Criminal Justice Section  

   Criminal Justice Magazine

Criminal Justice Magazine
Fall 2000
Volume 15, Issue 3

Trial Tactics

Stephen A. Saltzburg

Third-Party Hearsay Exceptions for Business Records

Throughout the United States one of the most familiar evidence rules is that which excludes hearsay declarations when offered for their truth. The general exclusionary rule is subject to various exceptions. One of the most frequently used exceptions is the business records exception.

Federal Rule of Evidence 803 provides the following hearsay exception for "business records":

 

The following are not excluded by the hearsay rule, even though the declarant is available as a witness:

* * *

(6)-Records of regularly conducted activity. — 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. The term "business" as used in this paragraph includes business, institution, association, profession, occupation, and calling of every kind, whether or not conducted for profit.

The federal rule is similar to rules that exist in every state—some created by statute and others by adoption of an evidence code.

A careful reading of Rule 803(6) reveals that it is ambiguous in at least one important way. The rule requires that information that is recorded in a business record be "transmitted by a person with knowledge," but the rule does not indicate whether the person whose knowledge is transmitted must have a particular kind of relationship with the business. This ambiguity has caused problems for trial lawyers. In this column we analyze one case that illustrates these problems and point out that the problem addressed in this case is not a new one.

In United States v. Vigneau, 187 F.3d 70 (1st Cir. 1999), the government charged Patrick Vigneau with participating in a continuing criminal enterprise, possession of marijuana with intent to distribute, money laundering, and conspiracy. The charges arose out of a drug distribution scheme in which Vigneau, his brother, and others acquired marijuana and steroids in the Southwest and resold them in the northeastern United States.

The government introduced evidence showing that one participant in the scheme, Richard Crandall, obtained the drugs from suppliers in Texas and Mexico and forwarded them to Vigneau, who transmitted funds to Crandall, primarily through Western Union money orders. These money orders sometimes were sent using Vigneau’s name and sometimes using false or borrowed names. The money orders were often picked up and cashed by an accomplice of Crandall, who turned the money over to him.

The government introduced more than 70 records of Western Union money transfers. Vigneau’s name, address, and phone number appeared on 21 "To Send Money" forms. His brother’s name, names of other defendants, and fictitious names appeared on other forms.

Other, substantial evidence pointed to Vigneau’s guilt. A search of his van revealed a "pocket organizer/drug ledger." In addition, a U-Haul delivery of marijuana to him was intercepted in Missouri and the deliverymen agreed to cooperate with the Drug Enforcement Administration (DEA). Their cooperation led to Crandall’s cooperation, and, in the end, federal agents were able to videotape a meeting between Crandall and Vigneau in which Vigneau discussed how to continue operations now that the U-Haul technique had been uncovered.

The totality of the evidence was sufficient to support a jury verdict on the charges, but use of the Western Union money orders threatened to undermine the convictions. Although the district court saw no problem with the money orders, the court of appeals found that the admission of most of them was clear error.

The Western Union forms

To understand the error that the court of appeals identified, it is necessary to understand how a Western Union money order worked at the time the crimes were committed. The "To Send Money" form had a left and a right side. The sender completed the left side by filling in the sender’s name, address, and telephone number—along with the amount of the transfer and the intended recipient’s name and location. Once the sender completed this portion of the form and provided it to a Western Union clerk, the clerk then filled in the right side of the form. The clerk signed the right side, dated it, stated the amount of the transfer and the fee for the transfer, and included a computer-generated control number. In 1995, Western Union clerks were not required to ask for proof of the sender’s identity.

Western Union used the control number to correlate the information on the "To Send Money" form with the corresponding "Received Money" form and the canceled check that it issued to pay the recipient. Although Western Union routinely discarded the forms after six months, it retained in its computer database the information provided by the sender.

