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Chandler Tosses Coates: The Use of Academic Legal Experts in Delaware Courts

Key portions of Harvard law professor John Coates’ well-publicized $950/hour expert report in the Cerberus-United Rentals litigation were tossed by Delaware Chancellor William Chandler in an opinion that gets more than a little testy:

After thoroughly reviewing Professor Coates’s report and both parties’ briefs, I find that the portion of the report that describes buyout deal structures is admissible as factual testimony and that the remainder of the report that purports to explain drafting practices is inadmissible as impermissible legal opinion.

. . . . It is therefore obvious that defendants’ expert intends to instruct this Court on how such “succinct but legal terms of art” should be interpreted.⁷ This Court, however, has made it unmistakably clear that it is improper for witnesses to opine on legal issues governed by Delaware law.⁸ It is within the exclusive province of this Court to determine such issues of domestic law.⁹ I, in interpreting the disputed contractual provisions at issue in this case, need not—indeed, may not—look beyond the well-established precedent of the Delaware courts, with which I am intimately familiar. The report, by opining on Delaware law and the application thereof under the guise of informing the Court of drafting “customs and trends,” impermissibly encroaches on the province of this Court.”¹⁰

⁷ Remarkably, in his report, Professor Coates appears to excuse practices that can only be described as inartful drafting as “one of the ways that the parties [to buyout negotiations] commonly economize on time and costs.” Id. Professor Coates states that the parties, in contravention of basic principles of contract interpretation and drafting, use certain phrases (e.g., “subject to” or “notwithstanding”) so as to “avoid the need to attempt to synthesize every provision of every related agreement that is or may be partly or wholly in conflict with the provision in question.” Id. Not surprisingly, disputes often arise precisely because of provisions that are “partly or wholly in conflict” with each other.

⁸ See, e.g., In re Walt Disney Co. Derivative Litig., No. 15452-NC, 2004 WL 550750, at *1 (Del. Ch. Mar. 9, 2004) (“In this Court, witnesses do not opine on Delaware corporate law.”).

⁹ See, e.g., id. (citing Itek Corp. v. Chicago Aerial Indus., Inc., 274 A.2d 141, 143 (Del. 1971); N. Am. Philips Corp. v. Aetna Cas. and Sur. Co., No. 88C-JA-155, 1995 WL 628447, at *3 (Del. Super. Apr. 22, 1995); State v. Hodges, Nos. CR 95-12-0405, CR 95-12-0406, 1996 WL 33655975, at *2 (Del. Super. Sept. 10, 1996)).

¹⁰ The report attempts to instruct this Court on interpretation of the agreement, which is the ultimate issue of law in this case. As this Court has concluded previously, the “proposed testimony [is] inadmissible not merely because it embraces an ultimate issue, but also because it embraces domestic law.” In re Walt Disney Co. Derivative Litig., 2004 WL 550750, at *1 (relying on Rule 704 and Itek, 274 A.2d 141) (emphasis in original).

There are some surprisingly sharp digs in that passage. The use of “remarkably” in footnote 7. The twice repeated crack about Coates seeking to “instruct” the Court. Did Chandler get up on the wrong side of the bed that morning? Was there something about the tone of the report that set Chandler off? (Having read the report, it seems perfectly respectful and professional.) Or is Chandler just fed up with legal academics trying to pass themselves off as expert witnesses?

Indeed, this decision reaffirms the message Chandler sent when he tossed key parts of Deborah DeMott’s report in the Disney litigation; namely, that he’s not interested in letting law professors provide expert testimony on the law. As Larry Ribstein observed of that episode:

Chancellor Chandler’s conclusion squares with what I know about the general U.S. evidence rule. Given the Chancellor’s conclusion in Disney, when should a law professor’s testimony be admissible? When it provides a comprehensive review of the case law? Presumably the court could read the professor’s treatise. If the professor is being asked to apply the treatise to the law, then isn’t she doing what the court should be doing? To be sure, FRCP 704 provides that the testimony is not excludable solely on that ground, but what if testifying on the ultimate issue is the only thing the professor is good for?

Like a lot of law professors, I’ve occasionally done expert witness work (although I’ve pretty much given it up in recent years) and I’ve always wondered why judges out here in California seem willing to allow such testimony. I’m happy (or was) to take the money, but that judges allow it never made much sense to me as policy matter.

I speculate that California judges tend to have limited expertise in corporate law and hope that an academic might give them guidance that is relatively unbiased. (After all, an academic who gave advice that contradicts his/her own scholarship, for example, won’t last long.) Given the considerable expertise of the members of the Delaware Chancery Court, however, that’s help they hardly need. Of course, as per Larry’s suggestion, I do hope the members of that court will at least read (and maybe even cite) my treatise.