Understanding the Business Records Exception to the Hearsay Rule

Sep 30, 2017

A deep understanding of the business records exception to the hearsay rule is essential in all stages of litigation—not just trial. Depositions are fertile grounds for advocates familiar with the rules to skillfully probe a witness and establish (or, if opposing the record's admissibility, debunk) the preliminary facts to admit a business record (including the document's admission for pre-trial motions). Likewise, misunderstanding this hearsay exception can cause discouraging results; desired documents are excluded (for not establishing the exception) while unwanted documents are admitted (for not properly challenging the exception).

As an initial matter, trustworthiness is the rationale behind the business records exception. If a business relies on certain records in its day-to-day operations, they are likely trustworthy enough to be used in court. On the other hand, if a record was specifically created for a party's use in litigation, it is understandably less trustworthy.   

For both the proponent and opponent of a business record's admission, the first step is understanding the foundational requirements of this hearsay exception:

1271. Evidence of a writing made as a record of an act, condition, or event is not made inadmissible by the hearsay rule when offered to prove the act, condition, or event if:

(a) The writing was made in the regular course of a business; 

(b) The writing was made at or near the time of the act, condition, or event; 

(c) The custodian or other qualified witness testifies to its identity and the mode of its preparation; and 

(d) The sources of information and method and time of preparation were such as to indicate its trustworthiness.

Cal. Evid. Code § 1271. 

A Record, Act, Condition or Event 

A common misstep is ignoring the opening language of Section 1271. The threshold requirement is that the writing record an "act, condition or event." A writing that purports to record only a conclusion does not qualify. 

People v. Reyes, 12 Cal. 3d 486 (1974) illustrates this point. In Reyes, the defendant was charged with first degree murder, and his defense was "diminished capacity." Id. at 494. The defense called a psychiatrist, who testified that the defendant consumed too many drugs and too much alcohol to "possess the capacity to deliberate or form an intent to kill...." Id. at 496. In addition, the victim allegedly made a homosexual advance towards the defendant. According to the defendant's psychiatrist, "[the defendant] had experienced an uncontrollable rage in response to the victim's homosexual advance and his conduct was an unconscious reaction to an attack on his masculinity." Id. 

During trial, the defense sought to introduce a psychiatrist's diagnostic impression of the victim (from several years before the homicide). Id. at 503. The report stated that the impression was, "[a]lcoholism with sexual psychopathy. This patient is not an outstanding patient for psychiatric treatment." Id. The defense argued that the report was admissible as a business record under Section 1271, but the trial court excluded it. Id.

The Court of Appeal affirmed the trial court's ruling. The Court reasoned that the report was not a "record 'of an act, condition or event.'" Id. Rather, the report communicated the psychiatrist's opinion, and the Court explained the danger of admitting third party opinions who are not subjected to cross-examination: 

[A] conclusion is neither an act, condition or event; it may or may not be based upon conditions, acts or events observed by the person drawing the conclusion; it may or not be founded upon sound reason; the person who has formed the conclusion recorded may or may not be qualified to form it and testify to it. Whether the conclusion is based upon observation of an act, condition or event or upon sound reason or whether the person forming it is qualified to form it and testify to it can only be established by the examination of that party under oath....

Id.citing People v. Williams, 187 Cal. App. 2d 355, 365 (1960). 

Because there was no way to cross-examine the psychiatrist who had diagnosed the victim with "sexual psychopathy," the record was properly excluded. The Reyes court did, however, distinguish between diagnoses made based on the thought process of many factors (an excluded conclusion) versus diagnoses that are tantamount to a statement of fact (which are not excluded): "[F]or example, a diagnosis that a man has suffered a compound fracture of the femur is a record of what the person making the diagnosis has seen but this is not true where the diagnosis [involves reasoning and] consideration of many different factors." Id.citing Williams, 187 Cal. App. 2d at 365; see also Hutton v. Brookside, 213 Cal. App. 2d 350, 355 (1963) (A nurse's written statement in medical records that the patient "seemed too ill to be moved" was an inadmissible hearsay conclusion).   

