TECHNOLOGY SOLUTIONS COMPANY, Plaintiff-Appellant and Cross-Appellee, v. NORTHROP GRUMMAN CORPORATION, Defendant-Appellee and Cross-Appellant.
Plaintiff Technology Solutions Company appeals from entry of a final judgment and verdict partially in plaintiff's favor, following a jury trial, on plaintiff's breach of oral contract claims against defendant Northrop Grumman Corporation, in which the circuit trial court granted in part and denied in part plaintiff's request for prejudgment interest. On appeal, plaintiff contends that the trial court erred in denying its request for mandatory prejudgment interest because the amount of its damages was certain. Plaintiff also contends that the trial court erred in granting it discretionary interest only from June 21, 1997, rather than from June 21, 1993, the date it filed its lawsuit. Defendant has filed a cross-appeal and contends that the trial court erred in denying its motion for judgment notwithstanding the verdict (JNOV) with respect to three of plaintiff's claims on the basis that plaintiff failed to present evidence of oral agreements, the claims were barred by the parol evidence rule, and one of the claims was barred by the statute of limitations. Defendant also contends that it was entitled to JNOV on the damage verdict because plaintiff failed to present sufficient evidence of damages. Defendant further contends that the trial court made numerous evidentiary errors during the trial, including: (1) barring evidence of another lawsuit filed against plaintiff to impeach plaintiff's witnesses; (2) barring evidence of a Securities and Exchange Commission (SEC) inquiry against plaintiff; (3) admitting evidence of defendant's course of dealing; (4) admitting two documents as business records because they were prepared in anticipation of litigation, not in the regular course of business; (5) admitting another document because it was legally incompetent; and (6) admitting evidence in violation of the parol evidence rule. For the reasons set forth below in the nonpublished portion of this opinion, we affirm.
[Editor's Note: Text omitted pursuant to Supreme Court Rule 23.]
[The following material is nonpublishable under Supreme Court Rule 23].
STATEMENT OF FACTS
Defendant was in the business of building B-2 stealth bombers at its Pico Rivera, California, plant. The manufacture of these planes required more than 100,000 parts, and 10,000 to 15,000 employees to work on them. Defendant desired to computerize and automate as much of the procurement and manufacturing processes as possible. In this regard, in 1985, defendant hired Arthur Young, a technology consulting firm, to install a computer system. The basic computer system, Material Requirements Planning (MRP), organized data with respect to parts. In 1988, certain individuals, including Al Beedie, Woody Chamberlain, Randy Muns, and Larry Thomas, left Arthur Young to start plaintiff company. Plaintiff, like Arthur Young, was in the business of designing and installing computer systems that helped businesses run more effectively. The work being performed by Arthur Young was transferred to plaintiff in January 1989. Plaintiff was to provide the design, development, and implementation of MRP II (Manufacturing Resources Planning), a system that computerized the total manufacturing process, from planning to execution. Production Inventory Optimization System (PIOS) software, developed under Chamberlain, and sold to defendant before plaintiff became involved with defendant, was the primary software to support MRP II. MRP II was installed, tested, and put into production in the fall of 1990.
Thereafter, defendant asked plaintiff to modify and add enhancements to the system based on its individual needs and the uniqueness of its production process requirements. This project was designated as the Materials Management Systems Integration Project (MMSIP). The subprojects at issue here, Executive Information System (EIS) (a system that allowed employees, particularly management, to share information electronically) enhancements and the MRP Planner, a system that automated scheduling and budgeting, both of which were part of Phase I or MMSIP I, and Phase II (or MMSIP II), detailed below, were undertaken, at near simultaneous times, and performance of the work overlapped. Also at issue in the instant case is the MRP Documentation project (documentation is a written description of the computer system, prepared after the system is completed and used for training and maintenance purposes).1
Plaintiff's contact with defendant was mostly through defendant's Operations Planning & Control (OP & C) Department, which was headed by Jack Weinberg, a vice president of defendant company. Under Weinberg were the responsible managers/overall project managers: Ed Marcinko through May 1991 and Richard Gieser thereafter. Under the overall managers were the project managers, including Jim Ray and Steven Campanelli from 1989 to 1991, Gieser from 1990 to 1991, and Cassandra Holley from 1991 to 1992. Under the project managers were the subproject leaders, Alfredo Mendoza and Bryon Purdy. Defendant also had its own in-house computer department, i.e., Northrop Information Services Center (NISC), formed in 1990 and headed by Herb Anderson, with Dana Taylor working under Anderson. Lastly, defendant had a Procurement Department-the department responsible for generating contractual paperwork. This was headed by Wayne Masterjohn. Individuals under Masterjohn included Jere Hall, senior management; Elaine Dower, management; Cheryl Snook, management; Campanelli until 1991, management; and the buyers, Alice Antone until the summer of 1991 and Sylvia Lona-Arvizu thereafter.
Plaintiff's employees involved with the projects at issue also included, in addition to those individuals detailed above, Charles Kaprelian, Chris Bremer, Mike Ashe, Matt DeDobbelaere, Nick Yoo, and Philip Mihok.
There is no dispute that certain written documents or contracts existed between the parties in connection with each of the projects at issue here. The general documents issued with respect to the overall projects are set forth below. Specific documents as to any particular project are set forth, as necessary, below. Initially, defendant issued a “Purchase Requisition Form,” dated November 14, 1988, identifying three projects with respect to MRP II: line one was for Marcinko's department, with a not-to-exceed amount of $926,179; line two was for NISC, with a not-to-exceed amount of $555,311; and line three was for the Procurement Department, with a not-to-exceed amount of $223,227. With respect to the overall MRP II project, defendant issued a “Request For Quotation” (RFQ) on December 16, 1988, containing two statements of work. On December 26, defendant issued a revised statement of work. Plaintiff was given verbal authorization to begin the project on January 13, 1989, which was followed up with a fax. This fax stated that plaintiff was to begin work under “verbal purchase order no. 428504,” plaintiff was not to submit invoices to defendant until a hard copy of the purchase order, expected to be issued by February 24, was received, and the not-to-exceed amount on all three line items was $166,667. A fact finding process took place on February 9, and negotiations were held between the parties from April 10 to April 14. On April 14, defendant issued a “Memorandum Of Agreement” (MOA) with a not-to-exceed amount of $2 million. A purchase order, issued by defendant, dated May 7, 1989, No. 428504I, was approved by defendant on July 7. The performance period was identified as November 16, 1989, to January 15, 1990, but covered costs from January 16, 1989, to January 15, 1990, and stated a not-to-exceed amount of $2 million. The July 7 purchase order specifically noted that the statement of work was subject to change and, despite its date, it was backdated effective to January 16, 1989. A change order was later issued by defendant on February 12, 1991, extending the period of performance to February 15, 1991.
Various purchase and/or change orders or other documents were issued separately by defendant with respect to each of the three original line items, adding funding to the line, and, thus, the overall project, and in some instances, adding additional statements of work or tasks to be performed. Specifically, a change order to the July 7, 1989, purchase order added the bill of materials documentation (part of the MRP Documentation at issue here) on December 6, 1990. This change order authorized plaintiff to document the bill of materials module, i.e., it revised the statement of work for line one and increased funding for this line. With respect to MMSIP, the preparation of a project plan was requested by defendant in March 1991, although work had begun on the project by June 1990. The MMSIP Project Plan (Plan) was issued by defendant on April 24, 1991, and detailed three phases: Phase I involved EIS and MRP Planner and was scheduled to be performed from April to October 1991; Phase II was scheduled to be performed from July 1991 to April 1992; and Phase III was scheduled to be performed from November 1991 to June 1992. A change order to the July 7 purchase order was issued by defendant on May 17, 1991, which added the statement of work for MMSIP as line six. The not-to-exceed amount was $2,234,156. The change order further stated that “Cost Reduction Initiative” (CRI) (government funding) approval was expected by October, at which time a new purchase order would be issued in connection with MMSIP.
With respect to Phase II, work began at least as of September 1991. On October 17, defendant issued a “Request for Price” (RFP) to plaintiff. The statement of work was identified as completion of the implementation of the MRP Planner and EIS currently in progress and to develop the requirements and prototypes for 12 different applications. The performance period was identified as November 1, 1991, to January 31, 1992. This RFP stated that plaintiff was to perform its services under the direction of defendant's “OP & C Process Integration Manager and Project Managers” and that work was to be performed not only at defendant's plant, but also at plaintiff's Dallas and Walnut Creek, California, offices. Six option periods were set out, extending the performance period in three-month increments, with the last period identified as May 1 to July 31, 1993. Renewal, according to the RFP, was dependent on the progress, development, and implementation of each phase as determined by defendant's project managers Gieser and Holley. Plaintiff was first to develop the requirements and prototypes and, thereafter, to build out the systems. Plaintiff responded on October 30, 1991, with its proposal.
During the first two weeks of November 1991, the parties drafted the statement of work for MMSIP. On November 1, defendant sent plaintiff the first statement of work which included 11 enhancements to EIS, including Image Process/OCR, Multi-Media Presentation, and the MRP II function documentation. On November 4, Lona-Arvizu, one of defendant's Procurement Department buyers, wrote to plaintiff's employee Bremer, stating that revisions had been made to the statement of work-the applications deliverable had been reduced from 12 to 5 and the performance period was now November 1, 1991, to April 30, 1993, with a statement of work from November 1, 1991, to February 28, 1992. On November 7, Lona-Arvizu again wrote to Bremer, stating that with respect to EIS, defendant was deleting the following enhancements previously identified: Image Process/OCR, Multi-Media Presentation, IMS/Wang Interface, Education/Training Interface, and Library (the enhancements plaintiff seeks compensation for here). Lona-Arvizu again wrote to Bremer on November 14, revising the statement of work, substituting one application for another. The final statement of work was that plaintiff was to complete implementation of the MRP Planner and EIS with respect to Phase I. With respect to Phase II, plaintiff was to develop requirements for five applications, including six EIS enhancements. The period of performance was listed as November 1, 1991, to February 29, 1992, with renewal options. Bremer provided plaintiff's proposal to Lona-Arvizu on November 18.
An “Authorization to Proceed” (ATP) letter was issued by defendant on December 11, 1991. This letter referenced the July 7, 1989, purchase order and authorized plaintiff to immediately begin work on the November 14, 1991, statement of work with respect to Phase II. The performance period was identified as November 11, 1991, to February 29, 1992, with a not-to-exceed amount of $2,552,809. Certain target dates were set forth, including a fact finding determination by January 8, 1992, negotiations by January 16, and definitization of the contract (i.e., the date defendant's purchase order was to be issued) was set for January 31.
In January 1992, President Bush gave his State of the Union Address. During this address, B-2 production was cut from 75 planes to 20 planes. 2
A fact finding investigation for Phase II was undertaken by defendant from January 13 to 15 and negotiations were held from February 14 to 19. On February 19, a MOA was issued, which referenced the November 14, 1991, statement of work and identified a performance period from November 11, 1991, to April 10, 1992. The MOA provided that only a limited number of plaintiff's staff was authorized to work on the project at defendant's premises from February 14 to April 10, and identified seven individuals. In addition, the MOA provided that the maximum billable hours per month for plaintiff's employees Bremer and Kaprelian combined was limited to 80 hours. Lastly, the MOA stated that it was not equivalent to a contract and it did not authorize plaintiff to commence work.
A new purchase order, No. 7552781K, with respect to MMSIP, was eventually issued by defendant on March 26, 1992. The March 26 purchase order identified the performance period as November 11, 1991, to April 10, 1992, identified seven of plaintiff's employees authorized to work, and included the limitation on Bremer and Kaprelian's hours. With respect to the services to be performed, the order referred to the November 14, 1991, statement of work. Specifically, it authorized plaintiff to develop the requirements and prototypes for Phase II applications and to develop six identified enhancements for EIS. The not-to-exceed amount was $2,552,809.
In April 1992, an employee of plaintiff who was involved with a project not at issue here, Jim Ray, wrote to plaintiff's chief executive officer Beedie, alleging certain improprieties by plaintiff with respect to the project in which he was involved. Because it was near the end of plaintiff's fiscal year, plaintiff's accountants undertook an investigation. On June 25, Price Waterhouse reported on its May 31 audit of plaintiff's financials, stating that it, along with counsel, had conducted an investigation and had found nothing to support the employee's allegations as to improprieties and there was no evidence of illegal acts or wrongdoing on plaintiff's part.
On July 1, 1992, plaintiff issued a press release that contained the following statement:
“The Company also has recorded $8.5 million in revenues from Northrop Corporation relating to work performed under oral authorizations. Approximately two-thirds of this amount was recorded as fourth quarter revenue. The Company has been attempting to negotiate a written contract with respect to this work, but to date has been unsuccessful. Because the Company could not finalize its position with Northrop, the Company is currently unable to predict the eventual outcome of the negotiations, and no assurance can be given that an agreement will ultimately be reached, or that any portion of this amount will be collected. Fourth quarter results include an $8.5 million charge to increase reserves to cover this receivable in the event that it proves to be uncollectible.”
Also on this date, plaintiff wrote to defendant, acknowledging that it had never sent any invoices to defendant for the $8.5 million and that defendant had not refused to pay plaintiff.
Anderson, the head of defendant's NISC, later testified with respect to this press release, stating that the day before its release, June 30, Chamberlain, an employee of plaintiff, called him and said, “I'm in trouble. The company has blundered on their backlog and possibly with the reporting of the revenue. And we need to get this business.” Chamberlain also told Anderson that plaintiff was issuing a press release with defendant's name on it. According to Anderson, he told Chamberlain that plaintiff should not use defendant's name.
Anderson also stated that the next day, July 1, he received a paragraph from the press release, which mentioned defendant's name. According to Anderson, “I told him [Chamberlain] at that time that that [oral authorization statement] was totally inappropriate and not to involve Northrop in that. We do not do oral authorizations without some written document.” Anderson then stated that Chamberlain did not tell him about the oral authorization statement on June 30, but that he had read it in the press release. However, Anderson then returned to his original position, stating he had a conversation with Chamberlain about the oral authorization language and then received a copy of the press release.
Anderson further stated that after he reviewed the press release, he discussed it with defendant's attorney and its contract people. On July 1, Anderson received a letter from Chamberlain and also spoke to him that day. According to Anderson, Chamberlain was very apologetic. Anderson also stated that defendant did not “take any issue with the work” because it did not know about it. Anderson disagreed with the statements in the press release as to oral authorization and attempted negotiations between the parties. Anderson further stated that plaintiff, even after it said it had done all this work, never brought the work to defendant to review. With respect to the press release, Anderson had stated in his deposition that, prior to the press release, he told Chamberlain that if plaintiff said anything about oral authorizations, defendant would deny it. However, Anderson later denied, on redirect examination, speaking to Chamberlain prior to the press release or stating that defendant would deny anything. Anderson further stated that after the press release, plaintiff never responded to defendant with a list of projects it had done, nor the amounts owed until it filed this lawsuit. According to Anderson, defendant wrote to plaintiff on July 2, disagreeing with the accuracy and veracity of the statement contained in the press release.
On July 6, 1992, certain shareholders filed a class action lawsuit against plaintiff and certain management, alleging a claim for securities fraud. This lawsuit was entitled Goldsmith v. Technology Solutions Company, No. 92 C 4374 (N.D.Ill.). The Goldsmith lawsuit was subsequently settled in June 1995.
On July 8, 1992, plaintiff's employees were escorted off defendant's premises. Kaprelian later testified that he was taken into a conference room where Debbie Armijo, a mid-level manager who reported to Taylor, one of defendant's NISC employees, and Gieser, one of defendant's OP & C Department employees, were present, and was told that plaintiff was no longer needed. Plaintiff was required to leave defendant's premises within an hour or two of being told same. According to Kaprelian, everything plaintiff had been using-personal files, computers, magnetic media, etc. stayed at defendant's plant. Yoo, another employee of plaintiff, confirmed that plaintiff was not allowed to take any of its materials with it. According to Yoo, defendant promised to ship the materials to plaintiff, but never did. DeDobbelaere, another one of plaintiff's employees, also confirmed that when plaintiff was told to leave the premises, plaintiff did not gather its work papers or the projects it was working on-those items were left on the site and DeDobbelaere did not know if they were ever returned to plaintiff.
Gieser, one of defendant's project managers, later testified that he learned of defendant's decision to terminate plaintiff approximately one to two hours before it occurred. According to Gieser, he was not consulted about the decision, which was made by Jack McHugh, vice president of Gieser's division. Also according to Gieser, as many as 15 of plaintiff's employees were still on the premises at this time. Gieser confirmed that plaintiff was not allowed to take any records or materials. Gieser also stated that he later learned the reason for plaintiff's termination-its July 1, 1992, press release.
Defendant's Procurement Department employee Lona-Arvizu testified that, at some point, Gieser advised her that McHugh required plaintiff's termination because of the press release. Lona-Arvizu thereafter obtained the press release and took it to management, who advised her to go see defendant's attorneys. Lona-Arvizu then had a meeting with Phil Markos, who told her to write to plaintiff terminating any additional work. On July 13, 1992, Lona-Arvizu did so. Lona-Arvizu stated that plaintiff never submitted any claim as required by her letter, nor any invoices. Similarly, plaintiff never provided defendant with an additional work product.
On July 14, 1992, Anderson, defendant's NISC head, wrote to plaintiff, stating that he had reviewed the matter and concluded that there was no indication of oral authorizations given to plaintiff to perform work. With respect to this letter and Anderson's conclusion that there were no merits to plaintiff's claims in its press release, Anderson admitted that he did not discuss these claims with defendant's project managers Gieser, Holley, or Campanelli. Rather, he asked people to investigate and accepted their recommendation.
The record also reveals that plaintiff company had a policy, applicable to top level executives and senior project managers, that if bonuses or compensation was computed based on sales or work on a particular account and, if the account defaulted, the employee responsible for that account would have to reimburse the company. Because of defendant's alleged failure to pay plaintiff, numerous employees, including Thomas, Muns, and Kaprelian, had to reimburse plaintiff company and/or forfeit large sums of money to it.
On July 28, 1992, plaintiff received a letter from the SEC, requesting certain information (the SEC inquiry). Although much of this letter is illegible, it did state that the SEC was undertaking “an informational inquiry,” which should not be considered any violation of law.
On September 3, 1992, plaintiff's attorney wrote to defendant's counsel, attempting to settle the matter without the need for litigation. In this letter, plaintiff's counsel identified each project, the amount owed, and defendant's employee(s) who authorized the work. Plaintiff sought the following amounts: with respect to the subprojects of EIS and MRP Planner, $1,830,000; the MRP Documentation, $522,000; and the Phase II work, $3,044,000. Plaintiff received another letter from the SEC on this date. On September 4, plaintiff responded to the SEC, and again, on September 21 and November 12, attaching additional responses and documents. On December 15, defendant responded to plaintiff's September 3 letter, stating that plaintiff's allegations of oral authorizations were without merit and it would not pay plaintiff.
On May 28, 1993, the SEC sent another letter to plaintiff, requesting specific documents. On June 21, plaintiff filed a complaint against defendant for breach of oral contract. On June 29, plaintiff provided supplemental information and documents pursuant to the SEC's requests. The SEC again requested additional documentation on August 6 and plaintiff responded on August 10 and 20. At this point, the SEC apparently ended its inquiry.
In connection with plaintiff's lawsuit, in August 1993, defendant filed a motion to dismiss plaintiff's complaint on the grounds of forum non conveniens, alleging that the events underlying the lawsuit occurred in California, the relevant documents and computers were there, most of the witnesses were there, and plaintiff agreed that jurisdiction rested in California and that California law applied. On September 15, 1994, the trial court denied defendant's motion, although noting that the parties agreed California law applied to the lawsuit. On October 18, defendant filed its answer to plaintiff's complaint.
Thereafter, over the next six years, extensive discovery was undertaken. Although both parties objected to certain discovery requests and refused to produce certain documents, defendant did so on a relatively consistent and perpetual basis. Numerous 201(k) conferences were had, letters were exchanged between the parties, and plaintiff filed several motions to compel defendant's compliance with discovery requests. In addition, issues with respect to the taking of depositions consistently arose. Although defendant had produced 160 boxes of documents totaling approximately 400,000 pages in connection with the Goldsmith case that were considered to have been produced in the instant case, the majority of problems here arose with respect to other vendor evidence, i.e., documents in connection with defendant's dealings with other vendors, that plaintiff sought.
On October 21, 1995, plaintiff filed a motion to compel defendant to comply with discovery. On May 10, 1996, the trial court granted, in part, plaintiff's motion. Defendant was ordered to produce its other vendor files, with a few exceptions. On May 24, plaintiff's attorney wrote to defense counsel with respect to depositions and discovery. Plaintiff proposed that the parties reach an agreement, to save time and money, that they not depose those individuals that would not be called at trial. In this regard, plaintiff proposed that neither party would be allowed to call a witness who had not been deposed. On May 31, defendant responded to plaintiff's proposal, rejecting same. On July 24, plaintiff wrote to defendant with respect to classified other vendor documents which defendant had refused to produce. According to plaintiff, for the last year it had asked defendant how to begin the process of obtaining Air Force clearance to review same and that defendant had agreed to produce such information, but had never done so. Plaintiff requested that defendant provide the information within the next week or it would bring the matter to the court's attention. Plaintiff further noted that defendant, after the May 10 order compelling defendant to produce documents, stated it would produce the documents on a rolling basis throughout the summer. However, according to plaintiff, even though 2 1/212 months had passed, defendant had not produced a single document. Thereafter, plaintiff wrote numerous letters to defendant with respect to obtaining clearance to review the classified documents, i.e., July 26, August 5, August 8, and September 9, to no avail.
On September 10, the trial court entered an order on defendant's emergency motion for a protective order. The trial court also ordered defendant to produce certain unclassified documents by September 20, to produce invoice documents by October 10, and to produce an index to RDR and CPD 30 documents by September 20.3 On October 24 and 31, plaintiff again wrote to defendant, asking it to reconsider plaintiff's May 24 proposal to limit the number of depositions required. In this regard, plaintiff asked defendant to revise its interrogatory response to include only those witnesses it intended to call at trial and plaintiff would do the same. Defendant responded on November 4, again rejecting plaintiff's proposal.
Thereafter, depositions of defendant's employees were scheduled, by plaintiff, but apparently did not proceed. The parties also exchanged letters with respect to deposing both plaintiff and defendant's employees, including disagreements as to where the depositions must be scheduled, and the fact that several depositions were cancelled. On May 19, 1996, plaintiff wrote to defendant, reiterating that at a recent hearing, the trial court expressed concern as to the slowness of discovery. In response to this, plaintiff set forth two proposals. First, with respect to other vendor evidence, plaintiff noted that the trial court had ordered defendant to produce such documents over one year before and defendant had not done so except for 44 vendors. Plaintiff proposed to forego discovery on other vendors, including the classified vendors, if defendant would agree that the parties could only present evidence in connection with these 44 vendors at trial. Second, plaintiff again proposed limiting trial witnesses to those deposed. On May 28, defendant responded, again declining plaintiff's proposals. Thereafter, additional depositions were scheduled, and many again postponed.
On June 27, plaintiff served its fourth request for production of documents upon defendant in connection with other vendor evidence. Thereafter, defendant objected to the request. On August 21, plaintiff wrote to defendant, requesting a 201(k) conference, noting that defendant had refused to produce other vendor evidence despite the fact that the trial court had concluded such evidence was relevant and had ordered defendant to do so. Plaintiff stated that it would be willing to withdraw some of its requests if defendant would agree to certain stipulations on its course of dealing.
On September 8, defendant served supplemental answers to interrogatories upon plaintiff, identifying 57 defendant employees or ex-employees, 31 employees or ex-employees of plaintiffs, and three other individuals, including someone from the SEC, that it intended to call at trial. On September 9, plaintiff served its supplemental answers to interrogatories, identifying 13 plaintiff (or previous) employees and 14 defendant (or previous) employees that it intended to call at trial.
On November 14, plaintiff requested another 201(k) conference because defendant, in response to plaintiff's fourth request for production of documents, again refused to supply documents with respect to its third-party vendor files. Plaintiff indicated that it would agree to withdraw this request if defendant agreed to certain stipulations. On November 19, defendant responded, stating that plaintiff's request was too burdensome, was unwarranted because defendant had already given plaintiff thousands of documents, and such information was irrelevant. On November 21, plaintiff filed a motion for imposition of sanctions based on defendant's refusal to produce documents that it had been ordered to produce on May 10, 1996, and asking that since plaintiff had no access to the information, defendant not be allowed to use any unproduced documents at trial.
Disputes with respect to depositions and discovery continued in 1998. In connection with plaintiff's November 21 motion for sanctions, on June 24, 1998, the trial court entered an order, ordering that: (1) neither party will be allowed to refer to defendant's dealings with vendors other than the 44 defendant had produced documents on; (2) with respect to other nonclassified vendors, the motion was continued; and (3) with respect to defendant's budgets, the motion was denied, without prejudice.
Thereafter, throughout the remainder of the year, plaintiff sent various letters to defendant with respect to its failure to answer discovery despite being given extensions of time to do so and provide its witnesses for depositions. Plaintiff filed another motion to compel in October and, in a letter with regard to same, stated that defendant had a history of ignoring discovery. The same situation continued into 1999. On May 26, 1999, the trial court entered a case management order (mostly of which is illegible), denying defendant's motion in limine with respect to other vendor evidence, denying in part without prejudice, and continuing in part, plaintiff's motion to compel, and setting the discovery cutoff date as December 31.
On August 9, defendant answered supplemental interrogatories, identifying 80 potential witnesses it would depose or call at trial. Thereafter, disputes over discovery and defendant's lack of production continued through the end of the year and into the next. On December 8, the fact discovery cutoff date was continued to February 29, 2000.
On January 10, 2000, defendant filed four motions in limine: the first sought to bar evidence with respect to defendant's course of dealing with plaintiff and other vendors; the second sought to bar the testimony of Jed Babbin, plaintiff's expert; the third sought to bar the testimony of Nicholas Cantwell (apparently a custom and usage expert plaintiff sought to call); and the fourth sought to bar plaintiff from presenting parol evidence with respect to the various projects at issue here. On March 20, the court set the matter for trial on December 4, 2000, which was later reset to January 2, 2001. Thereafter, scheduling of evidentiary depositions commenced.
On June 19, 2000, the trial court entered an order with respect to a June 13 final pretrial conference. The court ordered plaintiff to provide defendant with a good faith list of its trial witnesses by June 30 and defendant was to do the same by July 28. Plaintiff complied with this order on June 30, by sending defendant a list of its trial witnesses. It is not apparent from the record if defendant provided plaintiff with its list by July 28.
On July 14, defendant filed an objection to exhibits used in the deposition of Mark Zmijewski, plaintiff's expert on course of dealing (later identified as trial exhibits No. 520 through 522). Thereafter, plaintiff responded and defendant replied. On August 28, defendant filed a motion to compel plaintiff to answer its sixth request for production of documents, fifth set of interrogatories, and to identify its Rule 206(a)(1) witnesses. The trial court granted this motion in part on August 31.
On September 22, the trial court entered an order on defendant's objections to Zmijewski's exhibits, sustaining defendant's objection. However, the court order noted that plaintiff was not precluded from using such exhibits as impeachment or rebuttal evidence and would not be precluded from presenting all evidence with respect to course of dealing. Also at this hearing, defendant presented argument on that portion of its motion to compel plaintiff to produce its course of dealing documents. This motion was continued.
On October 4, plaintiff filed a motion to establish its right to prejudgment interest. Plaintiff also filed eight motions in limine: the first sought to bar defendant from violating the trial court's June 24, 1998, order; the second sought to bar defendant from offering a certain witness as an opinion witness; the third sought to bar defendant's witnesses from testifying as to matters they were instructed not to answer at their depositions; the fourth sought to bar defendant from claiming it lacked funding for the projects at issue; the fifth sought to bar defendant from offering into evidence plaintiff's vice president of manufacturing Joseph Rohner's memorandum to Beedie with respect to complaints of impropriety made by one of plaintiff's employee; the sixth sought to bar defendant from offering Bremer's proposal letter to Gieser with respect to the Documentation project as an offer of compromise; the seventh sought to bar defendant from mentioning Goldsmith or the SEC inquiry during trial; and the eighth sought to bar defendant from offering a September 1992 memorandum drafted by plaintiff as privileged. On October 10, defendant filed additional motions in limine. Defendant apparently refiled its previously filed fourth motion in limine, seeking to bar parol evidence. Defendant filed its fifth motion in limine seeking to exclude certain exhibits used at Yoo's deposition (Nos. 1, 18, 20, and 21) and Thomas' deposition (No. 41 (trial exhibit No. 329)) as hearsay documents. Defendant's sixth motion in limine sought to exclude another exhibit used at Thomas' deposition (No. 6).
On November 2, plaintiff filed two additional motions in limine: the ninth sought to prohibit defendant from calling Mark Hosfield as an expert witness and the tenth sought to preclude defendant from taking positions at trial that were contrary to the pretrial positions it had taken. Defendant filed memoranda in opposition to plaintiff's first eight motions in limine and plaintiff filed responses to defendant's six motions in limine. Defendant also filed its response to plaintiff's motion to establish its right to prejudgment interest.
On November 20, defendant filed replies in support of its six motions in limine. Plaintiff also filed replies in support of its first eight motions in limine. On November 27, hearings on the motions in limine began. With respect to defendant's first motion in limine, to bar other vendor and course of dealing evidence, defendant argued that this evidence was inadmissible for three reasons: (1) similar acts cannot be used to prove conformity; (2) course of dealing with respect to other contracts is not admissible in a breach of contract case under Illinois law, particularly where there are no similarity of facts and all contracts were different as was the case here; and (3) the evidence did not show what plaintiff purported it showed, i.e., that defendant authorized plaintiff to perform certain efforts. Conversely, plaintiff argued there were five grounds, under California law, why such evidence was relevant. According to plaintiff, evidence of custom and usage and course of dealing was admissible because it was the practice in the industry, and, with defendant in particular, due to the time sensitive nature of the project. Plaintiff further argued that the question in the instant case was whether, prior to paperwork being issued, was there a contract. The second basis for admissibility was an Illinois case that provides a clear explanation of the law on routine business practices. The court then inquired whether the parties disputed the fact that written documents that came after work began was a course of dealing in the industry. Defendant responded that it did not dispute that plaintiff was allowed to work before or while written papers were being drafted. The court then inquired as to whether is was undisputed that there was a course of dealing with other vendors and defendant responded in the negative. The court then inquired as to why course of dealing could not be handled by stipulation. Plaintiff stated it was because the simple fact that a course of dealing existed was not enough for the jury and, although it was willing to work on a stipulation with defendant, a stipulation was unlikely because defendant was fighting every step of the way and would not agree to anything. Specifically, plaintiff's counsel stated, “When we tried to get agreements on this, we couldn't, * * *. We had to hire experts. When we tried to work out anything simply, we couldn't, which is why we now prepared this whole case to an incredible extent the hard way and why it's so long.” The next basis for admissibility, according to plaintiff, was to show implied authority. Plaintiff stated that “one of the issues, I think, still is-We would take a stipulation on this, but I don't think we'll get it-that the user has authority, not just the procurement people.” The court denied defendant's motion in limine, without prejudice, stating that defendant could object to specific evidence at trial. Thereafter, the trial court denied defendant's motion to compel plaintiff to produce its course of dealing evidence and continued the balance of the motions in limine.
On November 30, the court heard arguments on defendant's fourth motion in limine pertaining to parol evidence. According to defendant, this case involved a simple and straightforward application of the parol evidence rule-alleged oral contracts that were created prior to a written contract. Plaintiff argued that the parol evidence rule was a substantive rule and, thus, California law applied. According to plaintiff, course of dealing and custom and usage trumped the parol evidence rule. Defendant argued that course of dealing involves the interpretation of an existing written contract. The court noted that course of dealing and custom and usage were always admissible. Following arguments, the trial court denied defendant's second motion in limine, denied defendant's third motion in limine, and continued the balance of the motions in limine.
On December 6, the trial court again heard arguments in connection with defendant's fourth motion in limine. Defendant argued that because plaintiff alleged oral contracts that preexisted written contracts, the parol evidence rule applied. Defendant then argued that the parol evidence cannot be used to establish the existence of an oral contract that is later the subject of a written contract since the written document “wiped out” the earlier oral authorization. The court denied defendant's fourth motion in limine, without prejudice, stating that defendant could re-raise the issue based on evidence offered at trial. The court continued the rest of the motions in limine.
On December 11, the court heard argument on defendant's fifth motion in limine pertaining to certain deposition exhibits, only one of which was still at issue, Thomas' exhibit No. 41, because plaintiff stipulated it would not seek to introduce Yoo's exhibits Nos. 1, 18, 20, or 21. In connection with Thomas' No. 42, the court found that just because it was stamped “for use of counsel,” this did not render it inadmissible. The court therefore denied defendant's motion in limine, without prejudice.
On December 13, the court entertained arguments in connection with plaintiff's first and second motions in limine. With respect to the first, which involved the court's June 24, 1998, order, plaintiff argued that, beginning in 1995, it had tried to get other vendor evidence from defendant and defendant had been ordered to provide same a couple of times by the trial court. Thereafter, plaintiff discovered that many of defendant's vendor files were classified and plaintiff attempted to get Air Force clearance, which never materialized. According to plaintiff, the parties then worked out a compromise in which only 44 vendor files would be used. Defendant argued that it produced an 840-page index and told plaintiff that if it wanted any other files to advise defendant. The court then granted plaintiff's first motion in limine.
With respect to plaintiff's second motion in limine, the court found that it was not fair to allow defendant's witness to give opinions beyond the 44 vendors since the parties were limited to reference to only those 44. In this regard, the court noted that plaintiff had not been given any information on any contracts other than those 44 and, therefore, would not be able to cross-examine the expert if he testified with respect to any other vendors. The court denied plaintiff's second motion in limine, but ruled that it would not allow questions about any vendor other than the 44. The court then reserved ruling on this motion.
On December 15, hearings on the motions in limine continued. Defendant again argued the issue of other vendor evidence, to which the court responded, “I don't want to revisit that. * * * It's about the 19th time you pointed that out.” With respect to plaintiff's first and second motions in limine, despite the rulings on December 13, it appears that the court reserved ruling on these pending further argument or trial.
On December 26, at the continued hearing, with respect to plaintiff's first and second motions in limine, plaintiff stated it believed the court had granted the first one. The court indicated that it had reserved ruling on both. With respect to plaintiff's fifth motion in limine pertaining to the Rohner memorandum, the court found that this document was not a business record and was highly prejudicial and, therefore, granted plaintiff's motion in limine.
On December 27, the hearing on the motions in limine continued. With respect to plaintiff's motion to read excerpts from Anderson's discovery deposition, the court believed this was proper, but requested additional law on the issue. The court then continued this matter. With respect to plaintiff's fourth motion in limine, to bar defendant from stating it had no money to pay for the work, the court denied the motion, without prejudice. With respect to plaintiff's sixth motion in limine, the court denied this motion, without prejudice, finding that the letter did not evidence an attempt to compromise or settle a debt. As to plaintiff's seventh motion in limine, with respect to the SEC inquiry, the court granted the motion. With respect to Goldsmith, although the court denied the motion, it then stated that the parties could not mention Goldsmith unless plaintiff first raised the issue. The court further stated that it did not see any relevance because anyone can file a lawsuit and say anything in a complaint.
On January 2, 2001, defendant filed a motion to reconsider the trial court's order of December 27, barring mention of Goldsmith. A jury trial, that spanned 11 weeks (the presentation of evidence ended on March 16) began on this date. On January 3, plaintiff filed a motion with respect to waiver of objections by defendant not made during evidentiary depositions and a memorandum in support of its motion. Defendant filed a motion in limine to bar plaintiff from using Anderson's discovery deposition at trial. Voir dire commenced on this day.
On January 5, prior to the parties making their opening arguments, defendant made an offer of proof in connection with its motion to reconsider the court's ruling barring evidence of Goldsmith. The court stated that if defendant was asking it to reconsider its prior ruling, that request was denied. The parties then entered into various stipulations: defendant admitted it had sufficient funds to pay for the projects for which plaintiff was seeking payment; plaintiff admitted it was paid on certain written contracts; and plaintiff admitted it never invoiced defendant for the amounts it now sought. Plaintiff then argued with respect to reading excerpts from Anderson's deposition. Thereafter, the trial court denied defendant's motion to bar use of Anderson's deposition and granted plaintiff's motion with respect to defendant's waiver of objections.4 After presenting their arguments, the parties then began presenting evidence to the jury.
Because the report of proceedings from the trial is so out of order, rather than setting it forth chronologically, we have organized the testimony and evidence by relevant topic or project. The testimony and arguments in connection with objections to evidence are set forth separately. Plaintiff called the following witnesses at trial: Woody Chamberlain, Ed Marcinko, Larry Thomas (evidence deposition), Richard Gieser (adverse witness), Jed Babbin (expert), Jack Weinberg, Randy Muns, Charles Kaprelian (video deposition), James Murtaugh, Chris Bremer, Mark Zmijewski (expert), Mike Ashe (video deposition), Matt DeDobbelaere, Alfred Mendoza (adverse witness), Cassandra Holley (adverse witness), Steven Campanelli (evidence deposition), Jim Read, Nick Yoo (video deposition), and Philip Mihok (evidence deposition). Defendant called Herb Anderson, Joseph Rohner, Al Beedie, Sylvia Lona-Arvizu, Dana Taylor, and Mark Hosfield (expert).5 In rebuttal, plaintiff offered the testimony of Michael Miller. The general background or responsibilities of pertinent individuals is identified below.
