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Exploring The “Sham Affidavit” Doctrine In Trade Secret Case Relating To Side-Switching Employee – Trade Secrets


Most litigators have at least a passing familiarity with the
“sham affidavit” doctrine, under which an affidavit
submitted in opposition to summary judgment that without
explanation flatly contradicts the affiant’s prior deposition
testimony is held insufficient to create a genuine issue of fact.
As explained by one court, the term:

[R]efers to the trial court practice
of disregarding an offsetting affidavit that is submitted in
opposition to a motion for summary judgment when the affidavit
contradicts the affiant’s prior deposition testimony. The
doctrine calls for rejection of the affidavit where the
contradiction is unexplained and unqualified by the affiant. In
such circumstances, the alleged factual issue in dispute can be
perceived as a sham, and as such it is not an impediment to a grant
of summary judgment.

Shelcusky v. Garjulio, 797 A.2d 138, 144 (N.J. 2002)
(internal citation omitted). For example, in the case often cited
as the originator of the doctrine, the plaintiff’s president
admitted at length during his deposition that he had no direct
evidence of the defendant’s purported fraudulent intent to
enter into a contract with no intention of performing it. In
opposition to the defendant’s motion for summary judgment,
however, he submitted an affidavit recounting in great detail
purported conversations in which the defendant essentially admitted
that it had never intended to perform. The district court found the
affidavit insufficient to create a genuine issue of fact and
granted summary judgment. The court of appeals affirmed, explaining
that “If a party who has been examined at length on deposition
could raise an issue of fact simply by submitting an affidavit
contradicting his own prior testimony, this would greatly diminish
the utility of summary judgment as a procedure for screening out
sham issues of fact.” Perma Research and Dev. Co. v.
Singer Co.
, 410 F.2d 572, 578 (2d Cir. 1969).

This issue recently came up in the context of
“side-switching” employees in a New Jersey trade secret
case between competing telemarketers. The plaintiffs alleged that
the defendants “hired away key managers and more than forty
members of their sales force, siphoned customers, and
misappropriated alleged trade secrets” that included the
“script” used on calls with prospects. Metro
Marketing, LLC v. Nationwide Vehicle Assurance, Inc.
, 275 A.3d
459 (N.J. Super. App. Div. 2022)

Among the plaintiffs’ claims was that several of their
employees, who were also named as defendants, had surreptitiously
started working for the defendant while still employed by the
plaintiffs. When they were deposed, all three denied they had done
so. Thereafter, one such person (referred to as the side-switching
employee) returned to work with the plaintiffs and provided an
affidavit in opposition to the defendants’ summary judgment
motion in which he admitted that the plaintiffs’ claims were
true (contrary to his deposition testimony denying them). His only
explanation for contradicting his deposition testimony was that he
“had found inaccuracies” and “hereby
retract[ed]” that testimony. Id. at 467.

The trial court held that the side-switching employee’s
affidavit was insufficient to defeat summary judgment, and the
Appellate Division affirmed. While noting that the doctrine had not
been previously applied on these facts, it held that the policies
behind it supported its application:

[W]e conclude the sham affidavit
doctrine should be applicable in New Jersey to a codefendant such
as Christensen who presents one version of the facts at his
deposition refuting a plaintiff’s claims, who thereafter
recants that testimony after taking employment with that plaintiff.
The adoption of this principle in a side-switching employment
context aligns with the policy underpinnings of the doctrine . . .
. A litigant should not be able to woo away an opposing party who
already has been deposed and then, having taken that party under
its fold and presumptive control by hiring or rehiring him, obtain
from that party a contradictory affidavit to defeat summary
judgment.

Although Christensen was not formally
realigned in the lawsuit and remains a defendant in the pleadings,
he clearly joined plaintiffs’ side of the contest after they
rehired him. . . . Manifestly, Christensen had “some motive,
emotional or financial, to fabricate sham issues of fact.” The
sham affidavit doctrine sensibly should extend to party affiants
such as Christensen as well as nonparty affiants.

A side-switching situation is
inherently suspect unless the recanting certification or affidavit
“reasonably explain[s]” why the witness changed his or
her sworn account . . . . Here, the record is bereft of such a
reasonable explanation.

