Thursday, March 26, 2009
Question: "I've heard that there's really no such thing as a surprise witness. Is that true?"
Answer: Generally. Surprise witnesses are like car crashes: They rarely happen if everyone is paying attention and following the rules, but you'll probably see one now and then anyway.
Why are surprise witnesses so rare? Before a case goes to trial, lawyers are allowed to engage in a lengthy process called discovery. They get to ask the other side for all sorts of information--including the identities of any witnesses their opponents may call. They then get to "depose" those witnesses, a process in which the witness is required to answer questions under oath for hours, sometimes days or even weeks.
And just to make sure neither side gets surprised, most courts require parties to exchange witness lists before trial. If there's a surprise witness on one side's list, the judge will generally either (a) give the other side an opportunity to depose the witness or (b) bar the witness from testifying.
With all those protections, how do any surprise witnesses wind up on the stand? Here are a few ways that can happen:
1. The surprise testimony comes during an emergency hearing (e.g., on a temporary restraining order, or TRO) and there's been no opportunity to depose the witness or even find out who he/she is.
2. The other side makes a tactical decision not to depose the witness. For example, I saw this happen in a case where the witness lived in Greece and opposing counsel thought his testimony would be inconsequential. They took a gamble (a bad one as it turned out) and decided not go through the hassle of taking an international depo. This wasn't technically an instance of a surprise witness so much as surprise testimony, but the effect was the same.
3. The lawyer who took the deposition (commonly called "depos" among legal professionals) didn't ask quite the right questions or didn't follow up sufficiently on a witness's evasive or ambiguous answers. It's common to have junior lawyers handle most of the depositions and other discovery, while senior attorneys handle the trial. As a result, the lawyer handling the examination at trial may take some calculated risks in asking questions that weren't asked at the depo--and may get surprised as a result.
Tuesday, March 24, 2009
The only problem is that everyone else on Wall Street was watching what happened to AIG. Those are, of course, the same people who are supposed to partner with the federal government in the trillion-dollar plan Secretary Geithner just announced. They sound a little unnerved, according to the Economist:
"Will private investors nibble? The potential returns look juicy, even though they must share profits equally with the taxpayer. Big firms that would be in the running to manage funds in the programme, such as BlackRock and PIMCO, have given it a cautious welcome. But others, such as hedge funds and private-equity groups, are wary of participating in government-backed plans after witnessing the hysteria whipped up over bonus payments at American International Group (AIG), a clapped-out (and now government-controlled) insurer.
"Government officials have tried to quell these concerns by calling potential asset-buyers “good guys” and providing assurances that they will be exempt from pay restrictions aimed at recipients of taxpayer largesse. But fear abounds that they will become the next target of self-righteous politicians, especially if they are seen to be reaping windfalls. 'The political risks are scary,' says one hedge-fund manager, who also points out that some of the plan’s details are still missing: for instance, the interest rate and duration on loans for mortgage-backed securities have yet to be determined."
Anyone who knows Wall Street knows that risk equals money. The more risk you want an investor to take, the more you'll have to pay them. So, in order to recover $50 million from one company, we've raised the investment risk for all the others. How much extra will they need to be paid to participate in Geithner's plan? Tough to tell, but I bet it'll be waaaaaaaaaaaaay more than $50 million.