Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Murray v. Just In Case Business Lighthouse, LLC

Supreme Court of Colorado, En Banc

June 20, 2016

Patrick Murray, Petitioner/Cross-Respondent:
v.
Just In Case Business Lighthouse, LLC, a Colorado limited liability company, Respondent/Cross-Petitioner:

          Certiorari to the Colorado Court of Appeals. Court of Appeals Case No. 12CA1261.

          SYLLABUS

         The Colorado Supreme Court holds that the violation of an ethical rule does not displace the rules of evidence and that trial courts retain the discretion under CRE 403 to exclude the testimony of improperly compensated witnesses. Next, the supreme court holds that trial courts may allow summary witness testimony if they determine that the evidence is sufficiently complex and voluminous that a summary witness would assist the trier of fact. It further holds that in those circumstances, summary witnesses may satisfy CRE 602's personal-knowledge requirement by examining the underlying documentary evidence on which they based their summary testimony. Finally, the supreme court holds that that under CRE 1006, trial courts abuse their discretion when they admit summary charts that characterize evidence in an argumentative fashion rather than simply organize it in a manner helpful to the trier of fact.

         Therefore, the supreme court reverses the court of appeals' holding remanding the case to the trial court, but affirms the court of appeals on all other issues.

         Attorneys for Petitioner/Cross-Respondent: Michael M. McGloin, Burleson LLP, Denver, CO.

         Attorneys for Respondent/Cross-Petitioner: Francis V. Cristiano, Cristiano Law, LLC, Denver, CO.

         Attorneys for Amicus Curiae Colorado Bar Association: Diane Vaksdal Smith, Burg Simpson Eldredge Hersh & Jardine, P.C., Englewood, CO; Marcy G. Glenn, Holland & Hart, LLP, Denver, CO.

          OPINION

         BOATRIGHT, JUSTICE.

          [¶1] In this case, we consider the interplay between the rules of evidence and the rules of professional conduct, as well as the breadth of the trial court's discretion in controlling the admission of summary exhibits and testimony.[1] This lawsuit originated from a business dispute between Respondent/Cross-Petitioner Just In Case Business Lighthouse, LLC (" JIC" ), and Petitioner/Cross-Respondent Patrick Murray. To prepare for the litigation, JIC hired Preston Sumner, a businessman with knowledge of business sales and valuation, as an advisor. Sumner agreed to help with the case in exchange for a ten percent interest in the case's outcome. In that role, he created summary exhibits and was identified as a witness for trial. Murray objected to Sumner's involvement in the case on several grounds: (1) Sumner's testimony should be excluded because his ten percent interest in the case constituted an improper payment in violation of Colorado Rule of Professional Conduct (" RPC" ) 3.4(b); (2) Sumner lacked the requisite personal knowledge of the case's underlying events as required by Colorado Rule of Evidence (" CRE" ) 602; and (3) the summary charts were inadmissible under CRE 1006. The trial court ruled that Sumner could testify as a summary witness, but not as an expert or fact witness, and it otherwise overruled Murray's objections. Sumner testified and laid the foundation for two summary exhibits, which the trial court admitted into evidence. The jury returned a verdict in favor of JIC, awarding it damages. Murray renewed his arguments on appeal. The court of appeals rejected them in part but remanded the case to the trial court to determine whether Sumner's testimony should have been excluded as a sanction for JIC's violation of RPC 3.4(b). Just in Case Bus. Lighthouse, LLC v. Murray, 2013 COA 112M, ¶ ¶ 21, 26, 34, 43, P.3d .[2] We granted certiorari, and now affirm in part and reverse in part.

          [¶2] First, we decline to adopt a per se rule excluding the testimony of improperly compensated witnesses. We hold that the violation of an ethical rule does not displace the rules of evidence and that trial courts retain the discretion under CRE 403 to exclude the testimony of improperly compensated witnesses. In applying that rule, we conclude that the trial court did not abuse its discretion in declining to exclude Sumner's testimony in this case because its probative value was not substantially outweighed by the danger of unfair prejudice. Therefore, we conclude that a remand to the trial court is unnecessary.

