Commercial Litigation and Arbitration

Hearsay — Uncertain Standard of Review — Business Records “Fraught with Double Hearsay” — Authenticating Witness & Personal Knowledge — Business Duty Requirement for Third-Party Speakers (Good Quotes)

Peak v. Kubota Tractor Corp., 2014 U.S. App. LEXIS 9174 (6th Cir. May 16, 2014):

Plaintiff-Appellant Anthony Peak ("Plaintiff") was injured after the front-end loader tractor he was using to move boulders malfunctioned, causing the boulders to fall on him, resulting in severe injuries. The jury rendered a verdict for Defendants Kubota Tractor Corporation and Kubota Industrial Equipment Corporation ("Defendants"). We affirm.


The court instructed the jury, including the following spoliation instruction, to which Defendants objected.

The plaintiff  [*9] in this case has not offered the original controller. As this evidence was under the control of the defendant and could have been produced by defendant, you may infer that the evidence would have been adverse to the defendant if you belief that no reasonable excuse for the defendant's failure to produce the evidence has been shown.

Plaintiff was under no obligation to request the defendant to retain the original controller; therefore, in determining whether or not the defendant has shown a reasonable excuse for not producing the controller, you may not consider any failure on the part of the plaintiff to request the defendant to retain the controller.


II. Analysis

A. Business Records

1. Standard of Review

Although state law governs the substantive issues presented in this diversity action, federal law governs all procedural issues "including evidentiary rulings made pursuant to the Federal Rules of Evidence." V& M Star Steel v. Centimark Corp., 678 F.3d 459, 465 (6th Cir. 2012).

As we explained in United States v. Williams, 63 F. App'x 782, 784-85 (6th Cir. 2003) and United States v. Carmichael, 232 F.3d 510, 521 (6th Cir. 2000), the standard of review for admission of hearsay evidence is somewhat unclear. Compare Stalbosky v. Belew, 205 F.3d 890, 894 (6th Cir. 2000) (observing that this court has traditionally reviewed de novo district court conclusions about whether proffered evidence is hearsay), and United States v. Laster, 258 F.3d 525, 529 (6th Cir. 2001) (reviewing the district court's admission of purchase records under Fed. R. Evid. 803(6) de novo), United States v. Dakota, 197 F.3d 821, 827 (6th Cir. 1999) (reviewing admission of documents under the business records exception de novo); with Trepel v. Roadway Express, Inc., 194 F.3d 708, 716-17 (6th Cir.1999)  [*12] (holding that General Electric Co. v. Joiner, 522 U.S. 136, 118 (1997), silently overruled this court's "heretofore well-settled precedent that hearsay evidentiary rulings are reviewed de novo" and requires abuse-of-discretion review). Yet as we also explained in United States v. Baker, "these two standards of review are not in fact inconsistent, because 'it is an abuse of discretion to make errors of law or clear errors of factual determination.'" 458 F.3d 513, 517 (6th Cir. 2006). See also id. at 517 n.6 (noting that in United States v. McDaniel, 398 F.3d 540, 544 (6th Cir. 2005), this court "concluded that Joiner did not require any change in our standard of review for evidentiary determinations at trial").

As in Baker, "[t]he decision as to the correct standard of review will not affect the outcome of this appeal." Id. at 517.

2. Merits

Plaintiff argues that the district court abused its discretion in admitting Defendants' business records because they contained hearsay within hearsay and each level was not excluded. Defendant's Exhibit 107, the Customer Contact form, stated that: "Jim Carroll--Talked to Ann again, she had talked to the tech. What they found is the plungers on the  [*13] single lever control were sticking on the lever itself. The tech lubed the plungers and the valve seems to work fine." Defendant's Exhibit 108, the Warranty Claim, stated in relevant part: "Remedy: repair CLEANED AND LUBRICATED PLUNGERS." Exhibit 108 also stated that the controller was repaired by cleaning and lubricated the plungers for a cost of $17.38.

Specifically, Plaintiff contends that the Customer Contact form documents communications between Defendant and a customer or dealer; it does not document communications between employees of the same business. Ann and the tech worked for Summit Power, not Defendants, and there was no evidence to establish that the tech's initial statements were made in the course of a regular business activity of Defendants. Plaintiff claims that the statements in the Warranty Claim document were "the fruit of the same hearsay."

Federal Rule of Evidence 803(6) excludes from the rule against hearsay, "regardless of whether the declarant is available as a witness":

   (6) Records of a Regularly Conducted Activity. A record of an act, event, condition, opinion, or diagnosis if:

(A) the record was made at or near the time by--or from information transmitted by--someone  [*14] with knowledge;

(B) the record was kept in the course of a regularly conducted activity of a business, organization, occupation, or calling, whether or not for profit;

(C) making the record was a regular practice of that activity;

(D) all these conditions are shown by the testimony of the custodian or another qualified witness, or by a certification that complies with Rule 902(11) or (12) or with a statute permitting certification; and

(E) neither the source of information nor the method or circumstances of preparation indicate a lack of trustworthiness.

This court has held that business records are properly admitted under this exception if they satisfy four requirements:

   (1) they must have been made in the course of regularly conducted business activities; (2) they must have been kept in the regular course of business; (3) the regular practice of that business must have been to have made the memorandum; and (4) the memorandum must have been made by a person with knowledge of the transaction or from information transmitted by a person with knowledge.

