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Delaware Court Rejects Use of a Corporation as an Expert Witness

In late February, the Delaware Chancery Court was forced to consider whether or not a corporation could serve as an expert witness in a dispute over the valuation of a business.  Although corporations can be considered a legal person under other areas of legal doctrine, the Delaware court decided against extending personhood to corporations for the purpose of expert witness testimony.

Corporation Submits Expert Witness Report

In In re Dole Food Co, Inc. Stockholder Litigation the Delaware Chancery Court was asked to settle a dispute that arose over a valuation of stock between Dole and its controlling shareholder, David Murdock.  As part of the stock analysis, Dole was to submit a valuation of its business assets, but did not do so to Murdock’s satisfaction.  In response, Murdock hired Stifel, Nicolaus & Company Incorporated to conduct an independent review of Dole’s value and submit an expert witness report to aid the court in its decision.

The expert witness report submitted by Stifel was jointly signed by Stifel executives Seth Ferguson and Michael Securro, two ranking officers in the company.  Although Mr. Ferguson claimed primary responsibility for the contents of the report submitted by his company, he maintained that he was not hired as an expert witness to testify during trial and that Stifel was the official expert of record represented by the report.  Both Murdock and Ferguson argued Stifel was the expert hired to provide a value assessment of Dole’s assets for purpose of the trial, and the actual humans connected to the report were only connected as agents of Stifel, Nicolaus & Company.

Classifying a corporation as a person is not unheard of in the legal community.  Corporations have been considered “people” under campaign finance laws by the Supreme Court, and other arenas of law and economics similarly consider corporations to be treated as a person because of their ability to contribute to, and influence, legal and economic markets.  Classifying corporations as people allows the law to regulate and exercise authority over them without the necessity of separate rules.  Given the existing legal precedent for treating a corporation as a person, it is not surprising that a party make the attempt to extend the classification to expert witnesses, however, the Delaware Chancery Court declined the invitation and rejected Stifel as a viable expert in Murdock’s shareholder case against Dole.

Delaware Court Rules Corporations Cannot be Expert Witnesses

The Delaware Court acknowledged that corporations are often treated as “people” for legal and economic persons, but made an important distinction in the case of expert witnesses because all witnesses are required to testify from personal knowledge.  Further, any witness, including experts, must be able to take an oath or make affirmation to testify truthfully, have memory refreshed if need be, and either hear, or be sequestered from, the testimony of other witnesses.  Emphasizing this point, the Court wrote, “Lacking a voice, a corporation cannot testify.  Lacking ears, it cannot hear.  Lacking a mind, it cannot have personal knowledge or a memory to be refreshed.  Lacking a conscience, it cannot take an oath or provide an affirmation.”  Given this “incorporeal nature” of corporations, they cannot on its own do any of the things that witnesses are required to do.

The Court went on to point out that beyond failing to satisfy the requirements of witnesses in general, corporations also fall short of the standards required of expert witnesses.  According to the rule of evidence guiding expert witness requirements, an expert must be able to perceive facts and data, and to be qualified by “knowledge, skill, experience, training, or education.”  The Court stated that corporations can have attributes or culture, they cannot gain knowledge or acquire skills.  Nor can corporations interpret data or address problems with its analysis while questioned on the stand.

The Court acknowledged that agents for a corporation, such as Mr. Ferguson for Stifel, can bind corporations and be called to testify on behalf of a corporation, the inability of a business to satisfy the human elements required of an expert witness ultimately led to the decision that Stifel could not testify.  The Court concluded by allowing Mr. Ferguson to serve as the expert witness instead of Stifel, but would not allow the corporation to be the expert in the case.