          [¶3] Second, we hold that trial courts may allow summary witness testimony if they determine that the evidence is sufficiently complex and voluminous that a summary witness would assist the trier of fact. We further hold that in those circumstances, summary witnesses may satisfy CRE 602's personal-knowledge requirement by examining the underlying documentary evidence on which they based their summary testimony. Applying this rule to the facts of this case, we conclude that the trial court did not abuse its discretion in permitting Sumner to testify as a non-expert summary witness because the evidence was complex and voluminous and Sumner's testimony helped the jury to understand it, and because Sumner summarized only previously admitted evidence that he had personally examined.

          [¶4] Third, we hold that that under CRE 1006, trial courts abuse their discretion when they admit summary charts that characterize evidence in an argumentative fashion rather than simply organize it in a manner helpful to the trier of fact. Applying this holding, we conclude that the trial court properly admitted one of Sumner's summary charts, Exhibit 1, because it organized relevant facts chronologically, but abused its discretion in admitting the other, Exhibit 1.1, because it included argument. Nevertheless, we hold that this error was harmless because it did not substantially influence the outcome of the case or impair the fairness of the trial.

          [¶5] Therefore, we reverse the court of appeals' judgment to the extent that it remanded the case to the trial court to determine whether Sumner's testimony should have been excluded, but affirm on the remaining issues.

         I. Facts and Procedural History

          [¶6] JIC is wholly owned and operated by Joseph Mahoney. JIC entered into an agreement with Pearl Development Company (" Pearl" ), whereby Pearl agreed to pay JIC a specified commission if it successfully " promote[d], solicit[ed], and otherwise secure[d] the potential sale . . . of Pearl." [3] Initially, JIC communicated with Epic Energy Resources, Inc. (" Epic" ), as a potential buyer, but the parties did not reach a deal at that time. Subsequently and without JIC's knowledge, Pearl's agents--including its president, Murray--reinitiated talks to sell Pearl to Epic. Eventually, Pearl's agents signed a letter of intent outlining their plans to sell Pearl to Epic. Before the sale was completed, Murray contacted Mahoney and convinced him to sign a termination agreement ending their previous business arrangement. Five months later, Epic completed its purchase of Pearl. Due to the termination agreement, JIC did not receive the commission it would have received as the exclusive agent authorized to facilitate Pearl's sale.

          [¶7] Upon learning of the sale, JIC sued Pearl's owners and officers, including Murray, alleging that they fraudulently misrepresented their intentions and failed to disclose that Epic was planning to purchase Pearl, and then used this misrepresentation to induce Mahoney to sign the termination agreement and deprive him of his expected commission.[4] To help prepare for trial, JIC hired businessman Preston Sumner as an advisor. As payment, Mahoney granted Sumner a ten-percent interest in the case contingent upon its outcome. Sumner did a variety of work related to the lawsuit, including analyzing documents and business records and creating summary charts and exhibits based on these underlying documents.

          [¶8] JIC disclosed Sumner as a witness and indicated its intention to use Sumner as an expert in business valuation pursuant to C.R.C.P. 26(a)(2). Subsequently, Mahoney revealed during his deposition that he was going to pay Sumner a contingency fee based on the amount Mahoney recovered in the lawsuit. In response, Murray filed a motion in limine to preclude Sumner from testifying as either an expert witness or a fact witness. In it, he argued that RPC 3.4(b) prohibited compensating witnesses on a contingency fee basis and, therefore, those witnesses should be prohibited from testifying at trial. The trial court granted the motion in part and denied it in part. In granting the motion in part, the trial court found that RPC 3.4(b) only prohibited Sumner from testifying as an expert witness. In denying the motion in part, the court found that RPC 3.4(b) did not prohibit Sumner from testifying as a non-expert witness and, therefore, allowed him to testify as a lay witness. The trial court found that the case was complex and the evidence was voluminous, and that Sumner was primarily helping JIC to organize and prepare its case. The court ordered Sumner to limit his testimony to " presenting evidence that would assist the trier of fact in understanding the transaction" and ordered him not to offer expert opinion testimony.