Jack Weinberg joined defendant's company in August 1986, was Vice President of Operations, Planning & Construction and controlled the management processes required to build the B-2. Weinberg oversaw the day-to-day work of plaintiff in implementing MRP. When plaintiff's company came into existence, Weinberg continued to work with those employees previously at Arthur Young and participated in the decision to hire plaintiff. Weinberg was responsible for approving allocation of funding to purchase additional services from plaintiff. Weinberg was not involved in contract negotiations, did not pay much attention to purchase orders, and was not aware when funding was exhausted or a performance period expired. Weinberg had no day-to-day role with respect to MMSIP. Weinberg left defendant company in January 1993 and began working for plaintiff, after he was recruited by Muns. Weinberg was laid off by plaintiff in August 1993.
Ed Marcinko was defendant's overall project manager until May 1991. Sometime thereafter, Marcinko was hired by plaintiff and helped assist it in reviewing documents received from defendant during discovery. Marcinko worked for defendant from 1985 to May 1991, was on medical leave from January 11 to March 18, 1991, and after returning, resigned on March 22, at which time he had already signed a contract for employment with plaintiff. However, Marcinko continued to work for defendant for approximately two months following his resignation. From 1991 to 1993, Marcinko worked for plaintiff, at which time he resigned. Marcinko's responsibility with defendant was to implement MRP. Specifically, Marcinko was brought into the company to determine what software to use for MRP and he recommended PIOS and Chamberlain to be the consultant. Marcinko was responsible for both functional aspects (engineering, accounting, and manufacturing) and technical aspects (support of computer programs) of the system as project director. Marcinko was the head of production integration systems, which was a department that served both liaison and administrative functions. Specifically, Marcinko was responsible for coordination between the user groups in Weinberg's department and other operational organizations, including NISC.
Steven Campanelli was the contract administrator for defendant, as well as a project manager for line three from 1989 to May 1991. Campanelli's boss was Wayne Masterjohn.
Richard Gieser worked for defendant from 1983 until 1994. Between 1990 and 1992, Gieser dealt mostly with Thomas, Bremer, and Kaprelian. Gieser did not participate in fact finding processes, negotiations, or execution of any documents. Gieser had very little dealings with Alice Antone since Marcinko was principally involved with her. When Gieser took over for Marcinko, Lona-Arvizu became the buyer. Although there were meetings with Lona-Arvizu, Gieser, and plaintiff, Gieser could not recall the contents of the meetings, and, other than purchase orders, change orders, and authorization procedures, Gieser did not recall the Procurement Department directing plaintiff's efforts. Gieser's deposition was taken on two occasions before trial and he spent over 88 hours preparing for them, reviewing other depositions and documentation. Gieser admitted that all of the depositions he reviewed gave stories that were opposite of his. Gieser was laid off by defendant in December 1994 due to downsizing.
Cassandra Holley was employed by defendant from December 1985 until September 1996. She was the project manager for Phase I from approximately June 1991. Holley was not involved in setting up the budget or schedule, nor the scope of work for Phase I because it was already underway. Holley was also the project manager for MMSIP II and was involved in setting up the budget, schedule, and statement of work. Holley reported to Marcinko and, when he left, to Gieser. When Gieser took over Marcinko's position, Holley took over Gieser's position as project manager of the MRP Planner.
Alfredo Lopez Mendoza began working for defendant's OP & C Department in approximately 1990 and became project manager for EIS.
Herb Anderson was a vice president of defendant company and head of NISC.
Sylvia Lona-Arvizu worked for defendant from August 1985 until October 31, 1999, at which time she was laid off. She held positions of Buyer, Senior Buyer, and Procurement Administrator. Lona-Arvizu dealt with plaintiff, primarily Bremer, from August 1991 to 1992, discussing proposals, terms and conditions, and rates of pay. Lona-Arvizu was a senior buyer from June 1991 to July 1992, succeeding Antone in that position. She was responsible for issuing purchase and change orders and had certain procedures to follow in doing same. Lona-Arvizu was paid by defendant for her testimony.
Woody Chamberlain was an executive vice president of plaintiff company. Before starting plaintiff company, he was involved with defendant, while working for a different company. Thereafter, Chamberlain joined Arthur Young and continued to be involved with defendant, providing consulting services. Chamberlain then became one of the founders of plaintiff company. Chamberlain was not involved with consulting after plaintiff was hired by defendant because of a noncompete agreement. However, he did have dealings with Weinberg, Anderson, Taylor, and Marcinko. Chamberlain was subsequently terminated from plaintiff company, but continued to have an ownership interest in the company. Chamberlain did not deal with defendant's Procurement Department and, according to him, it was always the users (the people responsible for implementation of the various systems and projects) who requested work. While Chamberlain was with Arthur Young, he was directly involved with negotiating fees and terms with defendant and saw most of the purchase orders. Chamberlain read the purchase orders at first, but then stopped because they all contained standard terms and conditions.
Randy Muns was plaintiff's on-site functional person for defendant and was involved in the implementation of MRP II.
Larry Thomas was plaintiff's project manager who was responsible for the overall implementation of the projects. He worked directly with defendant's management teams to manage the day-to-day efforts. Thomas left the projects in May 1991 and returned in January 1992.
Chris Bremer was one of plaintiff's project managers and was involved with both MRP II and MMSIP. As project manager for MRP II, Bremer dealt with defendant's employee Campanelli. As project manager for MMSIP, he dealt with defendant's employee Gieser, Holley, Mendoza, and Purdy. As account manager for Phase I and II, after Thomas left, Bremer dealt with Campanelli, Antone, and Lona-Arvizu with respect to line three. In this capacity, Bremer was responsible for the commercial aspects of the project, i.e., purchase and change orders, etc. In dealing with payment issues, Bremer spoke with Marcinko and Muns. Plaintiff paid Bremer for the time of his testimony and preparation for same.
Charles Kaprelian worked for plaintiff from 1988 until 1993 and, during the period from October 1990 to July 1992, he worked on defendant's projects. Kaprelian was plaintiff's project manager for Phase I, with Yoo acting as the manager primarily responsible for EIS and DeDobbelaere for the MRP Planner. Kaprelian did not discuss financial arrangements with defendant since that was not his role. Kaprelian left plaintiff company in 1993, but was paid for his trial time and in giving his deposition. He also was still a shareholder of the company.
Nick Yoo was plaintiff's project lead for EIS. Yoo was not involved with contracting for MMSIP.
Matthew DeDobbelaere began working for plaintiff in 1989. DeDobbelaere was the development team leader for the MRP Planner beginning in February 1991. He had a group of programmers, interfaced with users, and reported to Bremer and Kaprelian. DeDobbelaere was not responsible for contracts and never saw them while plaintiff was working.
Mike Ashe worked for plaintiff from 1989 to 1993, and again from 1995 to an unspecified year. From May to the fall of 1991, Ashe worked on IMPCA (a project not at issue here), first on-site and then off-site. Thereafter, in January 1992, he was brought in as one of the programmers on Phase II to finish one of the prototypes. He was then moved to lead the team when the project moved into development.
Philip Mihok was an analyst and had functional knowledge with respect to MRP II, but did administrative work as well, including invoicing defendant. Mihok worked on-site until February 1992 and then left because plaintiff's administrative tasks were transferred to Dallas.
Contract Terms In General
There were two types of contracts between the parties-fixed price contracts and time and materials contracts. Thomas testified, with respect to fixed price contracts, that plaintiff included a very, very detailed description of work to be performed because it wanted no changes. Conversely, with respect to time and materials contracts, the description of work was generally not so detailed and it was intended to evolve and change over the course of the project. Bremer testified that most work for defendant was done on time and materials basis because the projects were “new technology” and involved an “entrant process” “going back and forth” with defendant, since “[y]ou couldn't really define the end product in detail that you could put a fixed price on it.”
There is no dispute that the purchase orders issued by defendant contained certain standard language. Specifically, both purchase orders contained the following language. Clause G300 provided:
“Notwithstanding any other provisions of this subcontract, the buyer designated purchasing representative is the only individual authorized to redirect the effort or in any way amend any of the requirements and terms of this subcontract.
* * * While it is recognized that considerable technical and administrative information, both oral and written, will be transmitted between the various functional personnel of the buyer and seller, any action resulting from such information is not contractually binding on either buyer or seller unless and until formalized by buyer's designated purchasing representative and seller's designated contract administrator.”
Clause G350 provided:
“Notwithstanding the date of this order as defined in the order faceplate block * * * Buyer acknowledges that seller, in order to comply with schedule requirements, in good faith commenced performance of work effort identified in this purchase order at seller's sole risk prior to receipt of formal authority.”
Thomas acknowledged that the purchase orders contained a statement that information received from functional people was not contractually binding and “at risk” language. Thomas further admitted he signed the purchase orders and did not require any language be changed or deleted, which, according to him, was standard boilerplate language. Specifically, Thomas testified that he signed the purchase orders even though they contained the above language because
“[i]t took an excruciating long time to get paperwork through the procurement process. And we were always so glad to see the paperwork come out that we didn't want to rock the boat in most cases. So, in a lot of cases we left clauses in or didn't make changes simply because it was-well, it would have taken more time for Procurement to reissue the changes, which would have * * * impacted getting the purchase order finalized. So it was just easier not to do so.”
Thomas further testified that defendant generally wrote a general statement of work and defined the tasks broad enough to give considerable latitude in changing the content or scope of the tasks during the course of the project. Gieser confirmed this, stating that the statements of work were subject to change because defendant knew constant changes were made at the task level. According to Gieser, “it would have, from an administrative standpoint, not make sense to say that we have to come back even when the not-to-exceed value may not change and expect to go through procurement and have them update the contract.” Weinberg, too, confirmed that a purchase order did not provide a very detailed description of work to be done and that the statement of work had to be filled in by the project managers, either orally or written.
With respect to clause G300, Kaprelian stated that, in his practice with defendant, this clause was not followed. Rather, plaintiff was typically given oral authority to proceed from one of defendant's project managers.
Marcinko testified it was his belief that a contract should not include an estimate of hours or any “level of detail” because the tasks were subject to change. According to Marcinko, the government changed its plans for the B-2 daily, which could affect what defendant needed from plaintiff. Because of the frequency of changes, Marcinko did not want a statement of work included in contracts or purchase orders because then any modifications would require a subsequent purchase or change order. However, Antone required such statements of work. Marcinko did not issue written change notices when changes came about and no one from the Procurement Department ever objected. Marcinko stated that because a change order to a purchase order could also take up to one year to issue, if this had to be done with every change, there would probably be 52 change orders per year.
Course of Dealing Evidence
Extensive evidence, over defendant's strenuous and repeated objections, on course of dealing was presented as to how projects began, continued, when funding was exhausted, as well as when the period of performance had expired or was nearing expiration. The evidence established that defendant needed projects to be completed as quickly as possible in order to save money. 6 However, defendant's Procurement Department moved slowly in generating contractual paperwork, taking anywhere from weeks to years to process a purchase or change order. Defendant's solution to this problem, as demonstrated by the testimony detailed below, was to give its project managers the power to orally authorize vendors, such as plaintiff, to begin a project or an aspect of a project before a written contract or document was issued. Such authority was exercised both at the beginning of projects as well as during projects. This course of dealing began at the very onset of the parties' relationship and continued throughout the course of the parties' three-year dealings with each other. In fact, plaintiff took over from Arthur Young under an oral agreement.
Testimony offered by both parties showed that work generally began before paperwork was in place and at the request of functional people, i.e., defendant's project managers, rather than at the direction of defendant's Procurement Department. Chamberlain testified that projects started with discussions as to defendant's needs and plaintiff's capabilities and work typically began prior to finalization of a purchase order. Specifically, Chamberlain stated that plaintiff followed requests for work from the users
“[b]ecause that's how we had always done it. That's a very-* * * it's normal behavior in the industry, to initiate a contract prior to a written purchase order, because part of the initial work that's done is to actually define and establish what it is you're going to do and what the parameters are, which you really don't know until you start to do some of the initial work.”
More specifically, as to “the normal way of conducting business,” Chamberlain stated that “we would start an engagement, and then we would basically define the scope of work, and then finally get the PO [purchase order] issued that included the scope of work; and then * * * we would get paid for the work that we had done.” According to Chamberlain, every project ever done for defendant was done in this manner. In this regard, Chamberlain denied that as soon as plaintiff received authorization to begin work, it always received something in writing.
Thomas confirmed Chamberlain's testimony, stating that “on virtually all of the implementations” to which he was assigned, he received oral requests from defendant to perform work, both on-site and off-site. This was the normal course of business, based on his 20 years' experience. Specifically, according to Thomas, on numerous occasions, plaintiff began an assignment that was not included in any purchase order, worked well beyond performance periods, and when funding had run out. With respect to his understanding of working without a contract, Thomas stated:
“From the beginning of our association with Northrop, we were always under severe time constraints. And the project was based on very aggressive schedules. It was our understanding that if we did not complete the work on schedule, that we would have had an effect on the production of the product, which at that point in our view was fairly critical to the national defense effort.”
Thomas further testified that during the entire period he worked for plaintiff, he took direct orders from defendant's project managers or their delegates. The buyers did not tell plaintiff what to do and, in Thomas' opinion, they were not qualified to do so. Similarly, plaintiff never asked the buyers for permission to start work. Additionally, Thomas stated that the buyers never instructed plaintiff not to listen to the project managers' instructions, nor was plaintiff ever told by a buyer not to do work until a change order issued. Kaprelian confirmed that defendant's Procurement Department never directed plaintiff's work. In this regard, Kaprelian stated that plaintiff received work instructions from defendant's project managers Campanelli and Gieser.
When questioned with respect to confirmation letters of oral requests, Thomas stated:
“I think it's important for everyone to understand that regardless of the reams of paperwork that we've seen that came out of the Procurement Department, we basically operated on verbal instructions and verbal authorizations from the project managers. So, it wasn't necessary to generate letters. We were working with these people face to face every day and basically did what they said to do.”
Muns, too, confirmed the course of dealing, stating that the work plaintiff did for defendant was high-pressured and complex, plaintiff had extremely aggressive delivery dates, and was on tight time deadlines. Muns also confirmed that work began without a written contract in place, although speaking mostly with respect to Arthur Young. According to Muns, Arthur Young started almost every effort for defendant without paperwork. Defendant's functional people would tell Arthur Young what needed to be done, some identification of the scope of work would be given, and work began. Muns stated that no one from defendant's Procurement Department ever redirected Arthur Young's efforts, nor did this occur with plaintiff. According to Muns, from 1986 to 1992, he had very infrequent dealings with the Procurement Department-only a couple of times per year.
Yoo, too, confirmed oral authorizations. According to Yoo, while working on a project for defendant's Procurement Department, he learned about the amount of paperwork required to generate a purchase order and the time-consuming aspect of getting a purchase order created and approved. Yoo further stated that instructions for EIS were given by Gieser and Holley orally in hallway conversations or meetings in Gieser's office. Yoo denied ever getting instructions from Antone. Yoo also testified that, based on past dealings with defendant, it was his belief that defendant's managers, i.e., Campanelli, Gieser, Mendoza, and Holley, were authorized to ask plaintiff to do work. Yoo did not recall ever hearing that only a buyer could authorize work and, if there was such a rule, it was never followed. Yoo further testified that other vendors also worked under oral instructions from the users.
Marcinko testified that plaintiff generally did not stop work if a contract was not in place; rather, plaintiff continued to work. In addition, he confirmed that requests were made for additional tasks by defendant prior to the time a purchase order was issued. Marcinko reiterated that it was common for plaintiff to begin work before paperwork was prepared and to continue work while additional or supplemental paperwork was being prepared. Marcinko was not aware of defendant ever refusing to pay a vendor for work done because no contract was in place while the work was being done.
Conversely, Anderson testified that he would be surprised to learn that plaintiff often worked under oral authorizations from the day it started working for defendant. He stated he had been assured that everything had written documentation. Anderson refused to answer plaintiff's counsel's questions with respect to previous orally authorized work, stating that counsel was merely relying on an assumption. Anderson admitted that he knew very little about what work plaintiff was doing for defendant. In fact, at his deposition, Anderson admitted he did not even know the difference between MSIP and MMSIP. Anderson also admitted at trial that there could possibly have been oral authorizations, but, according to him, these must be shortly followed by written documentation. Anderson was then impeached with his deposition testimony in which he stated that defendant never orally authorized work. Specifically, at his deposition, Anderson testified as follows:
“No, we do not authorize orally work. There has to be a written document.
* * *
* * * And we've always followed it. And to my knowledge, no one has not followed it.”
When questioned in connection with plaintiff's press release, Anderson stated:
“There is no such thing as oral authorizations in our company. I said that about ten times. There is no such thing.
* * *
“Because we're a defense contractor. And being a defense contractor, you cannot have oral authorizations. * * *
In the defense industry you can't do that. You have to have a written document following up on that.”
The following colloquy then occurred:
“Q. Are you saying that you never verbally tell anybody to do work?
A. No. I'm not saying that. We can verbally tell someone. But that is followed up with a written document. You always have a written document.”
Anderson then denied being aware of any outside vendor being orally authorized to do work because “[i]t is not permitted.”
Lona-Arvizu testified that neither Gieser nor Holley had authority to authorize work without her knowledge and that plaintiff should not have done work without a purchase or change order being issued by defendant, unless it was warranty work.
The same situation existed when authorized funding on a project ran out. Chamberlain testified that funding would run out during a project, but plaintiff did not stop work. According to Chamberlain, the users requested plaintiff to continue work even though funding had run out. Thomas confirmed this, stating that when authorized funding was exhausted, “the practice * * * was that Northrop would give us verbal authorization to proceed and subsequently or at the same time process the paperwork that was required to update the purchase order and change the funding amount.” Yoo confirmed that there were times when plaintiff was working on a project and funding ran out. According to Yoo, “[W]e were to work as before, waiting for the paperwork process to complete through the approval cycle.” Yoo testified that from mid-1990 to February or March 1991, funding ran out on MMSIP and plaintiff did approximately $3 million worth of work during this time.
Bremer testified that by July 1991, plaintiff had worked for six months without being paid in full. According to Bremer, this was the same situation as had existed earlier and, had plaintiff been asked to leave at that time, i.e., in February 1990, it would have done $2.6 million of work that defendant would have claimed plaintiff was not entitled to payment for same.
Gieser, however, testified that there were only two or three times during the projects when funding ran out and, in those cases, defendant initiated a purchase order change supplement or purchase requisition to add additional funding.
Plaintiff also offered expert testimony on course of dealing from Jed Babbin. Babbin reviewed the 44 vendor files from defendant to determine which vendors had worked without contract coverage for any period of time. According to Babbin, out of the 44 vendors, 3 were parts vendors and were excluded from his calculations and 2 contained inconclusive records and were also excluded. As such, he worked with only 39 vendors. Babbin detailed 12 vendors specifically at trial as examples.
Babbin testified that he obtained his definition of a contract from defendant's own witnesses, including Lona-Arvizu's trial testimony and the deposition testimony of Jere Hall and Len Pelley, both members of defendant's Procurement Department management. By defendant's own definitions, Babbin concluded that there were four or five kinds of nonwritten contract items: (1) work done before a contract was issued; (2) work done after a contract period of performance had expired; (3) work done after funding had been exhausted; (4) work done on tasks outside a statement of work; and (5) work done by someone not designated in a purchase order to do the work.
With respect to exhibit No. 695, Babbin's 51-page report, which is not in the record,7 Babbin stated that page 11 contained the evidence of work done without a contract. Babbin testified that 36 of the 39 vendors, or 92%, had worked without a written contract being in place. Babbin further stated that 30 of the 39 contracts had standard terms and conditions that were the same in each contract and that 18 of the contracts had a G300 clause.
On cross-examination, defense counsel attacked Babbin's expertise and credentials, as well as his failure to analyze defendant's procurement practices. Defense counsel then questioned Babbin with respect to Goldsmith and the fact that Babbin had read Marcinko's deposition from that case, specifically asking Babbin what kind of case Goldsmith was. Upon plaintiff's objection, the court reiterated that the underlying issues in Goldsmith were subject to a motion in limine that had been granted.
Thereafter, Babbin was asked whether he knew that defendant had done business with more than 44 vendors and he replied that he did not know that for a fact. Plaintiff's counsel then objected, stating that this, too, was covered by a motion in limine and defendant could not refer to any other vendors. The court reserved ruling on plaintiff's objection.
Babbin then admitted that the 92% he previously referred to represented the number of vendors, not the number of transactions entered into. Defense counsel then questioned Babbin about whether oral authorizations were allowed under $25,000, and Babbin admitted that 8 of 36 vendors' contracts were under $25,000 and that only 5 of 36 were over $1 million.
Babbin reiterated that it was his conclusion that 36 vendors worked without a written contract at some point in time. However, he admitted that there was no evidence that any vendor ever worked entirely on an oral authorization, although General Electric worked for 17 months without a written contract. According to Babbin, all vendors eventually received a written contract.
Course of Payment/Invoicing
Chamberlain testified that defendant was “notoriously late in payment.” Thomas confirmed this. Specifically, with respect to plaintiff's April 15, 1991, invoice for $175,000-the last work done on line three-Thomas stated that plaintiff was only partially paid upon its submission because there was insufficient funding for this line item. Plaintiff was not paid the balance for approximately 14 months. In this regard, Thomas and Bremer identified exhibit No. 92, which was a resubmission in February 1992 for the April 1991 invoice, with a balance of $88,000. Defendant's change order request for the $88,000 was finally approved in June 1992, at which time plaintiff was paid the balance. Campanelli confirmed that defendant requested that plaintiff reinvoice defendant. According to Campanelli, Bremer discussed with defendant the fact that, from October to January, plaintiff worked without funding being available. Campanelli further testified that Bremer was told, “You will get paid.”
Likewise, according to Chamberlain, although plaintiff was supposed to invoice defendant every two weeks along with its time sheets, it did not always do so. For example, as of October 25, 1991, more than $2.5 million had not been billed and the period was 77 days old. Chamberlain did not know the reason for this. However, Chamberlain did state that vendors often were asked to delay issuing an invoice until paperwork was in place. Muns confirmed this, stating that plaintiff did not send defendant invoices when it first began work because defendant advised it a purchase order was required before sending invoices. Plaintiff simply accrued the revenue and kept track of it.
Gieser admitted there were times when invoices exceeded the funding authorized by a purchase order. According to Gieser, he would have expected the Procurement Department to notify him when this occurred, but he did not recall it ever occurring.
“At Risk” Language
With respect to the phrase “at risk,” Chamberlain testified that this meant plaintiff would proceed without authorization, either oral or written, and may or may not get paid. However, Chamberlain was never told by defendant that plaintiff was working at risk and, if he had heard such words, he would have stopped work. Thomas also testified with respect to the phrase “at risk.” According to him, plaintiff was never advised that it was working at risk and, in fact, it never worked at risk because it had verbal authorization to work. Thomas further denied that he was ever told by anyone at defendant's company that if there was no purchase order, plaintiff was working at risk. In fact, according to Thomas, plaintiff was told the opposite, i.e.,
“* * * Steve Campanelli, who was viewed * * * as the purchasing expert or procurement expert, told us specifically that as long as we were told or authorized or allowed to do work by one of Northrop's managers or project team, that we were not working at risk-he was emphatic about that-and that Northrop was legally obligated to pay us for whatever work we did for them.”
Campanelli stated that he never used the term “at risk” in reference to whether a vendor would get paid or not. Marcinko, too, testified with respect to working at risk. Marcinko acknowledged that plaintiff was sent a document stating it was working at risk. However, according to Marcinko, he did not recall plaintiff ever receiving such a document, other than this one, and he denied anyone ever told plaintiff it was working at risk. Weinberg testified that work at risk was a common business phrase that meant if one was working without a contract, it may not get paid.
Plaintiff sometimes sent status reports to defendant that were distributed among various individuals at defendant company. Apparently, the reports were originally created by Marcinko. According to Thomas, Marcinko defined the format of these monthly reports. Marcinko would review them and he and Thomas would also discuss them in detail. These reports were long, contained a very detailed breakdown, included statement of work reference numbers, and were distributed, inter alia, to defendant's Procurement Department, specifically the buyers, as well as NISC.
Thomas testified that when Gieser, who had a completely different type of management approach than Marcinko, replaced Marcinko, Gieser made changes to the way plaintiff reported its work. Specifically, Gieser changed the format and content of status reports. In this regard, Thomas identified one of the first MMSIP status reports created after Gieser took charge. It was shorter, more succinct, and less detailed than previous reports. In addition, there was no statement of work reference numbers and the amount of detail on who was working and their hours were not included. Moreover, the distribution list decreased under Gieser as time went on and the Procurement Department, buyers, and NISC were no longer included. In addition, Gieser required status reports less frequently than Marcinko's once-a-month reports. The last status report plaintiff sent to defendant was January 31, 1992. Defendant never complained thereafter about the lack of status reports, which both Gieser and Holley confirmed.
Gieser admitted that he changed the format of the status reports to include less detail and no statement of work reference numbers and explained his change, stating that because plaintiff's employees sat outside his office every day, defendant had a good awareness of what was going on. Gieser further stated there were frequent meetings during which assignments were discussed. Gieser also admitted that the distribution list changed over time and that, by the end of 1991, when he was in charge, the distribution list was down to only a few people and, at some point, it included only he and Holley. Thereafter, Gieser replaced the status report with action item logs and/or outstanding activity logs, a format that was created by either himself or someone in his department. Although both types of documents were offered into evidence, Gieser testified that he did not know why they were titled differently since they appeared to track the same information. According to him, the action item logs were more effective than the status reports and, thus, status reports were no longer necessary.
Thomas testified that plaintiff did work off-site when it was more cost effective for defendant. According to Thomas, when plaintiff did work off-site, defendant was aware of it and had authorized it. Thomas further testified that defendant was not billed for off-site work until the project was complete, pursuant to defendant's instructions, thus making the invoices for off-site work for relatively large amounts of money and for longer periods of time. In addition, Thomas testified that, to his knowledge, time sheets for off-site work were not sent to defendant because plaintiff was “told not to.” Similarly, off-site work was generally not included in status reports. According to Thomas, although off-site work may have been referenced in status reports, it was not detailed.
Bremer confirmed that invoicing differed for on-site and off-site work. According to Bremer, on-site work was invoiced two times a month, whereas off-site work was usually invoiced only once at the completion of a project. In this regard, Bremer identified two invoices for off-site work that each covered four to five months of work. Bremer also confirmed that off-site work was generally not included in status reports.
MRP II was a system designed to computerize the total manufacturing process. Originally there were three subprojects under it, lines one through three. The MRP Documentation project was later added to line one. In addition, line six was later added for MMSIP.
Although work began on the overall project in January 1989, under an oral authorization, a purchase order was not issued by defendant until July 7, 1989. According to Thomas, with respect to the fax accompanying the oral authorization to begin work, this document covered only a portion of each of the three projects and certain items identified in it were not followed. Thomas and Muns were involved in the April 1990 negotiations with defendant in connection with the July 7 purchase order. Thomas testified that several clauses were discussed with defendant in connection with relevance and plaintiff was told the clauses were not applicable to their dealings, they were boilerplate language, and plaintiff should ignore them. Thomas also stated that although plaintiff was told by defendant not to submit invoices until a purchase order was issued by defendant, plaintiff received permission from defendant in April 1989 to submit invoices because defendant had missed target dates for finalizing the purchase order.
Marcinko testified that the description of tasks in the purchase order was “very cursory” and was used only to define the statement of work and not to define tasks necessary to support that scope. Additionally, at the time the statement of work was created, the parties did not know, at the task level, exactly what needed to be done-they only knew on an overall level. Thomas confirmed that it was not possible, at the beginning of the MRP II project, to describe the work in detail. In order to determine what ultimately had to be done to complete the project, Marcinko stated:
“There would be an iterative process. * * * We began by creating questionnaires and sending them out to the different functions in the divisions. They responded to the questionnaires. Out of the questionnaires we made a determination of how adequate their answers were. We developed scopes of work and activities to support resolving any questions that we had.”
Work was done on MRP II without funding or contracts in place. Marcinko detailed specific instances where there was no contract covering work or where funding was exhausted for each of the three line items from the beginning of the project (1989) to mid-1991. Thomas confirmed these situations. Specifically, Marcinko testified that during the time the verbal authorization expired and the July 7 purchase order, plaintiff continued to work and Marcinko continued to ask plaintiff to perform tasks. According to Marcinko, from January to July 1989, no one from the Procurement Department came to him and told him to tell plaintiff to stop work because there was no contract authorizing its work. Marcinko then testified with respect to other occurrences during the MRP II project when plaintiff worked without a contract or sufficient funding in place. Specifically, only $167,000 was originally authorized for all three lines, although not broken down, and the amount had been exhausted by the end of January 1989. From January 16 to April 15, plaintiff submitted, with defendant's express permission, invoices totaling $826,000 ($600,000 for line one, $200,000 for line two, and $26,000 for line three). However, additional funding was not approved for line one (Marcinko's project) until July 1 ($700,000), July 10 ($300,000), and August 16 ($1 million). Thus, the amount had gone from $700,000 in November 1988 to $2 million for line one alone. Marcinko stated the parties were not able to perceive earlier that this amount was necessary because of the nature of the work. Additionally, the statement of work changed because users came back and asked for more tasks. Thomas confirmed this, stating that additional work was added because it was impossible to define the full statement of work at the beginning of the project. Marcinko further testified that plaintiff again worked from April 30 to June 15, 1990, and December 31, 1990, to January 15, 1991, when there was no written contract in place. The total amount ultimately authorized for line one was $3.982 million.
Thomas confirmed the periods plaintiff continued to work in a deficit and that additional tasks were added during the project. According to Thomas, most of these tasks were done before they were included in any document. Thomas, too, testified that although there was no written contract between February 24 and July 7, 1989, plaintiff continued to work. According to Thomas, all relevant defendant employees, including Antone, were aware of plaintiff's continued work, no one ever told plaintiff to stop working, and Thomas was not aware that plaintiff had ever been told it was working at risk.
Marcinko testified that the same situation existed for line two (the NISC project) as with line one, and that the work was included in the original $167,000. Plaintiff worked without a contract from April to June 1990, for a total of $490,000. According to Thomas, by the time plaintiff issued an invoice on this line, it had incurred $200,000, and by the time a purchase order was issued, $300,000. Although no work was performed on this project between January and March 1990, because all tasks were completed, in April 1990, defendant's project manager Jim Ray (NISC) authorized plaintiff to perform additional tasks. In this regard, Thomas identified a status report that showed work on a project that was not included in any statement of work at the time, but which was eventually included in the July 1990 change order. Thomas stated that, in April 1990, funding on this line ran out again, which continued until June. According to Thomas, plaintiff and defendant operated in a similar fashion as under line one-work began on verbal authorizations, plaintiff completed additional tasks on verbal authorizations, and plaintiff continued to work after funding had run out.
The same was true with respect to line three (the Procurement Department project). From April 15 to June 15, 1989, plaintiff worked with no written contract and then after August 31. Plaintiff again worked without a written contract from May 1990 to February 28, 1991. The original amount for this line was $300,000 and ended up being $2.6 million. With respect to line three, Thomas, too, testified that this work proceeded similarly to work on line one-plaintiff continued to work because it was told to do so by Campanelli. Again, this project was included in the initial $167,000. However, before a purchase order was issued, plaintiff had done $200,000 worth of work. Funding was added in December 1989, January, February and April 1990. Despite the additional funding, plaintiff worked in a deficit from September 1989 to March 1990. The April 1990 change order also changed the performance period and added tasks. However, according to Thomas, these tasks had been started in December 1989. Funding again ran out in May 1990, which lasted until February 1991. A March 1991 change order added additional funding.
Weinberg testified that he was not aware in 1989 that plaintiff had worked for months without a purchase order, but knew plaintiff continued to work and never stopped. According to Weinberg, plaintiff was working under his authority. Weinberg stated that he was aware of the fact plaintiff had run up $1 million in work prior to a purchase order being issued and was never told this was wrong by anyone in the Procurement Department.
The MRP Documentation project was added to line one by a December 6, 1990, change order. This project was originally headed by Marcinko on defendant's side and taken over by Gieser. On plaintiff's side, Thomas was the project manager and then Bremer became involved. There is no dispute that the bill of materials module was authorized by a written contract and paid for by defendant. At issue here are five or six additional documentation modules. It also appears that there is no dispute that all of the work on the documentation was done off-site in plaintiff's Dallas office, apparently pursuant to Marcinko's instructions.
Bremer testified in general as to the nature of this project. Bremer stated that PIOS was computer software that helped implement MRP. According to Bremer, defendant could not simply buy the software and use it because a great deal of modification was necessary for the software to work in defendant's environment. Bremer further testified that although PIOS came with its own documentation, due to the magnitude of customization done for defendant, that documentation was inadequate. By the end of 1990, plaintiff and/or its predecessor had done five years of changes to PIOS for defendant. According to Bremer, it would be very difficult for defendant to operate its system in the future without current documentation and, if it did try to do so, it would require a series of telephone calls and much wasted time. Bremer also testified that, by the fall of 1990, plaintiff was winding up work on the original MRP, which was the point in time when documentation was normally created.
Marcinko testified, on direct, cross, and redirect examination, that he asked Thomas to do all the documentation, but also asked him to do the bill of materials first because of a request from the Engineering Department. Marcinko stated that he discussed the other five or six modules with Thomas in the fall of 1990 in Marcinko's office and he specifically said he “wanted complete documentation of the systems,” i.e., all of the modules. Plaintiff did the work and, by the time Marcinko left defendant company in May 1991, the documentation was complete enough to send out for comments. Because Gieser acted in Marcinko's job capacity for most of 1990 due to Marcinko's health problems, Marcinko requested Gieser to follow through to ensure there was ample coverage in the written contract to support all of the documentation. When Marcinko departed from the company, he left Gieser to deal with the final portion of the project.
Marcinko admitted that the November 1990 statement of work, which was drafted by Gieser, only included the bill of materials documentation. Despite this language, according to Marcinko, the other documentations were implied in this statement of work. Marcinko nonetheless admitted that of all the documents he reviewed containing a statement of work for the documentation project, he did not find any reference to any documentation other than the bill of materials.
Thomas testified that plaintiff had done documentation for Campanelli on a purchase module. Marcinko was impressed by that work and asked plaintiff to do the documentation for his projects. Marcinko instructed Thomas to do the bill of materials first. According to Thomas, after plaintiff delivered the bill of materials documentation, sometime in late 1990, Marcinko requested that plaintiff complete documentation on the remaining modules. Thomas further testified that all of the documentation was delivered to Marcinko, he reviewed it, requested some changes, which were made, and plaintiff returned the documentation to Marcinko. Marcinko then distributed the documentation to the relevant departments, who kept it and used it. Thomas and Marcinko both left the project shortly after the documentation was delivered and Bremer took over for Thomas.
Thomas acknowledged that defendant issued a RFQ (“Request for Quotation”) with respect to the bill of materials, plaintiff responded, and a change order was issued on December 6, 1990. Thomas stated that this was the first instance in which he remembered defendant issuing a RFP on an existing purchase order. Thomas admitted that only the bill of materials documentation was mentioned in the change order.
Thomas further testified that plaintiff did not send status reports to defendant in connection with the bill of materials documentation, at least no detailed accounting of its work. However, he acknowledged that some status reports referenced the bill of materials documentation, but did not include the status of work. Thomas further testified that plaintiff did not submit time sheets or invoices for work done on the documentation because the work was done off-site.
Bremer testified that work on the documentation project had already begun when he became the project manager, which was after Thomas left. According to Bremer, when the bill of materials documentation was delivered to Marcinko, Marcinko “went through it, liked it, and wanted to make sure we were working on the other modules.” Approximately one month later, after plaintiff delivered the other modules, Marcinko suggested that he would like the shop control documentation subdivided into three separate submodules, so plaintiff did so, and delivered the submodules to Marcinko. Bremer further testified that the EIS documentation was given to Gieser and Gieser distributed it to various people to review. According to Bremer, this was in approximately August 1991 and he never heard defendant had not accepted the documentation. Thereafter, plaintiff was asked to integrate the documentation into the EIS system. Bremer stated that he spoke with Gieser around the same time about needing to have one source for documentation because with an electronic version, as opposed to a paper version, only one change would have to be made on one copy, not many copies.
Kaprelian confirmed that the documentation was loaded on the EIS system at Gieser's request. Although Kaprelian was not involved in the documentation project, he saw the documentation displayed on EIS. He also observed Gieser review it with Yoo, as well as request changes. According to Kaprelian, Gieser wanted the documentation on EIS because
“from a delivery standpoint, if the * * * documentation was stored in an electronic format and distributable electronically, it could be changed in one location and distributed to many very rapidly.
In addition to the fact that there wouldn't be opportunity for different people within the organization to have different versions of the documentation.”
Lastly, Kaprelian stated that integration onto the system would provide ready access because if employees needed to refer to a manual, they “could simply pull up the documentation on their computer screen and refer to it.”
Bremer testified that after the documentation was delivered to defendant, he visited Marcinko at home since he was no longer on-site due to illness. According to Bremer, he went to Marcinko's home on other personal matters and “took the opportunity [to discuss payment] because this was all kind of done on his watch and I wanted to just verify with him that it was done and how to get paid for it.” According to Bremer, Marcinko “said the money was there, that Rich had the money and to go back and see Rich Gieser about it.” Thereafter, Bremer spoke with Gieser. Bremer had broken down the different modules and costs and discussed these with Gieser who stated he would go to Weinberg about getting paid. It was Bremer's testimony that he told Gieser the modules cost $450,000 and he gave Gieser his handwritten notes. According to Bremer, Gieser returned after speaking to Weinberg, and “said he got handed his head” and threw the papers on Bremer's desk. Bremer did not know where the papers now were.
