Jill D. Olsen v. Lee Kraus ( 2022 )

United States Court of Appeals
For the Eighth Circuit
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No. 20-2771
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Jill Denise Olsen, in her capacity as Chapter 7 Trustee for Xurex, Inc.
Plaintiff - Appellee
v.
Giacomo E. Di Mase; Leonard P. Kaiser; Tristam G. Jensvold; Steve McKeon
Defendants
Lee O. Kraus, Jr.
Defendant - Appellant
Jose Di Mase; DuraSeal Pipe Coatings Company, LLC; DuraSeal Holdings, S.r.L.;
Joseph Johnston; Dietmar Rose; Robert Olson; HDI, Holding Development
Investment S.A.
Defendants
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Appeal from United States District Court
for the Western District of Missouri - Kansas City
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Submitted: September 22, 2021
Filed: January 31, 2022
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Before LOKEN, COLLOTON, and BENTON, Circuit Judges.
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BENTON, Circuit Judge.
Xurex, Inc. filed for Chapter 7 bankruptcy. The trustee sued Lee O. Kraus,
Jr. and 20 other defendants for breach of fiduciary duty and civil conspiracy. As
relevant here, the jury returned a verdict for the trustee against Kraus for conspiracy
to breach fiduciary duties. Kraus appeals the verdict and the district court’s 1 denial
of his motions for judgment as a matter of law, a new jury trial, the entries of
judgment, and “all adverse rulings subsumed within.” Having jurisdiction under 28
U.S.C. § 1291, this court affirms.
I.
In 2010, DuraSeal Pipe Coatings Company, LLC (DPCC) signed an exclusive
North American license agreement with Xurex, a manufacturer and patent holder of
protective coatings. The agreement required DPCC to make minimum monthly
purchases and pay royalties through 2018.
Jose Di Mase owned and controlled DuraSeal Holdings, S.r.L. It acquired
DPCC in 2011 and made a similar worldwide licensing agreement with Xurex. 2 Di
Mase hired Kraus as a consultant to help with the deal. Kraus also had a contract
with Di Mase’s “personal investment vehicle,” Holding Development Investment,
S.A. (HDI).
In early 2014, Xurex CEO Leonard P. Kaiser, Jose Di Mase, and Xurex
directors Giacomo E. Di Mase and Tristram G. Jensvold began discussing
bankruptcy with Kraus. Kraus drafted and arranged a 2014 Amendment to the 2010
agreement between Xurex and DuraSeal. The Amendment gave manufacturing and
production rights to DuraSeal, eliminated any minimum purchase obligations, but
1
The Honorable Ortrie D. Smith, United States District Judge for the Western
District of Missouri, who took inactive status on September 1, 2020.
2
DuraSeal Pipe Coatings Company, DuraSeal Holdings S.r.L., and their
combination will be referred to as “DuraSeal” unless otherwise noted.
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allowed DuraSeal to keep its exclusive licenses. Kraus signed the Amendment on
behalf of DuraSeal as “CEO.”
Later in 2014, Xurex filed for bankruptcy. The Chapter 7 trustee sued Kraus
and others for conduct leading up to and including the 2014 Amendment. Kraus was
named in only one of the two claims presented to the jury—civil conspiracy.
Two months before trial, Kraus’s counsel withdrew. He proceeded pro se.
He orally moved for judgment as a matter of law. Post-trial Kraus again moved for
judgment as a matter of law or a new trial. The district court denied his post-trial
motions on preservation and substantive grounds. Kraus appeals the denial of his
post-trial motions, the jury verdict, the judgment, and all adverse rulings subsumed
within.
II.
A motion for judgment as a matter of law under 50(a) “must specify… the law
and facts that entitle the movant to the judgment.” Fed. R. Civ. P. 50(a)(2). “A
post-trial motion for judgment may not advance additional grounds that were not
raised in the pre-verdict motion.” Klingenberg v. Vulcan Ladder USA, LLC, 936
F.3d 824, 834 (8th Cir. 2019).
This court reviews for abuse of discretion the district court’s determination
about what grounds were raised by a 50(a) motion. Hurst v. Dezer/Reyes Corp., 82
F.3d 232, 237 (8th Cir. 1996). This court reviews de novo the denial of a renewed
motion for judgment as a matter of law. Burroughs v. Mackie Moving Sys. Corp.,
690 F.3d 1047, 1052 (8th Cir. 2012).
In Kraus’s oral 50(a) motion for judgment as a matter of law, he listed the
elements of a civil conspiracy but did not cite any particular elements as unproven
or lacking sufficient evidence. In his 50(b) motion post-trial, Kraus argued for the
first time that there was no evidence of an unlawful overt act in furtherance of the
conspiracy; plaintiff’s theory of damages was unsupported and ignored DuraSeal’s
right to terminate minimum purchases; and the breach-of-fiduciary duty claims
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underlying the conspiracy claim should have been dismissed for bootstrapping and
duplicating the breach-of-contract claims.