Vigneau’s hearsay objection

When the government sought to introduce the Western Union records, Vigneau objected that the records were hearsay and were improperly being used to show the truth of what was stated therein. The court of appeals aptly summarized the objection as follows: "Whoever wrote the name ‘Patrick Vigneau’ on the ‘To Send Money’ forms was stating in substance: ‘I am Patrick Vigneau and this is my address and telephone number.’" (187 F.3d at 74.) The court of appeals recognized that "if there were independent evidence that the writer was Patrick Vigneau, the statements would constitute party opponent admissions and would fall within an exception to the rule against hearsay," but it reasoned that the government could not simply ask the jury to assume that Vigneau was the writer and could not "use the forms themselves as bootstrap proof that Patrick Vigneau made the admission." ( Id. at 75.)

Although it is not completely clear from the court of appeals opinion, it appears that the government did not contest that the forms were hearsay and that they were offered for the purpose that Vigneau claimed. It also appears that the district court understood the objection and believed that the forms were hearsay.

The government’s response

Rather than disputing that the forms were hearsay, the government responded to the hearsay objection by invoking the business records exception. The district court apparently found that the records qualified under the exception and were not untrustworthy. It admitted the records without redaction for their truth and instructed the jury that it was to decide the weight to be given to the records.

The court of appeals recognized that the "To Send Money" forms "literally comply with the business records exception because each form is a business record, and in this case, the computer records appeared to be a trustworthy account of what was recorded on the original ‘To Send Money’ forms." (187 F.3d at 75 (footnote omitted).) But the court held that "the business records exception does not embrace statements contained within a business record that were made by one who is not a part of the business if the embraced statements are offered for their truth." ( Id.)

To the delight of evidence professors, the court of appeals returned to "[t]he classic case" of Johnson v. Lutz, 253 N.Y. 124, 170 N.E. 517 (N.Y. 1930), which excluded an unredacted police report that incorporated the statement of a bystander that was recorded by a police officer in the ordinary course of business. The court of appeals saw that Johnson was cited in the Advisory Committee’s Note to Rule 803(6) and found clear evidence that the drafters intended to limit the exception to information provided by members of the business. The court explained that the limitation on whose information was admissible through a business record "is not a technical formality." (187 F.3d at 75.) It explained as follows:

Johnson v. Lutz . . . follows directly from the very rationale for the business records exception. When a clerk records the receipt of an order over the telephone, the regularity of the procedure, coupled with business incentives to keep accurate records, provide reasonable assurance that the record thus made reflects the clerk’s original entry. Thus the business record, although an out-of-court statement and therefore hearsay, is admitted without calling the clerk to prove that the clerk received an order. See generally 2 McCormick on Evidence § 286 (4th ed. 1992).

But no such safeguards of regularity or business checks automatically assure the truth of a statement to the business by a stranger to it, such as that made by the bystander to the police officer or that made by the money sender who gave the form containing his name, address, and telephone number to Western Union. Accordingly, the Johnson v. Lutz gloss excludes this "outsider" information, where offered for its truth, unless some other hearsay exception applies to the outsider’s own statement.

( Id. at 75–76.)

The court reasoned that, although the federal business records exception excluded business records that otherwise qualified for admission if they were shown to be untrustworthy, an argument that records were trustworthy would not result in admission if the records did not otherwise qualify as business records. It recognized that in some cases a business record might contain a third-party statement that would itself be admissible—for example, an excited utterance recorded in a business record. But no exception appeared applicable to a situation in which a Western Union clerk made no effort to verify the identity of the person who signed a form. The court also noted that in other situations a statement in a business record might be admissible for some purpose other than its truth, but that in this case the only relevance of the records was to prove who was the sender of the forms.

The error in admitting the unredacted evidence concerning the "To Send Money" forms required reversal of the moneylaundering counts that related to the forms. Interestingly, the court held that the admission of the computer records indicating that Vigneau was the sender on 21 occasions did not require reversal of his conviction on the conspiracy to launder count. The court reasoned that there was strong, independent evidence of conspiracy and no need—as there was on the moneylaundering counts—for the jury to find that Vigneau himself mailed the money orders.