Bremer then called Muns and the two went back and forth about what could be done. Muns stated that, to avoid litigation, plaintiff should offer $100,000. Bremer went back to Gieser. The testimony conflicts at this point. Bremer testified that he discussed the documentation with Gieser and what necessary paperwork to put together. According to Bremer, Gieser told him the required format of the letter and that he should use the term “unsolicited proposal.” Bremer further testified that Gieser stated “at risk” language was needed. However, Bremer testified it was not his belief that plaintiff was at risk because it had been authorized by Marcinko to do the documentation.
Gieser testified that in the fall of 1990, his responsibilities changed because of Marcinko's illness. At this time, he became the acting manager of the department. Gieser denied that in the fall of 1990 Marcinko told him to prepare the paperwork for all documentation. According to Gieser, Marcinko only asked Gieser to put together a purchase requisition for the bill of materials documentation. Gieser stated that Marcinko, not he, created the statement of work and the funding amount was $75,000. According to Gieser, Marcinko never advised him that the requisition was incorrect or it should include all documentation and more money.
Gieser further testified that he first learned, through Bremer, that plaintiff had completed all of the documentation. According to Gieser, prior to this time, he was not aware that plaintiff was working on it even though he interacted with plaintiff every day. Specifically, Gieser stated that, in early 1991, Bremer came to his office and said that plaintiff was working on the other modules. At this time, Bremer asked Gieser if defendant wanted to purchase the documentation and asked Gieser if he would see a problem with defendant doing so. According to Gieser, he asked Bremer under what authority plaintiff did the work and Bremer alluded to the fact that it “may have come out of a conversation” with Marcinko, but he really understood plaintiff had no real authority. Gieser suggested that Bremer put together a proposal. According to Gieser, he left the situation as, if Bremer wanted to submit an unsolicited proposal, he could do so. According to Gieser, Bremer never advised him, during this conversation, that defendant owed plaintiff money for this work.
Gieser also testified that thereafter Bremer submitted a proposal to Gieser for $100,000 for all of the documentation modules. It was Gieser's belief that plaintiff was making a discounted offer because it had done the work at risk. After receipt of Bremer's proposal, the documentation was made available to defendant and was shared with defendant's users. Gieser also discussed the additional documentation with defendant's NISC people. According to Gieser, NISC's response was to decline the documentation. Gieser did not recall if any of the other users ever got back to him with recommendations. In any event, Gieser stated that he never responded to Bremer. Thereafter, however, plaintiff made another offer to defendant to buy the documentation, which defendant declined.
Bremer stated that he did not pursue payment for the documentation after his initial proposal because Muns stated he would take care of the matter.
MMSIP In General
Work began on the MMSIP project in mid-to-late 1990, but was not yet included in any statement of work. Again, this project involved three phases, although only two were implemented. Phase I involved EIS enhancements and the MRP Planner. Phase II involved defining requirements, making prototypes, and building out the applications. Weinberg was the executive sponsor and was responsible for funding.
The lack of funding on the project was discussed with defendant. On November 1, 1990, Antone wrote to plaintiff, stating that funding had run out and plaintiff was working at risk. It was her recommendation that plaintiff stop work. Despite this letter, according to Thomas, plaintiff was authorized to continue work until funding was obtained. In this regard, there was a meeting between Bremer and defendant's employees, Elaine Dower and Campanelli in Campanelli's office on November 6. At this time, although Dower stated that plaintiff could continue to work, she stated it was at risk. According to Thomas, immediately after this meeting, outside in the hallway, he had a conversation with Campanelli who was concerned about the “at risk” language since plaintiff was doing work for him. Thomas testified that Campanelli assured him plaintiff was not at risk and it should not worry about getting paid. Specifically, “he [Campanelli] made a blanket statement that at any point in time where * * * we were doing work for Northrop and had been asked to do that work by one of their management personnel, that there was no chance we wouldn't get paid, we would always get paid for that work. They were legally obligated to do so.” Thomas further testified that plaintiff did not consider itself working at risk, nor did Antone, Dower, or Campanelli because this was just a process the parties went though to comply with procedure.
Bremer confirmed Thomas' testimony, stating that after the meeting, he, Thomas and Campanelli talked outside of the office. According to Bremer, “[Campanelli] informed Larry and me that as long as we had verbal authorization from a manager at Northrop, that we could consider that the work was authorized and to proceed” and need not worry about working at risk or not getting paid. Bremer testified that, according to Campanelli, the “at risk” letter sent by defendant was requested by Antone for the file and was a formality.
Thomas also admitted there was a November 1990 meeting with defendant's employee Jere Hall in which plaintiff was advised not to start new projects without a contract. The same thing was reiterated in February 1991. Thomas stated, however, that plaintiff did start projects without contracts after these dates. According to Thomas, no one from defendant's Procurement Department ever told plaintiff to stop work. In addition, according to Thomas, despite Hall's statements and defendant being aware of plaintiff doing work, Hall never contacted plaintiff and asked why it was working on MMSIP even though no purchase order had been issued, nor did Hall state it was not authorized to do so.
The Plan for MMSIP was issued by defendant on April 24, 1991, a change order on May 17, 1991, adding line six, and a new purchase order ultimately issued on March 26, 1992. The purpose of the Plan, according to Weinberg, was to obtain money to pay for the project. Marcinko had a role in preparing the Plan and directed Gieser, the overall project manager, to prepare it. Gieser stated that many individuals, including Kaprelian and Bremer, were involved in creating the Plan, but he was responsible for its compilation and content. The Plan called for development of 9 applications over a 15-month period. According to Marcinko, Weinberg placed no limit on the cost of the project, which was estimated at $6 million, with a $22 million savings to defendant. Weinberg, Gieser, and Marcinko all testified that costs and savings were dependent upon adhering to the 15-month schedule. As set forth above, the performance period was April 1991 to July 1992 and the three phases of the project were to overlap in their implementation.
Marcinko then testified with respect to documents in connection with this project. Marcinko stated that the May 17, 1991, change order that added the statement of work for the project, in describing the “objectives,” gave plaintiff “zero” instruction on what to do. Similarly, Marcinko stated that, at this time, defendant was not aware of all of the work necessary to complete the project; rather, defendant simply had a general idea. Kaprelian confirmed that the statement of work contained in the change order and Plan gave limited information as to the actual production or nature of the system to be delivered. According to Kaprelian, by looking at the statement of work, one could not tell how defendant wanted either the EIS or MRP Planner to operate and did not state in any detail what defendant wanted included in the systems.
Kaprelian testified that plaintiff obtained knowledge of what defendant needed and wanted in the system by working with defendant's employees and project managers, i.e., the development efforts were highly iterative. According to Kaprelian, informal meetings were conducted with verbal instructions coming from defendant as to what to do. Specifically, Kaprelian stated:
“Essentially, the way the process worked is we would work with Northrop personnel to define their requirements.
And what I mean by that is we would go through a series of meetings with them to understand what their business issues were, and what they wanted solved, and how they wanted it solved * * *.
Then we would return with more information relative to what we thought we heard. We would solicit feedback from them, and then we would make changes, and go forward with another series of those sessions.
So when I talk about iterations, if you can imagine a meeting where somebody explains to you what they want, you go away from that meeting, and come back with either some sort of documentation, or potentially a computer systems prototype, or potentially just come back and ask more questions because you weren't sure from the first meeting.
And then you simply incrementally refine what it is you're going to do on a go-forward basis.”
Kaprelian also stated that from May to December 1991, plaintiff was doing the iterative process, which was done immediately outside Gieser's office.
Kaprelian further testified that it was his experience that plaintiff's work was flexible and subject to change-daily, weekly, and hourly at the behest of Gieser, Holley, Mendoza, and Campanelli. However, Kaprelian did not know whether these requests were ever included in a purchase order.
Gieser also testified with respect to the Plan, confirming that work had begun before the Plan was created. According to Gieser, it was very important for the project to stay on schedule so defendant could achieve the benefits documented. Gieser stated that every month of delay would cost defendant $300,000. Weinberg similarly testified that a delay from April to October 1991, to await CRI (“Cost Reduction Initiative”) government funding, would cause a loss of $1.8 million to defendant. Notwithstanding this statement, Weinberg testified that in 1990, he made efforts to decrease his budget because he was instructed to do so by the general manager. Despite this, a request came from the Procurement Department to fund MMSIP. Weinberg refused to fund the project, but advised the Procurement Department that if it could get CRI government funding, the project could go ahead. With respect to the Plan, Weinberg stated that he signed the Plan despite his refusal to fund the project, but that by signing it, he was not committing to definitely go forward with the entire project.
Gieser also testified that during the summer of 1991, there was a debate within defendant's company whether there would be further B-2 cutbacks and whether it was a good idea to build such an elaborate computer system since the 75 planes defendant had been contracted to build had already been cut to 57. Gieser stated that in July, J.P. Zalinger wrote a memorandum stating his belief that defendant should get government funding before it went through with MMSIP. However, according to Gieser, this view was not endorsed by defendant's management. Defendant was aware of the risk of cutbacks, but, by October 1991, had authorized $3.6 million on the project.
Gieser further stated there was a second area of debate within defendant's company. A couple of bitter NISC people were complaining about plaintiff. According to Gieser, there was a rivalry between some of the NISC people and plaintiff. In this regard, Gieser identified a December 13, 1990, memorandum from Jim Ray (NISC), showing that a dispute was ongoing between NISC and plaintiff. Ray warned of a project (MMSIP) that another NISC employee had stumbled upon the previous week. According to Ray, NISC was not told about this project and was not asked to participate in it. Ray further indicated that Campanelli clearly wanted plaintiff in the driver's seat with respect to MMSIP and the bottom line was it was an “architecture issue” between NISC and plaintiff.
Gieser further identified another memorandum from Ray, dated July 12, 1991, in which NISC complained that the MMSIP project did not undergo a fair bid. Gieser did not recall the complaints made in the memorandum. Gieser also did not recall having heard complaints in the summer of 1991 from NISC that if it were allowed to do the work, it could develop the knowledge it lacked. According to Gieser, NISC was not asked to do the work because it did not have the expertise to do so. Specifically, NISC employees did not know the language MMSIP was being coded in. According to Gieser, in September, he and Holley met with approximately 25 NISC people, regarding questions NISC had in connection with MMSIP. Gieser described this meeting as a “disaster.”
With respect to funding for MMSIP, Gieser sought an increase from $2.6 to $3.6 million in August 1991. Apparently, all necessary individuals signed the noncompetitive procurement justification form, including the president of the B-2 division who was above Weinberg. Gieser also identified a memorandum from defendant's CRI department, dated September 24, 1991, sent to the Procurement Department, stating that defendant would not be receiving CRI funding for MMSIP. According to Gieser, defendant had decided not to seek CRI funding, but decided to spend $3.6 million of its own money. Weinberg confirmed that he signed the nonprocurement justification form for $3.6 million, and, at this time, defendant knew it would not be receiving CRI funding. According to Weinberg, defendant nonetheless had made the decision, through accounting and financial people, to go ahead with the project and fund the MMSIP project itself.
Around the same time, and over the course of the next few months, unplanned activities arose. In this regard, Gieser identified a July 11 status report that detailed more than a page of unplanned activities. Gieser testified that unplanned activities were not unusual. It was Gieser's belief that the statement of work changed throughout the MMSIP project, but Gieser admitted that unplanned activities were never added to the statement of work. According to Gieser, these unplanned activities were not outside the scope of the statement of work; rather, it was his opinion they were additional tasks the parties became aware of that had to be performed to deliver upon the objectives of the project.
Initially, Holley did not recall plaintiff being required to do work that had not been originally planned. Holley then identified a memorandum from Kaprelian to her that demonstrated unplanned activities had arisen. Despite this, Holley stated she did not recall such activities. Holley was then impeached with her deposition testimony in which she stated that there were a lot of unplanned activities with respect to Phase I of MMSIP. Holley then admitted it was typical for unplanned activities to arise during a project and related that defendant had to add approximately $1 million to the project because of unplanned activities. Holley also did not recall if the statement of work was ever changed to reflect unplanned activities. Holley denied asking plaintiff to do these unplanned activities and did not recall if she had the authority to do so. Holley, however, did not recall objecting to plaintiff's work and admitted the activities were necessary to complete the project.
Phase I, EIS Enhancements
The EIS system was to allow defendant's employees, particularly management, to share information electronically. Gieser was the overall project manager, Holley the project manager, and Mendoza the project leader. Kaprelian was the project manager for plaintiff and Yoo the project leader. Work began on EIS in April 1991.
Kaprelian testified that plaintiff worked on this project with Gieser, his team, and others he designated. Specifically, Kaprelian stated that “[plaintiff] would go through an analysis, a design; and [plaintiff] would refine the application over a period of months; and [plaintiff] would continue to refine it as [plaintiff] met with [defendant] on a regular basis.” According to Kaprelian, Gieser took “a very close personal interest” in EIS and it was one project “that he favored for whatever reason.” With respect to the project, Kaprelian testified that Gieser “consistently and constantly made requests for changes on this particular application.” Specifically, according to Kaprelian, in addition to requests made at meetings, “[a]t any moment during the course of a working day, Rich [Gieser] could come out and make requests of us.” Kaprelian further testified that requests after February 1992 came primarily from Gieser and Mendoza.
Kaprelian also stated that much of the EIS work was done off-site and, to the best of his knowledge, the project was never completed before plaintiff was asked to leave in July 1992. Kaprelian admitted that only certain items of EIS work were referenced in defendant's purchase order's statement of work, but not all were. In addition, Kaprelian acknowledged that several enhancements were crossed out on one statement of work. However, Kaprelian stated that plaintiff was later requested to work on two of these, the image processing and multi-media components, because Gieser changed his mind and asked plaintiff to work on them. According to Kaprelian, Gieser made this request sometime in early 1992. Thereafter, Gieser requested plaintiff to adapt the EIS to interact with IMPCA and to work on UNIX. Kaprelian further testified that not all requests made by defendant were documented in the outstanding activity logs. Similarly, Yoo testified that whether or not the document imaging and Multi-Media Presentation were included in a statement of work, Gieser or Mendoza later requested that plaintiff add these enchantments.
With respect to image processing and Multi-Media Presentation, Kaprelian and Yoo both testified that these enhancements were done off-site at plaintiff's Walnut Creek office, between February and July 1992, because that was where plaintiff had the expertise or speciality in connection with these applications, defendant did not have space on-site for plaintiff to bring in more people, and the people with the expertise did not have security clearance to enter defendant's premises. Plaintiff's employee Yoo and defendant's project manager Holley confirmed that the work was transferred to Walnut Creek to take advantage of the resources there. Holley testified that she authorized same.
Yoo testified that, at the beginning of the EIS project, no description was written down because it was a concept project, i.e., there was no similar software available on the market. In this regard, Yoo also testified that the Plan contained a very generic description of the project and there was no detail of how the system was to function. The same was true with respect to the statement of work contained in the change order. Further, neither the change order nor the Plan detailed how the applications were to be built and there was no description of the deliverables. According to Yoo, because EIS was a concept, it required plaintiff to work heavily with the users and to get instructions from them. In this regard, Yoo confirmed Kaprelian's testimony that the process was highly iterative and incremental changes and requests were made by defendant's employees Gieser and Mendoza either on a day-to-day or weekly basis. According to Yoo, defendant could not have known everything it wanted in the system at the beginning of the project and, therefore, the scope of the project changed over time. Specifically, Yoo testified that on a day-to-day basis he had informal discussions with Gieser and Mendoza as well as formal scheduled meetings. Yoo gave several specific examples of informal directions he received from defendant and stated these informal directions were not always reduced to writing. With respect to formal instructions, Yoo testified as follows:
“I believe there was formal setting meeting was initiated early part of '92, with Cassandra Holley; and typically, we set up a weekly scheduled meeting-I believe usually on Wednesday, ten o'clock-to review the project status progress, as well as generate additional tasks items * * * for TSC to perform for that week.
Q. Okay. And were written records kept for work assigned in those meetings?
A. Yes, we had started to document meeting minutes, document action items and so on; but I don't believe the meeting minutes were kept religiously.”
Yoo further stated that the activity log did not include every task defendant asked plaintiff to do. According to him, it included only those tasks discussed during the weekly meetings-the tasks given outside of these meeting were not tracked. Yoo testified that he never received instructions from defendant's buyer Lona-Arvizu and rarely saw her. Yoo further testified that the situation remained the same even when funding ran out in September 1991. According to Yoo, plaintiff was “conducting business as usual, still getting instructions from both Al Mendoza and Rich Gieser, how to go about building changes to EIS and building new components for EIS.”
Yoo also testified that Gieser had long-term plans and goals for EIS. According to Yoo, “Rich Gieser specifically mentioned to me that he want[ed] to take the EIS system that we develop and wanted to use it division-wide and also make the EIS * * * corporate-wide.”
Gieser admitted it was his hope that the EIS system would be used corporate-wide, not just in the B-2 department. According to Gieser, NISC planned to do so and he discussed this with Weinberg and members of his staff, including Campanelli. Despite this hope, Gieser denied instructing plaintiff to continue to enhance and upgrade the EIS application off-site to make it feasible to go corporate-wide. Gieser also denied asking plaintiff to build out the multi-media system, document imaging, UNIX, IE Standards, PC Resource Confirmation, or the MRP Liaison Workflow Simplification applications off-site. According to Gieser, if he had asked plaintiff to do this work, it would require status reports, a request for funding, etc. Gieser stated that he first learned of the additional enhancements when he was advised of the lawsuit against defendant. Gieser also stated that these enhancements were never delivered to defendant.
Despite having testified on cross-examination that he first learned plaintiff claimed to have performed EIS work off-site, Gieser admitted on redirect examination that defendant authorized some off-site work on EIS. In this regard, Gieser identified defendant's project manager Holley's April 22 memorandum, indicating that in February 1992, she authorized Yoo to transfer a portion of the EIS work to the Walnut Creek office because plaintiff's expertise was there. Gieser also admitted that Mendoza traveled to Walnut Creek in March to review the EIS results. However, Gieser denied being aware of any meeting with respect to document imaging and the multi-media system. Gieser then admitted it was possible things were going on with Mendoza and Holley that he did not know about. Gieser also admitted that the outstanding activity log showed that defendant continued to request EIS enhancements into June 1992.
Gieser then testified that a testing procedure was undertaken in late 1991 to mid-1992. In this regard, Gieser identified a January 16, 1992, memorandum that detailed what items plaintiff needed to complete or fix. According to Gieser, work after January 31 pertained to closure issues and the action item log was better able to keep track of such matters than status reports. Gieser testified it was his intent that the log would be a complete list of all significant items remaining to be worked on, but that very trivial items would not be included. Gieser denied requesting any significant changes by plaintiff that were not included on the log.
Similarly, Gieser identified Mendoza's June 10, 1992, memorandum that detailed a discussion with respect to EIS on June 8, to which Gieser was not a party. Gieser stated that this memorandum indicated all standards were satisfied with respect to the EIS system. According to Gieser, if defendant was going to claim plaintiff breached its warranty on this work and, in fact, was performing warranty work, this should have been on Mendoza's mind at this time and included in this memorandum. According to Gieser, he never saw any subsequent memoranda stating that anything was wrong with plaintiff's work and was never notified that plaintiff was performing warranty work. Kaprelian confirmed that plaintiff was never advised that it had done any work incorrectly, that it should redo work for free, or that it was performing warranty work. Gieser further testified that none of the items detailed on the outstanding activity log stated they were warranty work. In this regard, Gieser stated that, to defendant, whether something was a warranty or a fix was the same thing. However, Gieser admitted that that it was clear from the outstanding activity log that warranty and fix were not the same things because fixes should not be assigned to defendant's employees. Despite this, Gieser stated that many items identified as fixes on the log were assigned to defendant's employees.
Mendoza was defendant's project lead for EIS. Despite this position, upon examination by plaintiff's attorney, Mendoza did not recall specifically what the project involved. When Mendoza first became involved with the project, the functionality of the EIS system was ready to be tested. Mendoza did not observe plaintiff performing work on EIS, but rather, according to him, he received the finished product. Mendoza testified that it was his belief that when he received the system, it was a fully functional, perfectly working system. Mendoza was impeached with his deposition testimony in which he stated that he did not believe the system was fully functioning. In any event, according to Mendoza, the testing was his only responsibility. Mendoza was not involved with instructing plaintiff on what work to perform and admitted it was possible that things went on between Holley and/or Gieser and plaintiff of which he was not aware.
Mendoza further testified that he worked with plaintiff's employee Yoo in testing the system, which originally took approximately two weeks. After his two-week testing, Mendoza determined that the system failed. Thereafter, Mendoza gave plaintiff a list of items that failed and those that passed. Plaintiff began making fixes to the failed items. After these fixes were made, Mendoza again tested the system, but, according to him, it never passed and he never recommended that defendant accept it. According to Mendoza, one of the major deficiencies of the system was that defendant could not download existing charts on the mainframe so they were readable, or, conversely, when they were downloaded, they were missing information. In addition, Mendoza was not able to print charts and not able to re-review charts without going through the whole presentation from the beginning. Mendoza stated that plaintiff fixed this last problem, but never fixed the other two. However, Mendoza admitted that plaintiff was terminated before it was able to fix the other problems and before it was able to complete EIS.
With respect to keeping track of problems, Mendoza testified that defendant did not do so at first. However, “later on * * * there was so much chaos within the organization as to who was doing what and when things were supposed to be done, that Cassandra [Holley] initiated an action item log.” According to Mendoza, “There were things that TSC [plaintiff] was trying to show us or new things that they saw out in the market that they felt could be part of EIS, and then there were the current things that needed to be done to get the system accepted, so we were constantly getting either changes to the system that were supposed to be fixes or demonstration of things plaintiff felt could be incorporated into the system.” In the latter regard, Mendoza testified that one of his duties was to decide what was a fix and what was an enhancement. According to him, a user wrote up a requested change, he reviewed the request, and determined whether it was a fix or an enhancement. Mendoza stated that such a determination was necessary in order to determine who within defendant company had to pay for it. Mendoza stated that a fix was paid for by his department, but an enhancement was paid for by the department requesting it. According to Mendoza, defendant did not make all of the requests contained in the action item log, but some were demonstrations that plaintiff wanted to show defendant. Mendoza further stated that simply because an item was put in the log did not mean it had been approved for incorporation into EIS; it was just approved to go on the list. Mendoza was impeached with his deposition testimony in which he stated that items were not placed in the log unless they were to be included in EIS pursuant to defendant's request.
Mendoza further testified that plaintiff never told him that the items defendant requested would cost more money, nor that they were outside the scope of the system plaintiff agreed to create. With respect to some of plaintiff's ideas, Mendoza stated that plaintiff's employee Yoo suggested including “EZ Closure,” but Mendoza did not ask him to do so. Mendoza, however, did not know if Gieser asked Yoo to do it. According to Mendoza, Yoo was constantly presenting such suggestions. Mendoza never asked plaintiff to do the Image Process/OCR and Gieser never asked plaintiff to do this in Mendoza's presence. To his knowledge, Mendoza stated that defendant never received the deliverable. The same was true with respect to Multi-Media Presentation, IMS/Wang Interface, Education/Training Interface, Library, and UNIX.
Mendoza also testified that Yoo asked him to come to the Walnut Creek office just to see the things plaintiff was working on in connection with EIS. According to Mendoza, he had to get Gieser's permission to go. However, Mendoza admitted, when shown Holley's April 22 memorandum to Lona-Arvizu, that Holley requested him to go to review the work.8 Despite this, Mendoza stated that it was his opinion that this was a marketing trip. According to Yoo, during this visit, Mendoza reviewed the “document imaging system, multimedia, EZ Closure, and EIS 2.0.”
According to Mendoza, after this trip, he never asked plaintiff to incorporate any of the items he saw into defendant's EIS system, although he did not recall what things he had seen. Mendoza reported to Gieser after the visit and, to his knowledge, Gieser never asked plaintiff to incorporate any of the things into defendant's system. Mendoza further testified that he never asked plaintiff to do anything on the EIS application that would not fall within the statement of work for the project. Mendoza was not aware that Gieser ever did so either. Mendoza also was not aware that plaintiff ever delivered any work to defendant that did not fall within the scope of the statement of work. According to Mendoza, because he was the team leader, Holley and Gieser would let him know what they were doing in connection with EIS and it was his belief that it was not likely that Holley or Gieser would ask plaintiff to do significant work and not inform him of it since it was his job to test the system and he needed to know what was in it.
Mendoza further testified that part of his responsibility was to help plaintiff's employee Yoo to sell EIS to defendant's users and, in this regard, he made presentations to other departments of defendant. According to Mendoza, he had trouble selling the product. Mendoza also testified that defendant's NISC Department had nothing to do with the EIS project. Mendoza did not know, however, because he was not present at the time the project began, if this was because NISC was against it. Mendoza was again impeached with his deposition testimony in which he stated that NISC was not involved with EIS because it was against it. Similarly, at trial, Mendoza stated that he did not know why NISC was against it, but at his deposition he had stated it was because defendant went outside NISC and NISC thought it could do the work itself. Mendoza admitted that if NISC had built EIS, it would probably have cost defendant more money than what plaintiff charged since, in Mendoza's experience, NISC projects cost more than if defendant hired an outside vendor.
Bremer testified that plaintiff drafted the statement of work for EIS with input from defendant's project managers Gieser or Holley. Bremer did not recall ever drafting a statement of work for off-site work. Despite this, Bremer identified a letter from co-employees Kaprelian and Rohner to Thomas that indicated the IE Standards, MRP Liaison Workflow Simplification, and PC Resource Confirmation enhancements were to be completed in plaintiff's Los Angeles office and supported by the Walnut Creek office after April 2, 1992. Bremer admitted that none of these applications was listed in defendant's purchase order. Additionally, Bremer testified that EIS off-site work also included capturing IE Standards, MRP Liaison Workflow Simplification, and production control of research confirmation.
With respect to warranty work, Bremer testified that none of the work plaintiff was seeking recovery for in this lawsuit was warranty work “because * * * we hadn't got the formal acceptance” from defendant on the project. Bremer admitted that plaintiff did some warranty work for the Procurement Department during the same time frame. However, according to him, this was a completely different project that had been accepted.
Although extensive testimony and evidence was presented with respect to the MRP Planner, since defendant does not raise any issues in its cross-appeal in connection with this project, we need not set forth the testimony and evidence regarding it.
Phase II of MMSIP
Work on Phase II of MMSIP started in August 1991, at which time plaintiff began gathering requirements definitions for the applications. Again, Gieser was the overall manager for defendant and Holley the project manager. Although Holley, as the project manager, was responsible for day-to-day activities, upon questioning by plaintiff's attorney, she could not recall the purpose of Phase II, nor did she recall that work, including creating the prototypes, was done off-site. However, upon questioning by defense counsel, Holley gave detailed answers with respect to its purpose and work on same.
There is no question that defendant gave plaintiff authorization to gather the requirements and develop the prototypes of 12 different applications. Also, there is no question that plaintiff began work before any statement of work for these processes was included in a change or purchase order by defendant. However, the statement of work was ultimately included in a March 26, 1992, purchase order and plaintiff was paid for the work. The dispute here is whether defendant authorized plaintiff to build out the applications, which plaintiff did from February to June 1992.
Although extensive testimony with respect to gathering the requirements was presented, we need only briefly set forth the evidence. Kaprelian, one of plaintiff's leads on the project, testified that the work method with respect to the requirements was similar to that of EIS, i.e., it was highly iterative, and plaintiff obtained the requirements, which would be used to design and build the applications, through meetings, conversations, interviews, and facility sessions with defendant's employees. Bremer confirmed this. According to Kaprelian, plaintiff spent a longer time defining the requirements than on other projects because defendant did not have space on-site for additional plaintiff employees to develop the applications there and due to security clearance issues. Ashe confirmed that these were the reasons for building the applications off-site. Because of these constraints or concerns, plaintiff was instructed, through Gieser and Holley, to gather the requirements on-site and develop the applications off-site. Gieser, however, denied telling plaintiff to spend months drafting the requirements so it could develop the applications off-site.
Kaprelian further testified that another factor leading to off-site work was Gieser's relationship with defendant's NISC people, which was not good. When asked how he knew this, Kaprelian stated “[t]here was no secret that Rich [Gieser] and his organization did not get along with NISC.” Specifically, Kaprelian stated that “[t]hey viewed NISC as an-an adversarial department that essentially, was not capable of-of performing the type of work that Rich wanted to see done.” According to Kaprelian, there were many discussions with respect to NISC and Gieser's relationship. Kaprelian heard about this conflict from Gieser, Holley, and Mendoza from late 1990 to July 1992. Kaprelian also testified in detail with respect to the reasons for the conflict and Gieser's distrust of NISC. Kaprelian further testified that Gieser told him “more than once about his relationship with NISC, which was strained at best.” Gieser, however, denied that he considered his relationship with NISC strained.
After the requirements were gathered, the next step was to build prototypes. This work began in November 1991 and continued through early 1992. These prototypes provided more of a visual representation of the requirements and showed the components of the system, i.e., how the system would work. The prototypes were created off-site at plaintiff's Dallas office and were completed by February 1992. Ashe, plaintiff's project lead, testified with respect to the nature of the work on the prototypes, which we do not set forth because it is not at issue here. Ashe's team was one of three to four different teams building the prototypes and Ashe had no direct contact with defendant's employees in doing so.
The ultimate purpose of gathering requirements and designing prototypes was to build out the applications. In this regard, Kaprelian testified that Thomas informed him that Gieser had instructed Thomas to go forward with the build out of the applications. Kaprelian assembled personnel and began working on the build out. The build out started in Dallas and was then moved to plaintiff's Los Angeles office in April 1992 because several very good programmers were located there and the office was closer to defendant's plant. Ashe managed the build out of the three modules that defendant went forward with and had three programming teams reporting to him. Bremer admitted that building out the applications was not contained in any documents. However, he testified that plaintiff had verbal authorization to do so. It was his belief that Thomas gave such authorization in February 1992, and advised plaintiff to build out the applications off-site. Bremer reiterated that it was Thomas, and no one else, that told plaintiff to build out the applications.
Kaprelian further testified that plaintiff did not require much input from defendant while building out the applications because it had previously spent months defining the requirements and building the prototypes. Ashe confirmed that defendant's involvement was not necessary during the build out because of the extensive requirements and prototypes. According to Ashe, plaintiff had all the information it needed. Ashe testified that from March to June 1992, he had no contact with defendant and had been told not to contact defendant or its employees by Kaprelian and Bremer because defendant was trying to keep the project in low profile due to layoffs and downsizing and defendant did not want a lot of people to know the project was ongoing. This was the first time he had ever been told not to contact defendant. In addition, Ashe testified that during the build out there would be no need to have access to defendant's computer system, hardware, or networks.
Kaprelian initially denied having any conversations with Gieser after plaintiff started the build out with respect to the build out, but then stated there were meetings in which Gieser expressed his vision to extend the EIS and Phase II applications beyond the B-2 Division. Kaprelian then testified that he believed Gieser asked plaintiff whether it was building out the applications and Kaprelian responded, “Yes, we are.” It was Kaprelian's understanding that Gieser was aware of the build out work. Specifically, Kaprelian stated:
“* * * [W]e would have these conversations with regards to what it is that he wanted to include as part of the applications that would be rolled out in a broader sense, conversations would occur * * *, and you guys are building those?
Or you guys are constructing that?
Or that's the way the applications are going to work?
And the answer was always yes.”
According to Kaprelian, after January 1992, oral updates with respect to the progress of the build out were provided to defendant when requested by Gieser and Holley.
Kaprelian, too, admitted that the November 14, 1991, statement of work contained nothing about building out the applications. Although Kaprelian was questioned extensively by defense counsel about reviewing purchase orders, change orders, and other documentation, he repeatedly stated that that was not his responsibility. Kaprelian also denied that it was his intent to build out the applications with the later hope of selling them to defendant.
Thomas confirmed that some Phase II work was done on-site and some off-site. Thomas testified that he was in constant contact with Gieser and they discussed what portion of the project was to be done off-site. In this regard, in early 1992, plaintiff phased some of its people off-site. Thomas did not write a letter to Gieser confirming this because, according to Thomas, it was not necessary. Thomas also had constant communications with Holley. Thomas stated, however, that during this time, he had little contact with Lona-Arvizu. According to Thomas, Gieser and Holley both authorized plaintiff to perform work off-site and knew that plaintiff was doing such work because Thomas briefed both of them as to on-site and off-site work. Holley confirmed that weekly, if not more frequent, status meetings were held with plaintiff and that there was constant contact between defendant and plaintiff. Because of the continuous communications, plaintiff did not send status reports to defendant.
Thomas testified that, at the same time, early 1992, Gieser advised plaintiff to continue work on the project and that he was aggressively pursuing funding. Thomas admitted that plaintiff did not send defendant invoices for work done on Phase II and plaintiff had done work for four to five months without any funding on the project. According to Thomas, this was because Pete Campbell (Accounts Payable Department) had clamped down on accounts receivable and, only after Gieser made the funds available, would plaintiff then be able to send invoices to defendant. Specifically, Thomas testified that “we were * * * told not to submit invoices on work where funding had not been approved. I don't remember exactly when this happened, but we made the mistake of issuing an audit report that has some criticism of the accounting-or accounts payable department.” It was Thomas' belief that because plaintiff had criticized Campbell, that “at that point accounts payable refused to accept invoices from us until they verified that funding was available. That had never been the case before, so we were essentially instructed not to invoice for this work.” However, Thomas stated that he had no question regarding payment for plaintiff's work because plaintiff always had been paid in the past.
Thomas further testified that, as far as he was concerned, Gieser was a designated purchase representative and “[h]e had all the authority in the world to authorize us to do whatever he wanted us to do, [and] did so on a number of occasions.” According to Thomas, “we had been informed of that fact previously by Mr. Campanelli, who was * * * a manager in the Procurement Department. So, it was our understanding that if Mr. Gieser authorized us to do something, we were to do it.”
Bremer confirmed that defendant was not billed for certain Phase II work, particularly after April 10, because the work was outside the period of performance. Bremer also confirmed that plaintiff did not bill defendant for off-site work because a situation had developed with Campbell, who “wasn't going to allow any more invoices to come through without the purchase order and the amounts in place.”
Lona-Arvizu denied telling plaintiff not to submit invoices unless a written contract was in place and stated she had never heard of such a policy at defendant's company. However, Lona-Arvizu testified that, pursuant to the purchase order, only work done on-site could be charged against the contract. Lona-Arvizu further stated that after plaintiff submitted its last invoice (April 1992), money was still remaining under the contract. Gieser confirmed this. Lona-Arvizu further testified that after plaintiff submitted its last invoice, she had a discussion with Bremer with respect to additional work and Bremer said nothing about plaintiff having done a million dollars worth of work for which it had not been paid.
Thomas also confirmed that Gieser had a plan to roll out the project to other departments and, specifically, that the plan was a five-year plan. Gieser asked Thomas to meet with him and Holley to talk about developing and finalizing the five-year plan. Holley came to Los Angeles at one point to discuss Gieser's five-year plan. Specifically, Thomas had lunch with Holley in late April 1992, at Gieser's request. At this lunch, the two discussed the future plans for expansion of MMSIP across defendant's company. Thomas stated that this was the first or second meeting to discuss Gieser's five-year plan. Holley acknowledged she met with Thomas on two occasions, once for lunch and another off-site meeting. Holley, however, testified that at the meetings, or at least one of them, she and Thomas only discussed her possible consulting career. Holley did not recall the purpose of the second meeting. She also did not recall whether Thomas gave her a status on the actual build out of the applications at either meeting.
A series of events and meetings ensued following the President's State of the Union Address in January 1992. At this time, two to four of the planes defendant had built were in the flying test program at Edwards Air Force Base, but the remainder were in some stage of production at defendant's plant. As noted above, negotiations were had between the parties as to Phase II from February 14 to 19, 1992. Lona-Arvizu stated that she was the lead on the negotiations for defendant. Lona-Arvizu also stated that everyone agreed, including plaintiff, that from February 14 to April 10, only a skeleton crew would be used because only a certain amount of money was remaining from the December 1991 ATP (“Authorization to Proceed”). Lona-Arvizu further stated that, at this time, Weinberg had not yet made any decision with respect to going forward with the prototypes.9 According to Lona-Arvizu, at the end of the negotiations, the parties entered into a memorandum of agreement. Lona-Arvizu denied that anyone from defendant told plaintiff to go ahead with the build out of the modules.
Apparently around the same time, Thomas had a discussion with Bremer in connection with funding. According to Thomas, Bremer, who was the primary contact with defendant's buyer,
“relay[ed] * * * that he [had] had a conversation with the buyer. I'm not sure how it came up, but they discussed the availability of budget. And the reason I remember it is it was still pretty positive. They [sic ] buyer told Mr. Bremer that the budget had been approved for the entire project. And I'm not exactly sure why she said this, but she made some comment to the effect that not even Jack Weinberg could stop it if he wanted to, not that he wanted to.”
With respect to conversations with Gieser about funding, Thomas stated:
“* * * [H]e assured me when we had the discussion about transferring people off site [approximately February 1992] that he was aggressively pursuing the funding. That's one reason we were so pleased by the comments from the buyer about the budget being approved.”
Gieser acknowledged that as of February 13, there was a deficit in funding. According to him, however, this was an unusual situation.
Despite this testimony, defendant's employees testified that Weinberg made some decision with respect to the project on February 28. According to Gieser, as of February 28, development of the applications was “deferred or cancelled.” Thereafter, Gieser stated that, at this meeting, Weinberg refused to fund the project except for a small part. Holley confirmed that Weinberg stated that since the B-2 program had been cut and defendant's production was winding down, there was no budget available for additional work. According to Holley, Weinberg decided that no further work would be done on Phase II. According to Weinberg, after this meeting, defendant did not enter into any contracts with plaintiff for additional millions of dollars.
