Opinion
IP 98-0031-C-T/G
October 4, 2001
ENTRY ON PLAINTIFF'S MOTION IN LIMINE
Though this Entry is a matter of public record and is being made available to the public on the court's web site, it is not intended for commercial publication either electronically or in paper form. The reason for this caveat is to avoid adding to the research burden faced by litigants and courts. Under the law of the case doctrine, the ruling or rulings in this Entry will govern the case presently before this court. See, e.g., Trs. of Pension, Welfare, Vacation Fringe Benefits Funds of IBEW Local 701 v. Pyramid Elec., 223 F.3d 459, 468 n. 4 (7th Cir. 2000); Avitia v. Metro. Club, Inc., 49 F.3d 1219, 1227 (7th Cir. 1995). However, a district judge's decision has no precedential authority, and therefore, is not binding on other courts, on other judges in this district, or even on other cases before the same judge. See, e.g., Howard v. Wal-Mart Stores, Inc., 160 F.3d 358, 359 (7th Cir. 1998) ("a district court's decision does not have precedential authority"); Malabarba v. Chicago Tribune Co., 149 F.3d 690, 697 (7th Cir. 1998) ("district court opinions are of little or no authoritative value"); United States v. Articles of Drug Consisting of 203 Paper Bags, 818 F.2d 569, 571 (7th Cir. 1987) ("A single district court decision . . . has little precedential effect. It is not binding on the circuit, or even on other district judges in the same district."). Consequently, though this Entry correctly disposes of the legal issues addressed, this court does not consider the discussion to be sufficiently novel or instructive to justify commercial publication of the Entry or the subsequent citation of it in other proceedings.
Plaintiff New Hampshire Insurance Company has filed a motion in limine regarding the applicable measure of damages. Defendant opposes the motion. After issuing a preliminary discussion on the subject and hearing oral argument, the court now rules as follows.
I. Factual and Procedural Background
On June 19, 1996, lightning struck a hog breeding facility owned by Heartland Pork Enterprises, Inc. (AHeartland@) in Bloomfield, Indiana. The lightning disabled the facility's ventilation system and resulted in the death of 188 pregnant sows. Plaintiff, New Hampshire Insurance Company (AInsurance Company@), as subrogee of Heartland, filed this action against Gregory Clark, individually and d/b/a Clark Electric Heating and Cooling (AClark@), alleging that Clark improperly designed the electrical system at the facility, which led to the failure of the ventilation system, thus causing the death of the 188 pregnant sows.
Insurance Company contends that Heartland suffered four categories of damages: (1) property damage consisting of the death of the 188 sows; (2) extraordinary expenses associated with the removal of the sows' carcasses; (3) lost profits due to the loss in production caused by the sows' death; and (4) loss in genetic trend progress caused by the sows' death. (Pl.'s Mot. Limine Regarding Applicable Measure Damages (hereinafter APl.'s Mot. Limine@) at 2-3.)
AGenetic trend@ is Athe improvement of the genetic merit over time.@ (Mabry Dep. at 18.)
Stanley Williams, Director of Genetic Programs and Director of Sales and Marketing for Heartland from 1994 through 1996, determined that the total cost to replace the 188 sows from the United Kingdom, the only potential source for sows other than Heartland's own facility, would have been $479,400. (Williams Aff. ¶¶ 9-17.) He determined that to replace the sows from Heartland's own facility would result in damages of $1,927,968 because Heartland would have to compromise genetic lines to fill the production gap. According to Mr. Williams, replacing the sows with sows from the United Kingdom would not fully compensate Heartland as Heartland had improved the genetics after receiving the original line from the United Kingdom.
This reflects a $950 purchase price per sow ($178,600), freight costs from the United Kingdom to Greene County at $400 per sow ($75,200), quarantine costs of $750 per sow in New York ($141,000) and quarantine costs of $450 per sow in Greene County ($84,600). The court's addition of these sums results in a total cost of $479,400. The court concludes that the $479,000 sum stated in Mr. Williams' affidavit is the result of a typographical error.
Neither Mr. Williams' affidavit nor his report submitted as attachments to Insurance Company's motion provides support for this claim. Nevertheless, the court assumes that the replacement cost through internal replacement would exceed the replacement cost if sows were purchased from the United Kingdom.
