December 03, 2014 Articles

Testimony by Proffer in Bankruptcy Court

Learn the allowances, advantages, and pitfalls of this trial technique.

By Joseph C. Barsalona II

Contested bankruptcy matters are often complex and involve multiple witnesses and potentially lengthy hearings. These hearings resemble mini-trials and often take place within a month or less from the filing of the motion. Even uncontested matters will require an adequate record to support your motion. Presenting the proper evidence to support your motion in the most effective and efficient manner is an important consideration for all trial counsel. There is also a fine line to navigate between presenting too much evidence and just enough to prevail at the hearing. Preparing fact witnesses for hearings can be a costly financial burden on the bankruptcy estate. Other than putting on testimony with a direct examination of a live witness, in some circumstances, counsel should consider utilizing the attorney proffer of witness testimony in their case in chief. This article provides an introduction to the technique of an attorney proffer of evidence in bankruptcy court, the rules related thereto, and practical considerations.

What Is a “Proffer”?
An attorney proffer is the direct testimony of a witness that is stated in open court on the record by counsel in lieu of direct examination of the witness. Counsel enters the essential direct testimonial evidence into the record without the need for traditional time-consuming questions and answers between counsel and the witness. Following the attorney proffer the witness will be available in court for cross-examination. If done correctly, with consent of other parties in interest, the advantages to the case and to the estate may be significant. Alternatively, if done improperly, the proffer could have a negative effect on the case.

Generally, the act of proffering is to offer or tender something, such as direct evidence in a case, for immediate acceptance. See Black’s Law Dictionary 570 (3d pocket ed. 2006). Indeed, presenting evidence by eliciting testimony from a witness is also technically proffering evidence to the court. But here the term refers to an attorney’s recitation in open court of the contents of a witness’s testimony in lieu of live direct examination. In this scenario, the attorney comes before the court and states the witness’s direct testimony into the record. Once the proffer is accepted into evidence by the court, opposing counsel may call the witness to the stand for cross-examination and the proponent may redirect if applicable.

Mechanically, a typical attorney proffer may proceed as follows:

Attorney: Your Honor, the Debtors would like to begin their case in chief on the Debtors’ Motion by introducing the direct testimony of their first witness, Mr. X, by way of attorney proffer. Mr. X is here in the courtroom, and he is available for cross-examination. I have conferred with counsel for the objectors and they have agreed to proceeding by attorney proffer of Mr. X’s testimony. If it please the Court, may I proceed in this manner?

Judge: Counsel, the Court will allow you to proceed in this manner subject to any other parties in interest having an objection. Do any parties in interest object to proceeding by attorney proffer? Hearing no objections, you may proceed.

Attorney: Thank you, Your Honor. The Debtors begin with a proffer of Mr. X, who is present in the courtroom and available for cross-examination. If called to the stand and put under oath, Mr. X would testify that . . . .

The attorney proffering the testimony proceeds until the testimony is concluded. The court will then ask if anyone wishes to cross-examine the witness. If so, the witness will take the stand and be sworn in, and cross-examination will proceed on the subject of the attorney-proffered evidence. Upon conclusion of the cross-examination, the court will ask if there is any redirect. Following any redirect (and recross, if permitted by the court), the witness will be excused. The testimony will be admitted and considered by the court as if the witness had testified live.

Rules Related to the Proffer
Interestingly, federal rules applicable in a bankruptcy case do not specifically address the use of an attorney proffer of evidence. (It is beyond the scope of this article to consider the various evidentiary objections to an attorney proffer of direct testimony. However, the Federal Rules of Evidence would apply to the testimony proffered by the attorney the same as if it were presented in a direct examination of the witness upon questions and answers.) However, there is case law devoted to the admissibility of written proffers where the witness is available for live cross-examination and redirect. See, e.g., In re Adair, 965 F.2d 777 (9th Cir. 1992); Lewis v. Zermano (In re Stevinson), 194 B.R. 509 (D. Colo. 1996). Because the only difference between an attorney proffer and a written proffer is the attorney’s recitation of the testimony at the hearing, the analysis is arguably equivalent.

Starting with the rules that govern, Federal Rule of Civil Procedure (FRCP) 43(a), made applicable to bankruptcy matters via Federal Rule of Bankruptcy Procedure 9017, states, “In all trials the testimony of witnesses shall be taken orally in open court, unless otherwise provided by an Act of Congress or by these rules, the Federal Rules of Evidence, or other rules adopted by the Supreme Court.” Fed. R. Civ. P. 43(a) (emphasis added). The Federal Rules of Evidence (FRE) also provide that “[t]he court should exercise reasonable control over the mode and order of examining witnesses . . . so as to . . . make those procedures effective for determining the truth . . . [and] avoid wasting time . . . .” Fed. R. Evid. 611(a)(1)–(2).

