Saturday, November 22, 2003

Two Opinions on the Uses and Abuses of Rule 701

To prove lost profits, corporate litigants sometimes offer lay opinion testimony from their officers and employees. The courts commonly permit such testimony, because the witness's experience with the company's affairs is thought to afford the requisite foundation in personal knowledge under Fed. R. Evid. 701. The Fifth Circuit has issued a published opinion declining to extend such latitude in a case where the witness was not a present or former officer, director, or employee. The witness in the Fifth Circuit case was merely the company's principal contact at a commercial lender, which had been planning to offer the litigant a construction loan in connection with a failed hotel deal. The trial court permitted the testimony, but the witness was held on appeal to lack sufficiently intimate acquaintance with the company's financial affairs to ground a lay opinion. In vacating the plaintiff's damage award and remanding for a new trial on damages, the panel distinguished precedents in which witnesses with affiliations analogous to those of employees or corporate officers (e.g., principal shareholders) have been permitted to opine on lost profits under Rule 701. One factor that may have influenced the outcome: after the the lay witness's opinion was successfully admitted ($8 million in lost profits), the plaintiff decided not to offer trial testimony from its previously designated damages expert ($4.3 million). See Dijo, Inc. v. Hilton Hotels Corp., No. 03-60010 (5th Cir. Nov. 20, 2003) (Jolly, Wiener, & Walter, JJ.).

In criminal cases, the distinction between lay and expert opinion assumes special significance, because under Fed. R. Crim. P. 16, the prosecution is required to afford pretrial summaries of expert testimony, but is under no such obligation for lay witnesses. But prosecutorial gamesmanship is not inevitably repaid with appellate reversal. The First Circuit has affirmed convictions from a massive six-month drug conspiracy trial in which the prosecution successfully offered opinion testimony from eight forensics examiners, two pathologists, and a ballistics witness, without having formally designated any of the witnesses as experts. The panel held that the forensic witnesses testified primarily as fact witnesses about their observations of the crime scene, and that the prosecution had made sufficient substantive pretrial disclosures concerning the other witnesses to negate any claim of prejudice. See United States v. Soto-Beniquez, No. 01-1619 (1st Cir. Nov. 20, 2003) (Selya, Coffin, & Lynch, JJ.). (The link is to the second of two files into which Findlaw has split the opinion. The First Circuit's site appears to be down at the moment.)
Fed. R. Evid. 702: If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.