John W. Mabry, Professor of Animal Science, University of Georgia, determined Heartland's genetic trend loss. He opined that it would take Heartland three years to replace the dead sows from Heartland's own production line. (Mabry Dep. at 18, 49-51.) To do so, Heartland would have to compromise genetic selection, causing a seventy cents per hog loss resulting in lost future income of $56,000 per year. (Id. at 19, 50.) This calculation is based on Mr. Mabry's assumption that the 188 sows would produce 4,000 parent females which would produce approximately twenty pigs per year, resulting in 80,000 pigs. (Id. at 50.) Mr. Mabry estimated that the genetic lag would last from two to three years, which he maintains is a conservative estimate. (Id.) Multiplying the lost future income of $56,000 per year by three years results in a total loss of genetic trend progress in the amount of $168,000.
The 188 dead sows are GGP, great-grandparents. GGPs generally constitute 3% of the herd and are used to produce GPs (grandparents), which in turn produce parent sows which produce the pigs that are sold. (Mabry Dep. at 58.)
Clark previously moved for partial summary judgment on damages allegedly resulting from unborn livestock and genetic damage to subsequent generations. It argued that Indiana law does not permit recovery of damages for the loss of litters and subsequent generations of the 188 sows destroyed in the fire. The court treated the motion as a motion in limine to exclude evidence of damages relating to the lost litters and subsequent generations. The court granted that motion, following the reasoning of Greives v. Greenwood, 550 N.E.2d 334 (Ind.Ct.App. 1990).
Insurance Company apparently understood the court's ruling on Clark's motion in limine as precluding it from introducing evidence of the future income lost by Heartland from the unborn litters of the 188 dead sows. According to Insurance Company, the court's ruling Alimits plaintiff's damages to $34,897.00, determined to be the salvage value (or meat value) of the sows, together with the genetic trend progress loss of $168,000.00.@ (Pl.'s Mot. Limine at 5.)
Salvage value is the sows' value as market hogs slaughtered for meat, not their value as breeding animals. (Pl.'s Mot. Limine, Ex. A, ¶¶ 5-6 Ex. 1 at 2.) David Schlader, C.P.A., formerly of Campos and Stratis who reviewed Heartland's claim submitted to Insurance Company, determined the sows' salvage value was $34,897. (Id., Ex. A, ¶¶ 5-6 Ex. 1 at 2 Sched. 1.)
Insurance Company seeks a ruling on the measure of its recoverable damages, arguing that its damages consist of the sows' replacement cost of $479,400 and the loss of genetic trend progress of $168,000.
The motion actually states the replacement cost as $479,450, but according to the court's mathematical calculations based on the figures used by Mr. Williams, the correct cost is $479,400.
After reviewing the parties' submissions on Insurance Company's motion in limine, the court issued a preliminary discussion on the issues and set the matter for oral argument. At oral argument, Insurance Company presented to two alternate theories of damages. First, it argued that it was entitled to (1) the replacement cost of the sows from the United Kingdom, as discussed in this court's preliminary discussion, and (2) loss of use damages for the first and second litters of the 188 dead sows. The Insurance Company then admitted that Heartland did not replace the sows with sows from the United Kingdom and requested that this court exclude evidence that the sows were not in fact replaced in this manner. If the court denied this motion, the Insurance Company then argued that it should be entitled to present a second theory of damages based on replacing the sows internally, which included: (1) salvage value, (2) loss of use damages, (3) genetic trend loss, and (4) the internal cost of replacing of the sows. Clark responded that its earlier understanding of damages in Indiana was too narrow, that it would concede salvage value and genetic trend loss (although it disputed the amounts of these damages), and that loss of use damages were prohibited under Grieves. This court now attempts to wind its way through this maze of damage claims and finalize its earlier discussion.
The court's entry entitled "Preliminary Discussion on Plaintiff's Motion in Limine" dated August 24, 2001, was just that and nothing more. During oral argument, counsel for the Insurance Company, in referring to the "Preliminary Discussion," indicated that the court ruled in certain ways in that document. That is not correct. The court's rulings on the damages theories are all contained in the instant document. The comments made in the "Preliminary Discussion" unless specifically incorporated herein, are superceded by this entry. Lest there be any confusion, this entry is the court's final word on how it will rule at trial on the admissibility of evidence on damages.