Turning to the case law, in In re Adair, 965 F.2d 777 (9th Cir. 1992), the debtors argued on appeal that the bankruptcy court’s standard procedure of requiring direct testimony by written proffer violated FRCP 43(a) and infringed on their due process rights. Adair, 965 F.2d at 779 (challengers argued that “essential [due process] rights . . . may be jeopardized . . . where the oral presentation is not allowed . . . [and] where the bankruptcy court’s ability to [gauge] credibility . . . may be unclear . . . .”). Similarly, in Lewis v. Zermano (In re Stevinson), 194 B.R. 509 (D. Colo. 1996), the appellants sought to void a judgment against them based on FRCP 43(a) and due process grounds. Id. at 511 (the challengers asserted that trial procedures imposed by bankruptcy court “denied them their right to a fair trial”). In both instances, the court rejected these arguments, finding that the proffer is a permissible “mode” of presenting direct testimony under FRE 611 and thus did not violate FRCP 43(a) or the challengers’ due process rights when the witness is available to be called to the stand. In re Adair, 965 F.2d at 780; In re Stevinson, 194 B.R. at 513. Because presenting a summary of the testimony with the witness nevertheless available “is an accepted and encouraged technique for shortening bench trials,” Adair, 965 F.2d at 779 (citing Phonetele, Inc. v. Am. Tel. & Tel. Co., 889 F.2d 224 (9th Cir. 1989)), courts have held that oral testimony by proffer “is essential to the efficient functioning of the crowded bankruptcy courts.” Id.; Haseotes v. Cumberland Farms, Inc., 216 B.R. 690, 694 (D. Mass. 1997); Saverson v. Levitt, 162 F.R.D. 407, 409 (D.D.C. 1995).

Applying this rule to an attorney proffer, the admissibility analysis should be the same because the same issue exists: The witness is not giving direct testimony live on the stand. However, the witness is available for cross-examination. In that sense, FRE 611 should permit an attorney proffer. It is recommended that counsel attempting to use an attorney proffer should obtain the consent for this process from opposing counsel. While the cases on written proffers suggest in some instances the court will allow an attorney proffer over an objection, the better practice is to do this by consent. If consent is withheld, putting the witness on the stand to testify is recommended.

Advantages of the Proffer
There are many advantages to making an attorney proffer in lieu of direct testimony. First, in uncontested matters, it can be used to develop the entire record. With the other party’s consent, direct testimony can be presented to the court in a succinct manner. Without its use, what should otherwise be a simple, relatively quick hearing could take a much longer time.

In contested matters, an attorney proffer may also be useful to focus the court on the specific and most important direct testimony without need for a lengthy question-and-answer format. Because the proffer is prepared before the hearing and is read into the record, there is no risk of an inadvertent statement by the witness during direct. The witness’s credibility also does not come under the microscope if proffered by an attorney—this may be good or bad depending on the witness and the circumstances involved. This does not mean that the witness should not be prepared for live direct testimony though; even if the opponent consents to proceeding by proffer, other parties in interest in the case may object to the attorney proffer. Moreover, the judge may decide not to allow the attorney proffer if he wants to hear the live witness and assess credibility. Nonetheless, when available, the attorney proffer gives the proponent complete control of the direct and often should be utilized in contested matters and trials for this purpose.

The attorney proffer also is helpful to bankruptcy judges, who often have crowded calendars and frequently hear many motions in one day. In this regard, bankruptcy judges may find the technique helpful to shorten contested matters and trials and streamline uncontested hearings.

Bankruptcy judges are sophisticated finders of fact. (Indeed, there are no jury trials in bankruptcy proceedings without specific designation by the district court and express consent of the parties. 28 U.S.C. § 157(e) (bankruptcy judges “may conduct the jury trial if specially designated to exercise such jurisdiction by the district court and with the express consent of all the parties”).) As such, bankruptcy judges typically are heavily immersed in the facts and background of the case in order to render the quick post-hearing decisions typical of bankruptcy court cases. Thus, attorney proffers aid the goal of efficient decision making by focusing the court specifically on the evidence that the proponent believes supports and substantiates the grant of relief at issue. In short, the attorney proffer can provide a direct, efficient method to provide the court with the necessary evidence required for the proponent’s case, and this can only assist the court in reaching its decision in a more efficient and effective manner.