Gieser stated that after this meeting, on the same day, he told Bremer of Weinberg's decision, and Bremer stated he was disappointed and asked if this was a final decision, to which Gieser responded in the affirmative. Gieser admitted that plaintiff was never given anything in writing as to Weinberg's decision to stop work on the project and defendant's decision not to spend the rest of the budgeted amount. In this regard, Gieser identified his November 14, 1990, letter to Arthur Young in which he advised Arthur Young that it could not work beyond allowed funding limits and that the project was closed. According to Gieser, he never sent such a letter to plaintiff when Weinberg made the decision not to proceed further on Phase II, nor did he see any such letter by anyone else from defendant's company.
Bremer testified that despite the January 1992 State of the Union Address, plaintiff had no belief that defendant did not need its services after this time. In this regard, Bremer identified a February 13, 1992, status of budget, which showed a budget of $8.5 million, and that plaintiff had used to date, $5.7 million, leaving approximately $3 million. Bremer denied that Gieser ever advised him that Weinberg had ceased all further work on Phase II. Bremer set forth six reasons he knew Gieser had not told him to stop work. First, Bremer would have had to repay plaintiff if plaintiff continued to work after it was told to stop. Second, others up the corporate chain would also have to pay back money and, therefore, Bremer had an obligation to them and would not continue work if plaintiff was not authorized to do so. Third was Weinberg's later reaction when plaintiff met with him. Specifically, Bremer stated, “If Jack Weinberg had said that [to stop work], when we later met with him, I think in July, when we went back to him to tell him * * * what was going on, * * * he never indicated that he wouldn't pay for the work we had done.” Rather, Weinberg redirected plaintiff to Anderson, defendant's NISC head. Fourth, defendant issued the March 26, 1992, purchase order. Fifth, work was still being done by plaintiff on-site and off-site and defendant continued to ask for additional work, including off-site work. Specifically, Bremer stated:
“* * * I can remember one guy named Williard-came * * * to * * * [the] TSC LA office * * * and evaluated some of the modules, to see how they were progressing, to see if it was meeting what their expectations were.”
With respect to this visit, Bremer testified that Williard, Ashe, and several other people were flipping through the screens of what Bremer believed to be the IE standards module, to show how the module would work. According to Bremer, he approached the group “just to kind of see how things were going, pick up kind of the climate,” and it was his belief that things were going well. Sixth was the fact that Gieser had a five-year plan for the project, which Gieser asked Bremer and Thomas to review to “see what we could do in terms of putting it together-.”
Kaprelian also testified that he would never have allowed employees to work on projects after February 1992 if defendant had not asked for the work because he was aware of plaintiff's payback policy.
Upon examination by plaintiff's attorney, Holley did not recall discussing Weinberg's decision with any of plaintiff's employees, but stated she got the impression they were made aware of the decision. Specifically, Holley stated:
“I remember them looking very concerned and saying is there any way possible we could continue. And I remember saying something to the effect that Jack has made his decision. The program has been cut. There are no funds available. And I just remember them starting to clean up papers and that-that type of activity.”
Upon questioning by defendant's attorney, however, Holley testified as follows:
“Q. Okay. I think you testified earlier that some TSC folks had expressed concern about the fact that a decision had been made not to proceed with coding on the project.
Do you recall that?
Q. Who were the TSC people that you recall having these conversations with?
A. The people I would talk to would be Charlie Kaprelian and Chris Bremer.
* * *
Q. And did you have those conversations with them shortly after the decision had been made?
According to Gieser, Weinberg never changed his mind about the February 28 decision. Weinberg testified, however, that he did not know how long after January 1992 that the formal direction to stop work was given to plaintiff. According to Weinberg, the lack of funding had nothing to do with the decision to stop work; it was not even an issue.
Gieser denied instructing plaintiff to go ahead with the build out of the applications. Similarly, upon questioning by defense counsel, Holley denied authorizing plaintiff to go ahead with the build out, as indicated by the following colloquy:
“Q. Now, I want to be very clear about this because Larry Thomas has testified that you, in conversations with him, explicitly and impliedly authorized him to proceed to develop the code and that you even sent people to the L.A. office to review the code to make sure it was adequate.
Did you ever do anything of the sort?
Lona-Arvizu testified that she learned of the decision not to proceed on the project. According to her, after February 28, Bremer asked her whether there was any additional funding and she replied in the negative. However, Lona-Arvizu did not tell plaintiff to stop work. Lona-Arvizu denied ever orally authorizing plaintiff to build out the modules and, to her knowledge, no one else did so either. Similarly, plaintiff never told Lona-Arvizu that it had been orally authorized to do the work.
On approximately March 14, 1992, Gieser and Thomas had a meeting. Gieser testified that Thomas again asked if Weinberg's decision was final and Gieser stated it was. According to Gieser, Thomas stated that plaintiff was going to go ahead with the development on its own. When Gieser asked Thomas why plaintiff would do that, Thomas stated that plaintiff was having discussions with NISC, taking the applications to the commercial market place and plaintiff was trying to work out a royalty deal with NISC. Gieser denied plaintiff ever reported it was building out the applications after these conversations. Gieser stated he had another conversation with Thomas a couple of weeks later and reiterated that there was no funding available for Phase II. According to Gieser, Thomas stated that plaintiff would continue to work on the build out because plaintiff was currently in negotiations with Anderson, defendant's NISC head. According to Thomas, however, at this meeting, he went over the work performed to date and the costs of same with Gieser.
Shortly after this meeting, on March 20, 1992, defendant began deaccessing some of plaintiff's employees. Thomas was one of the first individuals to be deaccessed according to Gieser. At trial, Gieser testified that deaccessing occurred because the project was over. However, he was impeached with his deposition testimony in which he stated that he did not know why plaintiff was deaccessed. Gieser further testified that after the deaccessing, there were about eight or nine of plaintiff's employees left on defendant's premises doing warranty work and “some EIS activity.” Muns testified that although he was deaccessed, he had last been on defendant's premises seven to eight months before. According to Muns, everyone on the deaccess list was an individual who had worked on projects that were already completed.
With respect to deaccessing plaintiff's employees, Lona-Arvizu stated that this was done because Thomas had circumvented her point of contact with plaintiff and had gone directly to Weinberg to try and sell an option agreement. Lona-Arvizu found out about this when Gieser and Holley were called in by Weinberg and then Gieser briefed her. It was discovered that certain of plaintiff's employees had security clearance who should no longer have it. Lona-Arvizu testified that if plaintiff had authority from Gieser to perform additional developments on the MMSIP, there would have been no reasons to deaccess Thomas.
As noted above, on March 26, 1992, defendant issued a purchase order. This purchase order referred to the November 14, 1991, statement of work, identified seven employees who were authorized to work, set forth a period of performance from February 14 to April 10, 1992, and limited Kaprelian and Bremer's hours, collectively, to 80 hours per month. The purchase order authorized plaintiff to gather the requirements and develop the prototypes. At the time of this purchase order, these tasks had been completed for several months.
Various individuals testified with respect to the limited staff identified in the purchase order and the limitation on Kaprelian and Bremer's hours. Despite the designation of a limited staff, Thomas testified that Gieser or Holley advised plaintiff to continue working at the level of staff it was at. Bremer confirmed that other individuals worked on the project and that defendant paid for some of the work. In this regard, Bremer identified a February 16 to March 15, 1992, invoice that detailed various employees who had worked, but who were not listed on the purchase order. The same was true with respect to the next invoice. Bremer stated that defendant never complained about this. Kaprelian confirmed that based on the invoices submitted to defendant, employees other than those identified in the purchase order worked on MMSIP after March 26 and defendant never complained or told plaintiff these people could not work. Bremer further testified that despite the 80-hour limitation for himself and Kaprelian, defendant did not adhere to it. In this regard, Kaprelian identified two invoices that showed the two billed 290 hours and defendant paid for those hours and never questioned it. Holley admitted that despite the fact the purchase order limited the individuals who could work as well as the hours of Kaprelian and Bremer, she signed off on time sheets that included other people and greater hours. Holley was not aware that the purchase order was ever amended to include these other people. Holley also did not recall any one from the Procurement Department ever telling her that she should not authorize payment for individuals not listed on the purchase order. Lona-Arvizu further acknowledged that Bremer and Kaprelian were limited to 80 hours each, but stated that Gieser or Holley could authorize more hours and, if they signed off on invoices, she would approve them.
On April 1, 1992, Jim Williard, a manager at the same or similar level as Holley, visited plaintiff's Los Angeles office at Holley's request, according to Thomas. Ashe testified that he recalled someone from defendant's company coming to Los Angeles to review the build out. According to Ashe, this was not a sales meeting, i.e., a meeting from which plaintiff hoped to sell defendant the product. Rather, the meeting was scheduled ahead of time, which he was sure of because plaintiff's employees worked many late nights and did a lot of hard work to get ready for it. Ashe stated that plaintiff “put together a whole walk through of the three systems that we had built.” Ashe did not know Williard's position, but stated he had a lot of knowledge on how the system would work in defendant's environment. Additionally, Williard was very interactive, his comments about the applications were very favorable, and he was very impressed with the work. Ashe further stated that Williard had some comments with respect to changes needed, which plaintiff did after the meeting. Holley denied sending Williard to plaintiff's Los Angeles office and, during her testimony, inquired as to who he was.
On April 12, defendant's project manager Marcinko sent a memorandum to Hall, one of defendant's Procurement Department managers, stating that efforts were underway to secure additional funding for continued MMSIP work, and that authorization was in the signature cycle and expected by April 19. According to Marcinko's memorandum, plaintiff had acknowledged that work after April 15 would not be reimbursed if the funding was not approved. With respect to this memorandum, Weinberg testified that he had never seen a statement to the effect that hours worked after April 15 would not be reimbursed if no funding was received. According to him, plaintiff had never been told, other than this time, that it was working at risk, nor had any other vendor. Thomas, however, testified that, despite this memorandum, he never considered plaintiff working at risk.
A series of meetings began in May between the parties with respect to funding and plaintiff being paid or able to invoice for the work it had done. Thomas testified:
“* * * [W]e briefed Mr. Weinberg on an occasional basis on the project. Most of the briefings were done by Mr. Gieser, but we did have a meeting with him [Weinberg] after we-after we'd done a considerable amount of work on the Phase II applications-we'd gone quite some time without being able to invoice-we met with Mr. Gieser and explained to him how important it was for us to be able to invoice for the work we had done and asked him to expedite the paperwork on getting the funding approved. Subsequent to that he asked for a breakdown of what we had done to date, what the costs have been. We presented that to him, and subsequently * * * his response to that meeting was that we needed to go meet with Jack Weinberg to talk about expediting the paperwork, get his assistance. So we did that.”
Gieser, however, testified that when he met with Thomas, Thomas asked if there was anything that would change defendant's mind with respect to its decision not to go forward on Phase II and Gieser responded in the negative. Thomas inferred, according to Gieser, that plaintiff needed some help because it was near the end of plaintiff's fiscal year and Thomas inquired as to whether Gieser could set up a meeting with Weinberg. Gieser further testified that Thomas never advised him that defendant owed plaintiff money. Thereafter, Gieser set up the meeting with Weinberg and was present at this meeting. Weinberg again stated there was nothing he could do. Weinberg advised Thomas to talk to NISC. Upon further questioning, Gieser testified, with respect to this meeting, that Weinberg stated, “There isn't anything I can do,” or “I will look into it” or both. Gieser did not recall Weinberg advising Thomas to see Anderson. Gieser conceded that Weinberg was engaged in employment negotiations with plaintiff at this time.
With respect to the meeting with Weinberg, Thomas' testimony differed from Gieser's. Thomas testified that he, along with Bremer and Kaprelian, met with Weinberg and Gieser at Weinberg's office. Thomas further testified:
“It was a very short meeting. Basically what we did was reiterate our request, a request we had made to Mr. Gieser that Northrop expedite the processing of the paperwork on the funding so that we could invoice for the work we had done and deliver pieces of the system. And I was-I recall it was kind of surprising. Jack's response, or Mr. Weinberg's response was that-he basically said, you know, what kind of position this puts me in. I had to think for a minute to realize what he was talking about. And then he reminded us at that point he was in discussions with TSC about an employment agreement. So, he was somewhat concerned about the impact of our request on his employment opportunity.”
According to Thomas, Weinberg did not indicate any surprise about the substantial amount of work plaintiff had done on MMSIP or that work had continued after the prototypes had been delivered.
Weinberg testified that Thomas showed up at the meeting and stated he was on a mission to get the money plaintiff had spent building out the applications and he was trying to influence defendant to pay for them. Weinberg did not remember where or when this meeting took place, but stated that Thomas was nervous because Beedie had threatened him and advised him not to come back to plaintiff's office without an agreement. According to Weinberg, Thomas did not tell Weinberg at this time that defendant had authorized the build out of the modules. Weinberg told Thomas there was nothing he could do to help. Weinberg denied telling Thomas he was in an awkward position because he was interviewing with or had been hired by plaintiff at this time and, according to Weinberg, his negotiations with plaintiff had nothing to do with his response to Thomas. Upon further questioning, Weinberg admitted that he told Thomas to talk to Anderson.
Thereafter, on May 20 or 21, Weinberg and plaintiff's employee Muns had a conversation or meeting. According to Weinberg, he told Muns to go to Anderson for payment. Weinberg stated that one of the reasons for this response was that Weinberg was transferring jobs. Another reason, according to Weinberg, was because the program was under Anderson's auspices. Muns testified that Weinberg advised him the B-2 program was in an imminent decline and Weinberg was not in a position to help plaintiff with the problems it was having getting paid. Muns confirmed that Weinberg told him to go to Anderson. Specifically, Weinberg told Muns to advise Anderson what plaintiff had done, what it could do, and to make a “real good deal.” Muns also stated that Weinberg told him not to go to Taylor because he was too low of a level, the politics in NISC would preclude Taylor from taking any action, and it would only string out the matter longer.
According to documentary evidence in the record, on May 21, Muns and Taylor met with Thomas, Bremer, and Kaprelian to create a business proposal. On May 22, Muns and Anderson had a meeting. According to Muns, he told Anderson what work plaintiff had done that defendant owed it for and plaintiff wanted to continue working for defendant. Muns outlined a proposal for work at a substantial savings for defendant and indicated that plaintiff needed to get the deal done by May 29, before the end of its fiscal year. Muns told Anderson that plaintiff could do “three-to-one” work for defendant. According to Muns, Anderson thought plaintiff had proposed a very good deal and stated that he would take it up with other management. Specifically, Anderson stated that he would hook Muns up with Charles Dolan, a staff assistant to Anderson, to work out the details.
According to Anderson, Muns came to him with a proposal for additional work that plaintiff would like to do. Muns proposed that 30 people would do unknown work in the future with a cost to defendant of $9.5 million, rather than the $16 million that it was worth. At this time, according to Anderson, Muns said nothing about projects underway for which defendant owed plaintiff. Anderson referred Muns to Taylor. According to Anderson, Muns told Anderson that he needed an agreement in seven days, but he did not state why. Muns was told there was no way defendant could do that that quickly and he knew it. Anderson turned the proposal over to Taylor, who subsequently advised Anderson that it was not something Taylor wanted to do. After hearing this, Anderson did nothing. Thereafter, Muns met with Dolan somewhere between May 23 and 30. Muns also stated that there were other meetings with Dolan and Taylor. Thereafter, documents were exchanged between the parties, including drafts of an agreement.
Chamberlain testified that he was contacted by his fellow employee Beedie about the problems with defendant and asked if he could help. Chamberlain believed he could resolve the problem because of his relationship with defendant. According to Chamberlain, he visited Anderson on June 2, 1992, and explained the seriousness of the problem. Chamberlain stated that the two talked for several hours and he “finally gave [Anderson] a proposal [and Anderson] concluded the meeting by saying, why don't you present that proposal to Dana Taylor; and if Dana Taylor goes along with it, it's fine with me.”
Anderson testified that Chamberlain came to him with respect to the proposal referred to above. Anderson told Chamberlain he would have Taylor look at it again. At this time, Chamberlain said nothing about any work plaintiff had done for which it had not been paid. After re-reviewing the proposal, Taylor again advised Anderson that he was not interested. Anderson relayed this information to Chamberlain. According to Anderson, Chamberlain wanted defendant to reconsider the issue and came to see Anderson in mid-June. Chamberlain stated that plaintiff had some financial issues within the company and it really needed the business. Anderson agreed to look at the proposal again.
On approximately June 23, 1992, Chamberlain and Muns met with Taylor, and Chamberlain “repeated the conversation” to Taylor that he had had with Anderson. Chamberlain and Muns “outlined the proposal in more detail, in specific detail; and at the end of another three or four hours, Dana [Taylor] said that he thought that it would be an acceptable solution.” The proposal was for plaintiff to “put 27 or 28 people on the Northrop account for another year, and we would charge them * * * at a rate of 50 percent the normal fees; and in exchange for doing that, Northrop would pay the outstanding receivable that was on the TSC books and then obviously, pay the 50 percent reduced rate in the going-forward mode.” Chamberlain stated that he did discuss the amount of the outstanding receivable, which was in the neighborhood of $9.5 million with defendant. After discussing the proposal with Taylor, Chamberlain indicated to Taylor that he had to confirm with Beedie that plaintiff would in fact be able to deliver on the proposal. According to Chamberlain, when he related the proposal to Beedie on a speaker telephone, during which Beedie was in a meeting with auditors, Beedie disagreed. Specifically, Chamberlain stated that Beedie “said we should go back and offer fewer people, as 23 or so, rather than the 27, 28 we had in mind. We argued. He finally then said, I'm giving you a direct order. You are not at liberty to go forward with this proposal with the client.” Chamberlain then advised Taylor that he was not authorized to go through with the proposal.
On the following Monday, while Chamberlain was at defendant's plant, he received a call from Beedie. According to Chamberlain, Beedie stated that he had reconsidered the proposal over the weekend and Chamberlain should go ahead with it. Chamberlain immediately went to Taylor, who indicated it was now too late. According to Taylor, the Procurement Department was involved and he no longer had control of the situation.
At the time Chamberlain was discussing the proposal with Anderson and Taylor, plaintiff company was about to issue its quarterly financial report. According to Chamberlain, since defendant had “challenged our receivable, if we couldn't resolve that issue, we would have to disclose that that money would be written off, which would be a severe impact on the profit and loss statement” for plaintiff. On July 1, 1992, plaintiff issued the press release as set forth above and the events detailed above ensued.
Testimony and Objections With Respect to Documentary and Other Evidence
Exhibit No. 531 10
Exhibit No. 531 was a spreadsheet created by plaintiff's employee Philip Mihok between July 8 and August 1992 with the help of Kaprelian and Yoo under the direction of Jack Hayden, a vice president of plaintiff company. Hayden was apparently working with plaintiff's attorneys to collect the money allegedly owed from defendant. Plaintiff presented the evidentiary deposition testimony of Mihok with respect to exhibit No. 531A, the same document as exhibit No. 531, except for a different date, as well as with respect to precursor documents to exhibits No. 531A and No. 531. Mihok stated that this spreadsheet was produced to differentiate the time charged versus time billed to defendant. Mihok testified with respect to how this document was produced as follows:
“Basically, each reporting period, the Northrop time sheets were gathered up and sent to me * * *. I then composed a spreadsheet, probably several of them, one of which was used to generate the invoice for billable hours and one of which was to retain the time that was charged against Northrop engagement that was not billed.”
According to Mihok, he began creating No. 531A in January 1992, at a time when plaintiff had stopped contemporaneously billing defendant for all the time it worked. Mihok then continued to explain how exhibit No. 531A was created, stating:
“Basically using a Northrop time sheet provided by the individuals on the project that categorized the project or subproject they were working on. I used that to generate the spreadsheets.
* * *
When I ran into the situation where there weren't tasks recorded on the time sheet, I typically would go to Chris Bremer and Charlie Kaprelian, Nick Yoo, perhaps Matt DeDobbelaere, to find out what the time should be on those sheets.
* * *
[From these individuals I] [b]asically [got] an assignment as to whether they were working on specific major subtasks, EIS 1, 2. In terms of Charlie and Chris, I believe we pretty well divided them across the project that were active at the time.”
Mihok continued this process as long as time sheets came to him. Mihok again stated the reason he began creating the spreadsheets as follows:
“Prior to January, I received time sheets, * * * expense reports, etcetera, and compiled that directly into an invoice. After the period around the beginning of January '92, * * * there were some items that were not going to be billed directly to Northrop immediately. That was kept in a separate spreadsheet to differentiate between what was going on an invoice and what was not going on an invoice at that time.”
After plaintiff was asked to leave defendant's premises, Mihok returned to plaintiff's Dallas office and worked on validating the time sheets against plaintiff's own records to produce a final spreadsheet. Mihok sought assistance from Kaprelian and Yoo to review the information and validate that people were in the proper categories. When Mihok was done with the spreadsheet, he turned it over to plaintiff's office manager or administrator. Mihok did not believe he put the heading “PREPARED FOR USE OF COUNSEL” on exhibit No. 531A and did not know who did. Mihok further stated that the process he used in creating exhibit No. 531A was similar to the process he utilized in preparing invoices.
On cross-examination, Mihok acknowledged that he prepared exhibit No. 531 while working for Hayden in July and August 1992. However, according to Mihok, it contained the same kind of information he had created and used in the past; it was just organized differently. Mihok did not know if any time was reallocated after he finished the exhibit, but acknowledged some had been when defense counsel pointed out same to him.
Kaprelian testified that, with respect to EIS, the MRP Planner, and Phase II work, other than employee time sheets, he did not keep any detailed record of work being done or what was requested because he was not required to do so. However, during July and August 1992, while working with Mihok, he spent time gathering such information.
Bremer confirmed that where there was no project code on a time sheet, and that when it came time to invoice, the supervisors and managers, who knew who was working on what, would advise Mihok of the proper work code. The same was done with respect to exhibit No. 531.
DeDobbelaere testified that time sheets were filled out on Monday or Friday and that two time sheets were made; one for defendant and one for plaintiff, although they included the same hours. DeDobbelaere stated that employees were supposed to fill out the time sheets daily, but often the employees would just keep notes and fill out the time sheets once a week. DeDobbelaere further testified that when employees failed to include a project code on their time sheet, someone completing the invoices would come to him and ask whether a certain employee was working on the MRP Planner. The same thing occurred in connection with exhibit No. 531A.
Yoo confirmed that he reviewed exhibit No. 531 and looked at individuals he knew were doing EIS work and allocated any such individual who did not use EIS codes if they had actually been doing EIS work. Yoo eliminated some individuals listed as EIS workers whom he knew were not doing EIS work. According to Yoo, he did this shortly after leaving defendant's premises, i.e., within a few months of the actual work. According to Yoo, the work was still fairly fresh in his mind.
Defendant objected to admission of exhibit No. 531 during the course of the trial, specifically during Kaprelian, Bremer, Yoo, and DeDobbelaere's testimony. These individuals all testified prior to Mihok. Plaintiff was required to take Mihok's evidentiary deposition during the course of the trial because the trial court repeatedly ruled that it had not laid a foundation for admission of exhibit No. 531 through other testimony. For example, during Kaprelian's testimony, defense counsel objected to reference to exhibit No. 531, stating that it was not a business record, that it was based on hearsay upon hearsay (the reallocation of time), and it was prepared for litigation. Plaintiff maintained that this document was a summary of voluminous records, i.e., time sheets. The court, during Kaprelian's testimony, sustained defendant's objection because the document contained hearsay and was not prepared by Kaprelian. Thereafter, defendant continually maintained that exhibit No. 531 was not a business record, was prepared for litigation, and contained hearsay, and the court continued to sustain defendant's objections.
Defendant presented an additional basis for lack of admissibility during Mihok's testimony. Specifically, during Mihok's testimony, when plaintiff's counsel asked Mihok why exhibit No. 531 was created, defense counsel objected, stating they were getting into testimony that was not available to the defense during Mihok's discovery deposition, i.e., why he prepared the document, since plaintiff had asserted the attorney-client privilege. According to defendant, Mihok was not allowed to answer at his discovery deposition why he had created this document. At Mihok's discovery deposition, plaintiff's counsel did invoke the attorney-client privilege on several occasions. The specific objections and comments are detailed below in connection with the substantive discussion of this issue. Defendant argued that because plaintiff exercised its attorney-client privilege with respect to exhibit No. 531 at Mihok's deposition, the document could not be a business record. Plaintiff responded that it did not assert any privilege with respect to exhibit No. 531 at the deposition. Following the arguments, the trial court sustained defendant's objection, finding that plaintiff had not laid a sufficient foundation to establish exhibit No. 531 as a business record. In this regard, the court stated that if a privilege was asserted, the document could not be a business record. Plaintiff continued to argue that it did not assert any privilege at Mihok's deposition, and, rather, that it specifically stated it was not asserting any privilege. The court responded that portions of Mihok's deposition had just been read to it where plaintiff asserted the privilege. Lengthy arguments then continued. According to plaintiff's counsel, Mihok was asked questions (at the discovery deposition) about exhibit No. 531 for over 30 pages with very few objections from plaintiff. Counsel then stated, “If your Honor reads this, this is in excruciating detail why did you come up with this number[,] what did this person tell you, what did that person tell you, goes into excruciating detail. We are not asserting privilege at all.”
With respect to the stamp “PREPARED FOR USE OF COUNSEL” on exhibit No. 531, plaintiff argued as follows:
“Now, the complicating problem here on all of this was that Mihok is preparing this at the same time we have a class action suit going in federal court and at the same time the SEC is having its informal inquiry, and different lawyers are handling different phases of it. There is actually a Northwest Airlines case going on at the same time. Different lawyers handling different phases of it. We get the document and someone put on the top, we never figured out who, prepared for counsel. It doesn't say privileged, it just says prepared for counsel. It looks like a layman put it on. A lawyer wouldn't have put that limited a statement on.
But, in any event, we get this thing and we produce it to them and we produce the underlying documents to them. And all we say is we don't want this construed as a broader waiver. * * *
But the one thing that is absolutely clear your Honor, less than two years after this case was filed we produced this document to them. About three years after this case was filed we produced Mihok to them. They questioned Mihok very extensively for two days on his exhibit, there are very few objections. There are a few, but there are very few. It is plain we are not asserting blanket privilege on this whole thing. There is [sic ] a few specific questions that we object and instruct not to answer.”
With respect to plaintiff's attorney's statement at the discovery deposition, plaintiff stated: “[W]e indicated before we produced them to you they were privileged but we were willing to waive the privilege with respect to those. And we are also going to waive the privilege with respect to the preparation of those materials,” and that “[i]f there was an assertion of privilege that was wrongful they had five years to try to remedy it and they didn't.” The court then asked plaintiff to explain how the document was created in the regular course of business. Plaintiff's counsel responded:
“The answer is on July 8, '92 we were escorted off the premises of Northrop and we learned at that point we had an issue with them. * * * We knew we had an issue and we needed to compile a record of what was owed * * *.
Between July 8 and August 11, the date on Exhibit 531-A, it is about a month, we gather together material from three different states, from all sorts of projects, dozens and dozens of people. I don't know if the Court has actually looked at how thick this thing is, but this was not a day's work to prepare it. In a month this-this took all the time sheets on all the projects which had been produced to them, all the underlying documents have been produced to them. We summarized them, and then gave it-that is what Mihok did, then he gave it to Yoo and Kaprelian, who were the leaders of the two projects. And as to certain time sheets where they couldn't figure out where to put them they allocated to different places. This was all done within one month.
* * *
* * * This was prepared as contemporaneously as it could be by people with knowledge for the purpose of creating a record of what Northrop owed us.”
Defense counsel responded that, up to this point, plaintiff simply failed to lay a foundation demonstrating that exhibit No. 531A was a business record.
After extensive argument on February 14, 2001, on both exhibits No. 531 and No. 553, as discussed below, which consists of over 150 pages in the record, the trial court denied plaintiff's motion to admit exhibits Nos. 531 and 553 and sustained defendant's objection. After additional testimony (Mihok's evidentiary deposition) and additional argument, on March 6, the court rendered its final decision with respect to admission of exhibit No. 531, stating that it heard and considered argument on this document on more than one occasion as well as the fact that it had been briefed extensively. The court reversed its original ruling and granted plaintiff's motion to admit exhibit No. 531 as a business record. Specifically, the court stated:
“The Court finds 531 was made in the ordinary course of business. And I have evidence, I have testimony regarding that and that it was in the ordinary course of TSC's business to prepare time sheet information regarding who was performing what work on what projects on what dates, that that was regularly kept and that the Exhibit 531-A was prepared not at the time but closely following the time of the matters reflected in it, I believe within two months, actually.”
When defense counsel requested a response to the fact that Mihok was directed not to answer questions as to why he had prepared this document at his discovery deposition, the court stated:
“The * * * Court finds that the preparation of this document was done in the ordinary course of business. In fact, this particular document, 531-A, was in response to a request of Mr. Hayden. And Mr. Hayden may have known that this was involved in some litigation. I can assume that's the case from what I've heard.
Mr. Mihok did not know this was prepared for litigation. He didn't know, actually as I recall, that there was any litigation occurring at the time he prepared it. It was not unusual, in fact, usual to prepare this information. The fact that it was requested * * * by Hayden at some point here I don't think affects the Court's consideration of whether or not it was-the matters contained in there were accurate.
The person preparing it didn't know that this was for litigation. And he also didn't * * * put at the top that this was prepared for counsel when that stamp on the pages appeared. From nothing that I have read enables the court to make that determination. But I do have Mr. Mihok's testimony that he didn't put it there, apparently it wasn't there when he prepared the document.”
Defense counsel then continued to argue the issue and the court stated:
“Ms. Simmons, we have your record here at length. The appellate court can certainly review it. The rest of the testimony also was that 531 was made available to defense counsel years ago. They had an opportunity to delve into it beyond Mr. Mihok any way they wanted.
I already heard the explanation that plaintiff's counsel felt that the questioning of Mr. Mihok at his deposition concerning what may have been done with Hayden and anything regarding his communication with Hayden was objected to because Hayden was involved in preparation of-or litigation and they didn't want to waive any privilege they might have.
And that was what was explained to the Court for those isolated objections. It did not prevent the defense from looking into the question of why these documents were produced from any source that they wished to do as, in fact they have done.”
Defense counsel continued to argue that at Mihok's deposition “the reason for its creation was something that was completely cloaked with the privilege” and defendant was not able to inquire into the reason it was prepared. The court responded: “There was no assertion of privilege as to 531-A. The only assertion of privilege * * * was regarding some communications between Mihok and Mr. Hayden.” Defense counsel then argued that this was an incorrect statement of the privilege asserted, stating that plaintiff's counsel did assert that exhibit No. 531 was a privileged document, but that he was waiving the privilege with respect to this document and defense counsel could, therefore, “ask questions about the preparation” of it. According to counsel when he asked why Mihok prepared the spreadsheet, which did not ask for a communication with Hayden, Mihok was directed not to answer the question on the basis of work product and attorney-client privilege. Despite this earlier position, defendant argued that plaintiff was now attempting to change its position and argue that it had not asserted the attorney-client privilege in connection with why exhibit No. 531 was created. The court replied:
“They did not, to my recollection, previously take the privilege except in the extent you said they may have taken it and waived it regarding the document. The objection based on privilege at the deposition of Mihok was [sic] a very few specific questions that were asked of him in the * * * context of many questions asked of him regarding 531-A.
And you already heard this previously argued, I think as recently as yesterday, that the objections were asserted to questions that had to do, maybe not in terms of phrasing the question, but in phrasing the proper answer to the question in terms of what counsel understood as a privileged communication or assert a privilege because Hayden was part of that conversation and Hayden was there for preparation for litigation.”
Although defense counsel continued to argue inadmissibility, the court reiterated that exhibit No. 531 was admitted into evidence.
Exhibit No. 553
Exhibit No. 553 was a spreadsheet created by James Murtaugh, an accountant and plaintiff's comptroller, from June to August 1993, in response to the SEC inquiry. Plaintiff offered Murtaugh's testimony at trial. According to Murtaugh, this document was prepared for a “governmental agency” request. Murtaugh learned through a meeting with his supervisor what information had been requested. According to Murtaugh, he followed a normal routine practice to create this document that he followed in creating over 100 other ad hoc documents for plaintiff. He gathered source documents, talked to employees, and consulted with external accountants-Price Waterhouse, who researched some data and provided audit trails. According to Murtaugh, the information used to create exhibit No. 553 was more than six inches thick (exhibit No. 1256, which is not contained in the record). Murtaugh testified that exhibit No. 531, which he obtained from plaintiff's Dallas office, contained employee names, projects, and the hours worked. Exhibit No. 531 was not only a part of exhibit No. 1256, but was used to create exhibit No. 553.
Murtaugh denied that in creating exhibit No. 553, any one ever stated it was for use in a lawsuit. Murtaugh admitted that he spoke with plaintiff's attorneys, who provided him with the nature of information the federal agency was seeking, since the attorneys were in contact with that agency. According to Murtaugh, he tried to be as accurate as possible in creating exhibit No. 553 and to keep an audit trail due to whom it was being prepared for.
Murtaugh stated that exhibit No. 553 was dated August 20, 1993, and that after this time, the document was used several times for different reasons, but he did not remember the specific reasons. With respect to page 1 of the document, Murtaugh stated that all the information there was derived from documents in files in Chicago. Plaintiff then moved into evidence page 1, at which time defendant objected, stating it was not a business record. The court stated that plaintiff could offer the exhibit, defendant would be allowed to cross-examine with respect to the foundation, and the court would then determine whether it was admissible.
On cross-examination, Murtaugh testified that he prepared exhibit No. 553 in the summer of 1993; he was not sure of the exact month, but knew it was completed by August 20. Murtaugh admitted that he was not asked to prepare any similar document at the end of any fiscal quarter or year, he was not asked to prepare such document in connection with any of his ordinary duties in filing 10Qs or 10Ks, and that this was a special project. Murtaugh further did not know if he was asked to prepare the document after plaintiff had filed suit against defendant because he did not know when the lawsuit was filed. Murtaugh was not aware that exhibit No. 553 was a privileged document when he prepared it and he still did not know whether it was a privileged document or whether any such privilege was waived. Murtaugh stated that plaintiff's counsel gave him the needs for the document and he created the format. Murtaugh did not know who prepared exhibit No. 531 and did not know if it was created in the ordinary course of business. However, Murtaugh utilized exhibit No. 531 so that he could break out the projects as he needed to do. Murtaugh admitted that without exhibit No. 531, exhibit No. 553 would not have the level of detail it did. Murtaugh further stated that, upon completion of the document, he gave a draft to plaintiff's attorneys and then received comments back from them. The document went back and forth between him and counsel for a couple of weeks and he made changes requested by counsel. On redirect examination, Murtaugh stated that although he spoke with counsel about the form in which the information should be presented and how it should be broken down, counsel never told him to change any numbers.
On February 14, 2001, the trial court entertained arguments with respect to the admissibility of exhibit No. 553. Defendant argued that this was counsel's work product and was created in anticipation of litigation. The court disagreed, finding that it was created for a business purpose-a government agency had requested information. Specifically, the court stated:
“The purpose, as I understand it, in court decisions on the admission of these business records that are created for a single purpose is exactly the situation that appears here * * * where a government agency is requesting information-
MR. DOCKTERMAN [Defense counsel]: No.
THE COURT: Let me finish so our record can contain my reasoning as well.
It is unlikely that a corporate entity or an individual would falsify documents that would themselves-that falsification would constitute a crime when you are dealing with a regulatory agency such as the SEC. So the credibility of compiling those documents and what is submitted is more likely to be accurate than otherwise. And that is why * * * this exception to the hearsay rule exists to begin with.”
Defense counsel then continued to argue that exhibit No. 553 was not admissible, and specifically stated:
“My problem is everything that they are trying to use was prepared for the use of counsel. It is not a business record. It was work product. They stamped it work product. And it was work product in connection with the SEC inquiry.”
Thereafter, Murtaugh testified with respect to exhibit No. 553. Subsequent to Murtaugh's testimony, plaintiff's counsel argued that it had established a foundation for the exhibit as a business record, even if the document was prepared for a unique situation. Defense counsel responded that plaintiff had not laid a proper foundation and that, because exhibit No. 553 was based on exhibit No. 531, exhibit No. 553 could not be admitted. Defendant further argued that exhibit No. 553 was not a business record because it was not created at or near the time of the events. In response, plaintiff argued that it received three letters from the SEC: July 1991, May 1993, and August 6, 1993. In the August 1993 letter, the SEC advised plaintiff to break down its information by project and month, not by quarters. Plaintiff argued that this was precisely what exhibit No. 553 did. Plaintiff's counsel argued that between July 8 and August 11, plaintiff prepared exhibit No. 531A, which was contemporaneous with the events contained therein. One year later, exhibit No. 553 was prepared and, in doing so, reliance was placed on exhibit No. 531. According to plaintiff, a sufficient foundation had been established that these documents were business records. Lengthy argument then ensued with respect to the admissibility of exhibit No. 531, which has been detailed above.
Thereafter, defense counsel argued that exhibit No. 553 was not a business record because “it is an extraordinary request from the SEC carrying the possibility of elevation from an inquiry to whatever levels you have-and I still am mystified, your Honor, between the difference between inquiry and investigation.” The court then commented: “A document where a government agency requests information that a corporation feels it must respond to such as the SEC, * * * it is not outside the regular course of business to respond accurately and truthfully to a government inquiry.” The court also stated:
“First of all, in this case, I don't see, again, the response, and I am focusing on 553 at this moment, I don't see that that is a document from what I have heard that was prepared in anticipation of litigation. The fact that rather than that what I have heard is that was a document prepared in response to an SEC inquiry.”
