The issue of alleged self-dealing between Interpool and individuals other than Cuneo first emerged during opening statements, when Cuneo's counsel asserted that Interpool and its chief executive officer, Martin Tuchman, "trade with interested entities and . . . say they can reach fair market prices," but complained that Interpool did not take that position with Cuneo. (Tr. 54)
On the third day of the trial, prior to calling Tuchman and other Interpool witnesses, plaintiff moved in limine to exclude any evidence concerning related party transactions other than those involving defendants. (Doc. item 68) It contended that all of the transactions that defendants evidently wanted to explore were fully disclosed and, in any case, that they were not relevant to whether Cuneo and Patterson had engaged in improper self-dealing. The Court did not take up the motion immediately.
Plaintiff then called Interpool's Astrin. Counsel for the Cuneo Defendants completed his cross-examination of Astrin without seeking to go into the subject of related party transactions involving persons other than the defendants. During the cross on behalf of the other defendants, the Court sustained an objection to a question as to whether Interpool ever had sold containers to another sales agent named Haute. (Tr. 477)
Following a recess, the Court heard counsel out of the presence of the jury both with respect to the question to which objection had been sustained and as to Interpool's motion in limine. It adhered to its ruling on the Haute question, noting that the alleged Haute transaction had been approved by Interpool after the disclosure of Haute's interest, whereas the claim against Cuneo and Patterson rested in major part on the concealment of their interests. (Id. at 478) Counsel for the Cuneo Defendants then announced that he had "no interest in delving into the particulars of the transactions that are listed partly in the deposition testimony and partly in the [Interpool] SEC filing." (Id. at 481) He went on to say, in essence, that the disclosure of the personal interests of others who had engaged in related party transactions with Interpool was unimportant because they were insiders and had disclosed to themselves, which of course is incorrect in view of the fact that Interpool has other shareholders and the disclosures appeared in public SEC filings. (Id. at 481-82) The Court then ruled that defendants were "not to go into the alleged self-interested transactions between Tuchman or others of Interpool that do not involve the matters in suit." (Id. at 482)
The other two transcript references made by the Cuneo Defendants in support of this argument add nothing of substance. In one case, counsel withdrew the question at issue. (Id. at 566-67) In the other, an objection was sustained, but counsel proceeded to elicit the substance of the information in response to subsequent questions. (Id. at 542-43) At no point did any of the defendants make an offer of proof except insofar as (a) the colloquy at pages 481 through 483 of the transcript indicated an intention to prove that Interpool had sold equipment to Haute in transactions in which Haute's interest was disclosed, and (b) the Court was generally aware that the defense wished to establish that certain Interpool insiders had engaged in related party transactions with Interpool which were disclosed in Interpool's SEC filings.
In these circumstances, the Cuneo Defendants' motion for a new trial on the ground that the Court improperly excluded relevant evidence is without merit. The question as to the dealings with Haute was not even asked on their behalf and they therefore have no standing to complain of the ruling sustaining the objection. More basically, evidence that Interpool engaged in related party transactions with others, whose interests were known to the company and disclosed to its shareholders, simply was not relevant.
The basic issue in this case was whether Cuneo and Patterson breached their duties to and defrauded Interpool by engaging in self-dealing transactions in which their personal interests were concealed.
Fully disclosed and approved self-dealing transactions by other Interpool personnel in utterly independent transactions simply had no bearing on the issues in this case.
The contention that such evidence was relevant to show that Cuneo lacked the requisite fraudulent intent is frivolous, as no reasonable person could conclude from Interpool's fully informed agreement to engage in disclosed related party transactions that it was appropriate to engage in self-dealing in which one's interest was concealed. See Tucker Anthony Realty Corp. v. Schlesinger, 888 F.2d 969, 974 (2d Cir. 1989) (consent to engage in self-dealing must be clear and explicit). In any case, the prejudicial effect of going into those transactions, in terms of waste of time and jury confusion, substantially outweighed any marginal relevance such evidence might have had. (See Tr. 478-83) In consequence, the evidence was properly excluded under Rules 402 and 403.
The Damages Instructions
Cuneo argues that the Court incorrectly charged that Interpool was entitled to recover all compensation paid to Cuneo during any period during which he breached his fiduciary duties to Interpool if the jury found, as it did, that he breached his fiduciary duty to Interpool. He contends, relying on RESTATEMENT (SECOND) AGENCY §§ 456, 469 (1957), that the only compensation that Interpool was entitled to recover was that paid with respect to specific transactions tainted by his breach. He is mistaken.
The Court charged in pertinent part as follows: