Court Opinion

ID: 6982100
Source: CourtListenerOpinion
Date Created: 2022-07-24 02:26:20.395255+00
Date Added: 2024-06-11T16:09:14.767326
License: Public Domain

BRYSON, Circuit Judge,
dissenting.
This case turns on a single point of evidence law, but an important one. At issue is the interpretation of what is probably the most commonly invoked exception to the federal hearsay rule, the “business records” exception.
The business records exception is embodied in Rule 803(6) of the Federal Rules of Evidence. Rule 803 provides, in pertinent part:
The following are not excluded by the hearsay rule, even though the declarant is available as a witness:
(6) A memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinions, or diagnoses, made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course of a regularly conducted business activity, and if it was the regular practice of that business activity to make the memorandum, report, record, or data compilation, all as shown by the testimony of the custodian or other qualified witness, unless the source of information or the method or circumstances of preparation indicate lack of trustworthiness....
By its terms, the rule requires several conditions to be satisfied before a document can be admitted under the business records exception. A sponsoring witness, either the custodian of the records or another qualified witness, must testify (1) that the records in question were made contemporaneously with the recorded events, (2) that the records were made by, or from information transmitted by, someone with personal knowledge of the events, (3) that the records were kept in the course of a regularly conducted business activity j and (4) that it was the customary practice of that business activity to prepare such records. See 5 Jack B. Wein-stein & Margaret A. Berger, Weinstein’s Federal Evidence § 803.11 (Joseph M. McLaughlin ed., 2d ed.1998). The records “must be excluded if a witness cannot vouch that the requirements for admission have been met.” Id. § 803.11[1], at 803-61 (listing cases).
The documents at issue in this case cannot be admitted as the business records of the entities that prepared the estimates because none of the above prerequisites for admission has been satisfied. The documents consist of notations on various slips of paper purporting to reflect some unidentified person’s estimate of the cost *1346of repairing particular items of furniture. The government failed to call any witness who could provide any of the required foundational testimony. The witnesses that the government did call — representatives of the government agencies that received the documents — did not know who prepared the documents, whether they were prepared contemporaneously with the events reported (ie., the damage and repair estimates), whether they were prepared in the ordinary course of a business activity, or whether it was the regular practice of that business activity to perform repair estimates. The government’s evidence thus completely failed to satisfy the requirements of Rule 803(6). This was not a technical flaw in an otherwise compelling array of proof. It was a wholesale failure to satisfy any of the elements of the business records exception to the hearsay rule. Moreover, the documents in question were not simply cumulative or marginally relevant materials: The documents constituted the only proof of value offered by the government in each of the cases before us on appeal.
Apparently aware that the repair estimates could not be admitted on the basis of testimony about the circumstances of their preparation, the government argues that the documents are admissible as the business records of the government agency that collected them in the course of preparing for this litigation. The government’s theory is this: The documents were assembled by Department of Defense personnel responsible for paying service members’ claims for damage caused to their furniture by private carriers in the course of moving, and for subsequently making claims against those carriers. At trial, representatives from the Defense Department testified that they had collected the estimate records, and that they had relied on those records in paying the service members’ claims and in seeking reimbursement from carriers such as the appellants. Because the Defense Department retained the records and relied on them, the government argues, those records are admissible as business records of the Defense Department.
This theory, which the court today adopts, is squarely at odds with the text of Rule 803(6). The rule requires foundational evidence to establish the circumstances in which the record in question was made. The government’s witnesses, however, were unable to testify about any of those circumstances. Instead, the government’s witnesses testified about the circumstances under which the government received and retained the records. But that is not good enough, under Rule 803(6), to justify the admission of the records for the truth of their contents. Where, for example, is the evidence that any of the records were made at or near the time of the event recorded or that any of the records were made by or from information transmitted by a person with knowledge? It is missing. The government witnesses admitted they had no idea of the circumstances under which the records were prepared. Under the rule, that should have been the end of the matter, and the evidence should have been ruled inadmissible under Rule 803(6).
Both the government and the court emphasize what they perceive as the reliability of the records in this case, purportedly ensured by the government’s interest in obtaining accurate estimates of the damage to service members’ property. There are three problems with this focus on reliability.
First, a party’s general interest in obtaining reliable information from a source is not sufficient to render that information rehable, as that term is used in the hearsay rules. I may have every expectation and desire that the statements my bank sends me every month are accurate, but my assumptions and wishes do not make the statements reliable absent evidence about how the statements were prepared.
Second, the particular grounds recited by the government for concluding that the repair estimates are reliable are not convincing. The penalties to which service *1347members were subject for filing a false claim would affect only cases in which the service member knowingly submitted an inflated estimate, not cases in which the estimate was unreliable but the service member had no reason to know that it was. Nor was there any sufficient guarantee of reliability in the very general testimony of the government witnesses that military officials who handled claims tried to become familiar with estimators in particular areas and sometimes rejected estimates as appearing to be too high (even though the military claims representatives did not personally view the damaged property).
Third, Rule 803(6) does not permit evidence that does not satisfy the rule to be admitted as long as it is considered reliable. To the contrary, the only role reliability plays in the Rule 803(6) calculus is to exclude evidence that otherwise qualifies for admission. Thus, even if particular records otherwise satisfy all the foundational requirements of the rule, the records must be excluded if the “source of information or the method or circumstances of the preparation [of the records] indicate lack of trustworthiness.” A finding of reliability, by itself, does not authorize admission under the rule.
At bottom, the government’s position is that even though it can offer no evidence regarding the circumstances under which the estimate documents were prepared, the documents can be admitted for their truth simply because the government collected the records, retained them, and relied on them. Under this theory, the government (or, for that matter, a private party) could presumably urge the admission of records collected from any source whatsoever, as long as the records were retained in a file and relied on in some way. Thus, the FBI could collect statements by unidentified informants and introduce those statements as business records, as long as it could show that the records were retained and relied upon in the course of the FBI’s business of investigating federal crimes. While such a proposition may seem hyperbolic, it appears to be consistent with the government’s theory of admissibility in this case. Significantly, the government’s counsel, upon being asked a question based on that hypothetical example, did not concede that such documents would be inadmissible. But the inadmissibility of such documents cannot be denied. See, e.g., Cameron v. Otto Bock Orthopedic Indus., Inc., 43 F.3d 14, 16-17 (1st Cir.1994) (product failure reports generated by doctors and collected by manufacturer of medical device not admissible as business records of manufacturer); Meder v. Everest & Jennings, Inc., 637 F.2d 1182, 1186-87 (8th Cir.1981) (police report based on statements from accident witnesses not admissible as business record); United States v. Pazsint, 703 F.2d 420, 424 (9th Cir.1983) (police tapes of emergency phone calls not admissible as business records). The court’s reasoning in Pazsint is directly relevant here:
[T]he police officer who made the recordings was acting in the regular course of business, but he had no knowledge of the truthfulness of the information being recorded, while the witnesses who gave the information which was recorded had personal knowledge but were under no business duty to report. The latter’s tape-recorded statements can not be given the presumption of reliability and regularity accorded a business record.
703 F.2d at 425 (citing United States v. Smith, 521 F.2d 957, 964 (D.C.Cir.1975); Advisory Committee Note to Fed.R.Evid. 803(6)).
To be sure, Rule 803(6) does not require that the sponsoring witness be the maker of the documents, as long as the sponsoring witness can satisfy all the foundational requirements of the rule. See Weinstein’s Federal Evidence, supra, § 803.11[1], at 803-61 to 803-64; 2 Kenneth S. Broun et al., McCormick On Evidence § 292 (John William Strong ed., 4th ed.1992); United States v. Parker, 749 F.2d 628, 633 (11th Cir.1984). But a custodian who has simply collected a group of documents from a *1348wide array of sources and who has no personal knowledge of the circumstances under which those documents were prepared is not qualified to give the necessary foundational testimony. See Weinstein’s Federal Evidence, supra, § 803.11[4], at 803-70 (“The person to whom the information is offered cannot qualify ... [if] he or she does not have personal knowledge of the underlying event.”). This court underscored that point in Kolmes v. World Fibers Corp., 107 F.3d 1534 (Fed.Cir.1997), in which one of the parties sought to admit the internal invention disclosure documents of a third-party company in an effort to invalidate a patent. We held the documents inadmissible under the business records exception, because the sponsoring witness “did not know when or how the documents were prepared.” Id. at 1542.
