS IN LIMINE (DOCS. 329, 334, 336-54, 359)


         This civil consent case is before the Court on the parties' numerous motions in limine. The parties have filed respective opposition and reply memoranda. The Court has carefully considered these motions and they will be addressed in turn.


         This case concerns the deterioration an agency contractual relationship between Allstate and its former exclusive agent Melissa Papanek. In 2008, Papanek acquired an economic interest in her father's insurance agency, the Papanek Agency, which had operated in the Dayton, Ohio area as an Allstate agency since 1972. Upon acquiring the agency, Papanek entered into an exclusive agency agreement (“EA Agreement”) with Allstate that authorized her to sell Allstate insurance products and prohibited her from selling or soliciting the sale of insurance products for any other insurance company. Approximately six years later, in late-2014, Allstate chose to end its relationship with Papanek and terminated the EA Agreement. The parties have been engulfed in heated litigation against each other ever since -- litigation that has continued in this trial court for almost as long as the exclusive agency agreement between them lasted.

         Notably, either party to the EA Agreement was permitted to terminate it, with or without cause, upon providing a 90-day notice to the other party. Allstate gave Papanek notice on September 2, 2014 that it was terminating the agreement 90 days thereafter on December 1, 2014. According to Allstate, it did so because Papanek admitted to improperly issuing auto and homeowners policies to Allstate customers without their knowledge, intentionally failed to remove vehicles from customers' auto policies, and delayed the cancellation of certain policies, all for the purpose of increasing the year-end bonuses paid to her by Allstate.

         Pursuant to the terms of the EA Agreement, upon its termination, Papanek could either sell her economic interest in her Allstate book of business to a buyer approved by Allstate or elect to receive a termination payment (“TPP payment”) from Allstate. Papanek ultimately elected to receive TPP payments over a period of twenty-four months, and Allstate began making those monthly payments in January 2015, following termination of the EA Agreement. Ultimately, however, Allstate ceased making such payments in December 2015, arguing that its obligation to do so ceased as a result of Papanek's material breach of continuing terms in the EA Agreement prohibiting the solicitation of Allstate customers for one year and forbidding the use of Allstate confidential information at any time after termination of the Agreement.

         Ultimately, Allstate filed this action asserting the following claims: (1) breach of contract against Papanek; (2) misappropriation of trade secrets against Papanek and her new insurance agency Phoenix; (3) tortious interference with contractual relationships against Phoenix; (4) tortious interference with business relationships against Papanek and Phoenix; and (5) unfair competition against Papanek and Phoenix.[1] Doc. 22. These claims all remain pending for trial and all generally involve allegations that Papanek solicited Allstate customers during the one-year solicitation period and has used Allstate's confidential information in furthering her business with Phoenix.

         Papanek answered Allstate's allegations and filed counterclaims asserting: (1) breach of contract; (2) tortious interference with contractual and business relationships; (3) violations of Ohio's Deceptive Trade Practices Act (“ODTPA”), Ohio Rev. Code § 4165.011 et seq.; (4) breach of the covenant of good faith and fair dealing; and (5) unfair competition. Doc. 34. Phoenix joined in Melissa's ODTPA and unfair competition counterclaims. See doc. 34 at PageID 458-61. Underlying these claims were arguments made by Defendants that Allstate interfered with Papanek's ability to sell her Allstate book of business, either in its setting of deadlines for her to complete the sale, not giving her a full 90-days to complete the sale, not giving her an extension of the 90-day period to complete the sale, not assisting her in finding potential buyers, and purportedly attempting to coerce the sale of Papanek's interest to a specific Allstate exclusive agent, Tony Peh. Ultimately, Defendants suggest that Allstate forced her to take TPP payments rather than permit the sale of her book of business and, thus, Allstate retained Papanek's book of business for a fraction of its actual value.

         Following the Court's decisions on summary judgment, only one counterclaim remains pending; namely, Papanek's counterclaim alleging that Allstate breached the EA Agreement by ceasing to make all TPP payments to her. Allstate argues that Papanek's breach of contract counterclaim cannot succeed because its duty to continue making TPP payments was relieved when Papanek materially breached the EA Agreement by soliciting Allstate customers during the year following termination of the Agreement and/or by improperly using Allstate's confidential information at any time following termination of the Agreement (or while she continued to work for Allstate if such confidential information was used for any purpose other than to further Allstate's interests).


         Having set forth the general background of the case and the claims/counterclaim remaining for trial, the Court turns to the motions in limine filed by the parties. “Although the Federal Rules of Evidence do not explicitly authorize in limine rulings, the practice has developed pursuant to the district court's inherent authority to manage the course of trials.” Luce v. United States, 469 U.S. 38, 41 (1984). “Motions in limine allow the court to rule on evidentiary issues prior to trial in order to avoid delay and to allow the parties to focus remaining preparation time on issues that will in fact be considered by the jury.” United States v. Mack, 298 F.R.D. 349, 351 (N.D. Ohio 2014), aff'd, 808 F.3d 1074 (6th Cir. 2015). However, “[a] ruling on a motion in limine is no more than a preliminary, or advisory, opinion that falls entirely within the discretion of the district court.” United States v. Yannott, 42 F.3d 999, 1007 (6th Cir. 1994).