II. Indiana Law on Damages
The Indiana Supreme Court recently outlined the purpose behind damages:
It is a well-established principle that damages are awarded to fairly and adequately compensate an injured party for her loss, and the proper measure of damages must be flexible enough to fit the circumstances. Decatur County AG-Services, Inc. v. Young, 426 N.E.2d 644, 646 (Ind. 1981); Terra-Products, Inc. v. Kraft General Foods, Inc., 653 N.E.2d 89, 93 (Ind.Ct.App. 1995); Wiese-GMC, Inc. v. Wells, 626 N.E.2d 595, 597 (Ind.Ct.App. 1993). In tort actions generally, all damages directly related to the dwrong and arising without an intervening agency are recoverable. Erie Insurance Co. v. Hickman by Smith, 622 N.E.2d 515, 519 (Ind. 1993).
Bader v. Johnson, 732 N.E.2d 1212, 1220 (Ind. 2000).
Livestock is regarded as property. Bottema v. Producers Livestock Ass'n, 366 N.E.2d 1189, 1192 (Ind.Ct.App. 1977). The basic measure of damages for property in Indiana courts is the fair market value of the property immediately before it was damaged or destroyed. Greives v. Greenwood, 550 N.E.2d 334, 338 (Ind.Ct.App. 1990).; Campins v. Capels, 461 N.E.2d 712, 718 (Ind.Ct.App. 1984); Moorman Mfg. Co. v. Barker, 40 N.E.2d 348, 352 (Ind.Ct.App. 1942).
The fair market value is said to be the price at which a willing seller would sell the items to a willing buyer. Campins, 461 N.E.2d at 718. The Seventh Circuit, applying Indiana law, has determined that "the market that determines the measure of recovery by a person whose goods have been taken, destroyed, or detained is that to which he would have to resort in order to replace the subject matter." Simmons, Inc. v. Pinkerton's, Inc., 762 F.2d 591, 606 (7th Cir. 1985).
The fair market value may include both the pedigree of the animal, Cleveland C., C. St. L. Ry. Co. v. Van Natta, 87 N.E. 999, 999 (Ind.Ct.App. 1909), and damages for loss of use, Shelbyville Lateral Branch R.R. v. Lewark, 4 Ind. 471, 473 (1853). Loss of use damages are available, in addition to the fair market value of the item, for the consequential damages that occur because the owner does not have her property. For example, when a train damaged a wagon, the owner was able to recover the cost of repairs to the wagon as well as the money he would have made in deliveries using the wagon. Id. at 472-73.
This is limited to the reasonable amount of time it takes to repair or replace the damaged item. D T Sanitation, Inc. v. State Farm Mut. Auto. Ins. Co., 443 N.E.2d 1207, 1209 (Ind.Ct.App. 1983).
These damages are limited by the general rule that one cannot receive damages from speculative losses or double recovery. In this line, the Indiana Court of Appeals has refused to allow damages for future unborn calves.
Greives, 550 N.E.2d at 338. In Greives, the plaintiff attempted to recover damages for the loss of profit from unborn or future unborn calves where many of their cows allegedly aborted calves due to stress from testing procedures. Id. at 337. The Greives court held that when damages are recovered for injury to or loss of cows, damages cannot be recovered for the loss of their unborn calves. Id. at 338. The court reasoned that unborn animals have no market value, a damage award for unborn animals would amount to double damages, and an award for the value of unborn calves would be speculative. Id. This decision appears to be correct on its facts because the plaintiff merely alleged that "many of their cows aborted calves," not exact numbers of calves lost. Id. at 338. The plaintiff's damages on this issue were therefore speculative. Further, damages for the loss of a cow known to be pregnant already included an amount for the unborn calf. Therefore, additional damages for the unborn calf would result in a double recovery for the plaintiff.
The Indiana courts have applied special rules to situations where fair market value would not adequately compensate the plaintiff.
Sometimes fair market value cannot be determined, or would be inadequate, as when for example, the article destroyed was unique or possessed qualities the special nature of which could only be appreciated by the owner. In such a case additional principles are helpful in determining proper compensation to the injured party.