It is also true that in some circumstances records prepared by one entity may be introduced as the business records of another. Those circumstances are addressed in McCormick On Evidence:
Problems may arise when one business organization seeks to introduce records in its possession but actually prepared by another. It seems evident that mere possession or “custody” of records under these circumstances does not qualify employees of the possessing party to lay the requisite foundation, and that the transmittal of information by the custodian regarding the contents of records in the custodian’s possession does not qualify the recipient to lay the foundation. However, when the business offering the records of another has made an independent check of the records, or can establish accuracy by other means, the necessary foundation may be established.
McCormick On Evidence, supra, § 292.
Thus, a company in possession of documents prepared by another company may introduce the documents as its own business records, even if the sponsoring witness from the custodian company cannot vouch for the circumstances under which the documents were prepared, provided that the custodian company “has made an independent check of the records, or can establish accuracy by other means.” McCormick On Evidence, supra, § 292. The custodian company’s independent check of the documents acts as a proxy for the requirement that the records have been prepared by someone with personal knowledge of the recorded events. By verifying the documents, the custodian company is in essence acquiring personal knowledge of the recorded events, and thereby effectively adopting the entries in the documents as his own. See, e.g., Munoz v. Strahm, Farms, Inc., 69 F.3d 501, 36 U.P.S.Q.2d 1499 (Fed.Cir.1995) (slides dated by Kodak admitted as business records of photographer in light of photographer’s testimony that it was his regular practice to send film to Kodak for processing and to check the dates on the slides when he received them from Kodak shortly thereafter).
Several of the cases cited by the government fit this pattern, in which business records prepared by one entity have been admitted as the records of a second entity, because the first entity’s records were integrated into the record system of the second entity, which was able to confirm the accuracy of the records. For example, in United States v. Childs, 5 F.3d 1328, 1333-34 (9th Cir.1993), and United States v. Ullrich, 580 F.2d 765, 771-72 (5th Cir. 1978), the courts upheld the admission of automotive records as the business records of car dealerships. Although the dealerships had not prepared the records, the dealerships relied on the documents’ identification of individual cars in keeping track of cars in the dealerships’ possession. Because the dealerships confirmed the accuracy of the records as they used them, the records were in effect converted into the dealerships’ records and admissible as such.
The same analysis has been applied to uphold the admission of a freight bill, which was initially prepared by another entity, but which was used by the custodi*1349an company to determine whether items were missing from a shipment, and on which representatives from the custodian company noted any discrepancies. See United States v. Carranco, 551 F.2d 1197, 1200 (10th Cir.1977). By virtue of the use made of the record, and the fact that the custodian company adopted the record as its own and confirmed its accuracy, the record was deemed admissible as a business record of the custodian company. See also United States v. Doe, 960 F.2d 221, 223 (1st Cir.1992) (gun sale invoice from other company was record of sports shop for purposes of showing purchase of gun because sports shop owner noted receipt of gun on the invoice at the time of receipt and used the invoice as his record of acquisition of gun).
The analysis applied in the above cases cannot be stretched to fit the facts of this case. This is not a case in which records made by one entity became the business records of another entity when the pertinent contents of the records were verified by the second entity. Instead, the. evidence showed that the repair estimate documents were placed into the military claims files, without further corroboration or verification, and used as the basis for paying the service members’ claims and litigating against the carriers. Although there was general testimony from two witnesses that the military attempted to find reliable estimators and would occasionally request a second estimate if the first seemed much too high in light of the damage report, the government offered no evidence that representatives of the agencies that received the estimates conducted any kind of audit to check their accuracy.
This case is therefore distinguishable from United States v. Sokolow, 91 F.3d 396 (3d Cir.1996), which the court cites. In Sokolow, the Third Circuit upheld the admission of an exhibit consisting of insurance claim adjustments made by Inservco, an administrator hired to adjust the claims after the liquidation of the insurance company to which the claims had been submitted. Because Inservco verified the information submitted on the proof of claim forms, the court admitted the forms as Inservco’s business records. 91 F.3d at 403-04. Although the business records were “derived in part from information provided by outside persons not under a business compulsion,” the business records exception was satisfied, the court explained, because Inservco had “adequate verification or other assurance of accuracy of the information provided by the outside person.” Id. at 403. In effect, the act of verification converted the claim forms from records made by a third party into records made by Inservco in the course of its ordinary business activities.
An instructive case in light of the government’s argument is NLRB v. First Termite Control Co., 646 F.2d 424 (9th Cir. 1981). In that case, the NLRB sought to introduce a freight bill prepared by Southern Pacific Railroad to show that a particular shipment of lumber was delivered from Washington to California. The NLRB offered as a sponsoring witness a representative of Economy Lumber Co., the company that received the freight bill and thereafter retained custody of it. Following a detailed analysis, the court rejected the NLRB’s argument that the freight bill was admissible as Economy Lumber’s business record, on the ground that the sponsoring witness was unable to provide the foundational evidence necessary to invoke Rule 803(6).
The court explained that the provision in Rule 803(6) that requires records to be supported by “ ‘the testimony of the custodian or other qualified witness’ insures the presence of some individual at trial who can testify about the methods of keeping the information.” 646 F.2d at 427. If the witness is not knowledgeable as to the manner in which the records are made and kept, the court explained, he or she cannot be subjected to meaningful cross-examination. ‘Without cross-examination on the keeping of the records, the trier of fact would have no rational basis on which to evaluate the accuracy of the record, and therefore the trustworthiness of the evi-*1350denee.” Id. Because the witness from Economy Lumber Co. “had no knowledge of how Southern Pacific’s records were made or maintained,” the court held her testimony insufficient to support the admission of the document. Id. Distinguishing other cases in which freight bills had been admitted, the court noted that in those cases the sponsoring witnesses were familiar with the procedures used by the companies that made the records in question, and the companies that adopted the records checked them for accuracy and relied on the information in them in their regular course of business. Id. at 428-29.
A particularly close analogue to this case is provided by the Fifth Circuit’s decision in United States v. Davis, 571 F.2d 1354 (5th Cir.1978). In that case, the government sought admission of a document that reflected the manufacture, sale, and shipment of a firearm. The document was executed by a representative of Colt Industries and sent to the Bureau of Alcohol, Tobacco and Firearms (BATF). The government’s theory in Davis, as here, was that the record was a business record of the BATF, even though it had been made by Colt and was merely on file with the BATF. Although the district court accepted that argument, the court of appeals rejected it. The court pointed out that the document was not shown to have been “made at or near the time” of the events reported and that it was not shown that the report had been made “by, or from information transmitted by, a person with knowledge” of those acts or events. 571 F.2d at 1359-60. The court added that the foundation evidence likewise afforded “no basis for determining whether ‘the source of [the] information or the method or circumstances of preparation indicate lack of trustworthiness.’ ” Id. at 1360 n. 10. Thus, the court rejected exactly the argument that the government has made here: that the records prepared by another entity should be regarded as business records of the government simply because the government retained those records in files and relied on them in litigation. See also United States v. Furst, 886 F.2d 558, 570-72 (3d Cir.1989) (records excluded when sponsoring witness had no “knowledge as to the accuracy of the information” on which the documents in question were based, “or as to the knowledge of the persons who prepared the records”); United States v. Pazsint, 703 F.2d at 424-25 (records excluded because officer who prepared records “had no knowledge of the truthfulness of the information being recorded”); White Indus., Inc. v. Cessna Aircraft Co., 611 F.Supp. 1049, 1059 (W.D.Mo.1985) (“the mere presence of a document — no matter what its authorship — in the retained files of a business entity does not by itself qualify that document as a record of ‘regularly conducted activity’ ”).
