Grunstein v. Silva, C.A. No. 3932-VCN (Del. Ch. Dec. 20, 2012).
Issue Addressed: Admissibility of trial exhibits.
This latest installment from the Court of Chancery in this long-running litigation about, among other things, a deal gone bad, addresses the admissibility of trial exhibits.
Regarding the category of exhibits that relate to other proceedings involving Mr. Grunstein, the Court cited to Delaware Rules of Evidence (DRE) 404, 405 and 608 to support its reasoning that statements in those prior proceedings are admissions by Mr. Grunstein and that they properly demonstrate related litigation involving a similar transaction involved in this case, but they will not be considered to “show what is alleged to be Mr. Grunstein’s proclivity to deviate from the truth. . . What amounts to specific instances of witness conduct or, more broadly, the witness’s character or reputation, which might be divined from this collection of exhibits, would not assist the Court in that function.”
Based on the “former testimony exception” to the hearsay rule under DRE 804(b)(1) – – the Court determined that the testimony offered was inadmissible hearsay that does not qualify under the former testimony exception because Mr. Grunstein “did not have a similar motive to cross-examine these witnesses with respect to the unique facts and claims present in this case.”
The next issue addressed was the attempt by defendants to offer a Proxy Statement of Beverly Enterprises, Inc. The plaintiffs objected on the grounds of hearsay. The Court referred to a Delaware Supreme Court decision of In Re: Santa Fe Pacific Corporation Shareholders Litigation, 669 A.2d 59, 70 (Del. 1995), in which the Court held that a proxy statement relied on for the truth of the matters contained therein would be hearsay with respect to claims other than disclosure claims. However, citing federal cases, the Supreme Court in that matter observed that certain federal courts allowed a registration statement to be admissible under the “residual exception to the hearsay rule” under DRE 807. See footnotes 7 through 10.
After discussing the factors in Rule 807 and applying them to the facts of this case, the Court found that an additional, neutral perspective on the Beverly acquisition from a party who was not a party to the current proceeding, would serve “the interests of justice,” and therefore the Court admitted the proxy statement.