         In deciding motions in limine, “[c]ourts should exclude evidence . . . only when it is clearly inadmissible.” Mack, 298 F.R.D. at 351 (citing Indiana Ins. Co. v. General Elec. Co., 326 F.Supp.2d 844, 846 (N.D. Ohio 2004)). Unless “certain evidence is clearly inadmissible, [courts] should defer ruling until trial so that questions of foundation, relevancy, and potential prejudice can be evaluated in proper context.” Id. Regardless, a “district court may change its ruling at trial for whatever reason it deems appropriate.” Yannott, 42 F.3d at 1007.


         The Court first addresses the two motions in limine filed by Defendants. Defendants first move for an order imposing an adverse inference against Allstate because Allstate failed to preserve a cell phone used by Ted Stefanov during his employment with Allstate -- a phone that was erased upon Stefanov's retirement during the pendency of this case. Doc. 329. Allstate filed a memorandum in opposition to Defendants' motion. Doc. 385. Following the filing of Defendants' motion in limine, the Court addressed Defendants' arguments on this issue in a separate order on a separate motion filed by Defendants. Doc. 381. For the reasons previously set forth by the Court (doc. 381 at PageID 10356), Defendants' motion for an adverse inference (doc. 329) is DENIED.

         In their second motion in limine, Defendants seek an order precluding Allstate from presenting evidence or referencing the reasons why Allstate purportedly chose to terminate the agreement between the parties, i.e, because Papanek engaged in dishonest conduct to increase the size of a year-end bonus. Doc. 334. Defendants do not seek to preclude evidence or reference to the undisputed fact that Allstate terminated the agreement. Id.

         Defendants argue that the reasons why Allstate terminated the agreement, i.e., Papanek's allegedly dishonest conduct, is not relevant to the claims or defenses at issue in the case, see Fed. R. Evid. 401); is inadmissible as character evidence under Fed.R.Evid. 404(B); and, to the extent it could be admissible for impeachment purposes under Fed.R.Evid. 608(b), the prejudicial effect outweighs the minimal probative value of such evidence. Doc. 334. Allstate opposes Defendants' motion, arguing that Papanek's dishonest conduct leading to termination of the agreement is relevant to proving her motive for soliciting Allstate's customers and using Allstate's confidential information. Doc. 386.

         From the undersigned's perspective, it is unclear how Papanek's allegedly dishonest conduct toward Allstate before termination of the Agreement is evidence of her motive for dishonest conduct after termination. While the Court could understand the assertion that Papanek was motivated to use Allstate's confidential information and solicit its customers because Allstate terminated her contract, it does not, however, make sense to suggest that Papanek engaged in such post-termination conduct because she previously lied to Allstate. Instead, Allstate's apparent contention in this regard seems more akin to improperly suggesting that Papanek's dishonest conduct after termination was in conformity with her dishonest conduct before termination. See Fed. R. Evid. 404(a)(1) (“Evidence of a person's character or character trait is not admissible to prove that on a particular occasion the person acted in accordance with the character or trait”). Thus, the undersigned is skeptical as to the admissibility of such evidence to prove motive.

         However, reference to such prior dishonest conduct may be proper under Fed.R.Evid. 608(b), which permits, at the court's discretion, the cross-examination of a witness on specific acts probative of the witness's truthfulness. Defendants acknowledge as much, but argue that, even if Papanek's dishonesty may be inquired into on cross-examination under Rule 608(b), the Court should not permit such inquiry because “its probative value is substantially outweighed by a danger of . . . unfair prejudice, confusing the issues, [or] misleading the jury[.]” Fed.R.Evid. 403. While the undersigned questions whether the prejudice effect of such evidence outweighs its probative value, the Court DEFERS a ruling on this issue until trial.


         Now the Court addresses Allstate's motions. Notably, many of these motions in limine were filed before the Court's most recent decision on summary judgment. That decision further reduced the counterclaims to be presented at trial and, thus, greatly impacts the scope of relevant evidence. Significantly, the Court has now disposed of Papanek's counterclaim alleging a breach of the covenant of good faith and fair dealing, in which Papanek alleged that Allstate interfered with her ability to sell her book of business, thus resulting in damages -- presumably the difference between the value of her book and the amount of TPP Allstate paid her. Because the Court has granted summary judgment in Allstate's favor on Papanek's contract counterclaim alleging a breach of the covenant of good faith and fair dealing, evidence in support of that counterclaim --such as Allstate's alleged interference with such sale and the value of her book of business -- is of little “consequence in determining the action” and, thus, questionably relevant. See Fed. R. Evid. 401.

         Nevertheless, the parties briefed such issues in the motions in limine, and the Court will address those motions herein.

         Equitable Defenses (Doc. 336)

         In its first motion, Allstate seeks to preclude Defendants from presenting argument and evidence supporting the affirmative defenses of waiver, equitable estoppel, laches, and unclean hands asserted in Defendants' answer. Doc. 336. Allstate argues that since it no longer seeks equitable relief in this ...

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