Against this array of authority, the court today is able to find only two cases in which courts appear to have admitted evidence under Rule 803(6) without requiring full compliance with the foundational requirements of the rule: United States v. Jakobetz, 955 F.2d 786 (2d Cir.1992), and MRT Construction Inc. v. Hardrives, Inc., 158 F.3d 478 (9th Cir.1998). The business records issue in the Jakobetz case involved a bridge toll receipt that the defendant submitted to his employer to obtain reimbursement of trip expenses. The receipt was introduced into evidence at the defendant’s trial to show that he was at the bridge in question at the time indicated on the toll receipt. The court held the receipt admissible as a business record of the company to which the defendant had submitted it, on the ground that the receipt had been incorporated into the records of the company, even though no witness testified about the circumstances of the record’s preparation and there was no evidence that the company had independently verified the information on the receipt. 955 F.2d at 800-01.
In holding that the toll receipt was admissible under Rule 803(6) based only on foundation evidence that toll receipts were regularly made part of trip expense reports and that the defendant had submitted the toll receipt to the company as part *1351of the expense.record for one of his trips, the court misapplied the rule. Because there was no evidence that the company-had verified the information on the receipt, the receipt could not be treated as the company’s own business record for purposes of introducing the contents of the record for their truth. The more suitable ground for admitting the receipt, suggested by the court later in its opinion, is that the defendant himself “relied on [the receipt’s] authenticity when he submitted the receipt for reimbursement of his expenses.” 955 F.2d at 801. The evidence thus should have been admitted as an admission, i.e., “a statement of which the party has manifested an adoption or belief in its truth.” Fed.R.Evid. 801(d)(2)(B).
The discussion of Rule 803(6) in the MRT Construction case is so cryptic that it is difficult to tell just what the court held. The court rejected an argument that certain attorney bills sent to Har-drives were improperly admitted as business records upon the testimony of Har-drives chief financial officer. In the course of its brief discussion of the issue, the court noted that Hardrives received the bills from the law firm, maintained the bills in their files, and relied upon the bills as statements of fees charged by the law firm. Based on that evidence, the court held the bills admissible under Rule 803(6). 158 F.3d at 483. The problem with the court’s analysis is that if the bills were introduced simply to show that the company was billed a certain amount for legal services, the bills were not hearsay at all. And if the bills were introduced for the purpose of proving some assertion of fact contained therein, the testimony of Har-drives’ chief financial officer was plainly inadequate to qualify the bills for admission. The latter fact is readily demonstrated by this example: If one of the bills had recited that one of the partners of the law firm was present at an all-day meeting on a particular date, the bill obviously could not be admitted to support the partner’s alibi in a murder case based on foundational testimony of a representative of the client to whom the bill was sent. To the extent that the MRT case stands for the proposition that documents obtained from company A can be admitted as business records of company B simply because a representative of company B testifies that company B incorporated company A’s records into its files and relied on them, it is unsound.
* * * * *
In the end, the government’s argument comes down to a two-part policy-based plea. First, the government argues that because the military has chosen to make payments to service members based on estimates submitted by the service members, those estimates should be considered rehable enough to admit the estimates against the carriers as substantive evidence of loss. Second, the government argues that it would be unduly cumbersome and expensive to require foundational witnesses to attend trials such as the one in this case to give foundational evidence regarding documents involving relatively small amounts of money.
As to the second point, the rules of evidence sometimes create problems for litigants, but there is no principle that permits the rules to be avoided when their application seems inconvenient. If other ways cannot be found to ensure that documentary evidence of property damage in cases such as this one is admissible, the government may be better served by developing a contractual arrangement with its carriers to resolve disputes over damages by means other than court proceedings.
As to the first point, the answer is that the government has not shown that the military verified the estimates at issue in this case or confirmed their accuracy. The business records exception is therefore not available as a basis for avoiding the plaintiffs’ hearsay objection. To be sure, the military could have had good reasons for honoring the . service members’ claims without verifying their accuracy, such as a desire to expedite payment to service *1352members whose property has been damaged, or a judgment that a system of verification of damage estimates would not be cost-effective. But the fact that the government has chosen to make payments to service members on the basis of estimate documents having virtually no foundational support does not mean that those documents should be admissible as evidence against third parties in a court of law. In accepting the government’s theory of admissibility in this case, the court has disregarded the plain language of Rule 803(6) and gone beyond the scope of any decision applying that rule. I therefore respectfully dissent.