Id. at 156 (citations omitted).

In summarizing its holding, the Appellate Division
explained:

In particular, the [sham affidavit]
doctrine can apply where, as here: (1) a codefendant is deposed,
(2) that deponent thereafter obtains a job with the plaintiff, (3)
the deponent then aids his new employer by signing certifications
recanting his deposition testimony, and (4) the plaintiff offers
those certifications in opposing summary judgment motions by the
other defendants.

Id. at 137. Ultimately, the court’s decision to
apply the sham affidavit doctrine may not matter to this case,
given that it remanded the case to the trial court to reconsider
its grant of summary judgment in light of other evidence that the
trial court erred by not considering. If the trial court on remand
denies the defendants’ summary judgment motion and the case
proceeds to trial, the side-switching witness will presumably be
called to testify by one or both sides, and his veracity will be
tested by cross examination.

In any event, one may question if the Appellate Division’s
reasoning for applying the sham affidavit doctrine on these facts
is entirely satisfying. To consider this question, we start with
some reasons that may support the doctrine:

1. Credibility Related to
Timing.
The idea that memory fades over time suggests that
a person’s earlier testimony will reflect a better recollection
of events than a subsequent affidavit.

2. Credibility Related to the
Type of Testimony, i.e., Oral (at a Deposition) or Written (in an
Affidavit).
First, unlike an affidavit, deposition
testimony is subject to on-the-spot testing via probing by the
examining counsel. Second, one may assign greater credibility to
deposition testimony on the basis that it is more spontaneous and
less filtered than an affidavit, which is typically prepared by or
with oversight of counsel. (On the other hand, counsel’s role
in preparing an affidavit can also be viewed as providing a layer
of protection against not-entirely-truthful testimony, potentially
making affidavit testimony more reliable.)

3. Credibility Related to the
Witness’s Self-Interest.
In the typical sham affidavit
scenario, deposition testimony is used on summary judgment by the
witness’s opponent (or the witness’s employer’s
opponent). Testimony that goes against the witness’s
self-interest is perceived to have enhanced credibility. See, e.g.,
Fed. R. Evid. 804(b)(3) (exception to hearsay rule in the case of
statements against interest). By contrast, a subsequent affidavit
submitted in opposition to the summary judgment motion will serve
the witness’s interests.

4. Reliance by the
Adversary.
An attorney who secures favorable deposition
testimony from the other side may not to pursue further discovery
on that issue, given that the attorney has secured solid evidence
of the facts she sought to establish at the deposition. A
subsequent affidavit from the deponent that contradicts his
testimony disrupts the orderly process of discovery.

5. Encouraging the Prompt
Correction of Erroneous Testimony:
Related to point 4, a
party that has provided erroneous testimony at a deposition should
be incentivized to correct it promptly so the other side can pursue
further discovery if necessary. Any seasoned litigator will have
experienced a witness who realizes, either himself or prompted by
his counsel’s inquiry, that he has made a mistake. When this is
corrected at the deposition, the adversary can follow up on the
spot. If corrected after the deposition, but while discovery
remains open, the adversary can seek to redepose the witness or
pursue other discovery to try to establish the facts at issue. But
if first addressed in an affidavit filed in opposition to a summary
judgment motion, which is typically filed after the close of
discovery, the court would have to reopen discovery and permit
supplemental briefing on the summary judgment motion if the moving
party is to have a chance to complete the record.

6. Preserving the Utility of
Summary Judgment Practice:
If summary judgment motions
supported by deposition testimony could be readily defeated by
contradicting affidavits by the deponent — thereby creating
an issue of fact that required resolution at trial — the
utility of summary judgment to dispose of ill-founded claims would
be notably diminished. On occasion, a truthful affidavit may be
rejected based on the sham affidavit doctrine, but an unspoken
assumption behind the doctrine is that it is applied far more often
to disregard false affidavit testimony. In an ideal world, this
would not be necessary because perjury laws would be sufficient to
prevent submission of patently false affidavits submitted to thwart
a meritorious summary judgment motion, but experienced (or jaded)
litigators know that sadly, this is not the case.