Circumstantial identification

The court of appeals observed that the government might have argued that there was circumstantial evidence that Vigneau sent the forms with his name on them, and that this circumstantial evidence was sufficient to admit the evidence as an admission. One difficulty, however, with the argument—aside from the fact that it was not made—would have been that it would not account for the bulk of the forms that did not bear his name. Moreover, because the names of Vigneau’s brother and other conspirators were used on some forms, it is not clear that an inference could be drawn that one person was sending all the forms or that the one person was actually Vigneau.

The court cited other cases in which evidence that a company like Western Union routinely verified identity approved the admission of business records:

Some cases have admitted under the business records exception "outsider" statements contained in business records, like the sender’s name on the Western Union form, where there is evidence that the business itself used a procedure for verifying identity (e.g., by requiring a credit card or driver’s license). Probably the best analytical defense of this gloss is that in such a case, the verification procedure is circumstantial evidence of identity that goes beyond the mere bootstrap use of the name to establish identity. While this gloss may well represent a reasonable accommodation of conflicting values, verification was not Western Union’s practice at the time.

(187 F.3d at 77.)

The court did use a circumstantial evidence analysis to support the admission of evidence concerning three of the "To Send Money" forms. The sender’s copies of two forms were among the papers seized in the search of Vigneau’s van. Because these forms were found together with other papers belonging to Vigneau, the court of appeals reasoned that there was sufficient circumstantial evidence to permit a jury to find that these were admissions by Vigneau. Independent evidence as to a third form was weaker. Even though the court concluded that there was evidence to support admission of these forms against Vigneau, it found that the fact that all of the evidence regarding the forms was lumped together and admitted for all purposes meant that the defense never had occasion to address the three specific forms and thus the admission of the totality of the evidence required reversal of the moneylaundering convictions related to the three forms as well as to the others.

Nonhearsay use

The court of appeals also recognized that the Western Union evidence had evidentiary value regardless of who actually mailed the "To Send Money" forms:

No doubt, the "To Send Money" forms were relevant to the government’s case regardless of whether Patrick Vigneau (or any other named sender) was the person who made an individual transfer: they showed transfers of money from Rhode Island directed to Crandall and others that tended to support the general description of the drug and money laundering activities described by the government’s witnesses. Thus, the forms could have been offered in redacted form, omitting the information identifying Patrick Vigneau as the sender of 21 of the forms. But that is not what happened.

(187 F.3d at 76.)

The court had no doubt that evidence that money orders were sent and cashed was admissible. Its concern was that the evidence indicating that Vigneau mailed specific forms was hearsay and was not properly admitted under the business records rule. It was the failure to redact the name of the sender that required reversal of the money-laundering counts.

An old problem

Vigneau is a 1999 decision, but the problem associated with offering business records that contain third-party statements is not new. It has been apparent since the Federal Rules were adopted in 1975. For example, in United States v. Yates, 553 F.2d 518 (6th Cir. 1977), a defendant was convicted of bank robbery. The court of appeals reversed his conviction because the trial judge made an improper comment to the jury. It also found error in the admission of a letter as a business record.

The letter was written by two bank employees to the management of the bank. Apparently, the employees set forth the details of the bank robbery as part of their duties to the bank. Thus, the letter appeared to be a business record of the bank. The employees added a postscript to their letter, however. The postscript read: "P.S. The FBI just phoned to notify us that the robber turned himself in this morning and is now in their custody." During oral argument, the government conceded that this part of the letter could not properly be described as a business record and should have been excluded. The court of appeals agreed as it summed up the reasoning: "The document contained statements made by a third party outside of the scope of the business. The mere fact that the recordation of the third-party statements is routine, taken apart from the source of the information recorded, imports no guaranty of the truth of the statements themselves."

One should not think that the problem discussed here was caused by the adoption of the Federal Rules of Evidence or by the codification of various state rules of evidence. The problem also existed before the codification movement reached its peak.

For example, in United States v. Graham, 391 F.2d 439 (6th Cir. 1968), three defendants were convicted of transportation of stolen motor vehicles, and two of them appealed. The owner of one car that had been stolen testified at trial, but the only evidence that a second car had been stolen was a Chicago police report containing a statement by the owner that his car had been stolen. The court of appeals had no difficulty with admitting police reports as business records under the Federal Business Records Act, 28 U.S.C. § 1732. But the court found that the admission of the statement by the car owner was not within the hearsay exception.