Made in the Regular Course of a Business

The next requirement is that the writing be made in the regular course of business. There are two important components to this requirement: (1) the business must routinely make a record of the act, condition or event in question as part of its regularly-conducted business, and (2) the record must have been made by someone with firsthand knowledge or be based upon information obtained from someone who had a business duty to observe and report the facts recorded as part of his employment. One way to think about this requirement is that the substance of the record must be reliable; it cannot simply be the regurgitation of inadmissible hearsay—even if its made in the regular course of business.  

For example, Zanone v. City of Whittier, 162 Cal. App. 4th 174 (2008) illustrates the importance of these two requirements. In Zanone, the plaintiff brought a gender discrimination and harassment lawsuit against the City of Whittier. The plaintiff Gina Zanone worked at the Whittier Police Department, and alleged that she was given poor reviews and demotions because of her gender. Id. at 178-83. Zanone further contended that other women in the Department had left because they had "concerns about promotability." Id. at 184. 

The City of Whittier sought to introduce certain documents pertaining to these "other women" who left the Department. Specifically, the City sought to introduce (1) "exit questionnaires" prepared by the women, and (2) summaries of the exit interviews prepared by City personnel. Id. at 184-85. The trial court denied their admission and, after Zanone was awarded $1.25 million by a jury, the City appealed. 

The Court of Appeal affirmed the documents' exclusion. The Court focused on the requirement that the record be created in the ordinary course of the author's business: "[T]he departing officers were neither employees acting on behalf of the Department nor acting in the ordinary course of their own business when they completed their exit questionnaires, an infrequent event." Id. at 191. The Court further explained the records' lack of trustworthiness: "The [departing] officers could have easily believed any complaints they may have made about sex discrimination—or anything less than a glowing endorsement of the Department and its personnel—would be communicated to their new employers and cause them to suffer adverse treatment as a result." Id. at 191-92. 

The Court reached the same conclusion with respect to the interview summaries, which were prepared by Department personnel. Id., at 192. The summaries were not admissible "because the employees who prepared them did not have first hand knowledge of the events recorded and the [departing] officers, who did have first hand knowledge, were not under a business duty to accurately report the facts pertaining to their departure." Id.citing Taylor v. Centennial Bowl, Inc., 65 Cal. 2d 114, 126 (1966). "A summary of an inadmissible hearsay statement cannot be made admissible merely because it is repeated in a valid business record." Id.

The Writing Was Made At or Near the Time of the Act, Condition, or Event

This timeliness requirement is again tied to the idea that the record be trustworthy. Just as memories fade with time, a document prepared long after the act it is purporting to record is inherently untrustworthy. See e.g.Prato-Morrison v. Doe, 103 Cal. App. 4th, 229 (2002). 

The timeliness of the record is measured from the time of the act, condition or event to the time the document is entered or recorded. See Aguimatang v. California State Lottery, 234 Cal. App. 3d 769 (1991) (documents were admissible because the "data" was entered at or near the time of the event, even though the records were not "printed" until much later).

The Custodian or Other Qualified Witness Testifies to its Identity and the Mode of its Preparation

The requirement that a witness attest to both the record's identity and mode of preparation can cause unanticipated challenges for lawyers unfamiliar with the details of Section 1271. This can become especially problematic when documents are produced at trial pursuant to a subpoena duces tecum under Section 1560 et seq.

Section 1560 provides a streamlined method for the production of business documents in response to a subpoena duces tecum. It provides that if the subpoena is for attendance in court, the custodian can mail the documents to the court in a sealed envelope. See Cal. Evid. Code § 1560(c)(1).

