Theory and Practice in the Courtroom: Hearsay in Business Litigation

By Daryl Williams

Exclusion of hearsay in the courtroom is like a knee-jerk reaction by opposing counsel and a similarly quick response by the judge. “What did he say?” is a question opposing counsel and the judge will think calls for hearsay if the guy talking is not a party to the lawsuit. So, the trial lawyer thinks, he will recast the question to “What did you understand?” Is that not hearsay if the only way the understanding came was by listening to what that non-party individual said?

How about this: the president of a company fires a superintendent after he hears from various employees that this superintendent was speaking to others in a derogatory manner about customer employees and behaving in a manner that did not meet the standards of the company. The superintendent sues for wrongful termination so the company’s lawyer asks the president on the stand why he fired the superintendent. The reason the superintendent was fired, of course, is because the president believed what he heard about the superintendent.

Q. Why did you fire him?
A. Because I was not happy when I heard bad reports from a customer.
Q. Who?
A. Joe Schmow.
Q. What did Mr. Schmow tell you?
OBJECTION: Hearsay.

Is it hearsay? Can the president relate what he was told that formed the basis of his decision? After all, that is why he fired the superintendent.

Some judges are going to rule that this is blatant hearsay and inadmissible, but others are going to let it in. Moreover, the courts ruling will be affected by—this is human nature—the court’s view of the case. The judge, even one on the bench for fifteen years, may disregard the technicalities of the hearsay rule if it suits him, the following is an actual transcript:

BY COUNSEL: Well, your Honor, again, we’re not using any of this evidence for the truth of the matter, other than this is the truth of the basis upon which we made a decision, which is not a hearsay problem.
THE COURT: All right. You can try to say that out loud to the jury if you want, but I’m going to laugh when you say that to me. You can split that hair and have somebody actually make that mental gymnastic leap. Good luck. I understand the damage that it does . . . .

The question, then, becomes how the lawyer educates or confuses the judge as to the nature of hearsay. Not being prepared for this type of nuance can be the difference between winning and losing. The trial lawyer has to remember that the trial judge does not try very many commercial cases, and those that he does try usually do not involve this sort of nuanced issue.

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