Delaware Court of Chancery Places Biological and Non-Biological Persons on the Same Footing Regarding Trial Testimony

Where one party to a lawsuit is a business entity or other organization, the other party to the lawsuit may take the organization’s pre-trial deposition testimony on specified topics by questioning a witness designated by the organization.

Where one party to a lawsuit is a business entity or other organization, the other party to the lawsuit may take the organization’s pre-trial deposition testimony on specified topics by questioning a witness designated by the organization. Rule 30(b)(6) of the Delaware Court of Chancery Rules (like Rule 30(b)(6) of the Federal Rules of Civil Procedure) requires the designated person to testify as to matters “known or reasonably available to the organization.” That means that the organization must designate a human witness who already possesses the organization’s “institutional knowledge” or it must educate a witness to the point that he or she is able to so testify.

It sometimes happens, however, that the designated witness lacks complete knowledge of the specified topics and is unprepared to testify or, worse yet, that the witness’s knowledge is inconsistent with the organization’s true institutional knowledge. The question then arises whether the organization should be bound by the witness’s deposition testimony or whether it should be allowed to supplement or correct the testimony at trial.

In ADT Holdings, Inc. v. Harris, C.A. No. 2017-0328-JTL (Del. Ch. Sept. 7, 2017), Vice Chancellor J. Travis Laster of the Delaware Court of Chancery ruled that organizations, or “non-biological persons,” should have the same opportunities to correct or supplement their testimony as “biological persons.” In ADT Holdings the plaintiffs filed a pre-trial motion in limine seeking to preclude the corporate defendant from offering evidence that “contradicts or seeks to expand” the deposition testimony of its designated witness. The plaintiffs urged the Court to adopt the view held by a minority of federal courts that treat Rule 30(b)(6) testimony as “something akin to a judicial admission—a statement that conclusively establishes a fact and estops an opponent from controverting the statement with any other evidence.” Id. at 2 (quoting State Farm Mut. Auto. Ins. Co. v. New Horizons, Inc., 250 F.R.D. 203, 212 (E.D. Pa. 2008)). Those courts have concluded that binding organizations to their Rule 30(b)(6) testimony prevents them “from thwarting inquiries during discovery, then staging an ambush during a later phase of the case.” Id. at 3 (quoting Rainey v. Am. Forest & Paper Ass’n, Inc., 26 F. Supp. 2d 82, 95 (D.D.C. 1998)).

Vice Chancellor Laster rejected the plaintiffs’ argument, instead adopting the view of a majority of federal courts that allow a Rule 30(b)(6) designated witness to “testify differently from the way he or she testified in a deposition, albeit at the risk of having his or her credibility impeached by the introduction of the deposition.” Id. at 4 (quoting R & B Appliance Parts, Inc. v. Amana Co., 258 F.3d 783, 786 (8th Cir. 2001)). The Court noted that allowing an organization to contradict the testimony of its own 30(b)(6) witness is consistent with Delaware Rule of Evidence 607 and its federal analog, which allow a witness’s credibility to be “attacked by any party, including the party calling him.”

The Court found that the purpose of Rule 30(b)(6) is “to afford comparable treatment to biological and non-biological persons” and place them “on the same footing” by allowing them to contradict their own testimony, only at the risk of losing credibility.

As a court that conducts only bench trials, and not jury trials, it is not surprising that the Court of Chancery would allow broad leeway in admitting evidence at trial, including evidence to contradict or supplement Rule 30(b)(6) testimony, relying on its own judgment to assign credibility to witnesses at trial. The lesson for corporations and other organizations in litigation is that, although they may be able to supplement or correct their testimony, they should thoroughly prepare their Rule 30(b)(6) witnesses so as to avoid loss of credibility at trial. The lesson for the other side is never to be satisfied with an unprepared Rule 30(b)(6) witness because the organization may be allowed to supplement the witness’s testimony at trial.

James G. (Jay) McMillan is a partner in the Wilmington, Delaware office of Halloran Farkas + Kittila LLP. He concentrates his practice in complex corporate and commercial matters, with a particular focus on litigation in the Delaware Court of Chancery. For more information on the firm, visit hfk.law.

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