          [¶9] At trial, Murray argued that Sumner should be prohibited from testifying under CRE 602 because he lacked personal knowledge of the events that led to the case. The trial court rejected this argument, stating that summary witnesses are acceptable in complex trials. However, the trial court ordered that Sumner's exhibits and testimony be based only on evidence that had already been admitted. Thus, Sumner limited his testimony to summarizing previously admitted evidence.

          [¶10] Murray also objected under CRE 1006 to the admission of two summary exhibits that Sumner created and used while testifying at trial: (1) an eight-page chart summarizing certain documentary evidence with some words in bold-face type (Exhibit 1); and (2) a one-page, color-coded timeline, also containing some bolded words and the headings " Things Mahoney Knew" and " Things Mahoney Did NOT Know" (Exhibit 1.1). Murray argued that the exhibits were inadmissible because the underlying documents were already admitted and were not too voluminous to conveniently examine in court, as CRE 1006 requires. He also argued that the exhibits should not be admitted under CRE 1006 because they were argumentative and prejudicial. The trial court overruled the objection, finding that the case was sufficiently complicated and the underlying documents sufficiently voluminous--over 200 exhibits had been admitted--to satisfy CRE 1006's requirements. Ultimately, the jury awarded $1,691,000 to JIC, which the trial court reduced to $563,610.30 based on the comparative fault of two of Pearl's co-owners.

          [¶11] Murray appealed, and the court of appeals reversed in part and affirmed in part. Murray, ¶ 74. First, the court of appeals vacated the trial court's judgment that Sumner's payment did not violate RPC 3.4(b); it held that the contingency fee payment did violate RPC 3.4(b) and ordered a limited remand to determine whether excluding Sumner's testimony was an appropriate sanction for the improper fee agreement. Id. at ¶ ¶ 23, 26. In doing so, the court of appeals declined to adopt a per se rule excluding Sumner's testimony based on his impermissible fee agreement. Id. at ¶ ¶ 9, 21. Judge Richman dissented from this portion of the opinion, arguing that contingent fee arrangements necessarily undermine the fairness and integrity of the trial and that the court should have vacated the judgment in its entirety and remanded for a new trial. Id. at ¶ 89 (Richman, J., concurring in part and dissenting in part).

          [¶12] Second, the court of appeals noted that most federal and state appellate courts that have considered summary testimony have held it admissible when " a summary witness has . . . knowledge [of the case] based on an independent review of other evidence." Id. at ¶ 32 (majority opinion). Thus, the court held that Sumner's testimony did not violate CRE 602 because it was based on previously admitted evidence that Sumner had personally examined and it was helpful to the jury. Id. at ¶ 34.

          [¶13] Third, the court of appeals held that the summary exhibits were admissible despite minor embellishments. Id. at ¶ 42. It held that the trial court did not abuse its discretion when it admitted the summary charts because the evidence was voluminous. Id. at ¶ ¶ 40-42. It also held that the charts were not " unduly prejudicial" because (1) the underlying documents were admitted as evidence, and (2) summaries or charts need not present both parties' versions of the facts. Id. We granted certiorari.

          [¶14] We now consider the interplay between the rules of evidence and the rules of professional conduct, and the breadth of the trial court's discretion in controlling the admission of summary exhibits and testimony. First, we examine the relationship between the ethical rules and the evidence rules at trial to determine whether paying witnesses contingent fees in violation of RPC 3.4(b) requires per se exclusion of the witnesses' testimony. Concluding that it does not, we then consider whether Sumner's fee agreement required the trial court to exclude his testimony in this case. Second, we consider whether non-expert summary witnesses may testify under CRE 602, and whether the trial court abused its discretion in permitting Sumner to testify as a summary witness here. Third, we consider under which circumstances summary charts are admissible as evidence under CRE 1006, and whether the trial court abused its discretion in admitting Sumner's summary charts in this case.

