Commercial Litigation and Arbitration

Email Evidence — Mere Fact That Email Is Kept in Routine Course of Business Operations Does Not Render It Admissible as a Business Record

United States v. Cone, 714 F.3d 197 (4th Cir. 2012):

D. Introduction of Customer E-Mails

Cone and Zhao last argue that the district court erred in admitting certain e-mails from JDC customers complaining that JDC products were "counterfeit" and "fake." Although the district court determined that the e-mails were introduced for a non-hearsay purpose, i.e., to show that Zhao and Cone were on notice that they were selling counterfeit goods, the court declined to give a limiting jury instruction to that effect and instead stated that "the e-mails say what they say and the jury will have to decide if they're believable or not. That's their job." (J.A. 1673-74.) Cone and Zhao contend that the court's actions constitute reversible error.

This Court reviews evidentiary rulings for an abuse of discretion and "will only overturn an evidentiary ruling that is 'arbitrary and irrational.'" United States v. Cloud, 680 F.3d 396, 401 (4th Cir. 2012) (quoting United States v. Cole, 631 F.3d 146, 153 (4th Cir. 2011)). Evidentiary rulings are subject to harmless error review, such that any error is harmless where we may say "with fair assurance, after pondering all that happened without stripping the erroneous action from the whole, that the judgment was not substantially swayed by the error." United States v. Johnson, 617 F.3d 286, 292 (4th Cir. 2010).

At the outset, we believe that the district court properly admitted the e-mails for the non-hearsay purpose of showing that Cone and Zhao were on notice as to the counterfeit nature of the goods they sold. See 5-801 Weinstein's Federal Evidence § 801.11[5][a] (Out of court statement not hearsay when "offered not for [its] truth but to prove the extent of . . . a recipient's notice of certain conditions.").

We are troubled, however, by the court's response to counsel's request for a limiting instruction. Indeed, while the emails may have been properly admitted for a reason other than their truth, the district court stated just the opposite--that the jury will have to decide "if they're believable or not." In other words, the court erroneously instructed the jury to consider statements contained in the e-mails for the truth of the matter asserted.

The government contends, nonetheless, that the court's statement was not error because the statements in the e-mails could have been admitted under a hearsay exception, namely the business records exception to the hearsay rule, found at Federal Rule of Evidence 803(6). We are not persuaded.

Rule 803(6)(B) allows for the introduction of records that are "kept in the course of a regularly conducted activity of a business." For a record to be admitted as a business record, it must be "(1) made by a regularly conducted business activity, (2) kept in the 'regular course' of that business, (3) 'the regular practice of that business to make the memorandum,' (4) and made by a person with knowledge or from information transmitted by a person with knowledge." Clark v. Los Angeles., 650 F.2d 1033, 1036-37 (9th Cir. 1981) (quoting Fed. R. Evid. 803(6)).

E-mails, however, present unique problems of recent vintage in the context of the business records exception. As one district court recently explained:

Courts are in disagreement on whether emails can and should fall under the business records hearsay exception. The business records exception assumes that records containing information necessary in the regular running of a business will be accurate and reliable. See Certain Underwriters at Lloyd's London v. Sinkovich, 232 F.3d 200, 204-05 (4th Cir. 2000). Email, however, is typically a more casual form of communication than other records usually kept in the course of business, such that it may not be appropriate to assume the same degree of accuracy and reliability. As email is more commonly used to communicate business matters both internally and externally, however, more formal paper records are becoming more unusual.

Its My Party, Inc. v. Live Nation, Inc., No. JFM-09-547, 2012 WL 3655470 at *5 (D. Md. Aug. 23, 2012) (unpublished). The district court in that case excluded the e-mails on the basis that the "more specificity is required regarding the party's recordkeeping practices to show a particular email in fact constitutes a reliable business record." Id.

While properly authenticated e-mails may be admitted into evidence under the business records exception, it would be insufficient to survive a hearsay challenge simply to say that since a business keeps and receives e-mails, then ergo all those e-mails are business records falling within the ambit of Rule 803(6)(B). "An e-mail created within a business entity does not, for that reason alone, satisfy the business records exception of the hearsay rule." Morisseau v. DLA Piper, 532 F. Supp. 2d 595, 621 n.163 (S.D.N.Y. 2008). The district court's observation that the e-mails were kept as a "regular operation of the business" is simply insufficient on that basis alone to establish a foundation for admission under Rule 803(6)(B). Accordingly, because the e-mails could not, on this record, be admitted under an exception to the hearsay rule, the district court's failure to give the limiting jury instruction was error.

We conclude, however, that the any error in the court's jury instructions or failure to give an e-mail limiting instruction was harmless. In the context of a twelve-day jury trial in which the government adduced overwhelming evidence of Cone and Zhao's guilt, we cannot conclude that Cone or Zhao were prejudiced by this single error concerning a minute portion of the total evidence against them. As discussed above, the government further introduced physical evidence in the form of counterfeit labels seized from Zhao's home and storage unit. The government also introduced routers seized by CBP, that Heidecker (a Cisco engineer) identified as counterfeit goods.

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