Campins, 461 N.E.2d at 720. These additional principles have required looking at the worth to the owner, Anchor Stove Furniture Co. v. Blackwood, 35 N.E.2d 117, 119 (Ind.Ct.App. 1941) (addressing the value of home furnishings and clothes); Aufderheide v. Fulk, 112 N.E. 399, 400-01 (Ind.Ct.App. 1916) (same), and replacement costs, Ridenour v. Furness, 546 N.E.2d 322, 325-27 (Ind.Ct.App. 1989) (fish).
Aufderheide involved a lawsuit for trespass and conversion of household furnishings and clothing. 112 N.E. at 399-400. A creditor entered the plaintiff's home and took her possessions, but claimed that they were only worth $136 in the market. The jury awarded plaintiff $2000 and defendant appealed. The Indiana Court of Appeals acknowledged the general rule that the measure of damages is the market value at the time and place and conversion, but determined that the general rule was subject to exceptions to comport with the "underlying principle of universal application . . . that fair and just compensation for the loss or damage sustained" be awarded. Id. at 400. The court recognized that household goods "have a value when so used in the home that is not fairly estimated by their value as secondhand goods on the market." Id. The court then determined the correct measure of damages to be the measure of damage to the owner based on actual damages incurred by being deprived of his property. Id.
In Ridenour, the Indiana Court of Appeals attempted to value various species of sport fish. There was no market value for the fish because it was illegal to sell them in Indiana. 546 N.E.2d at 325-26. The trial court determined that the correct measure of damages was to look at actual production costs. The court of appeals determined that loss of development time must also be considered. The court likened the fish to a case in which the plaintiff was enjoined from harvesting his wheat. The correct measure of damages in that case was not the value of the wheat seed that the plaintiff had planted, but the value of the wheat harvest. Id. at 326 (citing Ross v. Felter, 123 N.E. 20 (Ind.Ct.App. 1919)). In the same way, the correct measure of damages of the fish was not merely production costs to produce three-inch fish. Rather, to fully compensate the plaintiff, the defendant was required to pay for ten-inch fish, which were "unique and irreplaceable . . . and represent[ed] a year lost to the stocking program." Id.
In sum, although the general measure of damages is the fair market value of the property before destruction including loss of use, this rule must yield to the greater concerns of fairness and full compensation in situations where the damaged or destroyed property is not readily replaceable and has a special or unique value to the owner.
III. Application to this Case
A. Insurance Company's First Theory
Insurance Company first argues that it is entitled to the cost of replacing the sows from the United Kingdom, including the cost of sows, shipping costs, and quarantine costs, and loss of use damages for the time it takes to get the replacement sows from the United Kingdom.
1. Replacement Cost
As indicated in this court's preliminary discussion, Insurance Company will be allowed to present evidence on the replacement value of the sows. Although the general formula for calculating damages is to look at the market value of the animal, including value based on the pedigree of the animal and loss of use, Indiana courts have used special rules for valuing items that are not readily replaceable because of their unique nature or value to their owner. The sows in question are not in the nature of personal household items, but they do have specific genetic traits that make them not readily replaceable. Because of this, the general rule applying fair market value must yield to the principles behind damage awards. Anchor Stove Furniture Co. v. Blackwood, 35 N.E.2d 117, 119 (Ind.Ct.App. 1941) ("When subordinate rules for the measure of damages run counter to the paramount rule of fair and just compensation, the former must yield to the principle underlying all such rules.") (citations omitted).
Heartland used the sows as breeding animals. Clark apparently still believes that Indiana law would only allow damages for the dead sows in the form of the market value of such livestock. That view is too narrow, given the nature of these sows. They were not raised as pigs to be sold for slaughter. Much like any other piece of farm equipment, these sows were developed to produce more pigs. The loss of a breeding pig means a loss of the pig's production until it can be replaced. Therefore, valuing them as meat would not compensate Heartland for its losses and something more than slaughter value of these sows is necessary to provide adequate compensation for their loss. Even Clark acknowledges that the replacement cost "is the most representative of the value of the sows as breeding animals." (Def.'s Resp. at 4.) Because the sows in question were uniquely bred by and for Heartland and not readily replaceable, Insurance Company will be permitted to present evidence of the cost of replacing the sows with sows from the United Kingdom.