The post-trial motion challenged wholly different grounds than the pre-verdict
motion. The district court thoroughly considered Kraus’s argument that he did
preserve the 50(b) issues, distinguishing Kaplon v. Howmedica, Inc., 83 F.3d 263,
266 (8th Cir. 1996); Jarvis v. Sauer Sundstrand Co., 116 F.3d 321, 323 n.4 (8th Cir.
1997); Sturgis Motorcycle Rally, Inc. v. Rushmore Photo & Gifts, Inc., 908 F.3d 313,
323 (8th Cir. 2018); and Hurst, 82 F.3d at 237. The district court ruled that Kraus’s
50(a) motion lacked particularity and failed to put the plaintiff on notice of the
arguments in his later 50(b) motion. The district court did not abuse its discretion in
ruling that the earlier motion failed to preserve the arguments in the 50(b) motion,
and properly denied it.
Kraus asked the district court to excuse his lack of compliance with Rule 50
because he was pro se at trial. “A document filed pro se is to be liberally construed.”
Erickson v. Pardus, 551 U.S. 89, 94 (2007). The district court concluded that even
liberally construed, the 50(a) motion “does not implicate, in any way, the arguments
he raises in his Rule 50(b) motion.” In its order denying the 50(b) motion, the district
court did add that because “Kraus was the most active trial participant and, inter
alia, was the only Defendant to cite case law and argue about judge versus jury
determinations,” he was not entitled to have his motion liberally construed. There
is, however, no different standard for pro se defendants who are “active” participants
in their defense. Kraus, a non-attorney, was entitled to the same liberal construction
as other pro se litigants. Regardless, the district court properly denied the 50(b)
motion.
A.
Kraus claims he is entitled to judgment as a matter of law on the civil
conspiracy claim because there was no third party to the 2014 Amendment.
Although he failed to address it in his 50(a) motion, Kraus did raise the issue at the
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summary judgment stage and in a jury instruction conference. The district court
replied that its final jury instructions would serve as a ruling on the issue. Instruction
No. 18 explained that a “corporation cannot conspire with its own employees or
agents unless the employee or agent has an independent personal stake in achieving
the object of the conspiracy.” Kraus did not object to the final jury instructions.
Regardless, Kraus is wrong about the third-party requirement under Missouri
law (which the parties agree governs the conspiracy claim). In general, “a
corporation cannot conspire with its own employees,” but there is an exception
“when an employee has an independent personal stake in achieving the object of the
conspiracy.” Mika v. Cent. Bank of Kansas City, 112 S.W.3d 82, 94 (Mo. App.
2003).
In support of his third-party-required argument, Kraus relies on Missouri
Highway & Transp. Comm’n v. Commerce Bank of Kansas City, 763 S.W.2d 172,
176-77 (Mo. App. 1988). As the district court explained, that case involved parties
on opposite sides of a contract conspiring to breach it. Here, in contrast, the
conspiracy was to breach a fiduciary duty, and the defendants each had conflicts of
interest, independent personal stakes, or knew about those conflicts and willingly
participated in the conspiracy regardless. The district court discussed at length, from
the evidence at trial, the “intricate web of connections” among many parties and non-
parties to the agreement. Specifically, there was sufficient evidence that Kraus was
not a formal agent of DuraSeal, or that he had an independent stake either as a
contractor for HDI, or as a consultant to Jose Di Mase, both third parties to the 2014
Amendment. There is sufficient evidence for the jury’s verdict.
B.
Kraus did not present an argument to the district court that Missouri law
requires an “unlawful act” in furtherance of a conspiracy. At trial, he listed the
elements of a civil conspiracy without mentioning the requirement of an “unlawful
act” he now alleges on appeal.
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Regardless, Kraus’s interpretation of Missouri law is incorrect. “A ‘civil
conspiracy’ is an agreement or understanding between persons to do an unlawful
act, or to use unlawful means to do a lawful act.” Oak Bluff Partners, Inc. v. Meyer,
3 S.W.3d 777, 780-81 (Mo. banc 1999). “The term unlawful, as it relates to civil
conspiracy, is not limited to conduct that is criminally liable, but rather may include
individuals associating for the purpose of causing or inducing a breach of contract
or business expectancy.” W. Blue Print Co., LLC v. Roberts, 367 S.W.3d 7, 22
(Mo. banc 2012). Here the jury found that (1) Kraus conspired with others to
eliminate the minimum-purchase obligations and/or create the rights to manufacture
and produce Xurex products, (2) he agreed with that purpose, (3) he knew that CEO
Kaiser had a fiduciary duty, (4) he acted in furtherance of the agreement, knowing it
was not in Xurex’s best interests, and (5) Xurex was damaged. There was sufficient
evidence for the jury to find civil conspiracy.
III.
Kraus argues for a new trial or reversal due to alleged inconsistency and
insufficient evidence to support the verdicts. This court reviews the denial of a new
trial for clear and prejudicial abuse of discretion. Amplatz v. Country Mut. Ins. Co.,
823 F.3d 1167, 1172 (8th Cir. 2016). “In reviewing the sufficiency of the evidence
to support the jury’s verdict, we interpret the record in a light most favorable to the
prevailing party, affirming unless no reasonable juror could have reached the same
conclusion.” Structural Polymer Grp., Ltd. v. Zoltek Corp., 543 F.3d 987, 991 (8th
Cir. 2008).
