Delaware Business Litigation Report

Federal Court Examines Admissibility of Various Evidences In Trans-Atlantic Chrysler Merger

Tracinda Corp. v. DaimlerChrysler AG, 362 F.Supp.2d 487 (D.Del. 2005). Tracinda Corporation ("Tracinda"), a Nevada entity with its principal place of business in California, was engaged in investing in companies and at the time was Chrysler's largest shareholder. Tracinda brought this action against defendants comprising of DaimlerChrysler AG, Daimler-Benz AG ("Daimler"), Jurgen Schrempp and Manfred Gentz, (collectively "Defendants") who were citizens of Germany alleging: (1) violations of securities laws; (2) common law fraud; and (3) conspiracy in connection with the 1998 merger between Chrysler Corporation ("Chrysler") and Daimler-Benz AG ("Daimler-Benz"). In this Memorandum Opinion, the Court examined a number of evidentiary objections brought by both parties. The objections included: expert opinion testimony, statements made by the CEO of the German manufacturer that were published in a newspaper, investment banker documents discussing business combination scenarios between the merger parties, third-party research reports, meeting notes on the merger, failure to include charts and privileged attorney-client matters. Applying the familiar Daubert standard, the Court permitted the testimony of two plaintiff-experts. The first involved an objection to the fairness opinion and the methodology adopted by the first expert to determine the appropriate premium to be paid. The methodology assessed the premium based on the allocation of board seats in the new entity. The second expert's testimony was challenged as flawed primarily because it ignored the fairness analysis of another entity and the discounted cash flow analysis of that entity which included automotive industry risk factors. The Court considered several other objections raised by both Defendants and the plaintiff. The Defendants' hearsay objection to the newspaper article in the Financial Times was partly overruled as an adoptive admission under Fed.R.Evid. 801(d) (2) and the balance of the article was held to contain hearsay. Similarly, the Court permitted the Barron's article as a recorded recollection of Defendant Schrempp's statements under Fed.R.Evid. 803(5). The Court also overruled objections that the contents of the Barron's article were unduly prejudicial under Fed.R.Evid. 403 because the court was the fact-finder and it stated that it was capable of excluding any improper inferences. The Court however held that admission of evidence that related to a discovery production dispute between the plaintiff and The Financial Times that sought production of audio tapes related to Schrempp's 2000 interview was irrelevant under Fed.R.Evid. 401. The Court held that a Complaint filed in an earlier federal court proceeding titled Glickenhaus v. DaimlerChrysler AG, Civ. Act. No. 01-004 (D.Del. Jan. 3, 2001) was hearsay and inadmissible. Banker documents used by the Defendants were admitted under the residuary catch-all provision of Fed.R.Evid. 807. The Court held that any authentication issue was overcome by the production of the documents by the Defendants, although no testimonial authentication was offered. Third-party research reports that were adopted by the defendants were permitted under Fed.R.Evid. 801(d)(2)(B) as non-hearsay. Notes prepared by Gary Valade, as an employee/agent of defendants were held to be non-hearsay party-opponent admissions. Further, the notes were admissible under the present sense impression exception to the hearsay rule under Fed.R.Evid. 803(1) because the declarant was present during the meeting at which he took the challenged notes. Additionally, the Court permitted the notes under the catch-all provisions of Fed.R.Evid. 807 because it contained circumstantial guarantees of trustworthiness. Deposition testimony offered by plaintiff was challenged under triple hearsay grounds; however, plaintiff demonstrated hearsay exceptions or admissions for each level and the court admitted the deposition of deponent Oswald. The Court also admitted excerpts from a book over Defendants' objections, as a prior inconsistent statement of a witness. The Court also admitted testimony and exhibits of defendants expert, Daniel R. Fischel and resolved some other evidentiary issues pertaining to deposition testimonies against plaintiff. Authored by: Raj Srivatsan 302-888 6831 rsrivatsan@morrisjames.com Share