Looking at these bases of support, we see that they can be
divided into two broad categories. The first category, embracing
points 1 through 3, is consistent with a search for the truth,
which is said to be a purpose of pretrial discovery. The second
category, comprising points 4 through 6, is about procedural
regulatory and efficiency.

On Closer Exam

How does the Appellate Division’s application of the sham
affidavit doctrine in Metro Marketing stack up if looked
at through this lens?

With respect to a search for the truth, the Appellate Division
seemed to assume, based on the portion of its opinion quoted above,
that the side-switching employee’s denials of wrongdoing at his
deposition had greater credibility than his subsequent admissions
in the affidavit. However, the sequence of denial followed by
admission in this case does not follow the usual sham affidavit
pattern. For example, the witness in the Perma Research
case repeatedly denied knowledge of a conversation during his
multiday deposition, but recounted the purported conversation in
detail in his affidavit opposing summary judgment. 410 F.2d at 578.
More generally, if a witness who testifies at deposition to a lack
of knowledge subsequently submits an affidavit presenting facts he
previously denied knowing, the affidavit may be disregarded as a
sham (unless the witness explains why he now recalls them).
Although the pattern in Metro Marketing is superficially
similar — the witness denied knowledge of wrongdoing at his
deposition but subsequently confirmed the wrongful act in his
affidavit — the witness’s subsequent
“confession” can be thought of as inherently more
credible than his earlier denials. Here, the witness is not first
denying knowledge of an event at a deposition and then testifying
to it in an affidavit. Rather, he was denying wrongdoing at his
deposition and subsequently admitting it in his affidavit.

The Appellate Division also expressed concern about a company
that hires away the other side’s employee in order to procure
his testimony. But again, the witness’s testimony was first
aligned with his then-employer’s interest (and his own
interest) at the deposition, and then aligned with his new
employer’s interest at the time of his affidavit. Apart from
timing, is there reason to believe that the witness’s
motivation to help his then-current employer was stronger the
second time than the first?

As to the preservation of procedural regularity and efficiency,
the Appellate Division’s decision fits comfortably in the
rationale behind the sham affidavit doctrine. On these grounds, the
contradictory affidavit of the side-switching employee was
correctly disregarded so as not to disrupt the orderly process of
litigation leading to the trial court’s grant of the summary
judgment motion.

Given the fallibility of memory, the sham affidavit doctrine
does not apply if the affidavit provides a credible reason for the
witness to contradict his deposition testimony. Stated simply, an
affidavit that explains the contradiction is probably not a sham.
This raises the question of how, if at all, the witness here (or
more likely, the non-movant’s counsel who presumably drafted
the affidavit) could have explained the contradiction.

For example, if the witness had been threatened prior to his
deposition and coerced into lying, that would undoubtedly have been
sufficient. Or if the witness stated in his affidavit that he was
not in his right mind at the deposition because he had just
suffered a death in the family, was ill, was on pain killers due to
recent surgery, and could think only about getting out of the
deposition to go home, that would likely have been sufficient. (To
be clear, these are hypothetical questions for discussion and not
based on any facts of the case.)

Moving to a less dramatic explanation, suppose the witness
stated in his affidavit that “I denied the wrongdoing at my
deposition because I was scared of getting into trouble, didn’t
want to get my friends in trouble, and was afraid of losing my job.
I was embarrassed by what I had done, and denied it even though I
knew it was wrong to give inaccurate testimony. But it’s been
gnawing at me ever since, and I want as best as I can to make
things right by coming clean and admitting what I did.” This
scenario is easy to understand. It would also be a clear admission
that the witness had knowingly and intentionally lied at his
deposition, putting him in a bad spot (exposure to perjury charges)
and potentially raising tough ethical issues for the lawyer
drafting the affidavit. But its candor and credibility would
seemingly be enough to avoid the sham affidavit doctrine.

From this case, at least in New Jersey, it appears that a bare
statement that the affiant “had found inaccuracies” in
his deposition testimony and “hereby retract[ed],” it
will not be sufficient to overcome the sham affidavit rule once it
is triggered, even if the factual bases for the rule’s
application may not fully align with its original rationale.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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