“[A] party waives any objection to an inconsistent verdict if she fails to object
to the inconsistency before the jury is discharged.” Williams v. KETV Television,
Inc., 26 F.3d 1439, 1443 (8th Cir. 1994). Here, Kraus did not object to the verdict
forms nor seek any clarification of the inconsistency before the jury was discharged
(first raising the claim in his post-trial motions). He waived the several arguments
he now raises about the language of the verdict director and the inconsistency of the
verdict.
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Ignoring his waiver, Kraus claims the court erred in merging the overlapping
damages awards in the jury verdicts. But courts must “reconcile and preserve” jury
verdicts “whenever possible.” Matrix Grp. Ltd., Inc. v. Rawlings Sporting Goods
Co., 477 F.3d 583, 592 (8th Cir. 2007). While “a party is entitled to proceed on
various theories of recovery, a party is not entitled to collect multiple awards for the
same injury.” EFCO Corp. v. Symons Corp., 219 F.3d 734, 742 (8th Cir. 2000).
When a plaintiff’s damage theories overlap, entering judgment on the larger of the
two amounts is an appropriate remedy. Id. Because plaintiff’s damage theories for
civil conspiracy and breach of fiduciary duty were the same, the district court
properly entered judgment on the larger of the two amounts. Kraus, Tristram
Jensvold, Giacomo Di Mase, Leonard Kaiser, and HDI, Inc. are not personally liable
for the larger amount, but jointly and severally liable for only the smaller amount,
$24,414,522.
IV.
This court’s review of unpreserved instructional error in jury instructions is
limited to plain error. Stanley v. Cottrell, Inc., 784 F.3d 454, 462 (8th Cir. 2015).
“Parties must make a timely objection to jury instructions, stating ‘distinctly the
matter objected to and the grounds for the objection.’” Moore v. Am. Family Mut.
Ins. Co., 576 F.3d 781, 786 (8th Cir. 2009), quoting Fed. R. Civ. P. 51(c). “The
mere tender of an alternative instruction without objecting to some specific error in
the trial court's charge or explaining why the proffered instruction better states the
law does not preserve the error for appeal.” Farmland Indus. v. Frazier–Parrott
Commodities, Inc., 871 F.2d 1402, 1408 (8th Cir. 1989). Although the district judge
discussed the matter of objections with Kraus several times during their conferences
on the jury instructions, Kraus did not object to the jury instructions.
Because Kraus did not object to the instructions, he “must show that an
obvious error in the jury instructions affected his substantial rights and that the error
seriously affected the integrity, fairness, or public reputation of judicial
proceedings.” Stanley, 784 F.3d at 463. This court should not review a jury
instruction “in a vacuum,” but rather “must view the instruction along with the
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evidence adduced at trial.” Goss Int'l Corp. v. Man Roland Druckmaschinen
Aktiengesellschaft, 434 F.3d 1081, 1092 (8th Cir. 2006). Contrary to Kraus’s
assertion, the “and/or” clause in Instruction No. 29, read in the context of the rest of
the jury instructions, did not instruct the jury that Kaiser’s participation was optional.
As discussed above, the district court properly refused Kraus’s erroneous
instructions on third parties and unlawful overt acts in civil conspiracy. The district
court did not plainly err in instructing the jury on the claim for conspiracy to breach
fiduciary duties (Instruction No. 29) or the definitions and legal statements in the
other instructions.
Kraus maintains the district court erred in instructing the jury about “entire
fairness.” Although the verdict director on civil conspiracy did not refer to entire
fairness, it was a factor in the verdict director on breach of fiduciary duty—the
predicate to the conspiracy claim.
“When a transaction involving self-dealing by a controlling shareholder is
challenged, the applicable standard of judicial review is entire fairness, with the
defendants having the burden of persuasion.” Americas Mining Corp. v. Theriault,
51 A.3d 1213, 1239 (Del. 2012). See generally In re Cornerstone Therapeutics,
Inc., S’holder Litig., 115 A.3d 1173, 1180 (Del. 2015) (describing when “entire
fairness” applies to breach of the duty of loyalty, rather than “subjective bad faith”).
The evidence at trial supported an instruction on entire fairness based on Jose
DiMase’s self-dealing as a controlling shareholder. There was no obvious error in
the district court’s instructions, which incorporated the applicable law on entire
fairness and submitted the issue to the jury.
Kraus did not object at trial to the trial management rulings he now appeals.
To the extent that any objection was preserved, the court was within its discretion to
deny his untimely attempt to designate deposition testimony, in allotting time for
closing argument, and in limiting Kraus’s examination of the trustee. See Huggins
v. FedEx Ground Package Sys., Inc., 592 F.3d 853, 856 (8th Cir. 2010).
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Kraus’s remaining challenges to “all adverse rulings” and the “cumulative
effect of errors” are likewise without merit.
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The judgment is affirmed.
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