In breach of fiduciary duty trial on the issue of plaintiff's lost profits, no error in admitting testimony by chief financial officer of plaintiff's parent corporation, rather than testimony by the new chief executive officer of the plaintiff's subsidiary; despite the testifying witness's claim that he lacked knowledge of the underlying documents on the plaintiff's lost profits, he did have personal knowledge of its profitability and had been designated as providing lay opinion testimony on this issue in a pretrial order, in Meaux Surface Protection, Inc. v. Fogleman, 607 F.3d 161 (5th Cir. May 17, 2010) (No. 09-20234)
Under FRE 701, courts have permitted lay testimony regarding complex concepts like lost profits where the witness is the owner or officer in charge (and he or she testifies not merely repeating what others have told the witness). See, e.g., United States v. 68.94 Acres of Land, More or Less, 918 F.2d 389, 397 (3d Cir. 1990) (noting that the owner of a property generally has the “special knowledge” requisite to testifying on the property's value but that they simply cannot just repeat “another's assessment”). However, what if there might be several witnesses with knowledge of the issue, such as of lost profits? A recent Fifth Circuit case notes that it boils down to the trial judge's discretion as to who can provide a sound base for testifying.
In the case, plaintiff Meaux Surface Protection (“Meaux”), a maritime sandblastine business, sought damages for an alleged breach of fiduciary duty by Defendants Fogleman, Kotrla, and CleanBlast, LLC. Fogleman and Kotrla had been officers of Meaux, whom they left to form a competing company CleanBlast. The plaintiff alleged that the defendants had "surreptitiously and unlawfully poached employees and clients while working for Meaux. Defendants removed the case to federal court. Meaux ... alleged ... that its 'loss of business' due to defendants' actions was 'significant.'” Meaux , 607 F.3d at 165.
In appealing the jury's verdict for the plaintiff, the defendants claimed that the trial judge improperly allowed them to be “'ambushed' by Meaux's decision to have Carsten Ennemann [chief financial officer of plaintiff's parent corporation] testify about lost profits, and not Rene Godoy, who took over as president of Meaux after [defendant] Fogleman's resignation" as President of Meaux in order to form competitor CleanBlast. The defendants argued that "when they deposed Ennemann, he denied having knowledge of the underlying documents Meaux would rely on at trial to prove its quantum of damages. At trial, the court rejected defendants' assertion that allowing Ennemann to present such evidence was unfair surprise. Counsel [for defendant Fogelman] had the relevant documents prior to Ennemann's deposition and could have questioned him to plumb his familiarity, or lack thereof, with Meaux's operations and profitability. At trial, the district court allowed counsel to engage in voir dire to test Ennemann's knowledge. The court concluded that Ennemann had personal knowledge of Meaux's profitability, which he garnered in his capacity as CFO of Muehlhan [plaintiff Meaux's parent company]." Meaux, 607 F.3d at 168.
The plaintiff's voir dire established that their proffered witness on lost profits was qualified to offer a lay opinion. The circuit also rejected the defendant's argument that the witness was not qualified to testify on lost profits, noting that:
"Meaux timely designated Ennemann in the pretrial order as a fact or lay opinion witness. As such, the heightened disclosure requirements for an expert witness were not implicated. Ennemann works on the starboard side of the Atlantic and does not personally observe Meaux's day-to-day operations. He does not paint oil rigs or sandblast ships. However, as Chief Financial Officer, he is intimately familiar with Meaux's financial performance. It would defy reason to say that the district court abused its discretion in allowing him to testify about such matters."
Meaux, 607 F.3d at 169 (citing United States v. Valencia, 600 F.3d 389, 416 & n.4 (5th Cir. 2010) (corporate officer who provides projections or opinions about changes in profits is not an expert witness, but rather, a lay witness under FRE 701); Tex. A & M Research Found. v. Magna Transp., Inc., 338 F.3d 394, 403 (5th Cir. 2003) (error in excluding estimate of “the lost-ship-time portion of the affidavit” under Rule 701 “was an abuse of discretion” but error was harmless)).
Nor did the circuit treat the defendant's argument of unfair surprise any more favorably:
"[T]here was no surprise in Meaux's election to call Ennemann to testify, and not Rene Godoy. Meaux designated Ennemann in the pretrial order as a witness 'familiar with the financial damages sustained by Meaux.' Merely because Godoy could have also testified about these matters as well does not mean he had to."
Meaux, 607 F.3d at 169 (citing Fed. R. Civ. P. 26(a)(2)).
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