The U.S. Court of Appeals for the Fourth Circuit issued an opinion on February 28, 2017 that strengthens the ability of small business owners to establish commercial damages in cases filed in federal court without necessarily having to pay extraordinary sums to a retained expert witness.
In Lord & Taylor, LLC et al. v. White Flint L.P., No. 15-1995, the Fourth Circuit found that an opinion regarding projected costs to a business entity could be offered through the testimony of a lay witness employed by the plaintiff business, so long as the testimony was based on the witness’s personal knowledge obtained by his “day-to-day” employment.
The opinion relies on Federal Rule of Evidence 701, which allows a so-called “lay witness” (i.e., one who has not been qualified as an expert in the field) to testify to an opinion where it is “(a) rationally based on the witness’s perception; (b) helpful to clearly understanding the witness’s testimony or to determining a fact in issue; and (c) not based on scientific, technical or other specialized knowledge within the scope of Rule 702.” Courts have used Rule 701 in the past to permit the owner or an officer of a business to testify to the value or projected profits of a business. See Advisory Cmte. Notes to Fed. R. Evid. 701.
In the Lord & Taylor case, the Fourth Circuit applied Rule 701 to allow an employee of Lord & Taylor who regularly oversees their construction projects to opine on the costs of reconfiguring a Lord & Taylor store to convert it from a mall anchor to a stand-alone store. The Court found that the witness had approximately 38 years of experience overseeing such projects on behalf of Lord & Taylor, and therefore had sufficient foundation to offer the opinion testimony. The employee testified that construction costs would total between $30 and $36 million. The Fourth Circuit upheld the jury’s verdict awarding Lord & Taylor $31 million.
Don’t Try This At Home
Putting on evidence of commercial damages through a lay witness is something of an advanced maneuver in litigation. First, there is a very fine line between the testimony allowed of a “lay witness” employed by the company permitted under Rule 701 and an employee who must be qualified as an expert before testifying, even if he or she does not have to provide a written report. The experience of litigation counsel will be put to the test in determining how to structure the testimony as true “lay” testimony, or making the appropriate disclosures to have the employee qualified as an “expert” without having to expend the time and money needed to produce an expert report.
Second, “lay opinion” under Rule 701 still requires appropriate foundation evidence. The Fourth Circuit’s recent decision should not be construed as an invitation for litigators to attempt to get in otherwise inadmissible evidence through the expedient of throwing their client’s Chief Financial Officer or small-business owner on the witness list on the eve of trial. Planning for the admission of lay evidence should start early in the case. The person issuing the “lay opinion” will most likely have to be deposed, and their work papers or other documents underlying their opinion will have to be produced in discovery.
Finally, preparing lay witnesses to give opinion testimony at trial can be challenging. Lay witnesses often lack the experience with courtroom procedures to withstand a withering cross-examination of their opinion, particularly if the opinion has not been carefully supported by documents produced in discovery. To prevent a lay witness from crashing and burning at trial, an experienced litigator will assist the lay witness in shaping and supporting the opinion early in the case, so that the witness does not put himself or herself out on a limb at trial.
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About The Author
Kathryn F. Abernethy has been defending companies in commercial lawsuits for 16 years. Her experience spans State and Federal courts, appeals, arbitration and mediation. From 2013 through 2016, she was a contributor to the “Economic Damages Expert: Commercial Losses” section of the annual Expert Witness Answer Book published by Practising Law Institute (PLI). Ms. Abernethy is the owner of Abernethy Law PLLC based in Central North Carolina, and can be reached at firstname.lastname@example.org.