After oral argument, it appears that Clark would concede some genetic trend loss, but continues to argue that the sows themselves are only worth their salvage value.
Clark relies on Harlan Sprague Dawley, Inc. v. S.E. Lab Group, Inc., 644 N.E.2d 615, 622 (Ind.Ct.App. 1994), for the proposition that "replacement cost is not the proper measure of damages for destroyed animals." In that case, the defendant attempted to avoid paying market value for rats that were killed by relying on replacement cost which would in effect give the plaintiff "no damages for a dead animal that [the plaintiff] could replace with a surplus animal from another [of the plaintiff's] facilit[ies]." Id. at 621. That case is inapplicable here where replacement cost fully compensates the Insurance Company for the loss because in Harlan the defendant was attempting to use the replacement cost theory to circumvent the basic premise of Indiana law on damages, fair and adequate compensation.
2. Loss of Use
At oral argument, Insurance Company contended that damages for the amount of the first two litters from the 188 sows should be allowed as loss of use damages. Clark countered that these damages were too speculative and not allowed under Grieves. This court is convinced its earlier discussion on this issue was correct.
The loss of use doctrine provides damages for the reasonable value of the loss of use of the property for the reasonable amount of time required for repair or to obtain a replacement. Persinger v. Lucas, 512 N.E.2d 865, 868 (Ind.Ct.App. 1987). In this case, the loss of use is items such as the amount of money that would have been received from the litters the sows would have produced. (See Pl.'s Mot. Limine at 2-3 ("lost profits due to the loss in production caused by the sows' death").) The lost profits from sales of the litters of the dead sows, to the extent they can be proven, are consequential damages arising from the deaths of the sows and attributable to Heartland's loss of use of the sows. This amount would be limited by the amount of time it would take to obtain replacement sows.
Nothing in this order prevents Clark from arguing that the lost litters are not worth what Insurance Company claims or that it would not take the time necessary to breed to two full litters to replace the 188 dead sows.
B. Actual Replacement
Insurance Company also asked this court to exclude evidence of its failure to replace the sows with sows from the United Kingdom. Indiana law on this subject is clear: "the question of actual repair . . . does not change the measure of damages." General Outdoor Adver. Co. v. La Salle Realty Corp., 219 N.E.2d 141, 152 (Ind.Ct.App. 1966); accord New York Cent. R.R. Co. v. Churchill, 218 N.E.2d 372, 377 (Ind.Ct.App. 1966) ("A party should not be penalized merely for not replacing the destroyed property; nor does it change the fact that he lost the use of the property."). The same theory applies to actual replacement from both a legal and logical standpoint. First, as the court of appeals noted: A court of law has no power to oversee the use of damages once they are awarded in actions such as in the case at bar. It is our opinion that a plaintiff is entitled to damages regardless of whether anything is done to correct the injury either by repair or by sale. We are concerned with a measure of damages only, and not the actual use by the injured party of any damages awarded.
General Outdoor, 218 N.E.2d at 152. Second, logically, many people may be unable to replace their property before receiving payment from the persons responsible for its destruction. It would be unfair to plaintiffs to require them to replace items before they have received payment or risk being unable to receive full compensation for their wrongfully destroyed property. Therefore, Clark will not be able to admit evidence that Heartland did not actually replace the 188 dead sows with sows from the United Kingdom.
C. Insurance Company's Second Theory
The Insurance Company contends that in the alternate it will present a theory of damage based on the internal replacement of the sows, which would include evidence of (1) salvage value, (2) loss of use, (3) genetic trend loss, and (4) internal replacement cost. At oral argument, this theory appeared to be an alternate to the Insurance Company's first damage theory if Defendant was able to admit the fact of non-replacement. As discussed above, the actual replacement of the sows (or failure thereof) is not admissible. This would appear to render a discussion of the second theory unnecessary, but as the argument evolved, Insurance Company proposed presenting all of its theories on damages to the jury and allowing the jury to sort through them. To avoid needless juror confusion, this court will now discuss Insurance Company's second theory of damages.