Defense counsel then argued that there was no difference between the two. Counsel also reargued that exhibit No. 553 was predicated on the “hearsay” document No. 531, and, therefore, inadmissible. As noted above, after extensive additional argument (over 150 pages total in the record), the trial court denied plaintiff's motion to admit exhibit No. 531 and exhibit No. 553 and sustained defendant's objection, again stating that exhibit No. 553 was inadmissible because plaintiff had not laid a foundation for admission of exhibit No. 531.
The parties again engaged in argument with respect to the admissibility of exhibit No. 553 (and No. 531) on March 2 and 5. On March 6, the court heard additional argument from defense counsel that exhibit No. 553 was not admissible because: (1) it was based on exhibit No. 531; (2) it was created at least one and one-half years after the events reflected in it; and (3) it was prepared in response to an abnormal circumstance, i.e., a government inquiry. The court responded:
“Okay. So we do frame this question for the appellate court, this Court finds that the Securities and Exchange Commission request for information of an entity that is regulated by the SEC is responded to in the ordinary course of business, notwithstanding that it may be the first and only time that the SEC had made an inquiry of that entity; that the entity cannot choose not to respond to it.
This is an agency that regulates, in this case, SEC. And it is certainly the regular course of business for an entity regulated by the SEC to respond to inquiries for information from-* * * for entities regulated by the SEC to respond to inquiries for information from that regulatory agency.
* * *
To me I really don't know what is more in the course of business of a regulated company than to respond to the regulator when the regulator is seeking information. And that response was not done a year, year and a half after this inquiry was made. It was done, as I recall, some 60 days-90 days.
* * *
* * * So it would seem to me that the accuracy of the inquiry-of the response it [is] somewhat reliable given that it is a response to the regulatory agency, that serious penalties attach to an inaccurate response * * *.”
The court reversed its previously ruling and then admitted exhibit No. 553 into evidence.
Exhibit No. 520
Exhibit No. 520, a spreadsheet summarizing the hours plaintiff had not invoiced defendant for, was created by Mark Zmijewski, a professor of accounting at the University of Chicago Graduate School, during discovery in this case, because defendant objected to admission of exhibits No. 531 and No. 553. Zmijewski charged plaintiff $40,000 for his time. Zmijewski testified that, in preparing this document, he redid exactly what Mihok had done in 1992 and created it using documents from 1992. According to Zmijewski, he started with time sheets for individuals and then looked at summary documents and time and expense review summaries. Zmijewski stated there were 62,197 hours on the spreadsheet. He obtained 60,354 hours from time sheets, 1,107 from summary documents, and 149 from time and expense reports. Zmijewski identified exhibit No. 523 as the summary of his underlying findings.
Zmijewski then performed additional calculations, similar to those done by Mihok. Specifically, Zmijewski collected information from individual time sheets, which he put in a simple spreadsheet. From invoices and other documents, he obtained hourly billing rates for the respective individuals, which he also put into the spreadsheet. A combination of these two items gave him a total of invoiced and uninvoiced hours. Zmijewski then subtracted the invoiced time for each project, using the invoices. Thereafter, Zmijewski allocated time sheets that did not contain a project code based on other documents and the deposition testimony of some of plaintiff's employees. This resulted in exhibit No. 521, which represents the time sheet inputs for each project. Defendant did not object to exhibit No. 521. At this point, Zmijewski still had three pages of documents with no project code for a total of 26,350 hours and $3,081,715. Also, at this point in the process, Zmijewski arrived at a total of approximately $8.19 million for which plaintiff had not invoiced defendant.
Thereafter, Zmijewski deleted an individual's hours from exhibit No. 521 if that person's hours had been invoiced (exhibit No. 522). For example, the amount with respect to Phase II of MMSIP went from $3.4 to $2.7 million. Zmijewski then attempted to allocate the remaining uncoded hours to individual projects based on other documents and deposition testimony. Zmijewski then prepared a summary of the hours he allocated, which are reflected in exhibit No. 520. Plaintiff moved for admission of these exhibits into evidence and defendant objected, stating that there was no foundation for the reallocations. The trial court admitted the exhibits over defendant's objection. At this point, Zmijewski arrived at a total owed by defendant of $6.3 million. Zmijewski stated that there were still hours left where there was no testimony or documentation to support any allocation, approximately $547,000, which hours and amount he did not include in his calculations.
Zmijewski acknowledged that defendant's expert had identified two mistakes Zmijewski had made, which Zmijewski checked, agreed with, and corrected. Zmijewski testified that when he created these documents in 2000, he did not have all the time sheets. According to him, if he had had all the time sheets that were available in 1992, rather than only those he had in 2000, he would expect that he could have allocated 100% of the time, i.e., the remaining $547,000.
On cross-examination, Zmijewski stated that exhibit No. 521A was his original spreadsheet that contained the two errors identified by defendant's expert. Zmijewski further admitted that he was not absolutely certain there were no more mathematical errors in his documents, but was absolutely certain, within a reasonable degree of certainty, that the documents were correct. Zmijewski admitted reallocating some of the codes the employees put on their time sheets based on their supervisor's testimony. A recess was then had, during which defendant moved to strike Zmijewski's testimony. The trial court apparently denied this motion.
Defendant offered the expert testimony of Mark Hosfield, a partner with Arthur Anderson, who charged defendant $300,000 for his work and opinion. It was Hosfield's assumption that plaintiff was suing defendant on a written contract. Hosfield reviewed plaintiff's time sheets, contractual documents between the parties, and the deposition testimony of Mihok, Yoo, DeDobbelaere and Zmijewski, as well as certain letters.
Hosfield took the amounts and codes from plaintiff's time sheets with respect to EIS and the MRP Planner and put the information into a database. Pursuant to an exhibit (No. 145 not of record), Hosfield limited an employee's hours chargeable to 12 hours per day (i.e., if an employee billed more than 12 hours per day, Hosfield deducted the excess time), utilized only those seven people identified in defendant's March 26, 1992, purchase order (i.e., if an employee was not identified in the purchase order and billed time, that time was deducted), and limited Bremer and Kaprelian's hours to 80 per month. Although Hosfield admitted that after the 80-hour restriction was imposed, defendant paid invoices containing greater hours for these two, Hosfield nonetheless limited, in his calculations, Bremer and Kaprelian's time because defendant never had an opportunity to decide whether it would allow the excess hours or not.
Hosfield then created a summary document like Zmijewski had done. Hosfield did not reallocate any time, but rather used the actual codes on the time sheets. It was Hosfield's opinion that neither the deposition testimony of Yoo, Kaprelian, DeDobbelaere or Murtaugh, nor exhibit No. 553, warranted reallocation. Hosfield then compared his database to the invoices submitted by plaintiff and concluded that plaintiff had not billed defendant for $71,664 with respect to Phase I of MMSIP. However, it was not his opinion that defendant owed this amount, rather it was just the amount not billed.
Hosfield undertook the same analysis with respect to MMSIP, excluding time, limiting time, etc. For this project, he arrived at the figure of $61,460. Again, it was not his opinion that defendant owed plaintiff this amount, just that plaintiff had not billed that amount. Hosfield's testimony with respect to time sheets where there was no code, or code “6.x.x.,” was incomprehensible.
Hosfield testified that the time plaintiff's employees worked on the MRP Planner and EIS after February 15, 1992, was accurately reflected in his spreadsheet. Conversely, he stated that exhibit No. 521A (Zmijewski's summary) and exhibit No. 531 (Mihok's spreadsheet) were incorrect. Specifically, with respect to Zmijewski's summary, Hosfield stated that certain math had been done incorrectly and task codes were erroneously picked up. The latter was also true, according to Hosfield, with respect to exhibit No. 531. Hosfield further testified that his spreadsheets were different from Zmijewski and Mihok's in that his summaries were not prepared for the use of counsel.11
On cross-examination, Hosfield admitted that he did not check exhibit No. 553 for accuracy, nor the supporting documentation, but stated he would be able to do so. Plaintiff's counsel then attempted to get Hosfield to answer questions with respect to hypotheticals, for page after page of the record, but Hosfield repeatedly stated that he could not answer them and repeatedly asked plaintiff's counsel to further fill in the hypotheticals. As a result, plaintiff's attorney finally discontinued this line of questioning.
With respect to exhibit No. 531, Hosfield stated that this document was unreliable because it did not reflect the actual project codes the employees had put on their time sheets and then, after Mihok created it, someone made additional changes. Hosfield then admitted that he did not know task codes were used by defendant solely because it was attempting to obtain government funding, nor did he know that NISC, when it did projects for defendant, never used such codes. However, Hosfield stated that, even if he knew this information and that defendant generally did not use such codes, his opinion would not change with respect to the unreliability of exhibit No. 531. According to Hosfield, it would have been acceptable for Mihok to supplement, clarify, or move around time minimally if he had talked to the people who had done the work. In this case, Hosfield stated that Mihok could have produced a reliable document. However, Hosfield reiterated that only a limited number of changes could be made. Upon further questioning by plaintiff's counsel, Hosfield repeatedly refused to answer questions and, instead, asked plaintiff's counsel questions.
With respect to exhibit No. 553 and the fact that this was prepared in response to an SEC inquiry, Hosfield stated that he was inclined to think it was a reliable document, without knowing the underlying support for same. Hosfield further admitted that he was not aware one of the purposes for Zmijewski creating exhibit No. 520 was to establish a foundation for admission of exhibits No. 531 and 553, to which defendant had objected. Hosfield further stated that he did not know the reason Zmijewski was asked to replicate what Mihok had done.
With respect to the mathematical errors in Zmijewski's spreadsheet, Hosfield testified that he did not calculate the implications of these; rather, he simply brought them to defendant's attention. When advised that the net effect of Zmijewski's mistakes favored defendant, Hosfield stated that he did not know that.
Defendant apparently first objected to Zmijewski's exhibits, particularly No. 520, on July 14, 2000, when it filed its objection and memorandum to the use thereof. On September 22, the trial court entered an order, sustaining defendant's objection. However, the order noted that plaintiff was not precluded from using such exhibits for impeachment or as rebuttal evidence.
The issue again arose during the trial. On February 21, 2001, defendant filed a motion to bar Zmijewski's testimony. On March 5, the court heard argument with respect to Zmijewski's testimony and plaintiff's exhibits No. 520 through 522. Defendant argued that Zmijewski was not an expert with regard to these exhibits because he simply did mathematical calculations. Defendant moved to strike Zmijewski's testimony. After argument by the parties (18 pages in the record), the court denied defendant's motion to strike Zmijewski's testimony. The court also admitted exhibit No. 520 over defendant's objection.
Course of Dealing/Parol Evidence Objections
During discovery, as noted above, defendant objected to course of dealing evidence based, in part, on the parol evidence rule, basically by refusing to produce the third-party vendor files plaintiff sought. On January 10, 2000, defendant filed motions in limine to bar evidence with respect to course of dealing. On October 10, defendant filed additional motions in limine with respect to course of dealing and the parol evidence rule. Ultimately, after extensive arguments and briefing, the trial court denied defendant's motions in limine for the most part and allowed plaintiff to present evidence of defendant's course of dealing, ruling that it was not barred by the parol evidence rule.
Although ruled upon before trial, defendant continued to object throughout the trial to course of dealing evidence. In this regard, defendant faxed a renewed motion to bar such evidence to plaintiff's attorney's office on Sunday, January 7, 2001, at 8:15 a.m. (the court later inquired of defendant, “Who are [you] kidding?”) and moved to strike Marcinko's testimony, after which the court requested that the parties file briefs and reserved its ruling. Defendant presented argument on the motion on January 8. Defendant renewed its objection on January 17, at which time the court overruled defendant's objection. On January 19, defendant again filed a motion to bar Marcinko's testimony as barred by the parol evidence rule with respect to the MRP Documentation project and, on January 23, filed a motion to bar Campanelli's testimony on the same basis. On February 1, defendant renewed its motion 12 to bar Kaprelian's testimony based on the parol evidence rule. The trial court denied this motion, stating that the matter had been previously discussed and the record was replete with the way defense contracts operated from every witnesses' mouth. Specifically, pursuant to previously testimony, work requirements changed as the project was ongoing and defendant's paperwork came later. The trial court noted that plaintiff could not stop work. Specifically, the court stated: “The fact that I have a written contract for certain matters, cannot preclude in other conversations, other work having been asked to be performed.” On March 6, after filing a motion to bar Thomas' testimony with respect to the MRP Documentation project based on the parol evidence rule, defendant again presented argument based on the parol evidence rule, which consists of approximately 35 pages of the record. The trial court then denied defendant's motion to strike both Marcinko and Thomas' testimony. On the same day, defendant also filed a motion for a directed verdict on all of plaintiff's claims based on the parol evidence rule and plaintiff's failure to present evidence of any oral agreements between itself and defendant. The trial court later denied this motion.
Goldsmith/SEC Inquiry Objections
On October 4, 2000, plaintiff filed a motion in limine to bar defendant from mentioning the Goldsmith case (a class action lawsuit against plaintiff for securities fraud) or the SEC inquiry. On December 27, the trial court granted plaintiff's motion in limine with respect to the SEC inquiry. Again, with respect to Goldsmith, the court stated that the motion was denied, but then stated that the parties could not mention the lawsuit unless plaintiff first raised it. On January 2, 2001, defendant filed a motion to reconsider the court's December 27 ruling with respect to Goldsmith, which the court denied. Despite this ruling, on January 5, defendant made an offer of proof in connection with its motion to reconsider. Thereafter, defendant again objected to the trial court's rulings. Specifically, on January 22, defendant again asked the court to reconsider its previous rulings on Goldsmith and the SEC inquiry. The court, after hearing additional argument, denied defendant's motion, concluding that the information was prejudicial and confusing. The court reiterated that no findings of fact were made and no verdict was rendered in Goldsmith. Accordingly, the trial court denied defendant's motion to reconsider.
On March 6, 2001, while plaintiff was still presenting its witnesses, defendant filed a motion for a directed verdict on plaintiff's MRP Documentation claim based on the statute of limitations, and a motion for a directed verdict on all claims based on plaintiff's failure to present evidence of oral agreements between defendant and plaintiff. On March 7, defendant moved for a mistrial based on the trial court's admission of plaintiff's exhibit No. 531 into evidence, which the court denied. Plaintiff then rested and defendant began presenting its witnesses. On July 12, defendant orally moved for a directed verdict, which the trial court denied. Defendant then rested.
On March 14, defendant filed a motion for a directed verdict on all claims based on insufficient proof or evidence of damages. On March 15, the parties again engaged in additional argument with respect to certain exhibits and reference to Goldsmith. In response, the court stated:
“ * * * For the reasons I've given before and will give again that I didn't want to get bogged down in this trial with matters concerning another trial [Goldsmith] that was ultimately settled. And I didn't want to get into the particulars of another trial in this trial. I thought it was inappropriate and prejudicial and barred reference to the Goldsmith litigation.”
Defendant then again moved to strike plaintiff's exhibits No. 531, 531A, and 553, arguing that they were not business records. The trial court denied defendant's motion, reiterating that there was a sufficient basis to conclude that they were business records. On March 16, the jury began deliberating. On March 19, while the jury was deliberating, defendant argued its motions for directed verdicts. The trial court subsequently denied all of them.
Sometime after 7:20 p.m. on March 19, the jury returned its verdict. With respect to EIS, the jury concluded that the parties had entered into an oral contract, that defendant breached it, and that defendant owed plaintiff $641,500. With respect to the MRP Planner, MMSIP II and MRP Documentation, the jury came to the same conclusions and awarded plaintiff $191,000, $2,870,000, and $100,000, respectively. With respect to IMPCA Port and SQL (not at issue here), the jury found no oral contracts.
On March 21, 2001, plaintiff filed a motion to determine prejudgment interest. On April 2, defendant filed a memorandum in opposition to plaintiff's motion and, thereafter, plaintiff filed a response. On April 17, the trial court entered an order on plaintiff's motion for prejudgment interest. In its order, the trial court first concluded that because California law applied to the substantive issues in the case, California law applied to prejudgment interest. With respect to mandatory interest, the court concluded that plaintiff was not entitled to interest because defendant was “not appraised of sufficient information from which to ascertain the debt allegedly owed.” With respect to discretionary interest, the trial court denied same since there were numerous bona fide disputes between the parties. On April 20, the trial court entered a judgment order on the jury verdict, awarding plaintiff $641,500 on the EIS claim, $191,000 on the MRP Planner claim, $2,870,000 on the Phase II claim, and $100,000 on the MRP Documentation claim. With respect to plaintiff's IMPCA Port and SQL claims (not at issue here), judgment was entered in favor of defendant. Lastly, with respect to plaintiff's IMPCA Plus claim (not at issue here), by agreement of the parties, the jury verdict was increased by 11.5%. Plaintiff was awarded a total amount of damages in the amount of $4,239,787.50. On May 18, defendant filed a motion and memorandum seeking costs, contending that it prevailed in the matter overall since plaintiff sought $10.5 million, but was only awarded $3.8 million, and, therefore, defendant was entitled to costs.
On June 19, defendant filed a posttrial motion and memorandum, which was 95 pages long with two volumes of appendices and other attachments. Appendix volume one was approximately 850 pages. Although the motion identified a volume two, this is not contained in the record. On the same day, defendant filed a motion to file a posttrial brief/memorandum in excess of 15 pages, seeking the order be filed nunc pro tunc since defendant had already filed the brief. Plaintiff also filed a posttrial motion with respect to prejudgment interest and for a new trial on MMSIP II damages. On June 26, plaintiff filed an objection to defendant's motion to file a brief in excess of 15 pages, noting that, on June 19, defendant filed a 95-page memorandum without authority to do so. Plaintiff did indicate that it would not oppose a memorandum of 25 pages. On July 3, the trial court denied in part and granted in part defendant's motion to file a brief in excess of 15 pages, allowing defendant to file a 30-page memorandum.
On July 31, defendant filed a shortened memorandum that was 30 pages with 18 footnotes, all of which contained substantive arguments. Defendant again relied upon the two appendices attached to its original motion and also incorporated arguments made in other motions. Defendant attached the motions to its shortened memorandum. These attachments comprised approximately 225 pages.
On August 6, plaintiff filed its response to defendant's motion for costs. On August 17, plaintiff filed a motion to file a brief in excess of 15 pages, which the trial court granted, allowing plaintiff to file 30 pages. On August 28, plaintiff filed its response, which consisted of 30 pages with 20 footnotes and substantive attachments comprising approximately 625 pages.
On September 5, defendant filed an emergency motion to file a reply brief in excess of 15 pages. On September 6, plaintiff filed its reply in support of its posttrial motion, attaching additional supporting materials. On September 7, the trial court granted defendant's motion for leave to file a brief in excess of 15 pages, granting defendant to file 30 pages, and also granted defendant a four-day extension of time (to September 14) in which to file its brief. On September 14, defendant filed an emergency motion for an extension of time to file its brief due to the events of September 11, 2001, to which plaintiff agreed. The trial court granted defendant until September 17 to file its reply brief. On September 17, defendant filed its reply brief in support of its posttrial motion. This brief again contained extensive footnotes (18), two of which comprised one-half page each. The next day, defendant filed its reply brief with respect to its motion for costs. On September 24, defendant withdrew its motion for costs on plaintiff's representation that it would not file a bill of costs.
On October 10, defendant sent a “brief-letter” to the court, submitting further arguments with respect to plaintiff's motion for prejudgment interest. On November 13, the trial court conducted a hearing on the parties' various motions. Thereafter, it ordered the parties to file briefs on the issues raised by the court during that proceeding. On November 19, both parties filed briefs pursuant to the court's direction. On November 21, plaintiff sent a letter to the court with respect to its prejudgment interest motion, in response to defendant's October 10 letter to the court.
On January 11, 2002, the trial court entered a final judgment modified nunc pro tunc. In its order, the court granted plaintiff's request for interest in part, denied plaintiff's request for a new trial on MMSIP II damages, and denied defendant's posttrial motion. The court awarded discretionary interest to plaintiff in the amount of $1,623,838 from June 21, 1997, to April 20, 2001. The trial court denied mandatory interest to plaintiff, noting that the number of hours its employees had worked had decreased from plaintiff's original estimate to the time of trial “due to witness error” and because defendant had not been provided with sufficient information to calculate the amount allegedly owed to plaintiff. The court also denied defendant's motion for JNOV, concluding that there was sufficient evidence to determine that plaintiff was entitled to the amounts awarded by the jury. The court also denied defendant's motion for a new trial, concluding that the jury verdict was not against the manifest weight of the evidence and that defendant had failed to prove any evidentiary errors.
On January 14, 2002, plaintiff filed a notice of appeal and, on January 25, defendant filed a cross-appeal. On February 4, the trial court entered an order staying enforcement of the judgment. On March 1, the parties entered into a stipulation with respect to the record on appeal. They agreed that the common law record would include only the following documents: complaint, answer, every document and order entered after January 1, 2000,13 defendant's June 28, 1996, emergency motion to compel testimony, the trial court's July 10 order on this motion, and correspondence dated October 10 and November 7, 2001. However, we note that other pleadings, apparently originals, are nonetheless contained in the record. The parties, in their stipulation, then indicate that the trial transcripts are contained in boxes 1 to 3 (these three boxes actually contain the common law record), plaintiff's trial exhibits are contained in boxes 4 to 7 (some of these contain the report of proceedings), and defendant's trial exhibits are contained in boxes 8 to 10. 14
[The preceding material is nonpublishable under Supreme Court Rule 23].
Before addressing the merits of the parties' arguments, we are compelled to comment on both plaintiff and defendant's attorneys' violations of supreme court rules, particularly Supreme Court Rule 341. (188 Ill.2d R. 341). As attorneys for large prestigious law firms, both should be well aware of the rules and strive to follow them to the letter. However, this is not, and has not been, the case here. This court is dismayed by counsels' conduct and, because of this, we are making this portion of our decision an opinion to not only guide other attorneys, but warn counsels that this court will not further tolerate such disrespect and disregard for court rules and decorum.
Defense counsel has filed two motions to strike plaintiff's briefs, or portions thereof, that we have taken with the case. For the reasons discussed below, these motions are denied. However, our denial in no way condones counsels' flagrant and extensive abuses here. The magnitude of such violations would easily warrant this court striking all of the briefs and dismissing the appeals in their entirety. LaGrange Memorial Hospital v. St. Paul Insurance Co., 317 Ill.App.3d 863, 876, 251 Ill.Dec. 191, 740 N.E.2d 21 (2000).
Defendant filed a motion to strike plaintiff's statement of facts as violative of Supreme Court Rule 341(a) (188 Ill.2d R. 341(a)). Defendant maintains that plaintiff's statement of facts contains legal discussion and argument, it includes facts not relevant to plaintiff's appeal, which are also conclusory, argumentative, and false, and those facts included that are relevant to its appeal are “riddled with improper argument,” are conclusory, are conjecture, and are unsupported by the record. Defendant argues that the Illinois Appellate Court has repeatedly reaffirmed the importance of Rule 341 and, because plaintiff has blatantly violated this rule, we should strike plaintiff's statement of facts in its entirety.
We agree with defendant that portions of plaintiff's statement of facts contain improper argument. However, while defendant is seeking to use Rule 341 as a weapon against plaintiff, it, too, has blatantly violated that rule. Its statement of facts is also “riddled with improper argument” as well as misstatements of fact. Thus, both plaintiff and defendant's statement of facts violate Rule 341.
Additionally, in defendant's brief, counsel makes substantive arguments in its footnotes (see discussion below) and plaintiff's counsel then responds to these. Plaintiff's counsel, too, makes substantive arguments in its footnotes and defendant's counsel thereafter continues this conduct in defendant's reply brief. Substantive arguments may not be made in footnotes and responses made thereto are likewise improper. Lundy v. Farmers Group, Inc., 322 Ill.App.3d 214, 218, 255 Ill.Dec. 733, 750 N.E.2d 314 (2001). In addition, defense counsel makes numerous misstatements of the facts and of the evidence in defendant's brief, as detailed by plaintiff in its reply. We highlight only two. First, defense counsel argues that plaintiff's witnesses, including Thomas, lied to the SEC. Clearly, this is an erroneous statement since there is no evidence in the record that any of plaintiff's employees, particularly Thomas, were interviewed by the SEC. In addition, defense counsel argues that plaintiff's counsel made certain arguments to the jury with respect to the SEC inquiry. However, as plaintiff notes, these arguments were made to the trial court, outside the presence of the jury.
We further note that both parties have used an excessive number of footnotes in violation of supreme court rules. Rule 341(1) provides that “[f]ootnotes, if any, shall be used sparingly.” 188 Ill.2d R. 341(a). Rule 344(b) also discourages the use of footnotes in briefs. 155 Ill.2d R. 344(b). Plaintiff's 42-page opening brief contains 18 single-spaced footnotes and its 124-page reply brief contains 73 single-spaced footnotes. Defendant's 93-page opening brief contains 53 single-spaced footnotes and its 27-page reply brief contains 21 footnotes. This is a total of 165 footnotes, 91 attributable to plaintiff and 74 to defendant! This cannot be characterized as a “ sparingly” use of footnotes. In addition, much of the information contained in these footnotes is “substantive material that should have been presented in the body of the briefs.” Lundy, 322 Ill.App.3d at 218, 255 Ill.Dec. 733, 750 N.E.2d 314. In fact, a majority of the footnotes in defendant's reply brief contain substantive arguments. Defendant has even raised contentions of trial court error in the footnotes and asks this court for relief. See fns. 30, 31, and 32. Clearly, this is improper. Moreover, had defendant's 21 footnotes been incorporated into the body of its 27-page reply brief, that brief clearly would have exceeded the page limitation set forth in Rule 341(a). 188 Ill.2d R. 341(a). Accordingly, defendant's attorney's conduct in filing defendant's motion to strike plaintiff's brief in this regard is disingenuous. Defendant's motion to file a reply brief in excess of the page limitation was denied by this court. Thereafter, defendant filed its 27-page reply brief with 21 footnotes. Clearly, counsel was seeking to avoid this court's ruling, as well as the page limitation of Rule 341(a) through the use of footnotes. We note that defense counsel employed the same tactics before the trial court. Specifically, despite a 15-page limitation, defense counsel filed a 95-page posttrial motion. Thereafter, the trial court ordered counsel to shorten the motion to 30 pages, a generous relaxation of the page-limitation rule. Although counsel shortened its motion to 30 pages, counsel attached previous briefs it had filed with respect to various issues and effectively increased the length of the motion to 250 pages.
Defendant has also filed a motion to dismiss plaintiff's reply brief, contending that its exceeds the page limitation set forth by Rule 341(a). Defendant maintains that plaintiff's reply brief was limited to 77 pages. Plaintiff, conversely, maintains that its reply brief was limited to 125 pages (75 pages for an appellee's (or cross-appellee's) response to the appellant's (or cross-appellant's) opening brief, plus 50 additional pages as cross-appellee).
Supreme Court Rule 341 provides the following page limitations:
1. Appellant's and appellee's opening briefs: 75.
2. Appellant's reply brief: 27.
3. Cross-appellant and cross-appellee are each given an additional 50 pages.
4. Cross-appellant's reply: 27.
Our independent research has disclosed no case addressing the page limitation for a cross-appellee's reply/response to a cross-appellant's brief. Instructive, however, is Rule 343 that provides that an appellant's answer to a cross-appeal is to be contained in its reply brief. Thus, reading the two rules together, plaintiff had 27 pages for its reply brief plus an additional 50 pages as cross-appellee to respond to the issues raised by defendant on cross-appeal for a total of 77 pages. To allow 125 pages as plaintiff maintains would be to ignore the language of these two rules. Although the issues here are detailed due to the volume of evidence presented, this does not give the parties authority to ignore the specific language of supreme court rules. While we could order plaintiff's counsel to file a reply brief within the page limitation, we decline such remedy so as to not prolong this matter any further.
Clearly, neither party has followed the letter, nor the spirit, of the supreme court rules. We do not condone such careless and deliberate disregard for the rules, as well as this court's rulings on motions. We, however, decline to penalize the parties by striking their briefs for their counsels' wrongdoings. We do, however, on our own motion, strike all of the parties' footnotes. See, e.g., Lundy, 322 Ill.App.3d at 218, 255 Ill.Dec. 733, 750 N.E.2d 314; Wright v. County of Du Page, 316 Ill.App.3d 28, 36, 249 Ill.Dec. 456, 736 N.E.2d 650 (2000); Lagen v. Balcor Co., 274 Ill.App.3d 11, 15, 210 Ill.Dec. 773, 653 N.E.2d 968 (1995) (all dismissing footnotes from parties' briefs on the courts' own motion). We also will disregard any inappropriate or unsupported material. Geers v. Brichta, 248 Ill.App.3d 398, 400, 187 Ill.Dec. 940, 618 N.E.2d 531 (1993). We admonish all counsels involved in preparing these briefs, from both law firms of Grippo & Elden and Wildman, Harrold, Allen & Dixon, to comply with supreme court rules in the future or face the possibility of dismissal of their clients' appeals.
In addition to the violations of supreme court rules hindering review of this matter, the state of the record itself has been a great impediment to review. The record is not in chronological order, nor is the report of proceedings (e.g., November 27, 2000, November 28, 2000, September 22, 2000, November 30, 2000). Similarly, many of the orders are either illegible or unreadable (i.e., # 9 in volume 2 of 2 supplemental volumes), and numerous pleadings are incomplete. Additionally, the manner in which the record was put together and bound hampered review. While we acknowledge part of the blame for the state of the record lies with the clerk of the circuit court since it bound the record, we believe that the parties nonetheless have a duty to this court to ensure that the record is in a proper state for efficient review. Specifically, many of the volumes of the record have fallen apart because the clips are too short and do not contain a fastener. In many other instances, the volume was bound too tight and therefore the first few lines of each page were inaccessible, necessitating the court to take the record apart. Also, in this regard, page holes were punched through text, rendering it unreadable. Lastly, the record contains double sided pages, again impeding review of this case. Given the vastness of this record (110 volumes) and the complexity of the case, we expect a proper record to enable our review, which is not the case here.
[Editor's Note: Text omitted pursuant to Supreme Court Rule 23.]
[The following material is nonpublishable under Supreme Court Rule 23].
Prejudgment InterestI. Conflict of Laws
Plaintiff first contends that the trial court correctly applied California's statute to its claim for prejudgment interest because prejudgment interest is a part of a plaintiff's substantive rights as it is a part of the measure of recovery and such issues are decided under the law of the state that supplies the substantive law applicable to the case. In the instant case, according to plaintiff, because California law governed the underlying contract issues, it governed prejudgment interest. Alternatively, plaintiff maintains that California is the state with the most significant contacts and, thus, its prejudgment interest statute applies.
Defendant contends that the trial court misapplied Illinois conflict of law principles by applying California's statute to an Illinois lawsuit against Illinois parties. According to defendant, the Illinois prejudgment interest statute applies because Illinois has the most significant relationship to the transactions and the parties in connection with the issue of prejudgment interest. Defendant argues that the court must look to the issue at stake in applying conflict of law provisions, which does not mean that one state law applies to all issues in the case. Defendant maintains that the trial court here failed to isolate the issue of prejudgment interest in evaluating conflict of laws and, if it had done so, it would have been compelled to conclude that the Illinois statute applied because the key consideration is the location of plaintiff, which is in Illinois.
Plaintiff responds that defendant has invented a new rule that has never been applied by any court, i.e., that prejudgment interest is subject to its own choice of law analysis.
Illinois follows the conflict of law provisions set forth in the Restatement (Second) Conflict of Law. Ingersoll v. Klein, 46 Ill.2d 42, 45, 262 N.E.2d 593 (1970). Under the Restatement, Illinois utilizes the “most significant contacts” test with respect to contracts. Olsen v. Celano, 234 Ill.App.3d 1045, 1050, 175 Ill.Dec. 799, 600 N.E.2d 1257 (1992). Under this test,
“ ‘[c]ontacts to be evaluated * * * include the place of contracting, negotiation, performance, location of the subject matter of the contract, and the domicile, residence, place of incorporation and business of the parties.’ [Citation.]” Olsen, 234 Ill.App.3d at 1050, 175 Ill.Dec. 799, 600 N.E.2d 1257.
See also Restatement (Second) Conflict of Law § 188, at 575 (1971) (setting forth the same factors). In addition, the Restatement further provides as to contracts for the rendition of services that the validity is determined by the “law of the state where the contract requires that the services, or a major portion of the services, [are to] be rendered * * *.” Restatement (Second) Conflict of Law § 196, at 623.
The principle defendant relies upon is depecage. Although no Illinois state court has utilized this term, the federal courts have concluded that because Illinois follows the choice of law provisions of the Restatement, which incorporates the principle of depecage, Illinois therefore also follows the principle of depecage. Johnson v. Ford Motor Co., Inc., No. 01 C 8882 (N.D.Ill. October 9, 2002). Under the principle of depecage, the choice of law analysis is applied separately to each issue. Ruiz v. Blentech, 89 F.3d 320, 324 (7th Cir.1996); Restatement (Second) Conflict of Laws § 188, comment d, at 579 (stating that courts are “not bound to decide all issues under the local law of a single state,” but further stating that “in an action on a contract made and to be performed in a foreign state by parties domiciled there, a court under traditional and prevailing practice applies it own state's rules to issues involving process, pleadings, joinder of parties, and the administration of the trial * * *”).
However, with respect to the measure of recovery in connection with contract claims, the Restatement provides that “questions involving the measure of recovery for breach of contract will be determined in accordance with the law selected by application of the rule of § 188.” Restatement (Second) Conflict of Laws § 207, at 674. With respect to interest, the Restatement further provides:
“The local law of the state selected by application of the rule of this Section determines whether plaintiff can recover interest, and, if so, the rate, upon damages awarded him for the period between the breach of contract and the rendition of judgment.” Restatement (Second) Conflict of Laws § 207, comment e, at 675.
See also 15A C.J.S. Conflict of Laws § 107, at 310 (2002) (stating that the measure of damages for breach of contract is “ordinarily governed by the foreign law which governs the contract”); 16 Am.Jur.2d. Conflict of Law § 178, at 184-85 (1998) (stating that “[t]he Restatement classifies prejudgment interest in the same category as other elements of damages for purposes of applying the damage law of a given state to a conflict-of-law situation”).
Before we apply a choice of law analysis, we must first determine whether there is a conflict between the laws of the two states. Malatesta v. Mitsubishi Aircraft International, Inc., 275 Ill.App.3d 370, 374, 211 Ill.Dec. 710, 655 N.E.2d 1093 (1995). “There is a conflict if the difference in laws will result in a difference in outcome.” Malatesta, 275 Ill.App.3d at 374, 211 Ill.Dec. 710, 655 N.E.2d 1093. Our review of a conflict of law decision is de novo. Household International, Inc. v. Liberty Mutual Insurance, Co., 321 Ill.App.3d 859, 869, 255 Ill.Dec. 221, 749 N.E.2d 1 (2001). Here, the parties do not dispute that the California and Illinois prejudgment interest statutes would result in different outcomes. As such, we do not undertake a detailed analysis of this question.
We first observe that the case relied upon by the trial court and parties, Libco Corp. v. Roland, 99 Ill.App.3d 1140, 55 Ill.Dec. 334, 426 N.E.2d 309 (1981), with respect to this issue is not directly applicable to this case. In Libco Corp., which involved a breach of fiduciary duty claim against the corporation, the court concluded that, because the corporation was incorporated in Delaware, Delaware law controlled all issues, including prejudgment interest. Libco Corp., 99 Ill.App.3d at 1148, 55 Ill.Dec. 334, 426 N.E.2d 309. However, the court's decision was based on a specific and distinct choice of law provision providing that the state of incorporation governs all issues with respect to the internal affairs of a corporation. Libco Corp., 99 Ill.App.3d at 1144, 55 Ill.Dec. 334, 426 N.E.2d 309. See also Newell Co. v. Petersen, 325 Ill.App.3d 661, 687, 259 Ill.Dec. 495, 758 N.E.2d 903 (2001) (noting that the rule providing that the state of incorporation governs all issues with respect to the internal affairs of a corporation is a distinct choice of law principle). We do not have such an issue in the instant case; rather, we are dealing with a breach of contract, not the internal affairs of a corporation. As such, Libco Corp.'s focus solely on the state of incorporation, and defendant's, is not controlling. We note, nonetheless, that the Libco Corp. court did apply Delaware law to both the substantive issues and to the prejudgment interest issue.
Defendant has not cited any authority that prejudgment interest is to undergo a separate choice of law analysis or any case in which the law of one state has been applied to the substantive issues and the law of another state, particularly Illinois, has been applied to the prejudgment interest issue. In fact, our independent research has disclosed just the opposite-the same state law is applied to both the substantive issue and the prejudgment issue. See Gold v. Ziff Communications Co., 322 Ill.App.3d 32, 60, 254 Ill.Dec. 752, 748 N.E.2d 198 (2001) (applying New York law to the substantive issues and prejudgment issue); Boise Cascade Home & Land Corp. v. Utilities, Inc., 127 Ill.App.3d 4, 13, 82 Ill.Dec. 180, 468 N.E.2d 442 (1984) (applying Illinois law to both the breach of contract claim and to prejudgment interest). See also In re Oil Spill by Amoco Cadiz, 954 F.2d 1279, 1330 (7th Cir.1992) (finding that prejudgment interest depends on the law supplying the substantive rule of decision in the case, i.e., here Illinois); SCA Services, Inc. v. Lucky Stores, 599 F.2d 178, 180 (7th Cir.1979) (applying Michigan law to both substantive issues and prejudgment issue on the basis that interest is part of the measure of the substantive recovery); Stonewall Insurance Co. v. Argonaut Insurance Co., 75 F.Supp.2d 893, 912-13 (N.D.Ill.1999) (concluding that California's, not Illinois', prejudgment interest statute was applicable); Draper v. Airco, Inc., 580 F.2d 91, 97-98 (3d Cir.1978) (holding that the state whose law governs the substantive legal issues also governs the prejudgment interest issue).
