No Per Se Barrier To Lay Opinion On Legal Or Defendant's Intent Issues

In real estate fraud trial, admission of testimony by witnesses that described defendant's activities as involving "fraud" or "misrepresentation" was not plain error under FRE 704; lay witnesses can offer "their opinions and inferences, even about ultimate issues in the case” and “[i]n some situations, even ... as to the mental state of another”; limited by whether the opinion is (1) "helpful" to jury under FRE 701, and (2) "not meaningless assertions" under FRE 704 limitations and (3) does not violate FRE 403 balance of probative value with prejudicial effect, in United States v. Locke, __ F.3d __ (7th Cir. June 21, 2011) (No. 10–1351)

It is hard not to confuse why it might seem that a lay witness at times has more latitude than an expert witness. This is particularly true with regard to the FRE 704 limitations on ultimate legal testimony and opinions as to a person's mental state. In a recent case, the Seventh Circuit made a careful analysis of the tension in this area of the FRE. It's conclusion of no error in admitting a lay witness's opinion on ultimate issues or on a defendant's mental state was limited, it warned. The circuit might have decided differently had the defendant objected contemporaneously, to alert the court to any problems. In the absence of adequately preserving the error, the circuit's application of the FRE 103(d) "plain errror" standard resulted in affirmance of the defendant's conviction.

In the case, defendant Locke operated a realty and broker organization which seemed to stay in business using "questionable and, ultimately criminal" practices, such as using false invoices from companies that did not exist, submitting forged documents in support of loan applications, including use of fake Social Security Numbers (SSN). The defendant was eventually charged with wire fraud.

At trial, the prosecution decided to present evidence only on five counts of wire fraud -- specifically involving real estate transactions by the defendant -- all five of these properties that the defendant handled fell into "foreclosure within months" of the defendant's activities and in each the defendant had submitted a loan application using "falsified information and supporting documentation." On these wire fraud counts, the government bore the burden of proving, among other things, that the false information she provided or withheld was "material" -- that the information could have influenced the fraud victims' decisions. The defendant raised a "good-faith" defense, insisting "she had merely relied on the instructions in [a] credit-repair book, never believing her actions to be illegal or deceitful." Locke, __ F.3d at __.

The jury did not buy her defense and convicted the defendant on all wire-fraud charges. She appealed, contending that the court erred by allowing the prosecutor to introduce lay opinion testimony that touched on the witnesses' opinions on "legal conclusions" and on the defendant's "intent." As outlined by the circuit, this testimony was evaluated for plain error because the defendant neglected to object to it contemporaneously under FRE 103(a). Several examples of the testimony the defendant challenged on appeal included:

  • A lay witness who was a with a "wholesale lender" involved with the defendant was asked if his business "would have funded" defendant's loans had it realized the Social Security Numbers on the loan documents were fake. The witness testified that it would influence his business as the defendant supplying false numbers "would just be a blatant misrepresentation of the borrower’s credit.” Another mortgage broker testified similarly and when asked about the false Social Security Numbers provided by the defendant, opined that "it would have killed the loan” ... "It’s fraud" and that that was because the SSN is "how we pull the credit" and "see if the person can pay for the home." A third employee of a lending agency described the impact of the defendant using false SSNs as "fraudulent information on the loan application.” She opined that with the discrepancies in "how Locke reported her income on applications to different lenders," had this been known "it would have changed the outcome because 'fraudulent information may have been provided' and justified denial of the loan. Locke, __ F.3d at __ (emphasis added).
  • A mortgage broker, also testifying as a lay witness with experience in having processed the defendant's loan applications, testified that had the defendant provided the true income on the application, rather than the fake one, that it would be considered by the brokerage as "some misrepresentation.... [as t]here was . . . quite a variance in income . . . which would trigger to the underwriter that there was something not exactly correct."Locke, __ F.3d at __ (emphasis added).
  • One lay witness who worked for the mortgage placement firm used by the defendant responded to questions about use of false numbers as resulting in rejection by the firm as "if the lender had known of a falsified address in the application packet because 'there’s obviously some what we call funny business or misrepresentation.” Similarly, another employee of the placement firm opined that the firm would not have forwarded the defendant's application to clients because the fake numbers meant "we wouldn’t have . . . [b]ecause it is obviously a misrepresentation of the facts with a [SSN] that does not belong to our applicant." Locke, __ F.3d at __ (emphasis added).