Cobbins v. Tenn. Dep't. of Transp., 566 F.3d 582, 588 (6th Cir. 2009) (citation omitted).

Rule 803(6) does not require that the custodian personally  [*15] gather, input, and compile the information memorialized in a business record. See United States v. Weinstock, 153 F.3d 272, 276 (6th Cir. 1998). Rather, the custodian must simply be familiar with the company's recordkeeping practices. Id. Similarly, "the other qualified witness" laying the foundation for the introduction of the business record need not have personal knowledge of their preparation, but must be familiar with the record-keeping system. Dyno Constr. Co. v. McWane, Inc., 198 F.3d 567, 575-76 (6th Cir. 1999).

We have explained that the business records exception "is based on the indicia of reliability that attaches to a record created or maintained by an employer in the ordinary or regular course of their business. An employer's independent motivation for creating and maintaining reliable business records obviates the need for sworn testimony and cross-examination." Cobbins, 566 F.3d at 588. Thus, once the foundation is laid, absent specific and credible evidence of untrustworthiness, "the proper approach is to admit the evidence and permit the jury to determine the weight to be given the records." United States v. Hathaway, 798 F.2d 902, 907 (6th Cir. 1986).

The district  [*16] court held that Bechtel was "capable of laying the foundation necessary to satisfy Rule 803(6)'s requirements with respect to the Customer Contact and Warranty Claim forms" because (1) he was "familiar with and understands Kubota's record keeping system for the former form and the system used by Kubota's dealers to create the latter form," and (2) he "regularly relies on the Warranty Claim forms prepared by its dealers to evaluate a reported issue with Kubota equipment or components and warranty coverage and reimbursement."

Indeed business records "are potentially fraught with double hearsay." United States v. Gwathney, 465 F.3d 1133, 1141 (10th Cir. 2006). Double hearsay "exists when the record is prepared by an employee with information supplied by another person." Id. (internal quotations and citation omitted). But information from an outsider is admissible for its truth under Rule 803(6) if that outsider was under a business duty to report the information. United States v. Cecil, 615 F.3d 678, 690 (6th Cir. 2010). In this case, as Bechtel explained, Summit Power had a contractual duty to submit warranty claims to Defendants via the Kubotalink system. (K. App. 19; Ex. 1, Bechtel  [*17] Aff. ¶7). Summit Power's dealer agreement required Summit Power to "follow Kubota's procedures for handling matters covered under a Kubota limited warranty, including for submitting Warranty Claims." (Id.). The technician was an employee of Summit Power who was working with Ann and Carroll to diagnose the problem with the controller, as required under Summit Power's business relationship with Defendants. Therefore, the technician was a participant in the chain producing the record in the course of his regular business activity. Thus, Ann's statements and the technician's statements to Defendants, based on personal knowledge, regarding Plaintiff's warranty claim were admissible under Rule 803(6).

Plaintiff complains that the documents lack trustworthiness because (1) the methodology of the statements therein "could never be tested," (2) no person in the triple-level chain of hearsay testified at trial, (3) Defendants replaced the controller assembly even though lubrication fixed the problem, (4) Defendants did not return the product despite Plaintiffs' request, (5) Defendants hid from him the fact that they replaced the controller, and (6) the employees who inspected the controller were  [*18] not called to testify even though they were available. Appellant's Br. at 20.

None of these assertions establish "credible evidence of untrustworthiness." Hathaway, 798 F.2d at 907. First, Plaintiff's inability to test the methodology of the statements (presumably that lubrication corrected the problem) goes to the weight of the evidence, an issue for the jury. See id. Second, Sixth Circuit law clearly holds that to be an "other qualified witness", it is not necessary to have personal knowledge of the documents' preparation. See Dyno Constr., 198 F.3d at 575-76. Third, Defendants' replacement of the original controller goes to the weight of the documents. In fact, Bechtel testified that Defendants replaced the controller as a "goodwill" gesture as is customary for good customers like Plaintiff, who had owned two previous Kubota tractors. Fourth, the record does not support the assertion that Defendants hid the fact that the original controller was replaced. Fifth, Plaintiff could have subpoenaed or deposed the individuals who saw the original controller.2 Finally, Plaintiff's reference to Defendants' spoliation was not relevant to the admission of the business records; in any event  [*19] given the permissive adverse inference instruction, the jury was free to conclude that the original controller was adverse to Plaintiff, regardless of Defendants' business records.3 The district court properly exercised its discretion in favor of admitting probative evidence. See Hathaway, 798 F.2d at 906 ("It is well established that federal law favors the admission of evidence which has any probative value at all.").

2   However, the district court noted that Summit Power is no longer in business and the parties represented that they were unable to identify and/or locate the individuals from Summit Power whose statements are contained in the subject exhibits.

3   Ironically, Plaintiff had admitted the Summit Power Repair Order, which contains the same type of alleged hearsay statements Plaintiff complained of in Defendants' business records. Plaintiff presented no witness to lay a foundation for purposes of admitting the document under Fed. R. Evid. 803(6). The district court admitted it anyway, over Defendants' objection.

In short, the district court did not err under either a de novo or abuse of discretion standard in admitting Defendant Exhibits 107 and 108.

Share this article:


Recent Posts