IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

Tll\/lOTHY GLICK and RENEE
GLICK

Plaintiffs,

v.
C.A. No. l2624-CB

limited liability company, THE
BLEACHERS CORPORATION, a
DelaWare corporation, and SAMUEL
KLEIN

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KF PECKSLAND LLC, a Delaware )
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Defendants. )
RULINGS ON POST-TRIAL EVIDENTIARY OBJECTIONS

WHEREAS:

A. On April 2l, 2017, defendants Samuel Klein and KF Pecl<sland LLC
filed a motion in limine seeking to exclude the admission of certain evidence at trial
(Dl<t. 59), Which defendants opposed on April 24, 2017 (Dl<t. 67);

B. On April 26, 20 l 7, the Court denied the motion in limine, but permitted
the parties to present evidentiary objections during post-trial briefing, With the
understanding that any evidentiary objection not asserted in the post-trial briefs
Would be Waived (Dl<t. 72 at 4-6);

C. ln their answering brief, defendants objected to the admissibility of

three categories of documents (Dl<t. 77);

D. The first category consists of (a) the transcript of a hearing in FHC
Dcmbury LLCv. LJA (Danbury), LLC, C.A. No. 2855-VCS (July 20, 2007), in Which
then-Vice Chancellor Strine imposed sanctions on Klein after finding that he “stole”
$178,()00 from the account of a business owned 50/50 by Klein and another person
“in clear violation of’ the Court’s status quo order (JX20l 20, 27), and (b) the
transcript of a deposition Klein gave in the same case (JX204, Dl<t. 75 EX. A);

E. The second category consists of two documents concerning a nursing
home Klein operated from 1996 to 2001 : (a) a press release issued by the New Yorl<
Attorney General stating that Klein had pled guilty “to the crime of Wilful Violation
of the Public Health Lavvs” concerning his operation of the nursing home (Dl<t. 75
EX. B) and (b) an article in the NeW Yorl< Times concerning the same nursing home
(Dl<t. 75 EX. C); and

F . The third category is a complaint Jodi J ones and nine other individuals
filed in the United States District Court for the Southern District of NeW Yorl< on
l\/larch 16, 20l7 (Case l:l7-cv-Ol94l-PGG) asserting, among other things, claims
for securities fraud and common law fraud against Klein, KF Pecl<sland LLC, and
Bleachers concerning their purchase of an interest in KF Pecl<sland (Dl<t. 75 Ex. D);

IT IS HEREBY ORDERED, this l7th day of November, 20l7, as

folloWs:

l. Plaintiffs seek to introduce the documents in the first category
(concerning the Danbury litigation) for two purposes: (a) under Rule 404 to
challenge Klein’s credibility and to show a “modus operandi, a pattern of conduct
that includes schemes and intentions to defraud others, treatment of money
belonging to others as his own, and a disregard for sworn oaths”;l and (b) under Rule
613 to show prior inconsistent statements Defendants object to the admission under
Rules 402, 404, 405, and 608. This objection is sustained in part and overruled in
part for the reasons explained in paragraphs 2-5 below.

2. Danburv_Rule 404. Plaintiffs cannot introduce the trial transcript

 

under Rule 404(a)(3) to challenge Klein’s credibility because the transcript
constitutes extrinsic evidence which, under Rule 608, cannot be introduced “for the
purpose of attacking or supporting the witness’ credibility.” Nor can plaintiffs
introduce the trial transcript under Rule 404(b).

3. Rule 404(b) provides that evidence of other “acts is not admissible to
prove the character of a person in order show action in conformity therewith” but

may be admissible “for other purposes.” Under Getz v. Stcite2 and its progeny, the

 

l Pls’ Post-Trial Reply Br. 5 (Dl<t. 82).

2 538 A.2d 726 (1988). Although Getz was a criminal case, the standard it articulated
applies analogously in civil cases. See Mercedes-Benz of N. Am. ]nc. v. Norman
Gershman'$ Thl'ngs to Wear, 596 A.2d 1358, 1365 (Del. l99l) (noting that although
“Getz’s guidelines were developed for criminal proceedings and specifically related to
‘other crimes,’ they have analogous application to the admissibility of ‘other wrongs or
acts’ in civil cases, including tort actions and . . . fraud or inisrepresentations.”).

3

Court is to consider five factors in determining admissibility under Rule 404(b): (1)
that the evidence is “material to an issue or ultimate fact in dispute”; (2) that “the
evidence must be introduced for a proper purpose” under Rule 404(b); (3) that the
acts must be “proved by plain, clear, and conclusive” evidence; (4) that the other
acts must not be “too remote in time”; and (5) that the probative value of the evidence
is weighed against its unfair prejudicial effect.3 When balancing the probative value
of the evidence against prejudicial effect under the fifth prong, a court is to weigh
the factors identified in Deshz`elds v. State.4

4. Applying the foregoing factors, l find this Court’s imposition of a
sanction against Klein for violating a status quo order by taking corporate funds for
his personal use is not admissible for the purpose proffered. Although the act was
proven by plain, clear, and conclusive evidence so as to warrant the imposition of a

judicially-imposed sanction and is not too remote in time,5 the act of taking money

 

3 Morse v. State, 120 A.3d 1, 8 (Del. 2015) (citations oinitted) (discussing five factors a
trial court is to consider under DRE 404(b)).