The case of American Home Assurance Co. v. Dykema, Gossett, Spencer, Goodnow & Trigg, 811 F.2d 1077 (7th Cir.1987), is directly on point because the plaintiff there made the same argument as defendant does here. In American Home Assurance Co., the plaintiff argued that the district court erred in applying the Michigan, not Illinois, prejudgment interest statute under a separate choice of law analysis. American Home Assurance Co., 811 F.2d at 1087. The district court “concluded that a party's entitlement to prejudgment interest * * * is governed by the law of the state which governs the interpretation of the contract in question.” American Home Assurance Co., 811 F.2d at 1088. Because Michigan law controlled the contract issue, it also controlled the prejudgment interest issue. American Home Assurance Co., 811 F.2d at 1088. The Seventh Circuit agreed with the district court's conclusion, stating: “We think that the district court here correctly concluded that an Illinois court would decide the prejudgment interest under the same law as that used to interpret the contract.” American Home Assurance Co., 811 F.2d at 1088. The American Home Assurance Co. court relied upon Morris v. Wibaux, 159 Ill. 627, 43 N.E. 837 (1895), in which the court addressed the issue of whether Montana or Illinois law applied to the issue of prejudgment interest. The Morris court ultimately awarded prejudgment interest under Montana's statute. Morris, 159 Ill. at 651, 43 N.E. 837. See also Johnson v. Continental Airlines Corp., 964 F.2d 1059, 1063-64 (10th Cir.1992) (holding that prejudgment interest is an integral element of compensatory damages and is not subject to an independent choice of law analysis, particularly since the plaintiffs were attempting “to pick and choose prejudgment interest law in the present case” where they agreed that Idaho law governed the issue of compensatory damages (no prejudgment interest available), but then argued that Colorado law governed the issue of prejudgment interest (prejudgment interest available)).
Based on the above authorities, we find that the issue of prejudgment interest is not subject to a separate conflict of laws analysis and that the law of the state that controls the substantive issues also controls the issue of prejudgment interest. Accordingly, we conclude that the trial court did not err in applying California's prejudgment interest statute.
II. Mandatory Interest-Phase II
Plaintiff next contends that the trial court erred in denying mandatory prejudgment interest pursuant to section 3287(a) of the California Civil Code with respect to Phase II because plaintiff's damages were certain and defendant knew the amount owed, $3,044,000, as of September 1992. According to plaintiff, it calculated the amount owed as of August 1992, presented that amount to defendant in a letter dated September 3, 1992, and has never altered the amount. Plaintiff argues that, although it provided two different amounts to the jury, the reason why it provided the second amount ($2,870,000) was not because the first amount ($3,044,000) was wrong or because plaintiff was unaware of the correct amount. Rather, plaintiff provided the second amount, as ascertained by plaintiff's expert, to counter objections defendant made at trial to the document containing plaintiff's original calculation and to show the reasonableness of the original calculation. Plaintiff maintains that the difference in amounts was not caused by an error in calculation, as the trial court concluded, but was due to the passage of eight years and plaintiff's expert's inability to allocate 100% of the time since some of the time sheets had been destroyed. Plaintiff also maintains that the difference in the amount awarded ($2,870,000) from the amount it sought ($3,044,000) is only 5.7% and, under California law, this variance does not render the original amount uncertain. Plaintiff also argues that the trial court erred in requiring it to provide sufficient information to defendant so that defendant itself could calculate the amount. According to plaintiff, it was not required to do so because, under California law, the test for certainty is (1) knowledge of the amount or (2) ability to calculate, a disjunctive standard.
Defendant contends that plaintiff was not entitled to mandatory interest because: (1) its damages were not certain; (2) the data supporting plaintiff's claimed damages was within plaintiff's control; (3) the amount of damages could not be resolved except by verdict or judgment; and (4) there were substantial disputes concerning the basis for computing damages. With respect to certainty, defendant maintains that plaintiff advised the jury that defendant owed it $10.5 million, then asked for an award of at least $6.6 million, and then stated an award of less than $5 million would not be worth trying the case 15 and, as such, plaintiff cannot contend that the requested damages were certain. With respect to supporting data, defendant maintains that, although plaintiff produced time sheets, plaintiff's trial witnesses failed to tie the time sheets to the work performed and, in fact, stated they were an unreliable basis upon which to compute damages. Thus, according to defendant, plaintiff failed to provide defendant with concrete data from which it could ascertain the damages sought by plaintiff because plaintiff itself did not even have such data.16 Defendant further maintains that the amount in controversy was in dispute and could only be resolved by verdict or judgment because plaintiff's damage summaries were unreliable and there were inconsistencies between plaintiff's damages at trial ($3.4 million) and the information supplied to its board of directors in June 1992 ($1.4). Lastly, defendant maintains that there was a dispute among plaintiff's own witnesses with respect to the proper amount of compensation and the allocation of damages.
Plaintiff responds that if damages are certain, which they were here, it was entitled to mandatory interest and no other issue is relevant. Plaintiff also maintains that it was not required to submit data to defendant because defendant knew the amount of the damages claimed and the amount of damages were not required to be determined by verdict or judgment because plaintiff provided defendant with the damage amount on September 3, 1992, and, therefore, the amount was known prior to any verdict. Lastly, plaintiff argues that defendant never disputed the method of calculation, nor offered any different method.
Section 3287(a) of the California Civil Code (California Code) provides:
“Every person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled also to recover interest thereon from that day, except during such time as the debtor is prevented by law, or by the act of the creditor from paying the debt.” CAL. CIV. CODE § 3287(a) (West _).
The test is stated in the disjunction and prejudgment interest is available if damages (1) are certain or (2) are “capable of being made certain by calculation.” Chesapeake Industries, Inc. v. Togova Enterprises, 149 Cal.App.3d 901, 906, 197 Cal.Rptr. 348, 351 (1983). In other words, “where the exact sum of the indebtedness is known [by the debtor] or can be ascertained readily,” interest should be awarded. Conderback, Inc. v. Standard Oil Co., 239 Cal.App.2d 664, 690, 48 Cal.Rptr. 901, 918 (1966). The rationale for this rule is that is it unreasonable to require a defendant to pay prejudgment interest before it is aware of the amount of its obligation or able to compute same. Lewis C. Nelson & Sons v. Clovis Unified School District, 90 Cal.App.4th 64, 69, 108 Cal.Rptr.2d 715, 718 (2001). An amount is deemed certain or capable of being made certain where there is essentially no dispute between the parties as to the basis for computation of the amount, if any is recoverable. Wisper Corp. v. California Commerce Bank, 49 Cal.App.4th 948, 959, 57 Cal.Rptr.2d 141, 147 (1996). The focus is upon “the defendant's knowledge about the amount of the plaintiff's claim.” (Emphasis in original.) Chesapeake Industries, Inc., 149 Cal.App.3d at 907, 197 Cal.Rptr. at 352. See KGM Harvesting Co. v. Fresh Network, 36 Cal.App.4th 376, 391, 42 Cal.Rptr.2d 286, 294 (1995); Stein v. Southern California Edison Co., 7 Cal.App.4th 565, 571, 8 Cal.Rptr.2d 907, 911 (1992). Specifically, as the court in Chesapeake Industries, Inc. stated:
“The fact the plaintiff or some omniscient third party knew or could calculate the amount is not sufficient. The test we glean from prior decisions is: did the defendant actually know the amount owed or from reasonably available information could the defendant have computed that amount. Only if one of those two conditions is met should the court award prejudgment interest.” (Emphasis in original.) Chesapeake Industries, Inc., 149 Cal.App.3d at 907, 197 Cal.Rptr. at 352.
If the defendant does not know the amount of its indebtedness or cannot readily compute it by reference to established or reasonably ascertainable market values or contract amounts, then the plaintiff must supply the defendant with a statement and supporting data so that the defendant can ascertain it. KGM Harvesting Co., 36 Cal.App.4th at 391, 42 Cal.Rptr.2d at 294; Levy-Zentner Co. v. Southern Pacific Transportation Co., 74 Cal.App.3d 762, 804, 142 Cal.Rptr. 1, 28 (1977). Under the above principles, however, if the determination of the amount is complex or is subject to varying results, it may be too uncertain to support prejudgment interest. See West v. Holstrom, 261 Cal.App.2d 89, 97, 67 Cal.Rptr. 831, 836 (1968) (the amount due was certain where it was only a matter of simply multiplying the number of board-feet of lumber hauled by the average weight of lumber per board-foot); Charlton v. Pan American World Airways, 116 Cal.App.2d 550, 554-55, 254 P.2d 128, 130 (1953) (the amount due was certain where the calculation was made under an expense report that listed all items claimed and supporting documentation was attached). But see Schmidt v. Waterford Winery, 177 Cal.App.2d 28, 34-35, 1 Cal.Rptr. 874, 878 (1960) (the calculation of damages requiring the use of a complicated formula and addition and subtractions of certain items was not certain or capable of being made certain within the meaning of the prejudgment interest statute). Likewise, the statute does not authorize interest “where the amount of damage, as opposed to the determination of liability, ‘depends upon a judicial determination based upon conflicting evidence.’ [Citation.]” Children's Hospital & Medical Center v. Bonta, 97 Cal.App.4th 740, 774, 118 Cal.Rptr.2d 629, 654 (2002). In other words, “where the amount of damages cannot be resolved except by verdict or judgment, prejudgment interest is not appropriate.” Children's Hospital & Medical Center, 97 Cal.App.4th at 774, 118 Cal.Rptr.2d at 654-55. A reviewing court undertakes an independent review of whether damages are certain or capable of being made certain. KGM Harvesting Co., 36 Cal.App.4th at 390-91, 42 Cal.Rptr.2d at 294.
Initially, we do not find the “variance” cases, KGM Harvesting Co. or Marine Terminals Corp. v. Paceco, Inc., 145 Cal.App.3d 991, 193 Cal.Rptr. 687 (1983), relied upon by plaintiff, applicable here. First, in both cases, prior to the lawsuit or immediately upon its commencement, the plaintiff provided the defendant with detailed documentation supporting its claim, i.e., invoices for repairs (Marine Terminals Corp., 145 Cal.App.3d at 994, 193 Cal.Rptr. at 688) and a detailed exhibit identifying the vendor substitute items were purchased from, the date of purchase, the amount, and the prices (KGM Harvesting Co., 36 Cal.App.4th at 390, 42 Cal.Rptr.2d at 294). Moreover, in both cases, the plaintiffs had mistakenly included items in the amount allegedly owed by the defendants. Marine Terminals Corp., 145 Cal.App.3d at 996, 193 Cal.Rptr. at 690; KGM Harvesting Co., 36 Cal.App.4th at 390, 42 Cal.Rptr.2d at 294. As such, ascertaining the correct amount was a matter of mere subtraction and could easily have been corrected at the time the plaintiffs had made their demands upon the defendants. Marine Terminals Corp., 145 Cal.App.3d at 997-98, 193 Cal.Rptr. at 691; KGM Harvesting Co., 36 Cal.App.4th at 392, 42 Cal.Rptr.2d at 295. Lastly, in both cases, the defendant did not dispute the amount of damages, only its liability. Marine Terminals Corp., 145 Cal.App.3d at 996, 193 Cal.Rptr. at 690; KGM Harvesting Co., 36 Cal.App.4th at 390, 42 Cal.Rptr.2d at 294. In fact, all of the “variance” cases cited by plaintiff, and disclosed from our independent research, involved minor “error omissions” of information or a miscalculation of costs and most involved cases where the defendant did not dispute the amount of damages. See also Charlton, 116 Cal.App.2d at 554-55, 254 P.2d at 130 (duplication of charges). The instant case does not involve a simple omission or inclusion of charges that only required a ready and certain calculation. Rather, it involved a review of time sheets, allocation of time, reallocation of time, and subsequent calculations. Additionally, defendant here disputed the amount of damages and the basis for calculating them. Thus, we do not find the “variance” cases controlling on the question of certainty of either defendant's knowledge or ability to obtain knowledge.
There is no dispute plaintiff gave defendant a precise amount that it allegedly owed, $3,044,000, on September 3, 1992. If this figure is deemed certain under California law, then the other issues raised by defendant with respect to its ability or inability to calculate or make certain the amount of damages, the reliability of the time sheets, and the alleged disputes it refers to, are irrelevant. Thus, the question here is whether the $3,044,000 figure was certain, i.e., did defendant know the exact amount of its alleged indebtedness. While $3,044,000 is clearly a certain, i.e., definite amount, we do not find it to be certain within the meaning of section 3287(a) of the California Code. We also do not believe that such amount should be binding upon defendant without further supporting documentation as plaintiff could choose any number and, pursuant to its argument, bind defendant to knowledge of the amount even if the amount was clearly wrong.
We find Chesapeake Industries, Inc., instructive on the issue of when a defendant has knowledge of its amount of indebtedness. In Chesapeake Industries, Inc., the plaintiff leased property from the defendant. Chesapeake Industries, Inc., 149 Cal.App.3d at 904, 197 Cal.Rptr. at 350. In the event of a breach of the lease, the defendant could terminate the lease or relet the premises and hold the plaintiff liable for any deficiency. The plaintiff vacated the premises on February 26, 1974, 3 1/212 years before the expiration of its 10-year lease. The defendant filed a lawsuit for possession and damages and was subsequently awarded possession and partial damages. Thereafter, the defendant relet the premises. Upon expiration of the lease term, the plaintiff brought an action for an accounting, seeking recovery of the excess sums that the defendant had received from reletting the premises. Chesapeake Industries, Inc., 149 Cal.App.3d at 904, 197 Cal.Rptr. at 350. After concluding that the lawsuit was an action for an accounting from February 26, 1974 (when the plaintiff vacated the premises) to October 31, 1977 (the date the plaintiff's lease expired), the court entered judgment in favor of the defendant. The trial court also awarded the defendant prejudgment interest. Chesapeake Industries, Inc., 149 Cal.App.3d at 904, 197 Cal.Rptr. at 350.
The plaintiff appealed the issue of prejudgment interest and the court noted that the question before it was whether the plaintiff knew or could have ascertained its liability to the defendant. Chesapeake Industries, Inc., 149 Cal.App.3d at 911, 197 Cal.Rptr. at 354. The court first concluded that the plaintiff could have ascertained its liability to the defendant prior to vacating the premises. However, as to the period between vacating the premises and the expiration of the lease, the court concluded that the plaintiff could not reasonably have known the amount of its indebtedness to the defendant. Chesapeake Industries, Inc., 149 Cal.App.3d at 911, 197 Cal.Rptr. at 354. First, the defendant had sole discretion to relet the premises under terms of its choice. As such, the court found that the defendant “not only had sole control over the premises but also was the only party in possession of the data required to determine the extent of [the plaintiff's] liability under the lease.” Chesapeake Industries, Inc., 149 Cal.App.3d at 911, 197 Cal.Rptr. at 354. Specifically, the court stated that “[t]his is not a case where the debtor [the plaintiff] could keep complete records of the transaction from which it could calculate its indebtedness.” Chesapeake Industries, Inc., 149 Cal.App.3d at 911, 197 Cal.Rptr. at 355. The court next found that the plaintiff also could not have calculated its liability from the date of its breach because “much of the critical data was in the sole possession of [the defendant].” Chesapeake Industries, Inc., 149 Cal.App.3d at 911, 197 Cal.Rptr. at 355. Accordingly, the court concluded that “[the plaintiff] could not have known from a mere reading of [the lease] whether a deficit was incurred during the three-year-eight-month duration of the lease or how much that deficit might be at any particular time.” Chesapeake Industries, Inc., 149 Cal.App.3d at 911, 197 Cal.Rptr. at 355
As in Chesapeake Industries, Inc., plaintiff here was in sole possession of the data required to determine defendant's alleged indebtedness, i.e., time sheets and employees/witnesses to state who worked on what despite the indications made on the time sheets. In the same vein, defendant did not have records to calculate its indebtedness. Moreover, with respect to the information plaintiff supplied defendant during the course of discovery, there is no evidence that defendant was provided with specific and detailed information as to whose hours had to be reallocated, i.e., x hours of a's time was to be moved from EIS to Phase II, x hours of b's time was to be moved from the MRP Planner to Phase II, x hours of c's time was to be moved from Phase II to elsewhere, etc. From the information contained in the record, all we can ascertain is that plaintiff gave general information that time was reallocated. As such, we cannot say that this is a case where defendant knew of the actual amount of its alleged indebtedness to plaintiff or could have ascertained same. Rather, it involved a complex computation.
For the same reasons, we also agree with defendant that the trial court properly relied upon Conderback. Although we acknowledge that the plaintiff there could not even arrive at a consistent figure, we find that the underlying principle of Conderback to be that the determination required a quite complex calculation to arrive at the amount of damages, i.e., reliance on an “open ended” purchase order, application of the plaintiff's pricing formula, negotiations conducted between the parties, and the parties' course of dealing. Conderback, 239 Cal.App.2d at 690, 48 Cal.Rptr. at 919. Based on these factors, the court concluded that it “detect[ed] an inherent complexity in the process.” Conderback, 239 Cal.App.2d at 690, 48 Cal.Rptr. at 919. According to the court, the defendant could not determine the amount owing until it received a statement from the plaintiff with respect to the amount as well as supporting data. However, even with such information, the court concluded that “under all the circumstances, it can[not] be said that the exact sum due [the plaintiff] could have been readily ascertained by [the defendant].” Conderback, 239 Cal.App.2d at 690, 48 Cal.Rptr. at 919.
As in Conderback, defendant here could not ascertain the amount owed until plaintiff provided it with a statement of such amount (which it did) along with supporting documentation. As noted above, even with supporting documentation, i.e., time sheets, the amount defendant owed for Phase II was not readily ascertainable because it was necessary to reallocate the time. Accordingly, we conclude that the trial court did not err in denying mandatory prejudgment interest with respect to Phase II because the amount of plaintiff's damages were not known to defendant, nor were they readily ascertainable.
III. Discretionary Interest on Other Claims
Plaintiff next contends that the trial court erred in failing to award discretionary prejudgment interest on plaintiff's other three claims from the date the lawsuit was filed, June 21, 1993, rather than from June 21, 1997. According to plaintiff, all California cases that have awarded prejudgment interest have done so from the date the suit was filed. Plaintiff maintains that when a delay is caused by a defendant's conduct, as it was here, prejudgment interest is even more appropriate. In this regard, plaintiff maintains that defendant caused delay by: (1) violating court orders to name only its trial witnesses and instead named 57 individuals; (2) contesting its project managers' authority to bind defendant to oral contracts; (3) delaying in complying with discovery; and (4) filing a forum non conveniens motion, which had little likelihood of success. Plaintiff argues that it was required to wait eight years for the money owed to it, during which time defendant had the use of $4.2 million that belonged to plaintiff. Thus, plaintiff contends that to award prejudgment interest for only one-half of the time was error.
Defendant contends that the trial court erred as a matter of law and grossly abused its discretion in awarding prejudgment interest because: (1) the trial court bestowed an unwarranted windfall on plaintiff since plaintiff never lost the use of its money because it had recouped money from its managers to satisfy, in advance, the purported damages caused by defendant's failure to pay; (2) plaintiff asked the jury to consider and, the jury in fact did consider, the time value of money, which is improper; and (3) the trial court arbitrarily focused on defendant's delay in awarding interest because it was plaintiff's unreasonable trial strategies that caused most of the delay, including its insistence upon deposing everyone identified on defendant's witness list, in developing irrelevant collateral evidence (course of dealing), in filing this lawsuit in Illinois, rather than California, and in withholding evidence.
Plaintiff responds that it lost the use of $4.2 million for nine years because, although it was reimbursed $5.3 million of the $10.5 million it sought in damages, it was not reimbursed for $5.2 million, which is greater than the $4.2 million judgment. Plaintiff also responds that it did not ask the jury for interest and the jury did not award interest, as evidenced by the fact the jury awarded exactly the amount calculated on Phase II and the MRP Documentation claims, and only one-half of the amount on the MMSIP I claim. With respect to defendant's argument that plaintiff delayed the proceedings, plaintiff argues that its filing suit in Illinois did not constitute delay, it was defendant who forced plaintiff to conduct extensive discovery on course of dealing to show that defendant's project managers had authority to bind defendant to oral contracts because defendant refused to concede this issue throughout the entire case until just prior to presentation of jury instructions, defendant delayed production of evidence even after the trial court had ordered it to provide such evidence, and it was defendant's conduct that forced plaintiff to depose all of the individuals listed on defendant's witness list because defendant refused to shorten the list and each witness could cause damage to plaintiff's claim that oral contracts were entered into by the parties.
We disagree with plaintiff that the trial court erred in not awarding discretionary prejudgment interest from the date plaintiff filed its lawsuit and conclude that it did not abuse its discretion in awarding interest from June 21, 1997. Section 3287(b) of the California Code provides: a plaintiff “may also recover interest * * * from a date prior to the entry of judgment as the court may, in its discretion, fix, but in no event earlier than the date the action was filed.” (Emphasis added.) CAL. CIV. CODE § 3287(b) (West _). Clearly, pursuant to the specific language of the statute, it is within the trial court's discretion as to the date from which interest should run. It is axiomatic that some significance should be given to every word or phrase in an act. Palos Verdes Faculty Ass'n v. Palos Verdes Peninsula Unified School District, 21 Cal.3d 650, 659, 147 Cal.Rptr. 359, 363, 580 P.2d 1155 (1978). A trial court abuses its discretion when its decision is arbitrary, capricious, unsupported by a rational basis, or entirely lacking in evidentiary support. City of Saratoga v. Hinz, 115 Cal.App.4th 1202, 1221, 9 Cal.Rptr.3d 791, 807 (2004); Low v. Golden Eagle Insurance Co., 110 Cal.App.4th 1532, 1544, 2 Cal.Rptr.3d 761, 770 (2003).
Although plaintiff states no California case has not awarded interest from the date of the filing of a complaint, and cites three cases in support thereof, our research has disclosed one such case. In National Union Fire Insurance Co. of Pittsburgh, Pa. v. California Cotton Credit Corp., 76 F.2d 279 (9th Cir.1935), the plaintiff filed its lawsuit on July 21, 1930. Judgment was ultimately entered on November 18, 1933. Although the plaintiff requested prejudgment interest from August 1, 1930, the court awarded interest from July 29, 1933. In affirming, the Ninth Circuit, in interpreting section 3287 of the California Code, stated, “If the trial court can, within its discretion, allow interest for the whole period, it can also allow interest for only a part of the period.” National Union Fire Insurance Co. of Pittsburgh, Pa., 76 F.2d at 291. The reviewing court concluded that the trial court did not abuse its discretion in awarding interest for only a part of the period.
In the instant case, we find that the trial court's decision was not arbitrary, capricious, unsupported by a rational basis, or entirely lacking in evidentiary support. This is particularly true since at argument on its motion to reconsider the issue of prejudgment interest, plaintiff specifically stated that a court “can do just about anything” and “[i]t can pick any date” and that no California case has reversed a trial court's decision on prejudgment interest for an abuse of discretion. Moreover, in its request for reconsideration of the issue, plaintiff not only sought interest from the date of the filing of its complaint, but also, alternatively, sought interest from March 19, 1995, five years prior to the date of judgment. Clearly, plaintiff was aware that some date, other than the date of the filing of the complaint, would be appropriate and proper. Based on the deferential standard due to the trial court's decision, plaintiff's acknowledgment, and National Union Fire Insurance Co. of Pittsburgh, Pa., we find no basis to conclude that the trial court abused its discretion in awarding prejudgment interest from June 21, 1997.
Likewise, we disagree with defendant that the trial court erred in awarding any interest at all. As the court in A & M Produce Co. v. FMC Corp., 135 Cal.App.3d 473, 186 Cal.Rptr. 114 (1982), acknowledged in considering a prejudgment interest issue, there was very little law on the standards or factors to consider in awarding prejudgment interest or in reviewing a court's decision with respect to same. A & M Produce Co., 135 Cal.App.3d at 476, 186 Cal.Rptr. at 128. This is still the case today, some 22 years later. We do not find it necessary to further comment on this fact, however, because we conclude that the trial court here did not abuse its discretion in this matter. The court originally denied plaintiff's request for discretionary interest, but before doing so, heard extensive argument on the issue and reviewed the fully briefed arguments of both parties. Thereafter, plaintiff asked the court to reconsider its decision, at which time the issues were again fully briefed and argued. In fact, after one hearing, the trial court requested additional briefing on certain issues. The court itself, at this hearing, stated that it had previously carefully, fully, and at length considered the issues raised by both parties, the exact same issues raised here on appeal, but would do so again. After re-reviewing the issues, the court awarded discretionary interest in part pursuant to the statute and in the interests of justice and equity. Clearly, the court's decision was not arbitrary, capricious, or unsupported by a rational basis. Moreover, after a thorough review of the record, we cannot say its decision was entirely lacking in evidentiary support. Accordingly, we conclude that the trial court did not abuse its discretion in awarding discretionary interest to plaintiff.
I. Course of Dealing Evidence
Defendant contends that the trial court erred in allowing plaintiff to introduce evidence of course of dealing, between not only defendant and plaintiff, but between defendant and other vendors, including, inter alia, Zmijewski's exhibits and Babbin's testimony. Defendant maintains that such evidence was irrelevant and confused the jury. Specifically, defendant argues that the trial court committed plain error in admitting such evidence because: (1) it was not relevant to prove plaintiff's alleged oral contracts since one cannot use course of dealing to prove the existence of a contract; (2) it violated the rule prohibiting admission of evidence of other similar acts to prove conformity therewith on a particular occasion, i.e., simply because defendant allowed plaintiff, and others, to perform work in the past prior to issuing a written contract did not prove defendant entered into an oral contract with plaintiff here or that defendant requested plaintiff to perform certain work; and (3) it was not relevant to interpret any term of the alleged oral contracts since course of dealing with respect to one contract is never admissible in a breach of contract action with respect to a different contract. Defendant further argues that the trial court grossly abused its discretion in not recognizing the delay, confusion, and prejudice resulting from the admission of the irrelevant and cumulative course of dealing evidence, which overwhelmingly outweighed any probative value.
Plaintiff contends that the trial court properly admitted evidence of defendant's course of dealing because such evidence was relevant to: (1) show the actual and apparent authority of defendant's project managers to bind defendant to oral agreements; (2) interpret the oral contracts; and (3) establish the essential elements of the oral contracts. Plaintiff also argues that it did not use such evidence for improper purposes, i.e., to show that defendant acted here in conformity with how it had acted in the past or to create a contract.
Initially, we observe that defendant has failed to set forth the standard of review as required by Rule 341(e)(3). 188 Ill.2d R. 341(e). The admission of evidence, including opinion or expert testimony, is within the trial court's discretion and its decision will not be disturbed on appeal absent an abuse of that discretion. Felber v. London, 346 Ill.App.3d 188, 189, 281 Ill.Dec. 482, 803 N.E.2d 1103 (2004). An abuse of discretion is found only where no reasonable person would take the view adopted by the trial court. Felber, 346 Ill.App.3d at 189, 281 Ill.Dec. 482, 803 N.E.2d 1103. Defendant's challenge here relates to the admission of course of dealing evidence and, therefore, our standard of review is based on an abuse of discretion.
Custom and usage, and course of dealing, are aids to ascertaining the intent of parties when a contract was made. Gray v. Mundelein College, 296 Ill.App.3d 795, 805, 231 Ill.Dec. 260, 695 N.E.2d 1379 (1998). Specifically, a previous course of dealing “may give meaning to or qualify an agreement.” H & H Press, Inc. v. Axelrod 265 Ill.App.3d 670, 677, 202 Ill.Dec. 687, 638 N.E.2d 333 (1994). More importantly, a “prior course of dealing between the parties may be considered in determining the terms of an oral contract.” H & H Press, Inc., 265 Ill.App.3d at 677, 202 Ill.Dec. 687, 638 N.E.2d 333. A custom or usage becomes binding upon parties if they have uniformly acquiesced in the practice and applied it for such a period of time so as to indicate that the parties contemplated the custom or practice in their contract formation. Ledbetter v. Crudup, 114 Ill.App.3d 401, 403, 70 Ill.Dec. 391, 449 N.E.2d 265 (1983). Custom and usage should be established by the testimony of several witnesses. Ledbetter, 114 Ill.App.3d at 403, 70 Ill.Dec. 391, 449 N.E.2d 265. Conversely, custom and practice “may be established by opinion testimony of a person with personal knowledge or by the introduction of specific instances of conduct sufficient in number to support a finding of routine practice.” Sanders v. City of Chicago, 306 Ill.App.3d 356, 366, 239 Ill.Dec. 628, 714 N.E.2d 547 (1999).
In Beatrice Foods Co. v. Gallagher, 47 Ill.App.2d 9, 197 N.E.2d 274 (1964), the court held that the trial court did not err in admitting testimony into evidence, regarding a prior agreement between the parties for the supply of milk from April to June 1958, in the case before it for fulfillment of a similar agreement for the period from July 1958 to March 1959. Beatrice Foods Co., 47 Ill.App.2d at 24, 197 N.E.2d 274. First, the court found that the other agreement was not too remote in time. Beatrice Foods Co., 47 Ill.App.2d at 24, 197 N.E.2d 274. Further, the court found that the prior agreement related
“analogously to the same general subject and tended to indicate a general course of dealings between the plaintiff and defendant as to bids to supply these products * * * in a certain manner over a consecutive closely related period of some months.” Beatrice Foods Co., 47 Ill.App.2d at 24, 197 N.E.2d 274.
The Beatrice Foods Co. court concluded:
“Whether the facts and circumstances considered in their entirety, with all the other evidence, indicated the parties had the same or a different agreement for July, 1958-March, 1959, or any part thereof, as compared with April-June, 1958, was for the jury to say. * * * [The evidence] was not incompetent or irrelevant. The weight and significance thereof, if any, was for the jury.” Beatrice Foods Co., 47 Ill.App.2d at 24-25, 197 N.E.2d 274.
In Edwin C. Price Co. v. Ruggles & Rademaker Salt Co., 283 Ill.App. 447 (1936), the plaintiff, a brokerage company, sued the defendant, a salt producer and seller, for breach of oral contract, claiming it was entitled to commissions on the procurement of two contracts for the defendant. Edwin C. Price Co., 283 Ill.App. at 447. The defendant argued that the plaintiff was only entitled to commissions based upon the quantity of salt sold (quantity-based commission). Edwin C. Price Co., 283 Ill.App. at 448. The question before the trial court was whether the defendant orally agreed to pay the plaintiff commissions for procurement of the contracts, as well as for quantity-based commissions. Edwin C. Price Co., 283 Ill.App. at 448. The defendant attempted to show that “under prior dealings between the parties, of a similar character to the transaction here involved, defendant had paid plaintiff commissions as it had done under the two contracts in question [i.e., quantity-based only].” Edwin C. Price Co., 283 Ill.App. at 451. The trial court excluded such evidence and, thereafter, the appellate court found that such exclusion was erroneous. Edwin C. Price Co., 283 Ill.App. at 451.
Defendant relies upon Dayan v. McDonald's Corp., 125 Ill.App.3d 972, 81 Ill.Dec. 156, 466 N.E.2d 958 (1984), in support of its contention that course of dealing under one contract “is never admissible” in a breach of contract action regarding an “entirely different contract,” which defendant maintains is the case here, i.e., plaintiff utilized course of dealing evidence with respect to other contracts that were entirely different from the contracts at issue. Dayan does not aid defendant. First, Dayan did not hold that course of dealing under one contract may never be used to interpret another contract. Rather, the court stated that “[e]vidence of a course of dealings under a contract which does not contain the same provisions as the contract in issue is generally held to be irrelevant and inadmissible.” (Emphasis added.) Dayan, 125 Ill.App.3d at 985, 81 Ill.Dec. 156, 466 N.E.2d 958. Second, in Dayan, an action to enjoin termination of the plaintiff's licensing agreement with the defendant based on his repeated and continuous substandard quality, service, and cleanliness (QSC) problems, the plaintiff attempted to show that the defendant had a course of dealing of accepting substandard conditions. Dayan, 125 Ill.App.3d at 981, 81 Ill.Dec. 156, 466 N.E.2d 958. In this regard, the plaintiff offered into evidence documents recording the conditions of other McDonald's restaurants. Dayan, 125 Ill.App.3d at 981-82, 81 Ill.Dec. 156, 466 N.E.2d 958. The trial court denied the plaintiff's request to admit the documents into evidence, finding that they were neither relevant nor material because the plaintiff's licensing agreement with the defendant was unique and substantially different regarding the contractual duties of the parties and the defendant's obligations from the standard licensing agreement that operators entered into with the defendant, under which type of agreements the course of dealing evidence fell. Dayan, 125 Ill.App.3d at 982, 81 Ill.Dec. 156, 466 N.E.2d 958. The appellate court agreed, finding that “the service provisions of the contracts were clearly different with a resulting difference in QSC enforcement and termination procedures.” Dayan, 125 Ill.App.3d at 985, 81 Ill.Dec. 156, 466 N.E.2d 958. As such, what the defendant did or allowed under the standard licensing agreements with respect to substandard QSC conditions was irrelevant to the plaintiff's licensing agreements and the defendant's conduct thereunder. Accordingly, the Dayan court concluded that the trial court properly rejected the plaintiff's evidence.
Clearly, this is not the case here. We do not have two written contracts that have diametrically opposite obligations and duties. Here, we have alleged oral contracts and, other than the specific nature of the project, i.e., EIS, MRP Documentation, etc., the contracts would appear to contain similar obligations and duties of the parties. Moreover, as detailed above, course of dealing in connection with one contract or agreement may be admissible with respect to another later agreement. See Beatrice Foods Co., 47 Ill.App.2d at 24, 197 N.E.2d 274; Edwin C. Price Co., 283 Ill.App. at 451. Accordingly, we find defendant's argument, that course of dealing evidence with respect to one contract can never be used in connection with another contract, unpersuasive.
Defendant next relies on Herget National Bank of Pekin v. Johnson, 21 Ill.App.3d 1024, 316 N.E.2d 191 (1974), in support of its contention that plaintiff cannot use evidence of similar acts to prove conformity therewith on a particular occasion, which, according to defendant, was plaintiff's purpose for presenting course of dealing evidence here. Although Johnson does so state, defendant ignores the balance of the rule stated by that court, i.e., “[t]he general rule is that evidence of conduct of a person on another occasion or occasions is irrelevant on the question of his conduct on the occasion in issue, except to show habit, state of mind, knowledge or intent and the like.” (Emphasis added.) Johnson, 21 Ill.App.3d at 1026, 316 N.E.2d 191. Here, course of dealing evidence was relevant and offered to show not only defendant's “habit,” but also knowledge, intent, and state of mind. Clearly, such use falls within the ambit of the rule. Additionally, Johnson was a personal injury action in which the defendant attempted to show the plaintiff was negligent because, on a prior occasion, just as in the case before the Johnson court, the plaintiff had “loomed” out in front of a car without lights on his bicycle. Defendant has not cited any authority that the rulings or law pertaining to a personal injury action, as set forth in Johnson, are applicable to the breach of contract action in the case at bar.
Lastly, defendant argues that plaintiff used course of dealing evidence to establish the existence of oral contracts. We do not agree. Rather, we agree with plaintiff that the record discloses that plaintiff offered course of dealing evidence to establish that defendant's project managers had authority to orally instruct plaintiff, i.e., that the project managers had authority to enter into contracts. Clearly, defendant challenged this authority and, extensively so, not only before trial, but during trial. Prior to trial, plaintiff attempted to get an agreement from defendant on the issue or a stipulation, but defendant refused. At trial, defendant offered the testimony of Anderson who emphatically stated that there was no such thing as oral authorizations and that everything had written documentation. Similarly, defendant offered Lona-Arvizu's testimony that only the buyer had authority to authorize work and that Gieser and Holley had no authority to authorize work without her. Thus, to rebut defendant's challenge, plaintiff necessarily had to present course of dealing testimony.
We also agree with plaintiff that the course of dealing evidence was offered to establish the terms of the contract, i.e., that it was a time and materials contract as virtually every other contract plaintiff had entered into with defendant. Under the above principles, we find that such a purpose was proper.
Because defendant placed plaintiff in the position of having to present course of dealing evidence, we do not agree with defendant that it suffered prejudice. Further, we do not find that the evidence was confusing or cumulative. Accordingly, we conclude that the trial court did not abuse its discretion in admitting course of dealing evidence.
II. Parol Evidence Rule
Because defendant raises several challenges based on the parol evidence rule, we set forth the general rules here. The parol evidence rule establishes that an integrated written agreement supercedes any prior or contemporaneous promise at variance with the terms of that agreement. Casa Herrera, Inc. v. Beydoun, 32 Cal.4th 336, 346, 9 Cal.Rptr.3d 97, 104, 83 P.3d 497 (2004). California's parol evidence rule, which is a rule of substantive law (Casa Herrera, Inc., 32 Cal.4th at 343-44, 9 Cal.Rptr.3d at 102-03, 83 P.3d 497), is embodied in section 1856 of the Code of Civil Procedure and provides, in pertinent part:
“(a) Terms set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement.
(b) The terms set forth in a writing described in subdivision (a) may be explained or supplemented by evidence of consistent additional terms unless the writing is intended also as a complete and exclusive statement of the terms of the agreement.
(c) The terms set forth in a writing described in subdivision (a) may be explained or supplemented by course of dealing or usage of trade or by course of performance.” CAL. CIV. CODE § 1856(a) to (c) (West _)
The parol evidence rule applies only when the parties have agreed that the written contract is an “integration”-“a complete and final embodiment” of the terms of their agreement. Masterson v. Sine, 68 Cal.2d 222, 225, 65 Cal.Rptr. 545, 548, 436 P.2d 561 (1968). “An integration may be partial rather than complete: The parties may intend that a writing finally and completely express only certain terms of their agreement rather than the agreement in its entirety.” Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc., 109 Cal.App.4th 944, 953, 135 Cal.Rptr.2d 505, 512 (2003). Under paragraph (d) of section 1856, “[t]he court shall determine whether the writing is intended by the parties as a final expression of their agreement with respect to such terms as are included therein and whether the writing is intended also as a complete and exclusive statement of the terms of the agreement.” CAL. CIV. CODE § 1856(d) (West _). Specifically,
“[i]n considering whether a writing is integrated, the court must consider the writing itself, including whether the written agreement appears to be complete on its face; whether the agreement contains an integration clause; whether the alleged parol understanding on the subject matter at issue might naturally be made as a separate agreement; and the circumstances at the time of the writing.” Founding Members of the Newport Beach Country Club, 109 Cal.App.4th at 953-54, 135 Cal.Rptr.2d at 512.
Additionally, in determining the intent of the parties as to whether the agreement is integrated, “the court must attempt to place itself in the same situation in which the parties found themselves at the time of contracting.” Haggard v. Kimberly Quality Care, Inc., 39 Cal.App.4th 508, 518, 46 Cal.Rptr.2d 16, 22 (1995). An integration clause in a written contract is but one factor the trial court should consider. Sicor, Ltd. v. Cetus Corp. 51 F.3d 848, 859 (9th Cir.1995). “ ‘[O]nly after the court finds the agreement not integrated may parol evidence be admitted to amplify its terms.’ [Citation.]” Heller v. Pillsbury Madison & Sutro, 50 Cal.App.4th 1367, 1381-82, 58 Cal.Rptr.2d 336, 344 (1996). Section 1856 further provides, “[w]here the validity of the agreement is the fact in dispute, this section does not exclude evidence relevant to that issue.” CAL. CIV. CODE § 1856 (West _).
“Whether a contract is integrated is a question of law when the evidence of integration is not in dispute.” Founding Members of the Newport Beach Country Club, 109 Cal.App.4th at 954, 135 Cal.Rptr.2d at 512. This only occurs where “the trial court's interpretation of the agreement d[oes] not turn on the credibility of extrinsic evidence and d[oes] not require a resolution of a conflict in that evidence.” Haggard, 39 Cal.App.4th at 517, 46 Cal.Rptr.2d at 21. Conversely, when the ruling involves a question of fact, we review the trial court's determination based on “the same deference on appeal as any other ruling of the court on an issue of fact,” i.e., under the “substantial evidence” test, where “we review the record in the light most favorable to respondents, we do not weigh the evidence, and we indulge all intendments and reasonable inferences which favor sustaining the trier of fact's findings.” Heller, 50 Cal.App.4th at 1382, 58 Cal.Rptr.2d at 345.
III. Entitlement to JNOV
Initially, defendant maintains that our standard of review when the trial court's denies a motion for JNOV is de novo. Plaintiff contends that the standard of review is that if there is any evidence, taken in the light most favorable to plaintiff, to support plaintiff's claim, a JNOV must be denied. According to plaintiff, all it need demonstrate to uphold the verdicts is some evidence to support the jury's award.
A motion for a JNOV presents a question of law which we review de novo. Schmid v. Fairmont Hotel Company-Chicago, 345 Ill.App.3d 475, 483, 280 Ill.Dec. 936, 803 N.E.2d 166 (2003). “If the evidence, viewed in a light most favorable to the non-moving party, so overwhelmingly favors the moving party that no contrary verdict could stand, a judgment notwithstanding the verdict should be granted.” Schmid, 345 Ill.App.3d at 483, 280 Ill.Dec. 936, 803 N.E.2d 166. “In ruling on a motion for a judgment notwithstanding the verdict, a court does not weigh the evidence, nor is it concerned with the credibility of the witnesses; rather, it may only consider the evidence and any inferences therefrom, in the light most favorable to the party resisting the motion.” Board of Trustees of Community College Dist. No. 508, County of Cook v. Coopers & Lybrand, 208 Ill.2d 259, 274, 281 Ill.Dec. 56, 803 N.E.2d 460 (2003). The trial court may not grant a JNOV “where the assessment of credibility of the witnesses or the determination regarding conflicting evidence is decisive to the outcome.” Bulger v. Chicago Transit Authority, 345 Ill.App.3d 103, 123, 280 Ill.Dec. 182, 801 N.E.2d 1127 (2003). “If reasonable minds can come to different conclusions based on the facts presented, then judgment notwithstanding the verdict is not appropriate.” Commerce Bank v. Youth Services of Mid-Illinois, Inc., 333 Ill.App.3d 150, 154, 266 Ill.Dec. 735, 775 N.E.2d 297 (2002).
Although defendant does not state whether California or Illinois law governs resolution of this issue and, in fact, cites to both California and Illinois cases, we believe that the formation of a contract is a matter of substantive law and, therefore, California law applies. Binder v. Aetna Life Insurance Co., 75 Cal.App.4th 832, 853, 89 Cal.Rptr.2d 540, 553 (1999) (the interpretation of a contract is to be “according to the law and usage of the place where [the contract] [wa]s to be performed”). “To form a contract, a manifestation of mutual assent is necessary.” Binder, 75 Cal.App.4th at 850, 89 Cal.Rptr.2d at 551. “A manifestation of assent may be found even though the moment of contract formation cannot be identified.” Binder, 75 Cal.App.4th at 851, 89 Cal.Rptr.2d at 552. Mutual assent can be manifested by written or spoken words, or by conduct of the parties. Binder, 75 Cal.App.4th at 850, 89 Cal.Rptr.2d at 551. Specifically, the “ ‘intention to make a promise may be manifested in language or by implication from other circumstances, including course of dealing or usage of trade or course of performance.’ [Citation.]” Binder, 75 Cal.App.4th at 850, 89 Cal.Rptr.2d at 551. More specifically, as the Binder court stated,
“ ‘the actions of the parties may show conclusively that they have intended to conclude a binding agreement, even though one or more terms are missing or are left to be agreed upon. In such cases courts endeavor, if possible, to attach a sufficiently definite meaning to the bargain. * * * Terms may be supplied by factual implication.’ [Citation.]” Binder, 75 Cal.App.4th at 851, 89 Cal.Rptr.2d at 552.
In other words, “courts can rely on usage and custom to imply a term where the contract itself is silent in that regard.” Southern Pacific Transportation Co. v. Santa Fe Pacific Pipelines, Inc., 74 Cal.App.4th 1232, 1240, 88 Cal.Rptr.2d 777, 783 (1999). When the evidence conflicts, the existence and terms of an oral contract are factual questions to be determined in the first instance by the trier of fact. Treadwell v. Nickel, 194 Cal. 243, 261-62, 228 P. 25, 32 (1924). We review a factual determination such as this only to determine whether there is any substantial evidence, contradicted or uncontradicted, that supports the determination. Western States Petroleum Ass'n v. Superior Court, 9 Cal.4th 559, 571, 38 Cal.Rptr.2d 139, 144, 888 P.2d 1268 (1995). “ ‘When two or more inferences can reasonably be deduced from the facts, a reviewing court is without power to substitute its deductions for those of the trial court.’ [Citation.]” Scott v. Common Council, 44 Cal.App.4th 684, 689, 52 Cal.Rptr.2d 161, 164 (1996).
A. MMSIP II Claim
Defendant first contends that the trial court erred in denying its motion for a JNOV on plaintiff's MMSIP II claim because: (1) plaintiff failed to present any evidence of an oral contract, much less evidence of the essential terms of any such contract; (2) plaintiff's claim is barred by the parol evidence rule; and (3) plaintiff knew by March 1992 that defendant had cancelled or deferred construction of the MMSIP II modules.
1. Evidence of Oral Contract
Defendant maintains that plaintiff failed to establish the existence of an oral contract because it presented no evidence that Gieser asked plaintiff to build the modules, no evidence of any specific representation by Gieser that defendant would pay plaintiff, and no evidence that defendant mutually agreed to the essential terms of an oral contract. According to defendant, although plaintiff attempted to show that Gieser and Thomas entered into an oral contract to build the three modules, the only testimony plaintiff offered was from Thomas, who never said there was any agreement between the two. In this regard, defendant states that Gieser repeatedly testified he was told by Thomas that the work was not being performed for defendant, but that plaintiff hoped to negotiate a deal to take the product to the commercial marketplace for which plaintiff would pay defendant royalties. Defendant further argues that, of all the documents routinely created in the parties' dealings with each other, none were never created in connection with the modules. Defendant also maintains that there was no evidence of an offer, acceptance or of any essential terms of the oral contract.
Plaintiff contends that it presented sufficient evidence, including course of dealing, to support of its MMSIP II claim. According to plaintiff, the parties' course of dealing provided the context for Gieser's request that plaintiff continue performing work on Phase II, in particular, building out the system. Plaintiff maintains that it presented testimony from Thomas, who stated that Gieser approved development of the modules off-site. According to plaintiff, when Gieser advised Thomas to proceed on the project, the only thing left to do was build out the modules. In addition to Thomas' testimony, plaintiff maintains that Bremer and Kaprelian's testimony demonstrated that Gieser's conduct thereafter was consistent with authorizing the build out. Plaintiff argues that all of the issues raised by defendant relate to credibility, which was for the jury to decide, which it did. Plaintiff also contends that it established all of the essential elements of an oral contract through direct testimony, existing written documents, and the parties' course of dealing. According to plaintiff, the build out was a continuation of the MMSIP II purchase order, which provided the type of contract (time and materials) and the hourly rates and expenses and, thus, supplied the essential terms of the oral contract. Alternatively, plaintiff argues that if we view the oral contract as a new contract, then the essential terms were supplied by course of dealing. In this regard, plaintiff maintains that it was always paid by the hour and the rate of pay never changed. In addition, all work it had ever performed for defendant, with the exception of one project, was performed on a time and materials basis. Thus, plaintiff maintains that it presented evidence of an agreement between the parties, as well as the essential terms of the agreement.
We find that the trial court did not err in denying defendant's motion for a JNOV. First and foremost, assessment of credibility and a determination with respect to conflicting evidence was certainly decisive to the outcome here. Thomas, Kaprelian, and Bremer testified that Gieser verbally authorized the build out. Gieser, Holley, and Lona-Arvizu testified that defendant did not authorize the build out. On this basis alone, a JNOV would not have been proper.
In any event, we find that the jury had sufficient substantial evidence, contradicted and uncontradicted, to conclude that the parties mutually assented and, therefore, formed an oral contract to build out the modules. We thus conclude that the evidence did not so overwhelmingly favor defendant to warrant a JNOV in its favor. First, there was evidence of spoken language that supports such a conclusion. Specifically, Kaprelian testified that Thomas informed him that Gieser instructed plaintiff to go ahead and build out the modules. Kaprelian also testified that Gieser had asked him whether plaintiff was building out the modules and he responded in the affirmative. Bremer testified that plaintiff had verbal authorization to build out the modules from Gieser. Thomas, too, testified that Gieser told him to go ahead with the project and build out the modules. Although Gieser, Holley, and Lona-Arvizu denied so instructing plaintiff, there was ample basis for the jury to discredit this testimony. Specifically, Gieser and Holley were impeached on numerous occasions regarding the build out of the modules and Holley's testimony, as is evident even from a cold reading of the record, was less than forthright. Although defendant makes much of the fact that plaintiff's witnesses cannot pinpoint the date when the agreement was made regarding the build out, as set forth above, mutual assent may be found even though the moment of formation cannot be identified.
In addition to defendant's employees' spoken words, the parties' conduct and actions support the jury's conclusion that defendant authorized the build out. Specifically, the evidence demonstrated that Gieser and Holley were given oral updates on the build out in the months after February 1992. In addition, there was testimony that when Gieser authorized the build out, he stated he was aggressively pursuing funding for it. Similarly, Bremer testified that he had a conversation with defendant's buyer, who stated that funding for the entire project had been approved. Also offered into evidence was Marcinko's April 12 memorandum to Hall with respect to his efforts to secure additional funding for the continued work on Phase II and the fact that the efforts were in the signature cycle. There also was evidence that Gieser and Thomas had a meeting on March 14. Although the discussions during this meeting are disputed-Gieser stated that Thomas indicated plaintiff was building out the modules on its own and was having discussions with NISC and Thomas stated he went over the work performed to date with Gieser as well as the costs of same-the jury could have given credence to Thomas' testimony. Additionally, Thomas met with Holley on two occasions, one of which was in late April, during which, according to Thomas, they discussed the build out along with Gieser's five-year plan to take the project company-wide. There was also evidence of meetings in May 1992 between plaintiff and defendant's employees, including Weinberg. At these meetings, plaintiff repeated its request that paperwork be expedited so that it could invoice for its work. Lastly, the record shows that work was moved to plaintiff's Los Angeles office in April 1992 and, shortly thereafter, Williard, a manager of the same level as Holley, visited plaintiff's office and participated in a walk through of the three modules plaintiff had built.
Also supportive of the jury's verdict was evidence of circumstances from which implications can be drawn that an agreement existed regarding the build out. Particularly, there was extensive evidence, although Gieser denied same, that he had a poor relationship with NISC and that that was the reason defendant (or he) had attempted to keep the projects in a low profile and done off-site. Similarly, evidence was presented as to why plaintiff did not invoice defendant for its work, i.e., defendant's Accounts Payable Department had “clamped down” and plaintiff was advised not to submit invoices.
Clearly, the jury had substantial evidence, both contradicted and uncontradicted, based on the specific language of the parties, their conduct, and other surrounding circumstances, to find that defendant authorized plaintiff to build out the modules. Thus, the evidence supported the conclusion that the parties entered into an oral agreement.
We also agree with plaintiff that the parties' course of dealing could be used, by the jury, to determine the terms of the oral agreement, including its type, the rate of pay, etc. Because the uncontradicted evidence established that every contract between plaintiff and defendant, with the exception of one, was a time and materials contract, the jury certainly had evidence to determine that the oral agreement was also a time and materials agreement. In addition, plaintiff argues, and defendant does not contradict plaintiff's argument, that plaintiff's rates of pay never changed. Accordingly, the jury could have utilized the rates of pay set forth in the March 26, 1992, purchase order as those for the oral agreement at issue. We therefore find that there was sufficient evidence from which the jury could have determined that the parties' oral agreement regarding the build out was sufficiently definite to form a valid and binding contract between them.
We briefly note that defendant relies on two cases, Reese v. Forsythe Mergers Group, 288 Ill.App.3d 972, 224 Ill.Dec. 647, 682 N.E.2d 208 (1997), and Mannion v. Stallings & Co., 204 Ill.App.3d 179, 149 Ill.Dec. 438, 561 N.E.2d 1134 (1990), in support of its argument that the evidence presented by plaintiff was too “insufficient and vague” to allow the issue of whether a contract was formed to go to the jury. However, these cases are inapplicable because they were decided based upon Illinois law and, as we have determined above, California's substantive law applies.
Based on the foregoing, we conclude that plaintiff presented substantial evidence from which the jury could have determined that the parties entered into an oral contract for the build out of the modules. Accordingly, defendant's argument, that it was entitled to a JNOV on plaintiff's MMSIP II claim because plaintiff failed to present evidence of an oral contract, fails.
2. Parol Evidence Rule
Defendant next maintains that even if the parties entered into an oral contract in January or February 1992, subsequent to this, on March 26, 1992, they entered into a written contract with respect to MMSIP II, which did not authorize the build out of the modules and, therefore, plaintiff's efforts to seek additional recovery pursuant to the alleged oral contract were barred by the parol evidence rule. According to defendant, because the subsequent written contract superseded the alleged oral agreement, defendant was entitled to a JNOV.
Plaintiff contends that its claim was not barred by the parol evidence rule because, under California law, the court is required to look at the whole of the parties' dealings to ascertain whether defendant's purchase order was intended to be a complete and exclusive statement of the entire terms of the parties' agreement. If the court determines that it was not, plaintiff argues that course of dealing, inter alia, may be used to supplement the contract. Here, the trial court concluded, correctly according to plaintiff, that the evidence overwhelmingly showed, with respect to defendant's dealings with plaintiff, as well as all other vendors, that oral agreements were necessary to add to defendant's written purchase orders and that the parties themselves did not intend the purchase order to be an integrated document even though it contained an integration clause that would preclude further oral agreements. In this regard, plaintiff argues that all of the relevant factors with respect to integration demonstrate that defendant's purchase order was not intended to be complete and exclusive and that separate oral agreements would naturally be made between the parties. Accordingly, plaintiff maintains that because the evidence clearly demonstrated that the parties did not intend that the purchase agreement be a fully integrated document, its claim is not barred by the parol evidence rule.
Although we acknowledge the contracts between the parties, particularly the March 26, 1992, purchase order, contain an integration clause, we do not believe this is dispositive. Rather, the evidence, as detailed extensively above, clearly demonstrates that the parties' practice was to enter into oral agreements which were later, sometimes more than one year, memorialized in a purchase or change order. When the written contract was issued, on most occasions, the documents were not up-to-date in the sense that they did not include terms with respect to all of the projects plaintiff was then currently working on for defendant. The dealings between the parties certainly showed that projects were added to existing purchase orders after the fact, i.e., the project was already in progress or done. The inescapable conclusion from these dealings is that the parties did not intend any particular contract, including the March 26, 1992, purchase order to be a full and complete embodiment of the entire terms of their agreement. Rather, the practice of the parties and nature of the work performed leads to a reasonable inference that additional oral agreements would naturally be made separately. The ordinary course of dealing is evidenced, as plaintiff argues, by the March 26, 1992, purchase order itself and the attendant circumstances. At the time of negotiations on this purchase order, February 14, 1992, the requirements had been completed for at least four to five months, and the prototypes were nearly completed, if some were not already completed. Moreover, at the time of the negotiations, Weinberg had not made any decision, whatever the nature of that decision was, with respect to the future of the MMSIP II project. Similarly, when the purchase order was issued on March 26, 1992, both the requirements and prototypes had been completed. All defendant was accomplishing in issuing the March 26 purchase order was to “catch up” in memorializing plaintiff's past work, as had been the case numerous times in the past. Moreover, other circumstances at the time of the March 26 purchase order lead to the inference that the parties did not intend it to be a complete embodiment of all of the terms of their agreement. Specifically, defendant (and/or Gieser) was attempting to keep the build out under low profile because of its problems with NISC as well as cutbacks. Similarly, defendant was behind in its target dates for a contract with respect to MMSIP II. Additionally, there was evidence that, in April, Marcinko indicated that he was securing additional funding for the continued work on MMSIP II, and that those efforts were in the signature cycle.
Based on the foregoing evidence, we find that there was substantial evidence from which the trial court could conclude that the parties did not intend the March 26 purchase order to be fully and completed integrated as to the parties' agreement in its entirety with respect to MMSIP II. Rather, the March 26 purchase order was a final expression of the terms included therein, i.e., the requirements and prototypes only. We also note that the alleged parol understanding is not at variance with, nor does it contradict, the March 26, 1992, purchase order terms. Rather, the evidence merely supplements the terms contained in the purchase order. Accordingly, we find that plaintiff's MMSIP II claim was not barred by the parol evidence rule and defendant was not entitled to a JNOV on this basis.
3. Plaintiff's Knowledge of Defendant's Cancellation
Lastly, defendant contends that the trial court, at the least, should have denied plaintiff damages subsequent to March 1, 1992, because plaintiff was advised shortly after defendant made the decision to postpone the MMSIP II project on February 28, 1992, of said decision. According to defendant, Bremer admitted that he had been told by defendant in January or February 1992 that defendant was cancelling or deferring further development of the modules. Gieser and other employees of defendant confirmed this situation.
Plaintiff contends that the jury could have concluded that defendant did not cancel or defer the work in early 1992. Plaintiff notes that defendant offered evidence to show that, at some point, defendant desired to defer the build out, but plaintiff presented evidence, however, to show that during the same period of time Gieser requested, encouraged, followed, commented on, and knew about the continuing work. Plaintiff thus argues that because the evidence was conflicting, it was for the jury to resolve the conflict.
We find defendant's argument unpersuasive. First, defendant does not even state positively what Weinberg's decision with respect to Phase II was-defendant uses the terms “defer,” “cancel,” and “postpone.” Clearly, a decision cannot be all three at the same time. We also note that, according to defendant's own witnesses, the nature of Weinberg's decision was ambiguous. Gieser testified that on February 28, Weinberg “deferred or cancelled” the project. Again, the decision cannot be both. In addition, defendant relies on Bremer's “admission” that in January or February 1992, he was advised that defendant wished to defer the program. However, Weinberg's alleged decision was not made until February 28. Most importantly, resolution of this issue involved a credibility question that was for the jury to decide, i.e., whether plaintiff had been told about defendant's decision or not. Gieser testified that he told Bremer, but Bremer denied this and gave six detailed reasons why he knew he had not been told of such a decision. Holley's testimony was also conflicting. Initially, she testified that she did not discuss the decision with plaintiff. Later, she testified that she did discuss the decision with Bremer and Kaprelian. Clearly, resolution of this issue was for the jury and defendant therefore was not entitled to a JNOV based upon its “cancellation” argument.
Based on all of the above reasons, we conclude that the trial court did not err in denying defendant's motion for a JNOV on plaintiff's MMSIP II claim.
B. EIS Claim
Defendant next contends that it was entitled to a JNOV on plaintiff's EIS claim because it was barred by the parol evidence rule. According to defendant, after the parties entered into the oral contract alleged by plaintiff, the parties entered into a written contract on March 26, 1992, that provided for only certain EIS enhancements and did not include those for which plaintiff sought payment.
Plaintiff contends that its EIS claim was not barred by the parol evidence rule because the March 26 purchase order was not integrated, the oral agreement did not contradict the purchase order, and the parties' course of dealing demonstrated that separate oral contracts were natural.
Based upon the same reasons underlying our rejection of defendant's parol evidence argument regarding plaintiff's MMSIP II claim, we find that defendant was not entitled to a JNOV on plaintiff's EIS claim since the March 26, 1992, purchase order was not integrated as to the parties' agreement and, therefore, the parol evidence rule did not bar plaintiff's EIS claim.
C. MRP Documentation Claim
Defendant next contends that it was entitled to a JNOV on plaintiff's MRP Documentation claim because, even assuming there was an oral contract, plaintiff's claim was barred by the statute of limitations and the parol evidence rule. Defendant also contends there was no evidence that it agreed to pay plaintiff $100,000 for the documentation.
1. Statute of Limitations
Defendant maintains that the California two-year statute of limitations, which plaintiff concedes is applicable here, barred plaintiff's MRP Documentation claim. Specifically, defendant argues that plaintiff knew as of May 12, 1991, that defendant would not pay for the documentation. According to defendant, since plaintiff did not file its lawsuit until June 21, 1993, plaintiff's claim was barred by the statute of limitations.
Plaintiff contends that the statute of limitations did not bar its claim because the jury could reasonably have concluded that defendant had not rejected plaintiff's request for payment until some time after June 21, 1991. In this regard, plaintiff argues that if defendant had rejected payment prior to this time, there would have been no reason for Gieser to seek input from defendant's employees in August 1991 as to the usefulness of the documentation. In addition, plaintiff maintains that there would have been no reason for Gieser to copy a July 1991 memorandum to Bremer updating defendant's management on the status of the documentation. According to plaintiff, this conduct strengthens the inference that defendant had not refused to pay for the work. Similarly, plaintiff argues that defendant had plaintiff install the documentation onto its computer system in 1992, a factor which also supports a conclusion that defendant had not yet refused or advised plaintiff that it would not pay for the work.
Although the parties state that the California two-year statute of limitations applies, they offer no authority for this proposition and we do not agree with it. A statute of limitations is a procedural matter. See Anthony v. Snyder, 116 Cal.App.4th 643, 651, 10 Cal.Rptr.3d 505, 512 (2004); Lease Partners Corp. v. R & J Pharmacies, Inc., 329 Ill.App.3d 69, 75-76, 263 Ill.Dec. 294, 768 N.E.2d 54 (2002). “Statutes of limitations are procedural, merely fixing the time in which the remedy for a wrong may be sought, and do not alter substantive rights.” Belleville Toyota, Inc. v. Toyota Motor Sales, U.S.A., Inc., 199 Ill.2d 325, 351, 264 Ill.Dec. 283, 770 N.E.2d 177 (2002). With respect to procedural matters, the law of the forum controls. Belleville Toyota, Inc., 199 Ill.2d at 351, 264 Ill.Dec. 283, 770 N.E.2d 177 (the court, although applying California substantive law pursuant to a choice of law provision in the parties' contract, applied Illinois law with respect to the statute of limitations). Here, the Illinois statute of limitations with respect to oral contracts is five years. 735 ILCS 5/13-205 (West 2000). Because plaintiff's lawsuit was filed on June 21, 1993, which is clearly within five years from May 12, 1991, the date upon which defendant claims plaintiff had knowledge of its refusal to pay, we find that plaintiff's lawsuit was not barred by the statute of limitations and defendant, therefore, was not entitled to a JNOV on this basis on plaintiff's MRP Documentation claim.
2. Parol Evidence
Defendant next argues that it was entitled to JNOV on plaintiff's MRP Documentation claim because it was barred by the parol evidence rule. According to defendant, in the later part of 1990, Marcinko asked Thomas to prepare the MRP Documentation. In December, a written contract was entered into, which authorized plaintiff to prepare documentation for only one module for $75,000, for which plaintiff was paid. According to defendant, although plaintiff claimed it was authorized to complete all documentation, the written contract authorized it to complete only one documentation and, therefore, plaintiff's claim for the additional work was barred by the December 1990 contract. Plaintiff maintains that this claim is not barred by the parol evidence rule for the same reasons set forth above.
While the MRP Documentation involved a different purchase or change order, our reasons stated above, rejecting defendant's argument, with respect to plaintiff's MMSIP II and EIS claims based upon the lack of integration of contracts, apply equally here. Accordingly, we find that defendant was not entitled to a JNOV on plaintiff's MRP Documentation claim since the December 1990 change order, listing only the one module documentation, was not intended by the parties to be the full and complete embodiment of the entire terms of their agreement.
3. Agreement to Pay $100,000
Defendant next maintains that plaintiff presented no evidence that the parties reached an agreement on any of the essential terms of an oral contract on the MRP Documentation and that there was no evidence that defendant ever agreed to pay plaintiff for the additional documentation. Plaintiff contends that it presented sufficient evidence, including course of dealing, to support a conclusion that defendant agreed to pay for the MRP Documentation.
We find that defendant was not entitled to a JNOV on plaintiff's MRP Documentation on this basis. First, as with plaintiff's MMSIP II claim, this issue required the jury to assess credibility and resolve conflicting evidence. As such, a JNOV would have been improper. Moreover, as with plaintiff's MMSIP II claim, this issue involves a question of whether the parties entered into an oral agreement, which was for the jury to resolve. We therefore conclude that the jury had sufficient substantial evidence, contradicted and uncontradicted, to find that the parties entered into an oral agreement for the balance of the documentation modules.
Marcinko, the head of the MRP Documentation project, testified on direct, cross, and redirect examination that he asked Thomas to do all of the documentation modules. Marcinko further testified that when he left defendant company in May 1991, the documentation was complete enough to send out for comment. Thomas, too, testified that Marcinko asked him to complete all of the documentation modules. Thomas also testified that the documentation was delivered to Marcinko, who reviewed it and requested some changes. After the changes were made, the documentation was returned to Marcinko, who distributed it to the relevant departments, which kept the documentation and used it. Bremer confirmed the above as well. In addition, Bremer testified that he gave the EIS documentation to Gieser in August 1991, who distributed it for review. Thereafter, according to Bremer, at Gieser's request, the documentation was loaded on defendant's EIS system, which Bremer observed on the system and also observed Gieser reviewing it with Yoo.
Conversely, Gieser denied that Marcinko told him to prepare paperwork for all of the MRP Documentation and denied knowledge that plaintiff was working on the balance of the documentation until early 1991. According to Gieser, at this time, Bremer alluded to the fact that he was aware plaintiff had no “real” authority to complete the work.
As we determined concerning plaintiff's MMSIP II claim, the jury had substantial evidence, based on the specific language of the parties, as well as their conduct, to find that defendant authorized plaintiff to document all modules. Accordingly, we conclude that the trial court did not err in denying defendant a JNOV on plaintiff's MRP Documentation claim.
D. Damage Verdict
Defendant next contends that the trial court should have entered a JNOV on the jury's damage verdict because plaintiff failed to prove what the parties agreed plaintiff would be paid under any of the alleged oral contracts. According to defendant, there was no evidence that defendant agreed to pay plaintiff, let alone any evidence as to the basis of payment, i.e., time and materials, fixed price, etc. Additionally, defendant argues that there was no evidence as to the parties' agreement as to which employees were to perform the work, hourly rates, and rules with respect to reimbursement of expenses-all key elements of a time and materials contract. Plaintiff contends that the parties' course of dealing provided all of the necessary elements to support the damage award, i.e., a time and materials contract at the same hourly rates and under the same terms always used between the parties.
As we determined above, the parties' course of dealing supplied the necessary and essential terms of the parties' oral agreements, including the basis of payment-time and materials-and the rate of pay. Accordingly, we find that defendant was not entitled to a JNOV on the damage verdict and the trial court did not err in denying same.
IV. New Trial
Alternatively, defendant contends that it is entitled to a new trial on plaintiff's MMSIP II, EIS and MRP Documentation claims because the jury verdict was against the manifest weight of the evidence for all the reasons it argued above in connection with its JNOV arguments. Plaintiff responds that defendant is not entitled to a new trial for all of the reasons it argued above with respect to defendant's JNOV arguments. Plaintiff also offers additional support for each of its three claims, which we need not detail.
Based on our conclusions above that the jury had substantial evidence, contradicted and uncontradicted, with respect to each challenged claim of plaintiff to find that defendant entered into oral agreements with plaintiff on each project, the terms of which were provided by the parties' course of dealing, we find that the jury verdicts on each of plaintiff's claims were not against the manifest weight of the evidence. Accordingly, we find that defendant was not entitled to a new trial on any of plaintiff's claims.
V. Evidentiary Trial Errors
Defendant next contends that the trial court committed fundamental evidentiary errors at trial that substantially prejudiced it and denied it a fair trial. Defendant maintains that it was prejudiced because it was denied the ability to cross-examine witnesses on key issues, the jury was confused with respect to competent evidence sufficient to support claimed oral contracts, and the jury was allowed to assess damages based on legally incompetent and inherently unreliable evidence. According to defendant, each error alone requires a new trial and, cumulatively, the errors require a new trial.
The admission of evidence rests within the discretion of the trial court. Felber, 346 Ill.App.3d at 189, 281 Ill.Dec. 482, 803 N.E.2d 1103. Evidence is admissible only if it is relevant. “ ‘Relevant evidence’ is that which has ‘any tendency to make the existence of any fact that is of consequence to the determination of the action more or less probable than it would be without the evidence.’ [Citation.]” DiCosola v. Bowman, 342 Ill.App.3d at 530, 535, 276 Ill.Dec. 625, 794 N.E.2d 875 (2003). Even if evidence is arguably relevant, it may nonetheless be excluded if it would confuse the issues or tend to mislead the jury. Demos v. Ferris-Shell Oil Co., 317 Ill.App.3d 41, 53, 251 Ill.Dec. 179, 740 N.E.2d 9 (2000). Similarly, where the probative value of evidence is outweighed by its prejudicial effect, the trial court may properly deny its introduction. Aardvark Art, Inc. v. Lehigh/Steck-Warlick, Inc., 284 Ill.App.3d 627, 636, 220 Ill.Dec. 259, 672 N.E.2d 1271 (1996). In determining whether the trial court has abused its discretion in admitting or refusing to admit evidence, “this court may not substitute its judgment for that of the trial court, or even determine whether the trial court exercised its discretion wisely.” DiCosola, 342 Ill.App.3d at 536, 276 Ill.Dec. 625, 794 N.E.2d 875.
A. Evidence of Goldsmith Lawsuit
Defendant first contends that the trial court erred in barring it from introducing evidence of the Goldsmith lawsuit because that case was relevant to demonstrate Thomas' interest, motive, and bias. According to defendant, it was plain error for the trial court to find this evidence irrelevant, particularly since Thomas was the sole witness to establish the existence of oral agreements and, thus, the case here rested upon a determination of credibility. Defendant maintains that it should have been allowed to introduce evidence with respect to Goldsmith because that case provided Thomas with a motive to lie here. Specifically, according to defendant, prior to this lawsuit, plaintiff's shareholders sued plaintiff and Thomas for recognizing millions of dollars in revenues in connection with “receivables” allegedly due from defendant. Thereafter, the SEC commenced an investigation against plaintiff. Further, according to defendant, because Thomas had a motive to tell the SEC that plaintiff had oral contracts with defendant, and then repeat such statements in Goldsmith, Thomas had to repeat the same story here. Defendant argues that the existence of a related lawsuit or investigation was a proper subject of inquiry. Defendant further maintains that such evidence was not unduly prejudicial to plaintiff.17
Plaintiff contends that the trial court properly concluded that evidence with respect to the Goldsmith lawsuit and the SEC inquiry was more prejudicial than probative, would confuse the jury, and would cause excessive delay. Plaintiff therefore maintains that the trial court properly excluded it. Plaintiff further argues that Goldsmith contained unfounded allegations that plaintiff had committed a crime and that reference to the SEC inquiry could mislead the jury to believe allegations had been made against plaintiff, which in fact were not. According to plaintiff, under Illinois law, allegations with respect to criminal activities, are not admissible. Plaintiff also argues that admission of this evidence would have required it to spend a significant amount of time submitting evidence to the jury to explain the issues in Goldsmith. In essence, plaintiff maintains that it would have had to conduct a trial within a trial to demonstrate that the Goldsmith allegations were unfounded and to show that the SEC had only made an inquiry and had not undertaken an investigation.
With respect to defendant's argument that evidence of Goldsmith and the SEC inquiry were needed to undermine plaintiff's witnesses' credibility, plaintiff maintains this is incorrect. According to plaintiff, defendant's argument is that Thomas lied to the SEC and, therefore, could not change his story in Goldsmith or here. Plaintiff argues that the problem with this contention is that neither Thomas nor any other employees of plaintiff took any position with the SEC; in fact, they were never interviewed, nor deposed by the SEC, and made no statements at all. As such, plaintiff argues, they could not be later “tied” to any lie they made to the SEC in Goldsmith or here. Similarly, plaintiff further maintains that Thomas was not deposed in the Goldsmith case. With respect to defendant's argument that the mere existence of Goldsmith and the SEC inquiry provided a motive to lie, with its focus on Thomas, plaintiff argues this is erroneous. Plaintiff stated that in July 1993, plaintiff received its last inquiry from the SEC and responded shortly thereafter. In June 1995, the Goldsmith case was settled. According to plaintiff, it was not until one year later, in June 1996, that Thomas was deposed in the instant case. Thus, according to plaintiff, any incentive Thomas may have had to lie had disappeared.
Defendant's sole basis for admission of evidence with respect to Goldsmith was to impeach Thomas, and we address the issue on this basis alone. First, contrary to defendant's argument, we note that Thomas was not the sole witness to establish the existence of oral agreements between the parties. Rather, as detailed above, Kaprelian, Bremer, and Marcinko, at the least, also testified in connection with authorization given to plaintiff by defendant on the various projects involved here. Second, and most importantly, there is no evidence that Thomas personally provided any information to the SEC, let alone evidence that he made any statement to that agency. As such, Thomas could not have lied to the SEC. Similarly, Thomas' deposition was not taken in Goldsmith and there is no evidence that he made any other sort of statements in that case. As such, as with the SEC, Thomas did not have an opportunity to tell a story or to lie. Accordingly, we agree with plaintiff that Thomas could not be “tied” to any previous lies that he was required to repeat in the instant case. As such, because Goldsmith provided no basis upon which to impeach Thomas, evidence with respect to that case would not have had a tendency to make the existence of a fact of consequence more probable here and, therefore, it was irrelevant.
We also agree with the trial court that such evidence would have been confusing and prejudicial to plaintiff. Specifically, as the trial court noted, there were no findings on the merits in Goldsmith since the case was settled. As such, the allegations made in the Goldsmith plaintiffs' complaint as to impropriety on the part of plaintiff here or Thomas were not proven and should not be used against Thomas in the instant case to demonstrate that he was involved in any alleged wrongdoing and, therefore, that he would lie here. The allegations of the Goldsmith plaintiffs were uncertain because they were unproven and thus evidence with respect to that case was inadmissible. See People v. Cameron, 189 Ill.App.3d 998, 1002-03, 137 Ill.Dec. 505, 546 N.E.2d 259 (1989) (stating that testimony of bias that is remote or uncertain is not admissible and refusing to allow evidence with respect to a civil lawsuit filed against a police officer to show bias of the police officer in the case before the court). Moreover, we believe, as the trial court here found, that evidence with respect to Goldsmith would have initiated a lengthy side issue, i.e., plaintiff would have had to prove that the allegations of the Goldsmith complaint were unfounded, would have consumed a great deal of time (“bogged down” this trial), and would have distracted the jury from the main issue. See Cameron, 189 Ill.App.3d at 1003, 137 Ill.Dec. 505, 546 N.E.2d 259.