         II. Improper Contingent Fee Witnesses

          [¶15] Murray first argues that JIC's contingent fee agreement with Sumner violated RPC 3.4(b), and he urges us to adopt a per se rule excluding the testimony of a witness whose compensation hinges on the outcome of a case. The court of appeals agreed with Murray that the fee agreement violated RPC 3.4(b), but did not adopt a per se rule excluding any witness who was paid in violation of the ethical rule. We agree with the court of appeals that the contingent fee agreement does violate RPC 3.4(b),[5] and we affirm its judgment and also decline to adopt a per se rule excluding the testimony of improperly compensated witnesses. We hold that the violation of an ethical rule does not displace the rules of evidence and that trial courts retain the discretion under CRE 403 to exclude the testimony of improperly compensated witnesses. In applying that rule, we conclude that the trial court did not abuse its discretion in declining to exclude Sumner's testimony in this case because its probative value was not substantially outweighed by the danger of unfair prejudice. Therefore, unlike the court of appeals, we conclude that a remand to the trial court is unnecessary.

         A. Standard of Review

          [¶16] Trial courts have considerable discretion to decide evidentiary issues, so we review such decisions for an abuse of discretion. People v. Segovia, 196 P.3d 1126, 1129 (Colo. 2008). " [A] trial court necessarily abuses its discretion if it bases its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence." Id. Appellate courts can review ethical violations if they become intertwined with the litigation. See Liebnow ex rel. Liebnow v. Boston Enters. Inc., 2013 CO 8, ¶ 11, 296 P.3d 108, 113. When that happens, we review a trial court's ruling on an ethical violation for an abuse of discretion. See id. at ¶ 14, 296 P.3d at 114 (applying abuse of discretion review to attorney disqualification for violation of RPC 1.7).

         B. Prohibited Contingent Fee Agreements

          [¶17] RPC 3.4(b) prohibits improperly compensating witnesses for their testimony. Specifically, the rule states, " A lawyer shall not . . . offer an inducement to a witness that is prohibited by law . . . ." Colo. RPC 3.4(b). Comment 3 elaborates on this rule: " [I]t is not improper to pay an expert or non-expert's expenses or to compensate an expert witness on terms permitted by law. It is improper to pay any witness a contingent fee for testifying." Colo. RPC 3.4, cmt. 3. RPC 3.4(b) prohibits lawyers from paying witnesses on a contingent fee basis because those witnesses " may thereby be improperly motivated to enhance [their] compensation and thus lose objectivity." Buckley Powder Co. v. State, 70 P.3d 547, 559 (Colo.App. 2002).

          [¶18] Even though RPC 3.4(b) unambiguously prohibits paying witnesses contingent fees, it is silent as to the admissibility of an improperly compensated witness's testimony. We begin by emphasizing that " [i]t is both illegal and against public policy to pay or tender something of value to a witness in return for his testimony." People v. Belfor, 197 Colo. 223, 591 P.2d 585, 587 (Colo. 1979) (quoting Model Code of Prof'l Responsibility DR7-102 (1979)). But the prohibition on paying witnesses a contingency fee for their testimony does not necessarily mean that those witnesses may never testify at trial. The Colorado Rules of Evidence are separate from the Colorado Rules of Professional Conduct, and each has its distinct purpose: the evidentiary rules govern issues of admissibility at trial, whereas the ethical rules govern attorney behavior. We must consider how these two sets of rules interact during trial.

          [¶19] We begin by noting CRE 402's general directive that " [a]ll relevant evidence is admissible," unless the United States Constitution, the Colorado Constitution, a state statute, the evidence rules, or the Supreme Court prohibits that evidence. Relevant evidence may be excluded " if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence." CRE 403. In weighing those dangers and considerations, the proffered evidence " should be given its maximal probative weight and its minimal prejudicial effect." People v. Dist. Ct. of El Paso Cty.,869 P.2d 1281, ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.