The circuit dismissed the defendant's challenges to the admission of this lay testimony, commenting there was no error because:

The Federal Rules of Evidence limit—but do not bar—lay witnesses’ ability to testify as to their opinions and inferences, even about ultimate issues in the case. In some situations, even “lay opinion testimony as to the mental state of another is indeed competent,” and it is within the discretion of the trial judge to determine whether such testimony is helpful under Rule 701 and appropriate under Rule 403’s balancing test."
Locke, __ F.3d at __ (citing Bohannon v. Pegelow, 652 F.2d 729, 732 (7th Cir. 1981) (lay opinion testimony subject to FRE 403 balancing); United States v. Bogan, 267 F.3d 614, 619 (7th Cir. 2001) (lay opinion touching on defendant's mental state is permissible)).

The circuit acknowledged that the evidence "Rules treat inferential testimony of expert and lay witnesses differently. The second half of Rule 704 provides, “No expert witness testifying with respect to the mental state . . . of a defendant in a criminal case may state an opinion or inference as to whether the defendant did or did not have the mental state...constituting an element of the crime charged....” Accordingly, “[s]ince neither Rule 701 nor Rule 704(a) limits the subject matter of lay opinion testimony, there is no theoretical prohibition against allowing lay witnesses to give their opinions as to the mental states of others.” Locke, __ F.3d at __ n.2 (citing United States v. Rea, 958 F.2d 1206, 1214-15 (2d Cir. 1992).

Applying these principles, the circuit examined:

  • Whether the lay witness's opinion testimony was helpful to the jury under FRE 701. The circuit found the testimony was helpful and the lay witnesses' testimony was admissible as they could opine on the defendant's intent as the "witnesses were officers or employees of the mortgage brokerages or lenders involved in” the defendant's transactions, “their opinions about the [defendant's] falsehoods' influence[d] ... the loan decisions [and] would have helped the jury reach a conclusion regarding the materiality element of the wire fraud charges.” Indeed, the circuit ventured to explain that the lay witness's opinions were not necessarily classified as legal conclusions. It was admissible under FRE 701 as the opinion testimony was "helpful to the jury and not meaningless assertions."
  • Whether lay witnesses opined on ultimate legal issue or on defendant's mental state, under FRE 704. The circuit had discussed how the testimony really was not dealing with the defendant's mental state, nor was their testimony about the defendant's mental state. Here, the circuit noted that while the witnesses used various words (e.g., "misrepresentation," "false," or "fraudulent") these words could "often carr[y] legal connotations," but in context of the case they did not convey a legal meaning but rather helped succinctly describe the evidence. The testimony described another element of the crime of wire-fraud: materiality. "[T]heir opinions could not be classified as legal conclusions, and did not speak of defendant's intent," noted the circuit. Accordingly, FRE 704 posed no barrier to admissibility.
  • The Balance of Probative Value And Prejudicial Potential Under FRE 403. This third consideration also weighed against the defendant. The circuit acknowledged that "the witnesses’ use of 'fraud' and 'misrepresentation' may have confused the jury as to wire fraud’s elements," but that the court's jury instructions mitigated any possible prejudice. Any possible juror confusion "was extinguished when the district court appropriately instructed the jury regarding wire fraud. It expounded on specific intent, explaining both that Locke must have intended to deceive or cheat the victims to gain money or property and also that good faith would be inconsistent with guilt. The district court made clear that, to convict, the jury had to find that Locke “realized what she was doing, was aware of the nature of her conduct, and did not act through ignorance, mistake or accident.” Locke does not argue that the jury was unable to follow the district court’s instructions, so we presume its verdict comported with those instructions. Locke, __ F.3d at __ (citing United States v. Ochoa-Zarate, 540 F.3d 613, 620 (7th Cir. 2008).

The circuit also explained the limited scope of its decision. Had the circuit not had to apply a plain error standard under FRE 103(d), the circuit might have found the district judge abused his or her discretion, particularly had the defendant contemporaneously objected:

But the bottom line is that Locke never objected to the testimony, let alone alerted the district court to her underlying concerns. Under the circumstances, we certainly cannot conclude that any error in the district court’s failure to strike the testimony sua sponte was “clear or obvious, rather than subject to reasonable dispute,” as the plain error doctrine requires. Accordingly, we reject Locke’s contention that the witnesses should not have been allowed to testify regarding their opinions because they reached legal conclusions and spoke of her intent.
* * *
In summary, we do not find that the district court plainly erred in failing to strike the witnesses’ challenged testimony sua sponte. The testimony was helpful to the jury, as it shed light on the materiality element of wire fraud. The testimony neither told the jury what conclusion to reach nor instructed the jury that wire fraud is a strict liability crime. Further, the overwhelming evidence in the case would have led to Locke’s conviction even in the absence of this testimony. Accordingly, her convictions must stand.
Locke, __ F.3d at __ (citing Puckett v. United States, ___ U.S. ___, 129 S. Ct. 1423, 1429 (2009).

Federal Rules of Evidence