4 Deshl'elds v. State, 706 A.2d 502, 506-507 (Del. 1998) (“(l) the extent to which the point
to be proved is disputed; (2) the adequacy of proof of the prior conduct; (3) the probative
force of the evidence; (4) the proponent's need for the evidence; (5) the availability of less
prejudicial proof; (6) the inflammatory or prejudicial effect of the evidence; (7) the
similarity of the prior wrong to the charged offense; (8) the effectiveness of limiting
instructions; and (9) the extent to which prior act evidence would prolong the
proceedings.”).

5 Courts analogize the remoteness prong of Getz to the ten-year time limit contained in
Rule 609(b). See Allen v. State, 644 A.2d 982, 988 (Del. 1992). The sanction this Court

imposed on Klein occurred on July 20, 2007, less than ten years before the trial of this
action, and defendants were put on notice that plaintiffs’ intention to use this evidence at

4

from a corporation in violation of a status quo order is not material to an issue or
ultimate fact in dispute in this case, which concerns whether Klein fraudulently
induced the Glicks to invest in Bleachers. Although plaintiffs purport to introduce
the extrinsic evidence to show “intent” or that Klein had a modus Operandz` for
treating others’ money as his own, however artfully it is phrased, the Glicks’ reason
for using this evidence appears to be for the purpose of providing evidence of Klein’s
character or a trait of his character (z`.e., dishonesty) for the purpose of proving action
in conformity therewith, which Rule 404(a) does not permit.

5. Danbury_Rule 613. Rule 613 provides that if a witness makes a prior
inconsistent statement or “does not clearly admit that he has made the prior
inconsistent statement, extrinsic evidence of such statement is admissible.”6 Klein
testified at trial he never “misapplied proceeds from bank loans before.”7 This
testimony is inconsistent with Klein’s deposition testimony in the Danbury
litigation, where Klein admitted that he submitted an affidavit to a bank for a
$300,000 loan to purchase furniture and fixtures for his joint partnership but instead

directed that the funds be wired to another company he controls “probably because

 

trial. See D.R.E. 609(b) (“evidence of a conviction more than 10 years old, as calculated
herein, is not admissible unless the proponent gives to the adverse party sufficient advance
written notice of intent to use such evidence to provide the adverse party with a fair
opportunity to contest the use of such evidence.”).

6 D.R.E. 613(¢).
7 Tr. 234-35 (Ki@in).

we were due money” and “money is a fungible commodity.”8 This part of Klein’s
deposition testimony in the Danbury litigation is admissible to show a prior
inconsistent statement under Rule 613.

6. Plaintiffs offered the documents in the second category (concerning
the nursing home Klein operated) to demonstrate “Klein’s willingness to lie.”9
Defendants object to the admission of these documents under Rules 402, 404, 405,
and 608. The objection is sustained. Evidence relating to the second category is
inadmissible for the reason proffered because Rules 404(a)(3) and 608 operate
together to prohibit the introduction of extrinsic “[e]vidence of a person's character
or a trait of his character.”10

7. Plaintiffs offered the third category (the Jones complaint) for two
purposes: (a) under Rule 404(b) to “undermine[] Klein’s credibility and establish[]

that Klein employed a deceitful scheme against other would-be Bleachers investors

nearly identical to that against the Glicks” and (b) under Rule 613 to show that Klein

 

8 JX204 192-201, 232-234.
9 Pls.’ Post-Trial Reply Br. 5.

10 D.R.E. 404. Although Rule 609(a) permits impeachment by evidence of a criminal
conviction if the crime was a “felony under the law under which the witness was convicted”
or “involved dishonesty or false statement,” the press release concerning Klein’s
conviction states simply that he plead guilty to “Wilful Violation of the Public Health
Laws” and it appears from the trial record that the conviction was for a misdemeanor. Tr.

227 (Klein).

“lied about those prior instances in his trial testimony in this case.”ll Defendants
object under Rules 402, 404, 405, and 608. The objection is sustained

8. Evidence relating to the J ones complaint is inadmissible under both of
plaintiffs’ theories. To be admissible under Rule 404(b), evidence of “other [acts]
must be proved by evidence which is ‘plain, clear and conclusive.”’12 Here, the
allegations in the Jones complaint, although eerily similar to many tactics Klein
employed in this case, are unproven allegations from an unverified complaint that
do not rise to the level of plain, clear, and conclusive proof. Furthermore, extrinsic
evidence is only admissible under Rule 613 if there was a prior inconsistent
statement Here, there is no prior inconsistent statement because Klein admitted at
trial that the J ones complaint was filed against him.13

9. With respect to each of the foregoing three categories, nothing in this
order precludes the Court from considering Klein’s trial testimony on these subjects
that was not proven by the introduction of extrinsic evidence, such as his admissions
(a) that he pled to guilty to a criminal misdemeanor for failing to maintain adequate
nursing staff at a nursing home he operated and (b) that he was sanctioned by then-

Vice Chancellor Strine. With respect to the latter issue, the Court also may draw

 

ll Pls.’ Post-Trial Reply Br. 4, 6.
12 Getz, 538 A.2d at 734 (quoting Renzi, 320 A.2d at 712).
13 Tr. 279 (Klein).

logical inferences concerning Klein’s credibility with respect to his denial of ever

seeing the transcript of that ruling or of knowing the reason for th

 
 
   

 

zhancellor