We briefly note that defendant relies on two cases in support of its argument that the existence of a related lawsuit or investigation is a proper subject of inquiry-Swanlund v. Rockford & I. Ry. Co., 305 Ill. 339, 137 N.E. 206 (1922), and Katz v. Shaf Home Builders, Inc., 94 Ill.App.3d 526, 49 Ill.Dec. 802, 418 N.E.2d 822 (1981). However, neither case aids defendant. In Swanlund, the supreme court, without setting forth any rationale or analysis, concluded that the trial court had erred in refusing to allow the defendant to ask a witness whether the witness had his own lawsuit pending against the railway company in connection with the accident in question in Swanlund. Swanlund, 305 Ill. at 346-47, 137 N.E. 206. Swanlund is distinguishable from the instant case because that case involved the question of whether a witness had a lawsuit against another entity, not whether a lawsuit was pending against the witness, as is the situation in the case sub judice. Similarly, Katz is not instructive because there the plaintiff had filed a claim against the defendant and the defendant in turn filed a claim against the plaintiff's employer. Katz, 94 Ill.App.3d at 527, 49 Ill.Dec. 802, 418 N.E.2d 822. When a representative of the employer took the stand, the court concluded that it was proper to ask him if a third-party action was pending against the company to show bias or interest. Katz, 94 Ill.App.3d at 530, 49 Ill.Dec. 802, 418 N.E.2d 822. This is simply not the situation here. There was no third-party claim against Thomas and, more importantly, there was no claim currently pending against him as was the case in Katz.
Based on the foregoing, we conclude that the trial court did not abuse its discretion in refusing to allow defendant to present evidence with respect to the Goldsmith lawsuit.
B. Evidence of SEC Inquiry
Defendant next contends that the trial court erred in barring it from presenting evidence of the SEC investigation because the investigation bore directly upon the credibility of plaintiff's witnesses. Specifically, defendant argues that the trial court's barring of such evidence deprived the jury of critical evidence needed to evaluate the credibility of the witnesses, and that this error was compounded by the trial court's refusal to allow such evidence even after plaintiff opened the door by introducing selected evidence with respect to the SEC investigation. In this regard, defendant argues that the trial court allowed plaintiff to present self-serving evidence, through its last witness, from the SEC investigation to bolster its claim. Specifically, plaintiff was allowed to use the fact of the SEC investigation to support its claim for damages and to argue that plaintiff must be telling the truth in the instant case because it told the SEC the same story. Defendant argues that it was prejudiced because it was not able to demonstrate that plaintiff and its witnesses had a motive to lie since they faced severe civil and criminal penalties.
In addition to its arguments set forth above, plaintiff contends that, contrary to defendant's statement, the SEC did not undertake an investigation, but rather an inquiry. Specifically, plaintiff maintains that the SEC requested information from it, never made any allegations or findings of wrongdoing on its part and, after it provided the information requested, nothing further was heard from the SEC. Plaintiff also argues that it was not the party that raised the fact of the SEC inquiry before the jury, but, rather, it was defendant. According to plaintiff, defendant first mentioned the SEC inquiry when, at the very beginning of its case, it introduced correspondence between plaintiff and the SEC. Plaintiff argues that because this evidence could have created the impression to the jury that the SEC was looking for wrongdoing, the trial court allowed plaintiff in rebuttal and in one instance to briefly explain that the SEC stopped requesting information after plaintiff had supplied the requested information.
For the reasons set forth above with respect to the Goldsmith lawsuit, we find that the trial court did not abuse its discretion in barring evidence with respect to the SEC inquiry. Specifically, the SEC only undertook an inquiry and never made any allegations of wrongdoing against plaintiff, nor did it bring any charges or actions against plaintiff. Moreover, as noted above, there is no evidence that Thomas, or any other witness here, made any statements to the SEC. As such, there were no lies that the witnesses were “tied” to that would be a basis upon which to impeach them with evidence of the SEC inquiry. The SEC inquiry was simply irrelevant and prejudicial and, thus, inadmissible.
C. Documentary Hearsay Evidence
Defendant next contends that the trial court erred in admitting hearsay documents, exhibits Nos. 531 and 553, prepared for the use of plaintiff's counsel as the sole support for damages. According to defendant, although plaintiff's damage claim was based on the number of hours worked, plaintiff failed to call any employees to testify as to the number of hours worked, nor did plaintiff introduce any time sheets. Rather, plaintiff relied upon two documents: (1) exhibit No. 531, the spreadsheet prepared by Mihok and (2) exhibit No. 553, the spreadsheet prepared by Murtaugh, plaintiff's comptroller, in response to the SEC inquiry. Defendant argues that both of these documents were prepared after the fact and for use by counsel. According to defendant, to get these documents admitted at trial, plaintiff had to convince the trial court to: (1) allow plaintiff to waive its pretrial assertion of attorney-client privilege; (2) ignore the overwhelming evidence that the documents were created in anticipation of litigation, not in the ordinary course of business; (3) permit plaintiff to make selected references to the SEC investigation to lay a foundation; (4) forgive plaintiff's discovery abuses in connection with the SEC investigation; and (5) conclude that, despite the fact the documents were based upon hearsay conversations rather than personal knowledge, and were created up to seven months after the events reflected in them, they were nonetheless business records. Defendant maintains that the trial court acquiesced in all of the above and admitted the documents, which was clearly erroneous because, without the documents, plaintiff could not have proven damages.
The trial court's decision to admit a document as a business record is a matter of discretion and we will not disturb that decision unless it constitutes an abuse of discretion. In re Joseph S., 339 Ill.App.3d 599, 608, 274 Ill.Dec. 284, 791 N.E.2d 80 (2003). Supreme Court Rule 236 provides:
“Any writing or record, whether in the form of any entry in a book or otherwise, made as a memorandum or record of any act, transaction, occurrence, or event, shall be admissible as evidence of the act, transaction, occurrence, or event, if made in the regular course of any business, and if it was the regular course of the business to make such a memorandum or record at the time of such an act, transaction, occurrence, or event or within a reasonable time thereafter. All other circumstances of the making of the writing or record, including lack of personal knowledge by the entrant or maker, may be shown to affect its weight, but shall not affect its admissibility.” 145 Ill.2d R. 236(a).
“The rationale for the rule rests on the notion that in carrying on the proper transaction of business, such records are useless unless accurate. The motive to follow a routine of accuracy, therefore, is great, while the motive to falsify is nonexistent.” Birch v. Township of Drummer, 139 Ill.App.3d 397, 406, 94 Ill.Dec. 41, 487 N.E.2d 798 (1985). To be admissible, the proponent only need show that the record was made in the regular course of a business at or near the time of the transaction. Bachman v. General Motors Corp., 332 Ill.App.3d 760, 789, 267 Ill.Dec. 125, 776 N.E.2d 262 (2002). However, a lack of personal knowledge by the maker of the document, according to the specific language of the rule, affects only the weight of the evidence, not its admissibility. 145 Ill.2d R. 236; In re Estate of Weiland, 338 Ill.App.3d 585, 601, 273 Ill.Dec. 220, 788 N.E.2d 811 (2003). Simply because a record is made in response to a singular occurrence or event, this does not compel a conclusion that it was not made in the regular course of business. Weiland, 338 Ill.App.3d at 601, 273 Ill.Dec. 220, 788 N.E.2d 811; TIE Systems, Inc., Illinois v. Telcom Midwest, Inc., 203 Ill.App.3d 142, 150, 148 Ill.Dec. 483, 560 N.E.2d 1080 (1990). Similarly, “any alterations made to [a] record affect the probative weight to be given to the documents, not their admissibility.” Wade v. City of Chicago Heights, 295 Ill.App.3d 873, 886, 230 Ill.Dec. 297, 693 N.E.2d 426 (1998).
1. Exhibit No. 531
a. Waiver of Attorney-Client Privilege
Defendant first contends that it was prejudicial and reversible error for the trial court to allow plaintiff to selectively waive the attorney-client privilege it had asserted prior to trial to lay a foundation for exhibit No. 531 as a business record. Defendant argues that plaintiff was required to demonstrate that the document was created for a business purpose, as a regular part of its business, and to show this, plaintiff was required to demonstrate why Mihok, plaintiff's analyst, created the document. According to defendant, Mihok, however, during his deposition, repeatedly refused to state the reason why he created exhibit No. 531. According to defendant, given this posture, it was reversible error for the trial court to allow plaintiff to waive the asserted privilege, six years later and two months into trial, and to allow plaintiff to disclose for the first time the alleged purpose for creating the document, i.e., that it was routine. Defendant argues that had it been allowed, at the time of Mihok's deposition, to ascertain the reason why the document was created, it could have conducted additional discovery to demonstrate that it was, in fact, prepared in anticipation of litigation (the Goldsmith lawsuit) and the SEC investigation and not in the ordinary course of business. Defendant maintains that it was surprised and prejudiced by introduction of same at trial.
Plaintiff contends that defendant was not prevented from discovering, prior to trial, how and why exhibit No. 531 was created. According to plaintiff, because of Hayden's (plaintiff's vice president) work with counsel and Mihok's work with Hayden, plaintiff properly claimed privilege on activities and communications in which Hayden was involved. Despite this, plaintiff maintains that it made it clear to defendant that it waived any privilege that may have attached to exhibit No. 531 and the creation of the exhibit. Specifically, plaintiff argues that it told defendant's attorney at Mihok's deposition that Mihok could be asked questions about exhibit No. 531. Thereafter, defendant questioned Mihok for over 100 pages about its creation. However, plaintiff was forced to object to certain questions, including one with respect to why exhibit No. 531 was created because defense counsel's question improperly included a time reference. According to plaintiff, had defendant not included any reference to time, it would have allowed Mihok to answer the question. Plaintiff maintains that it was defendant's own fault that it did not obtain the information because it failed to ask proper questions.
Defendant has failed to state our standard of review when ascertaining whether the trial court erred in its determination of whether plaintiff asserted any privilege or waived same. We also note that although defendant cites case law with respect to asserting privilege at a deposition which later precludes presentation of the same evidence at trial, these cases are from other jurisdictions, whose holdings are not binding on this court. Bare contentions in the absence of authority do not merit our consideration and are deemed waived on appeal. Obert v. Saville, 253 Ill.App.3d 677, 682, 191 Ill.Dec. 740, 624 N.E.2d 928 (1993). Accordingly, defendant has forfeited this issue.
Notwithstanding defendant's forfeiture, were we to consider defendant's argument, we would agree with the trial court's conclusion that plaintiff did not assert any privilege with respect to exhibit No. 531. The following colloquy occurred at Mihok's deposition with respect to attorney-client privilege:
“Q. [Defendant's attorney:] What specifically were you doing to determine what was charged but not paid by Northrop?
MR. LAUERMAN [Plaintiff's attorney:] I'm going to object and instruct him not to answer on attorney-client privilege grounds, with one exception. The spreadsheets that we gave you, actually, before we gave them to you-The spreadsheets that were created, I think, in August of '92. We indicated before we produced them to you that they were privileged but we were willing to waive that privilege with respect to those; and we're also going to waive the privilege with respect to the preparation of those materials. So you can ask him about that. But I'm going to instruct him not to answer any other questions about what he was doing at Jack Hayden's request.
* * *
Q. Did you prepare any report or written document in connection with what you were doing during the two months under Jack Hayden's time number?
MR. LAUERMAN: I'm going to object and instruct the witness not to answer except with respect to the spreadsheets we referred to earlier.
* * * [approximately 100 pages later]
Q. Did you prepare this document during the one- or two-month period you were reporting to Jack Hayden?
A. [MIHOK:] Yes, I believe that's correct.
Q. Tell me what the task was that you were assigned to do that resulted in you preparing this document.
MR. LAUERMAN: I'm going to object and instruct the witness not to answer.
Q. BY MS. SIMMONS [Defendant's attorney:] Are you listening to your lawyer and refusing to answer that question?
* * * [approximately 65 pages later]
Q. Why did you prepare the spreadsheets when you prepared them?
MR. LAUERMAN: Objection. And I instruct the witness not to answer on privilege and work product grounds.”
Clearly, in plaintiff counsel's first and second objections on the basis of attorney-client privilege, he specifically indicated that any privilege with respect to the spreadsheets had been waived. Counsel's statement could not have been any clearer. In other words, it could not have been any clearer to defense counsel that she could ask Mihok questions about exhibit No. 531, including the reason for its creation. As such, defendant's argument that plaintiff asserted an attorney-client privilege with respect to exhibit No. 531 is erroneous.
Moreover, defense counsel's questions to Mihok, that counsel relies on, the last two sections quoted above, do not support defendant's argument. Defense counsel's first question asked for communications between Mihok and Hayden-information which was privileged. In addition, the question did not inquire of Mihok as to why he had prepared exhibit No. 531. Similarly, in the second question, defense counsel did not ask why Mihok had prepared the document at all; rather, counsel asked Mihok why he prepared it at the time he did, i.e., while working with Hayden. Again, as to why the document was prepared at this time may have been privileged information and plaintiff properly objected to it. Likewise, the question did not simply ask Mihok the reason for preparing the document; rather, counsel qualified it with a time frame. When read in context and in its entirety, the transcript of Mihok's deposition clearly discloses that plaintiff did not object to defense counsel asking questions as to why exhibit No. 531 was prepared, nor did plaintiff ever assert a privilege as to this document. As the trial court noted, the problem was defense counsel's failure to properly phrase her questions. Accordingly, we find defendant's argument in this regard unpersuasive.
b. Elements of Business Record
Defendant next contends that the trial court erred in admitting exhibit No. 531 as a business record because it was not created in the regular course of business and it was not created by a person with knowledge of the events recorded therein. Defendant argues that exhibit No. 531 was created in anticipation of litigation and, therefore, cannot constitute a business document. Despite well-settled rules, the trial court, according to defendant, allowed plaintiff to avoid the “prepared for litigation” rule because Mihok purportedly did not know the document was being created for litigation. Without citation to authority, defendant maintains that Illinois courts do not recognize an exception for “scrivener ignorance.” Defendant argues that there is no doubt that exhibit No. 531 was created for litigation and was created at the direction of counsel. Specifically, “PREPARED FOR USE OF COUNSEL” was stamped on every page of the document. Additionally, plaintiff's attorney, who at trial stated that the document was a business record, had, prior to trial, asserted the attorney-client privilege. Moreover, the document was created between July 8 and August 1992, after the Goldsmith lawsuit had been filed and after the SEC investigation had begun. Defendant also argues that Mihok had no personal knowledge of the events reflected in the spreadsheet. Rather, he began with time sheets and then consulted unidentified employees to reallocate certain time. Defendant argues that Mihok did not consult with the employees who had made the entries on the time sheets. Additionally, defendant argues that subsequent to Mihok's preparation of exhibit No. 531, someone else (unknown) revised his allocations.
Plaintiff contends that the trial court did not err in admitting exhibit No. 531 as a business record. Plaintiff first maintains that defendant's argument that personal knowledge of the maker is required is erroneous since Supreme Court Rule 236 specifically states it is not. Plaintiff next argues that it presented evidence to establish the requisite elements to admit exhibit No. 531 as a business record. Specifically, plaintiff states that it presented evidence that the document was created for a business purpose-to keep a running total of the hours defendant had not yet paid plaintiff for, it was prepared in the same manner plaintiff had always created invoices and, in fact, it was intended to become an invoice, it was created in the regular course of business, and it was made as the hours were worked. Plaintiff maintains that Mihok began preparing this document in January 1992, prior to any problems with defendant, prior to the filing of the Goldsmith lawsuit, and prior to the SEC inquiry. Plaintiff also argues that exhibit No. 531 was created at the time of the events recorded therein or within a reasonable time, one month thereafter. Plaintiff further argues that even if there was a question that some litigation purpose was in mind when exhibit No. 531 was created, the reason behind the business record rule, reliability, shows that it was nonetheless properly admitted.
We reject defendant's first argument that exhibit No. 531 was not created in the regular course of business, but rather in anticipation of litigation based on the “PREPARED FOR USE OF COUNSEL” stamp and plaintiff's assertion of privilege. We do not find the stamp on the document dispositive. We believe that the source of this stamp was adequately and logically explained by plaintiff's counsel to the trial court. Specifically, counsel explained that plaintiff was then-involved in several legal and regulatory matters and that different attorneys were handling different aspects of the matters. Counsel further stated that, at some time, some unknown person, probably a layman, put the stamp on this document. Moreover, with respect to assertion of privilege, an issue which we addressed above, plaintiff did not assert any privilege regarding this document and, as such, this is not a basis to find it was prepared in anticipation of litigation.
Conversely, we believe there was sufficient evidence to support the trial court's conclusion that exhibit No. 531 was prepared in the ordinary course of business and for a business purpose-creation of a record of what defendant owed plaintiff. Specifically, we note that precursor documents to exhibit No. 531 were begun in January 1992. According to Mihok, because plaintiff was not immediately billing defendant for all of the work it was performing, Mihok created this document to differentiate between what was billed and what was not. Mihok further testified that he used the same or similar process in creating these spreadsheets as he used in compiling invoices. Mihok also testified that the same information he used in the past to create invoices was used to create the spreadsheets, including exhibit No. 531, and that the information was just organized differently. Based on this evidence, we cannot say that no reasonable person could take the view adopted by the trial court. Lastly, exhibit No. 531 was created in July and August 1992. We believe this time frame, within one to two months of the events recorded in exhibit No. 531, was sufficient to fall within a “reasonable time” after the events.
We also reject defendant's argument that exhibit No. 531 was not based on Mihok's personal knowledge, but rather, hearsay upon hearsay, and alterations were made to the document, both rendering it inadmissible as a business record. As set forth above, the maker of a document need not have personal knowledge. Additionally, defendant does not cite any authority in support of the proposition that hearsay upon hearsay falls outside the ambit of Rule 236. We also find nothing in the rule that disqualifies what defendant categorizes as hearsay upon hearsay. See Weiland, 338 Ill.App.3d at 601, 273 Ill.Dec. 220, 788 N.E.2d 811. Likewise, as stated above, any alteration made to a document after the maker was done with it goes to the weight to be given the document, not to its admissibility.
We therefore find that the trial court had sufficient evidence to conclude that plaintiff established the foundational requirements to admit exhibit No. 531 as a business record, to-wit, it was created in the ordinary course of business for a business purpose and at or near the time of the events recorded therein. Accordingly, we conclude that the trial court did not abuse its discretion in admitting exhibit No. 531 as a business record.
c. Waiver by Defendant
Plaintiff contends that defendant waived any objection to exhibit No. 531, which was utilized during the depositions of Yoo and Kaprelian, who assisted in preparing it and so testified at their depositions, because defendant failed to object to it. Defendant does not respond to this argument. Based on our determination that plaintiff established the foundational requirements for admission of exhibit No. 531 into evidence, we need not address this issue further.
2. Exhibit No. 553
Defendant next contends that it was plain error to admit exhibit No. 553 into evidence because its author, Murtaugh, admitted that he could not have prepared it without exhibit No. 531. Defendant further argues that the trial court erroneously concluded that a document prepared at the direction of counsel and in response to an SEC investigation could qualify as a business record. According to defendant, documents prepared in response to abnormal business circumstances do not constitute documents prepared in the ordinary course of business.
Plaintiff contends that exhibit No. 553 was properly admitted as a business record. Specifically, Murtaugh, plaintiff's comptroller, testified that he created this document between June and August 1993 in response to an SEC request. Murtaugh further testified that, in the past, he had created over 100 similar ad hoc reports. Additionally, plaintiff argues that all individuals who helped Murtaugh prepare exhibit No. 553 knew it was going to be submitted to the SEC so they had a motive to be as accurate as possible. Because this document was created for a regulatory agency, plaintiff maintains that it was a proper business record.
With respect to defendant's argument that exhibit No. 553 was not admissible because it was based on exhibit No. 531, which it maintains also was inadmissible, we disagree based on our discussion above. We also reject defendant's argument that exhibit No. 553 was not admissible because it was created for “abnormal business circumstances.” Because our review is based on an abuse of discretion standard, we believe the trial court's comments with respect to admission of this exhibit are the best indication of why it did not abuse its discretion and that it offered a logical rationale for admission of same. Specifically, the trial court stated:
“It is unlikely that a corporate entity or an individual would falsify documents that would themselves-that falsification would constitute a crime when you are dealing with a regulatory agency such as the SEC. So the credibility of compiling those documents and what is submitted is more likely to be accurate than otherwise. And that is why * * * this exception to the hearsay rule exists to begin with.”
On another occasion, the trial court stated: “A document where a government agency requests information that a corporation feels it must respond to such as the SEC, it is their-it is not outside the regular course of business to respond accurately and truthfully to a government inquiry.” In concluding that exhibit No. 553 was admissible, the trial court found as follows:
“* * * [T]his Court finds that the Securities and Exchange Commission request for information of an entity that is regulated by the SEC is responded to in the ordinary course of business, notwithstanding that it may be the first and only time that the SEC had made an inquiry of that entity; that the entity cannot choose not to respond to it.
This is an agency that regulates, in this case, SEC. And it is certainly the regular course of business for an entity regulated by the SEC to respond to inquiries for information from-* * * for entities regulated by the SEC to respond to inquiries for information from that regulatory agency.
* * *
To me I really don't know what is more in the course of business of a regulated company than to respond to the regulator when the regulator is seeking information.”
Clearly, the trial court's reasoning and rationale do not lead to a conclusion that it abused its discretion. Specifically, the circumstances surrounding the preparation of exhibit No. 553 indicate trustworthiness. Again, as the trial court noted, exhibit No. 553 was prepared at the request of the SEC, an entity that regulated plaintiff's business. The SEC requested information from plaintiff to ensure that it was not cheating the public or its investors, i.e., the information was requested for protection of the national public interest and to ensure maintenance of fair and honest markets. See, e.g., 15 U.S.C.A § 78b; § 77sss (1997). The SEC has authority under section 78u of the United States Code to make such investigations or inquiries that it deems necessary in order to ensure no violations are occurring. 15 U.S.C.A. § 78u (1997). If plaintiff lied to the SEC in its responses, serious repercussions could result against plaintiff. Accordingly, we agree with the trial court that exhibit No. 553 was reliable and was made in the regular course of business.
Defendant, relying on federal case law interpreting Federal Rule of Evidence 803, argues that exhibit No. 553 was not admissible because it was prepared for “abnormal circumstances.” We disagree with defendant. First, there was no evidence that the SEC's request for information from plaintiff was an abnormal circumstance or abnormal request. Additionally, we do not believe that simply because this was the first time such information was requested by the SEC and the first time plaintiff prepared such a document that this rendered it inadmissible. Under Illinois law, as set forth above, simply because a document is prepared in only one instance or for the first time, does not render it inadmissible. Lastly, we do not find the cases relied upon by defendant in support of its argument controlling. As stated above, these cases interpret Federal Rule of Evidence 803. The language of Rule 803 is different than the language of Rule 236. Specifically, Rule 803 uses the words “regularly conducted business activities,” whereas Rule 236 uses the words “regular course of business.” Case law interpreting Rule 803 appears to interpret “regularly conducted business” more strictly than Illinois courts interpret “regular course of business” set forth in Rule 236. As such, the cases interpreting Rule 803 are not controlling here. Based on the foregoing, we cannot say that the trial court abused its discretion in admitting exhibit No. 553 as a business record.
D. Incompetent Documentary Evidence-Exhibit No. 520
Defendant next contends that the trial court erred in admitting exhibit No. 520, Zmijewski's reconstructed summaries, because it was not legally competent. First, according to defendant, the document was not admissible pursuant to expert testimony because Zmijewski was not an expert; he only did simple math and added numbers from times sheets (albeit, incorrectly) and then reallocated the time, which anyone with a calculator could have done. Second, defendant maintains that exhibit No. 520 did not qualify as a summary of voluminous records 18 because the document did not contain summaries but, rather, reconstructions and reallocations based upon hearsay. Third, defendant maintains that exhibit No. 520 was based upon exhibit No. 531, which defendant also maintains was inadmissible. Lastly, defendant argues that there was no evidence that the underlying records upon which exhibit No. 520 was based were accurate or admissible.
Plaintiff responds that the trial court properly admitted exhibit No. 520. According to plaintiff, because it appeared during discovery that defendant would object to admission of exhibits No. 531 and No. 553, plaintiff hired accountant Mark Zmijewski to create a counterpart to exhibit No. 531. Zmijewski followed essentially the same procedures Mihok had followed in preparing exhibit No. 531. Defendant was aware of the process and had the opportunity, which it took, to depose all witnesses involved in creating this spreadsheet. Plaintiff further argues that it was proper to allow Zmijewski to testify with respect to preparation of this document because it summarized six months of time sheets. According to plaintiff, the fact that Zmijewski did simple math did not disqualify him from testifying as to the contents of the time sheets. Plaintiff further maintains that exhibit No. 520 was a summary of voluminous records, i.e., time sheets, and the document was created to save time at trial. In this regard, plaintiff states that it could have presented witnesses at trial with respect to each time sheet and testimony as to work performed that would have consumed a great deal of time.
“where originals consist of numerous documents, books, papers or records which cannot be conveniently examined in court, and the fact to be proved is the general result of an examination of the whole collection, evidence may be given as to such result by any competent person who has examined the documents, provided the result is capable of being ascertained by calculation.” People v. Crawford Distributing Co., 78 Ill.2d 70, 77, 34 Ill.Dec. 296, 397 N.E.2d 1362 (1979).
Specifically, according to the Crawford Distributing Co. court, “[t]he witness' testimony is admissible since it is merely a statement of what those instruments show and the voluminous character of the original documents precludes their convenient examination in court.” Crawford Distributing Co., 78 Ill.2d at 77, 34 Ill.Dec. 296, 397 N.E.2d 1362.
We disagree with defendant's argument that exhibit No. 520 was not admissible as a summary of voluminous records. Instead, we find the facts in Crawford Distributing Co. and F.L. Walz, Inc. v. Hobart Corp., 224 Ill.App.3d 727, 167 Ill.Dec. 42, 586 N.E.2d 1314 (1992), which plaintiff relies upon, akin to the facts in the instant case and the courts' holding in those cases applicable here. In Crawford Distributing Co., an accountant and investigator for the Attorney General's office, in a prosecution of the defendant for restraint of trade, reviewed 1,200 to 1,250 invoices from the defendant that had been selected by the prosecutor from a much greater number of invoices subpoenaed from the defendant. Crawford Distributing Co., 78 Ill.2d at 76, 34 Ill.Dec. 296, 397 N.E.2d 1362. The witness reviewed the invoices, tabulated, summarized, and charted them to demonstrate to the jury whether the defendant had increased its prices in conformity with the previous announcement it had made. The trial court admitted the witness' testimony and charts over the defendant's objection. Crawford Distributing Co., 78 Ill.2d at 76, 34 Ill.Dec. 296, 397 N.E.2d 1362. On appeal, the defendant argued that the witness should not have been allowed to testify as an expert and that the charts should not have been admitted. Crawford Distributing Co., 78 Ill.2d at 76-77, 34 Ill.Dec. 296, 397 N.E.2d 1362. Our supreme court disagreed. First, the Crawford Distributing Co. court noted that the number of invoices, 1,200 to 1,250, was “such that it would be inconvenient for the jurors to be expected to look at each document and plot in their minds the significance of each.” Crawford Distributing Co., 78 Ill.2d at 77, 34 Ill.Dec. 296, 397 N.E.2d 1362. In this regard, the court found that the “charts only simplified and clarified what the invoices would show if the jurors took the time and had the ability to chart the details.” Crawford Distributing Co., 78 Ill.2d at 77, 34 Ill.Dec. 296, 397 N.E.2d 1362. More specifically, it was the Crawford Distributing Co. court's belief that “it is impractical to require the jury to read the entire mass of documents and entries.” Crawford Distributing Co., 78 Ill.2d at 77, 34 Ill.Dec. 296, 397 N.E.2d 1362. Accordingly, the Crawford Distributing Co. court concluded that “[t]he convenience of the trial demands that the other evidence be permitted in the form of the testimony of a competent witness who has perused the entire mass of documents and states summarily the net result.” Crawford Distributing Co., 78 Ill.2d at 77, 34 Ill.Dec. 296, 397 N.E.2d 1362. With respect to the witness testifying as an expert, the court stated:
“[I]t was necessary for the State to demonstrate to the court that [the witness] had the ability to summarize these invoices before his testimony or charts could be admitted into evidence. Thus, although he did not testify as an expert in that he did not express an Opinion, his expertise demonstrated that he had the ability to examine and summarize the invoices.” Crawford Distributing Co., 78 Ill.2d at 77, 34 Ill.Dec. 296, 397 N.E.2d 1362.
The defendant also argued that the charts should have been excluded because they did not contain all of the evidence. Crawford Distributing Co., 78 Ill.2d at 77-78, 34 Ill.Dec. 296, 397 N.E.2d 1362. The Crawford Distributing Co. court again disagreed, finding that the defendant had an opportunity to cross-examine the witness about items that were not charted. Crawford Distributing Co., 78 Ill.2d at 78, 34 Ill.Dec. 296, 397 N.E.2d 1362. Ultimately, the Crawford Distributing Co. court concluded that “it [was] within the discretion of the court to admit such statements or schedules of figures or the results of the examination of numerous documents to be introduced into evidence.” Crawford Distributing Co., 78 Ill.2d at 78, 34 Ill.Dec. 296, 397 N.E.2d 1362.
The same situation occurred in F.L. Walz. There, one witness reviewed 37 boxes of invoices, containing thousands of invoices. F.L. Walz, 224 Ill.App.3d at 729, 167 Ill.Dec. 42, 586 N.E.2d 1314. The witness ultimately ended up with eight boxes of invoices separated into three different groups. At trial, the witness admitted that he had placed seven invoices into the wrong group. F.L. Walz, 224 Ill.App.3d at 729, 167 Ill.Dec. 42, 586 N.E.2d 1314. After this, another individual typed a summary of the invoices, which consisted of 284 pages. F.L. Walz, 224 Ill.App.3d at 730, 167 Ill.Dec. 42, 586 N.E.2d 1314. Thereafter, a one-page summary was created, showing the total for cost of labor, amount charged for parts, and amount for supplies and mileage, by year and monthly averages. The plaintiff's expert then utilized these two summary documents to prepare a damage calculation. F.L. Walz, 224 Ill.App.3d at 730, 167 Ill.Dec. 42, 586 N.E.2d 1314. At trial, the expert testified with respect to the factors that were and were not taken into consideration in reaching his opinion. F.L. Walz, 224 Ill.App.3d at 731, 167 Ill.Dec. 42, 586 N.E.2d 1314.
On appeal, the defendant argued that the summaries were irrelevant, inaccurate, and inadmissible. The F.L. Walz court disagreed, relying on Crawford Distributing Co. F.L. Walz, 224 Ill.App.3d at 731, 167 Ill.Dec. 42, 586 N.E.2d 1314. Specifically, the court stated that with respect to over 9,000 invoices that were reviewed and charted, “[t]he exhibit only simplified and clarified what the invoices would show if the jurors took the time and had the ability to chart the details. Obviously, it would have been impractical to require the jury to read the entire mass of entries and documents.” F.L. Walz, 224 Ill.App.3d at 732, 167 Ill.Dec. 42, 586 N.E.2d 1314. In addition, although the original individual to separate the invoices testified that only he could ascertain which invoices were relevant, the F.L. Walz court concluded that this went to the weight or credibility of the charts, not their admissibility. F.L. Walz, 224 Ill.App.3d at 732, 167 Ill.Dec. 42, 586 N.E.2d 1314. The court further disagreed with the defendant that the charts were inadmissible because they did not include all 37 boxes of invoices, finding that the defendant had an opportunity to cross-examine the witness with respect to other invoices. F.L. Walz, 224 Ill.App.3d at 732, 167 Ill.Dec. 42, 586 N.E.2d 1314. See also People v. Wiesneske, 234 Ill.App.3d 29, 43-44, 175 Ill.Dec. 252, 599 N.E.2d 1266 (1992) (admitting a spreadsheet summarizing financial records).
In the instant case, Zmijewski reviewed numerous time sheets and invoices, the exact number of which is not evident, but, clearly the number was voluminous. From this review, he created a summary chart. This is precisely the course of events in both Crawford Distributing Co. and F.L. Walz. In addition, although Zmijewski admitted that he made some calculation errors, this fact is like the situation in F.L. Walz in which the witness placed several invoices into the wrong category, and defendant here clearly had an opportunity to cross-examine Zmijewski with respect to these errors. Lastly, as in both Crawford Distributing Co. and F.L. Walz, the fact that not all of the time sheets were used in the instant case, because many were destroyed, and thus, exhibit No. 520 did not contain all of the evidence, this factor went to the weight of the evidence, not its admissibility.
Based on the above cases, we find that the trial court did not abuse its discretion in admitting exhibit No. 520 as a summary of voluminous records. With respect to defendant's argument that Zmijewski could not testify as an expert, and thus exhibit No. 520 was inadmissible, we need not address this argument given our conclusion that exhibit No. 520 was admissible as a summary. With respect to defendant's argument that exhibit No. 520 was inadmissible because it was based upon exhibit No. 531, which defendant also maintains was inadmissible, we need not address this argument given our resolution of the issue above that it was admissible. Lastly, with respect to defendant's argument that exhibit No. 520 was inadmissible because there was no evidence that the underlying documents were accurate or admissible, we note that the underlying documents were the same documents used by Mihok in creating exhibit No. 531. Also, defendant did not raise this basis for lack of admissibility with respect to Mihok's document and, therefore, cannot do so now. Moreover, it is clear that plaintiff's time sheets and invoices would have been admissible as business records. Accordingly, we find that the trial court did not abuse its discretion in admitting exhibit No. 520 into evidence.
E. Parol Evidence
Defendant next contends that the trial court erred in allowing plaintiff to introduce parol evidence to alter the terms of the parties' written contracts. For the reasons set forth above, we find defendant's argument unpersuasive.
F. Cumulative Error
Lastly, defendant contends that the cumulative effect of each of the trial court's errors requires a new trial. Because we have concluded that the trial court did not commit any evidentiary errors, defendant's argument fails.
[The preceding material is nonpublishable under Supreme Court Rule 23].
For the reasons stated in the unpublished portion of this opinion, we affirm the judgment of the circuit court of Cook County.
1. FN1. Plaintiff also filed claims for other projects, IMPCA Port, SQL, and IMPCA Plus. These claims are not at issue here and are not discussed.
2. FN2. In the 1991 State of the Union Address, President Bush cut production from 132 planes to 75 planes.
3. FN3. Defendant produced an 840-page index. Defendant later admitted that this index was useless and it could not produce the index the court ordered it to produce.
4. FN4. There is no evidence that the trial court ruled on the balance of the motions in limine, e.g., plaintiff's first through third and eighth through tenth motions.
5. FN5. Upon examination by plaintiff's attorney, Mendoza did not recall much. When he was read portions of his deposition, he agreed that that was what he recalled then, but stated he did not so recall currently. Holley, too, did not recall many important events or details upon examination by plaintiff's attorney. However, upon questioning by defense counsel, she recalled much more detail and specific events. Anderson, like Mendoza and Holley, did not recall many important events.
6. FN6. This was demonstrated by defendant's November 29, 1988, noncompetitive procurement justification form that stated, “Production Schedule critical-must have the MRP System fully integrated to support B-2 production program.” Specifically, “The schedule for implementation of MRP-II was tied fully to the transition from prototype to production of the B-2 bomber. And the MRP-II system was to be in place at the time the program went from prototyping or concept stage to production stage.” If plaintiff did not work for a month or two, this would affect defendant's production and, thus, it was important for plaintiff to commence work immediately and continue working at all times.
7. FN7. It is unclear from the record whether Babbin's report was admitted into evidence or not.
8. FN8. Holley confirmed that she sent Mendoza to Walnut Creek to review the results of plaintiff's off-site work.
9. FN9. We note that everyone else testified that the prototypes were done at or near this time and Weinberg had authorized the production of same in November 1991.
10. FN10. Argument with respect to the admissibility of exhibit No. 531 was interspersed with arguments as to the admissibility of exhibit No. 553. This order segregates the arguments to the extent possible.
11. FN11. This statement is nonsensical given the fact that Hosfield undertook the calculations after being hired by defense counsel.
12. FN12. The record does not disclose when the original motion was filed.
13. FN13. Despite this agreement, not every document or order entered after January 1, 2000, is contained in the record. For example, there is no final witness list from either party as ordered by a June 19, 2000, court order, there are no orders with respect to plaintiff's first through third, and eighth through tenth, motions in limine, the December 27, 2000, order is not in the record, and there is no order with respect to defendant's January 2, 2001, motion to reconsider.
14. FN14. The parties, particularly plaintiff, should have given this court advance notice of this stipulation in their briefs in light of the fact that the stipulation was buried in the record until volume 33. Without such notice, reviewing the record as it is with documents from 2000 and later dated documents, interspersed with documents from earlier dates, was extremely difficult. Specifically, events that occurred years before the date of the document being reviewed were often referred to therein and, since this court was not aware of the precise content of the earlier events, matters were jumbled and therefore often confusing.
15. FN15. These amounts are the total damages plaintiff sought, not damages for Phase II only.
16. FN16. Plaintiff responds to this argument in a footnote.
17. FN17. In support of this argument and to define undue prejudice and how this court should evaluate the issue, defendant relies upon Oberlin v. Akron General Medical Center, 91 Ohio St.3d 169, 743 N.E.2d 890 (Ohio 2001). However, because Oberlin is an Ohio case, the analysis and rationale of Oberlin is not binding on this court and we decline to address it.
18. FN18. Defendant relies upon two cases in support of this contention, one of which is an Illinois Appellate Court case from 1931, LeRoy State Bank v. J. Keenan's Bank, 261 Ill.App. 441 (1931). Appellate court decisions issued prior to 1935 have no binding authority. Bryson v. News America Publications, Inc., 174 Ill.2d 77, 95, 220 Ill.Dec. 195, 672 N.E.2d 1207 (1996). Accordingly, we do not address this case.
Presiding Justice BURKE delivered the opinion of the court:
CAHILL and GARCIA, JJ., concur.