People v. Frederick

When can a judge restrict an expert witness as to the type of testimony to be given, and what is the standard for an "investment contract" under California law?


The court held that an expert need not be given an unlimited scope on which they may testify and that an investment contract is the investment of money in an enterprise with the expectation of return, but without the ability to exercise control over the operation of the enterprise. Frederick and others were convicted of operating an illegal endless chain scheme involving the purchase of calling cards and cell phones. Frederick wanted to introduce expert witness testimony on the law of endless chains and whether the scheme she was accused of was in fact an endless chain under California law. The trial court restricted the expert's testimony because he would be opining directly on questions that the jury was to decide. The Appeals Court upheld this ruling, reasoning that experts may opine on topics that touch on the ultimate issues to be decided by the jury, but if the opinion invades the province of the jury to decide the case, it was impermissible. Frederick also claimed that because the investors in the program were styled as co-owners and were required to seek out additional participants, it could not be held to be an investment contract. The Court of Appeals rejected this contention based on the testimony of multiple victims stating that they had no expectation of actively managing the business and other evidence demonstrating they held no managerial control of the scheme's operations.

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Published In: Criminal Law Updates, MLM / Direct Sales Updates, MLM Consulting / Network Marketing Updates, Securities Updates

Reference Info:State, 9th Circuit, California | United States

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