As regular readers know, I’ve spent the last two weeks trying a case with Francis Malofiy. [If you googled in looking for him, skip to the bottom of this post.] Last Friday, after 15 hours of deliberations, the jury returned a verdict in favor of our client on all six questions — relating to the nature of the agreement, damages, whether our client breached his obligations, whether defendants would get a set-off, and when the statute of limitations began to run — and awarded him $4.17 million in damages. The vote was 10–2, which is good enough under Pennsylvania law. The judge kindly let the attorneys talk with the jurors (assuming they wanted to talk, of course), so I went back to figure out what happened with those two holdouts.
Post-verdict discussions with jurors often reveal a handful of surprising and insightful comments that sometimes make me re-think how I tried the case. Jurors tend to take their duties very seriously, and so lawyers can usually jump right into detailed questions about the facts and what they thought about various issues. We were fortunate to have a number of invigorated and candid jurors who were happy to talk to us about the case.
In our case — in which our client alleged that he was frozen out of his ownership interest in an industrial business after spending two years building the business’ physical plant — there were a lot of issues, from the disclosure requirements for SBA Loans to the right type of saw for a particular cutting machine, but one issue loomed large: the lack of a written agreement. We had documents (including one signed by all the parties) supporting our claims, they had documents (signed by them, but not our client; we alleged they were created after the lawsuit was filed) supporting their claims, but there was no single document that purported to be the agreement among the parties. It was mostly our client’s word against the defendants’ word, with each side portraying radically different circumstances surrounding the agreement, chiefly differences over the work our client did in those two years.
As a legal matter, there’s nothing wrong with a plaintiff alleging an oral contract: an oral contract is just as binding and enforceable as a written contract, and there’s no special limitations on proving such an oral agreement. Graham v. Jonnel Ent., Inc., et al., 435 Pa. 396 (1969)(“a jury may find an oral contract on a mere preponderance of the evidence”). Similarly, there’s nothing wrong with proving a case primarily, even entirely, through circumstantial evidence, such as the witnesses we brought in to say that our client was referred to as an owner, that he was a signer on the corporate bank account, et cetera. See Pennsylvania Suggested Standard Civil Jury Instructions 4.00 (“You may decide the facts in this case based upon circumstantial evidence alone.”).
Whatever the law says, however, presenting oral contracts and circumstantial evidence to juries is always a challenge. When we talked to the jury, we learned that the two jurors who felt we hadn’t met our burden, and then two more jurors who had kept the damages award lower (the remaining eight jurors wanted to award our client nearly $7 million), all had one thing in common: they were under 30 years old, and they expected more of a paper trail for our client’s claims. Said one, “I felt your client was negligent in not doing more to protect himself with a written agreement.” It’s like the old doctrine of contributory negligence from Lochner Era tort cases brought back to life for contract cases.
In many ways, the younger jurors’ demands are understandable, it’s the “CSI Effect” (discussed more here in the context of scientific evidence) and the ubiquity of email and text messaging coming into the courtroom as expectations about evidence. Our client, though, isn’t the type to email or to text. He builds industrial shops, work that, like most industrial and heavy machinery work, can’t be done by email. It’s all done onsite, while wearing hard hats, with a handshake. That’s how he dealt with everyone, including the defendants.
The older jurors, those over 30, and particularly those over 40, had no problem accepting that a multi-million-dollar business deal could be reached and executed over the course of years with nothing more than a handshake. Some of the older jurors had friends or relatives who had gone into business with others on similar terms: I’ll do this, you’ll do that, let’s shake on it and get to work. Anyone who has run a business has inevitably entered into an agreement without a single document reflecting their understanding. I don’t trust my bank or my phone company as far as I could throw them, and so I demand everything be in writing; when it comes to building a business, though, there’s necessarily trust among the parties — would you go into business with someone you didn’t trust? — and so there’s the tendency to put aside formalities like a written contract.
I’ve lost count of the number of potential clients I’ve talked to who needed a lawyer because they made the mistake of doing business on a handshake and got burned for it. It’s how business works in practice, and the common law has recognized that for centuries. But there’s a big difference between what the law says and how jurors will apply it.
The lingering question is whether the younger jurors’ reluctance to believe in oral agreements (and the one juror’s belief our client should be penalized for the lack of documents in spite of their own belief our client was right) is a genuine generational shift [update: that’s what Scott Greenfield thinks] or is merely a display of youth that will change once they have more experience in the business world. One of my deeply-held beliefs about juries is that there is no substitute for juror experience, and that no demographic feature will do as much to inform their decision as their own experiences. Thus, personally, I think the young jurors’ lack of experience had more to do with their views than any generational shift.
To the extent people in their 20s have had business experience (outside of being a cashier or the like), it’s normally as interns at large corporations, where internal accounting and legal processes force deals to be done almost entirely on paper, rather than in the small business world, where entrepreneurs routinely make promises to one another and then act in a manner consistent with those promises, without ever actually exchanging a formal document showing what “the deal” really was.
[Update, May 22, 2014: This post is more than two years old, but it has suddenly received a bunch of new traffic because of Francis’ copyright infringement cases against Led Zeppelin and Usher. I’m not involved in either case and don’t have any better contact information than you’d find on his website.]