Section 1561 requires that the documents be produced with an affidavit which states that, (1) "[t]he affiant is the duly authorized custodian of the records or otherwise qualified witness and has authority to certify the records," (2) "[t]he copy is a true copy of all the records described in the subpoena ...," (3) "[t]he records were prepared by the personnel of the business in the ordinary course of business at or near the time of the act, condition, or event[,]" (4) "[t]he identity of the records[,]" and (5) "[a] description of the mode of preparation of the records."

Finally, Section 1562 provides that, "[i]f the original records would be admissible in evidence if the custodian or other qualified witness had been present and testified to the matters stated in the affidavit, and if the requirements of Section 1271 have been met, the copy of the records is admissible in evidence." 

A common practice for businesses responding to subpoenas pursuant to Section 1560 is to submit an affidavit that closely tracks the language of Section 1561. Indeed, many businesses have form affidavits that exactly track the language of Section 1561. The potential problem is that such an affidavit is essentially a list of conclusions, not facts. For example, the declaration will state that the records were prepared "at or near the time of the act," but will not provide any details as to when or how they were specifically prepared.   

Taggart v. Super Seer Corp., 33 Cal. App. 4th 1697 (1995) is instructive on this issue. The Taggart case involved a personal injury action against the manufacturer of a motorcycle helmet. Among the documents that the plaintiffs sought to introduce at trial included certain helmet impact test reports. Id. at 1704. The test reports were produced at trial with a signed declaration pursuant to Sections 1560 and 1561. Id. 

Taggart should serve as a warning to all lawyers employing Section 1560 for the production of business records at trial: "[A] custodian's declaration may state all the matters it is required to state under section 1561, yet fail to provide a sufficient foundation of the records under section 1271." Taggart, 33 Cal. App. 4th at 1706. 

Turning to the facts of the case, the Court explained that, "the custodian's declaration conformed meticulously to section 1561. However, it contained no evidence as to what the [helmet test] reports were, how they were prepared, or what sources of information they were based on. It offered no evidence that the [helmet test] reports were trustworthy." Id. The Court further reasoned that the custodian's absence at trial created a potentially unfair advantage for the proponent of the records (were they admitted): "Normally, where the proponent of evidence invokes the business records exception, the opponent can test the applicability of the exception by cross-examining the custodian of the records.... The custodian's declaration [in this case] enjoyed an irrebuttable and conclusive effect on the admissibility of the records." Id. at 1708. 

The Court acknowledged that its ruling weakened the desired efficiency of Section 1560 et seq., but explained it was necessary to ensure only the admissibility of reliable business records: "We are aware that this construction of section 1560 et seq. lessens their usefulness as a low-cost way to obtain documentary evidence for use at trial.... A contrary construction would create a hole in the business records exception big enough to drive a truckload of hearsay through; the proponent of a business record who could not show how it was prepared, or who knew the way it was prepared would indicate that it was untrustworthy, could nevertheless introduce the record into evidence." Id. 

The Sources of Information and Method and Time of Preparation Were Such as to Indicate its Trustworthiness

Courts employ various ways to measure a record's trustworthiness. For example, in Levy-Zentner Co. v. Southern Pacific Transportation Co., 74 Cal. App. 3d 762 (1977), the Court of Appeal examined the admission of fire investigative reports that were prepared by and offered against the defendant. The Court analyzed the facts and concluded that the preparation of the report was consistent with the requirements of Section 1271. But the Court further held that the records' admission were "supported by an alternative test of reliability, namely, a party will not admit things damaging to its own position unless believed true." Id. at 786. So even when the defendant argued that the report contained inadmissible opinions, the Court found it noteworthy that the opinion was contrary to the defendant's position at trial: "The rules pertaining to the necessary foundation for conclusions are not applicable to out-of-court admissions against interest." Id. at 787.

Section 1271 is important, and each element of the statute should be considered when moving to admit or objecting to a business record's admission. 

David Sugden is a shareholder at Call & Jensen. He can be reached at [email protected].

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