The court made the following logical analysis in reaching its conclusion:

It has thus been stated that one of the purposes behind section 1732 is to permit the business record to be introduced into evidence in substitution for the person making the report. United States v. New York Foreign Trade Zone Operators, Inc., 304 F.2d 792 (2d Cir. 1962). Under this approach, and absent an additional exception to the hearsay rule, had the police officer who made the stolen car report in this case been called to testify, he would not have been permitted over objection to relate what he had been told by the purported owner of the cars for the purpose of establishing the truth of the matter asserted.

(391 F.2d at 447.)

The court stated that "it is here determined that a police report is not admissible under the Federal Business Records Act for the sole purpose of establishing the truth of the matter asserted by a third-party informant. Were it relevant, the police record in evidence would of course be admissible as proof that the car to which it referred had been reported stolen." ( Id. at 448.)

It should be noted that the logic of the Graham court goes only so far. The fact is that one person working for a company generally cannot come into court and testify as to what other people working for the company said, if the statements by these other people are offered for their truth. A hearsay objection would be sustained to such testimony, and no exception would be readily available. Thus, when it comes to oral statements, the hearsay rule tends to exclude statements that are made outside of court to a witness by both third parties and fellow workers.

Several assumptions underlie the business records exception. One is that employees of a business have an interest in providing accurate information so that the business will succeed. A second is that a business has an interest in recording important information on which it will rely. A third is that few businesses could operate solely on the basis of employee memories without reliance on records. The truth is that the maker of a business record might well be able to create a document that could be admitted to prove the truth of statements made by others, as long as those others share a duty to the business.

Eight lessons

Lessons that may be learned from examining Vigneau and thinking about third-party statements embedded in business records follow.

1. The fact that a business chooses to include information in a document that is undoubtedly a business record does not guarantee that all of the information in the document qualifies for admission over a hearsay objection.

2. The person providing information that is included in a business record generally must be working for or under some duty to the business in order to qualify the information for admission under the business records exception.

3. In some cases independent verification of information provided by a third person will be sufficient to qualify the information as within the business records exception. When an employee of a business makes an independent effort to verify information, it takes on the reliability of other information transmitted to the business by members thereof.

4. If a statement by a third party that is recorded in a business record qualifies for admission under another hearsay exception, the statement may be admitted for its truth. Federal Rule of Evidence 805 makes specific provision for this situation.

5. It is important for counsel to examine business records closely to determine when statements are made by persons outside of the business. A timely and specific objection is required to preserve a claim that portions of a business record should be excluded or redacted. In Vigneau, for example, the hearsay objection appears to have been both timely and specific. Had no objection been made, it is doubtful that a reviewing court would have found plain error.

6. If information contained in a record is relevant for some purpose other than proving its truth, it may be used without recourse to a hearsay exception. Generally, the proponent of the evidence is required to identify the purpose for which the evidence is offered.In Vigneau, the government failed to suggest a nonhearsay use for the Western Union evidence. The court of appeals saw one, but found that it was too late for it to be of use, as the jury heard the evidence without any instruction limiting how it could use the evidence.

7. If the proponent of a business record does offer it for a limited purpose, the opponent generally has the burden of requesting a limiting instruction that clarifies that the information is not to be used for the truth of its content. Failure to request an instruction may amount to a waiver. The issue did not arise in Vigneau because the records were not offered for anything less than all purposes.

8. Every business is on notice when it obtains information provided by third parties and includes it in its records that it faces a potential hearsay objection if the information is to be relied upon in litigation. Therefore, the business has a reason to verify the information when it is gathered, if possible, or to ensure that the record sets forth all circumstances underlying the transmission of the information that might qualify the information as falling within a separate exception to the hearsay rule.

Stephen A. Saltzburg is the Howery Professor of Trial Advocacy, Litigation, and Professional Responsibility at George Washington University Law School in Washington, D.C. He is also a contributing editor to Criminal Justice magazine.

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