Itek Corp. v. Chicago Aerial Industries, Inc.

Supreme Court of Delaware · Contracts

ContractsLetters of intentExpert testimonyEvidenceletter of intentexpert testimonydomestic lawtrade usage

Facts

Itek sued C.A.I. for breach of contract and Bourns for tortious interference arising out of negotiations for Itek's acquisition of C.A.I.'s business and assets. A central issue at trial was the significance and effect of a jointly executed letter of intent. Defendants called two experts, an investment banker and a Wall Street lawyer, who testified over objection about the function and meaning of letters of intent in merger and acquisition practice, including descriptions such as a record of the stage of negotiations, an agreement to agree, a memorandum of understanding, and a "hunting license." Itek argued that this testimony improperly instructed the jury on the law and that its cross-examination of the lawyer-expert was unduly restricted.

Issue

Did the trial court commit reversible error by admitting expert testimony describing the meaning and significance of a "letter of intent" in corporate acquisition practice? Also, did the trial court improperly restrict Itek's cross-examination of the lawyer-expert or err in admitting responsive testimony elicited on cross-examination?

Rule

An expert witness may not give an opinion on applicable domestic law because stating the law is exclusively the function of the trial judge, just as factfinding is the jury's function. But an expert may define an uncommon term according to the customs and usages of the trade or business with which the expert is familiar, and this is true even if the expert is a lawyer. The scope of cross-examination is committed to the trial judge's sound discretion and will be reversed only for clear abuse. A party may not complain of a responsive answer to a question that party itself asked on cross-examination.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In a contract dispute in Denver, Nora Patel claims that a signed "framework memo" bound Summit Ridge Robotics to sell its sensor division to her firm, Alder Point Systems. At trial, Summit Ridge calls a retired judge as an expert, who testifies, "Under Colorado contract law, a framework memo like this is not an enforceable agreement."

Should the court admit the expert's testimony?

Explanation. The testimony should be excluded because it gives an opinion on applicable domestic law, which is the judge's function to determine and explain to the jury. The majority distinguished impermissible legal instruction from permissible explanation of trade usage. Here, the witness is not merely defining a business term by custom and usage; he is telling the jury what Colorado law is. (Derived from Itek Corp. v. Chicago Aerial Industries, Inc. (n.d.).)