1. Genetic Trend
Progress Insurance Company argues that it should be entitled to $168,000 for loss of genetic trend progress. Insurance Company contends that the genetic trend loss is a category of loss of use, describing it as follows:
it would take a total of three years for Heartland to replace the dead sows from Heartland's own production line. However, in order to replace the dead sows from Heartland's own production line, Heartland would have to compromise genetic selection. In essence, Heartland was forced to compromise the quality of the hogs being raised.
(Pls.' Mot. Limine at 4.) Insurance Company then concludes that there is a seventy cents per hog loss resulting in a loss of future income of $56,000 a year for three years.
Insurance Company addressed this court's initial concern that it "cannot receive damages for purchasing sows from the United Kingdom and for comprised genetic selection based on replacing the sows through internal breeding," by limiting its claim for genetic loss trend to damage theories where the sows were replaced internally. However, this court determines that, in any event, the genetic loss trend is too speculative and not adequately supported by Indiana law to be presented to the jury.
Although this court does not understand Grieves to be as limiting as Clark in this case, it is still the law of Indiana and clearly prohibits speculative damages. In this case, 188 GGP sows were killed. According to Insurance Company's expert, the GGPs are typically 3% of the herd. The expert then divided 188 by 3%, and rounded down to determine that 188 GGPs would produce 4,000 parent sows. He then calculated that each parent sow would produce twenty pigs per year that would be worth seventy cents less per pig because of the loss of genetic trend. These calculations are simply too speculative to be admissible as damages under Indiana law. First, it is unclear whether the 188 GGPs in question actually constituted 3% of the herd. (Mabry Dep. at 53-55.) Second, even if they were, the 4,000 parents calculated by the expert are two generations removed from the GGPs and the market pigs for which the loss is calculated are even further removed. Indiana law simply does not allow for the loss of 188 sows to be carried forward to this many generations. Therefore, the Insurance Company may not argue the loss of genetic trend progress to the jury.
2. Salvage Value, Internal Replacement Cost, and Loss of Use
Also problematic is the Insurance Company's claim of entitlement to salvage value, internal replacement cost, and loss of use. Although not entirely fleshed out in the oral argument, it appeared to the court that Insurance Company wanted to argue that it was entitled to all three types of damages. Indiana law clearly prohibits double recovery for the same loss. See Grieves, 550 N.E.2d at 337-38. Allowing damages for salvage value and internal replacement costs presents some problems because these are two recoveries for the same sows. Further compounding this problem is the addition of the claim for loss of use. If the sows were replaced internally, the damages for loss of use of the sows seem minimal and would surely not extend past the in-utero piglets. At the very least, damages for loss of use would appear to overlap with the internal replacement cost damages. Because of these problems with Insurance Company's second theory of damages, this court will limit the Insurance Company to its first theory.
D. The Insurance Payment and Method of Calculation
Both parties agree that the amount Insurance Company paid to Heartland on its claim for the destroyed sows is irrelevant, as is the method used by Insurance Company to calculate the loss. (See Pl.'s Mot. Limine at 14-15; Def.'s Resp. at 4.) The insurance payment made by Insurance Company to Heartland is inadmissible to prove the value of the 188 sows. See So. Ind. Gas Elec. Co. v. Ind. Ins. Co., 383 N.E.2d 387, 396 (Ind.Ct.App. 1978).
Insurance Company at one point during the oral argument suggested that perhaps the amount it paid was not subject to exclusion. However, that argument was never developed or explained, and this court reaffirms its earlier decision on this issue.
IV. Conclusion
Thus the motion in limine is GRANTED in part. Insurance Company may present evidence concerning the unique value of the sows that were destroyed and evidence of the replacement value of the destroyed sows. Evidence of the unborn livestock also is relevant inasmuch as it related to the loss of use theory of the Insurance Company, and not to the loss of genetic trend progress. Evidence that Heartland did not replace the sows with sows from the United Kingdom is not admissible. Evidence of the insurance payment made by the Insurance Company to Heartland as well as the method by which Insurance Company calculated Heartland's loss is inadmissible.
Insurance Company will be required to file a supplemental report explaining how its loss of use figures were determined, as it stated it would in the oral argument on September 14, 2001.