Potential Pitfalls
As counsel considers whether to use a proffer in lieu of live direct testimony, there are potential pitfalls that should be considered. As stated above, many courts have found the use of written proffers permissible when the witness is available for cross-examination and redirect. In re Adair, 965 F.2d at 777; Kuntz v. Sea Eagle Diving Adventures Corp., 199 F.R.D. 665 (D. Haw. 2001); Haseotes, 216 B.R. at 690; In re Stevinson, 194 B.R. at 509; Union State Bank v. Geller (In re Geller), 170 B.R. 183 (Bankr. S.D. Fla. 1994). However, we have found no reported decision or treatise that speaks to an absolute right to use an attorney proffer in lieu of live direct testimony. As a result, the ability to use the technique should never be taken for granted.

Further, obtaining the consent of the other party is crucial to the use of an attorney proffer. Notwithstanding whether attorney proffers are permitted by the court generally, counsel should not expect to be permitted to submit an attorney proffer over the objection of other parties. While there may be many reasons for such an objection, perhaps the most compelling is that opposing parties may have a right to hear the direct testimony from the actual witness, live on the stand, to assess the witness’s credibility.

Consent from opposing counsel alone does not mean that the witness will not be called to the stand for live direct: In certain cases the judge may want to hear the direct live, and also other parties in interest in the case (such as the United States trustee) may object to the use of an attorney proffer. As a result, a witness must always be prepared to take the stand and give direct testimony notwithstanding any consent received beforehand. As such, even if counsel intends to use an attorney proffer, you must prepare your witness for direct and cross-examination.

Also, there are courts that have expressed displeasure with attorneys using a proffer in lieu of live direct testimony. For example, in In re Alexander, No. 12-40408-JWV13, 2012 WL 3156760 (Bankr. W.D. Mo. Aug. 1, 2012), both parties submitted evidence by proffer and the court specifically made the point of noting its displeasure in its opinion. See id. at *1 (the court introduced the facts by saying “[t]he Court gleans the following facts from the pleadings and the Trustee’s and Debtor’s counsel’s testimonial ‘proffers[]’” and then followed in a footnote “[t]he Court prefers actual testimony over testimonial proffers by counsel”). Indeed, some courts explicitly prohibit the technique. For example, Judge Bernstein of the U.S. Bankruptcy Court for the Southern District of New York has chambers procedures that provide, “Written direct examination or proffers may not be used for evidentiary hearings and trials unless the Court orders otherwise.” See Chambers Procedures of the Hon. Stuart Bernstein for the U.S. Bankruptcy Court for the Southern District of New York (emphasis in original). On the other hand, Judge Drain, who sits in the same district as Judge Bernstein, not only permits proffering but expects the practice. Compare Chambers Procedures of the Hon. Stuart Bernstein for the U.S. Bankruptcy Court for the Southern District of New York, supra, with Chambers Procedures of the Hon. Robert D. Drain for the U.S. Bankruptcy Court for the Southern District of New York (“Written direct examinations by affidavit or declaration on penalty of perjury of witnesses within the party’s control are expected to be used for evidentiary hearings and trials, with the declarant to be available for cross-examination and re-direct.”). While this is just one example, the different procedures of these two judges within the same bankruptcy court venue illustrate the need to know the practices and procedures of the judge hearing your case.

Finally, attorneys should carefully weigh the impact of presenting a live witness as opposed to an attorney proffer. Counsel may damage his case by doing an attorney proffer instead of presenting the live direct examination of a credible and charismatic witness. Alternatively, counsel may hurt her case by putting on certain witnesses, who do not “present well” on the stand. There is a balance when using an attorney proffer as opposed to live testimony—efficiency versus the importance of allowing the judge to hear and assess the witness on the stand. Which of those features is more valuable to your case is a question counsel must assess in each instance.

The attorney proffer of testimony in lieu of live direct testimony should be a part of every bankruptcy lawyer’s arsenal of trial techniques. If done properly, it allows attorneys to form a complete record on uncontested matters and give complete control of direct testimony to the proponent in contested matters. Attorney proffers are also helpful to judges because they facilitate efficient decision making. Problem areas do exist, though. Without consent, a proffer typically will not be permitted, and the witness will be compelled to take the stand. Attorneys must also be knowledgeable of their judge’s preferences on the use of attorney proffers and the unique attributes of individual witnesses. Ultimately, the attorney proffer may be beneficial in ways that presenting a live witness may not be, which makes it an essential tool to use in both contested and uncontested evidentiary hearings.

Copyright © 2014, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).

Joseph C. Barsalona II – December 3, 2014