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Thursday, August 7, 2008

On The Road To Sturgis: Eighth Circuit Properly Allows For Admission Of Supplemental Tax Returns, But Under Wrong Rule Of Evidence

The recent opinion of the Eighth Circuit in Gaillard v. Jim's Water Service, Inc., 2008 WL 2938843 (8th Cir. 2008), correctly affirmed the trial court's decision to allow for the admission of supplemental tax returns as impeachment evidence, but it did so based upon the wrong rule of evidence.  In Gaillard, David Gaillard, a pastry chef from France, was struck and injured by a vehicle driven by Howard Hoyt and owned by Jim's Water Service, Inc. (JWS) while he attempted to repair a parked motorcycle on the shoulder of I-90 as he was heading to the Sturgis Motorcycle Rally.  Gaillard thereafter sued Hoyt and JWS for negligence, claiming brain injury, chronic pain from leg injury, and loss of income.  The first trial resulted in a mistrial because the jury verdict was not unanimous, but a second trial resulted in a verdict for the defendants

At the first trial, Gaillard submitted his supplemental tax returns to support his lost income claim.  Before the second trial, however, he moved to exclude the tax returns, but the trial court denied his motion.  Instead, the court permitted the defendants to use these returns to prove that Gaillard falsified his income tax returns and otherwise fabricated his lost income to inflate his damages.  As noted by the court,

     "Defendants also presented evidence at trial suggesting Gaillard exaggerated his injuries, falsified income tax returns and otherwise fabricated his lost income to inflate his damages. After the accident-and to inflate his lost income claim-he filed supplemental tax returns, which claimed additional income of as much as $120,000 per year for the previous few years derived from an alleged catering business he owned. The evidence at trial showed during the same years he was supposedly earning about $150,000, but declaring only around $30,000 per year, he failed to pay the IRS a debt of $11,000. The evidence also showed he was fraudulently receiving unemployment compensation for the two years before the accident, claiming to be unemployed while he in fact worked for a pest control business and allegedly made $118,000 a year as a self-employed caterer. Even Gaillard's expert on lost earnings stated he could not rely on Gaillard's tax returns because he could not 'trust them' and they might be 'pure fiction.'"

After the verdict was entered in favor of the defendants, Gaillard appealed to the Eighth Circuit, claiming, inter alia, that the trial court erred by permitting the defendants to introduce his supplemental tax returns as impeachment evidence.  The Eighth Circuit disagreed, finding that "when Gaillard presented evidence to suggest he suffered a loss of income, he opened the door for Defendants to produce evidence to contradict his claims.  It then cited to one of its previous rulings, in which it had found that tax returns may be treated as prior inconsistent statements.  The Eighth Circuit then concluded that:

     "The district court properly found the tax returns were admissible as impeachment evidence under Rule 608(b), which allows the 'court in its discretion to allow cross examination of witnesses regarding specific instances of a witness's own conduct if the past experiences are probative of a character of untruthfulness.'"

The Eighth Circuit's conclusion was correct, but its reasoning was not.  The problem with the court's reasoning is that prior inconsistent statements not given under oath are governed by Federal Rule of Evidence 613, which renders them admissible as long as certain disclosure requirements are fulfilled, and which, pursuant to subsection (b), allows for the prior statements to be proven through extrinsic evidence.

Conversely, let's look at the text of Federal Rule of Evidence 608(b)Rule 608(b) states in relevant part that:

     "Specific instances of the conduct of a witness, for the purpose of attacking or supporting the witness' character for truthfulness...may not be proved by extrinsic evidence. They may, however, in the discretion of the court, if probative of truthfulness or untruthfulness, be inquired into on cross-examination of the witness (1) concerning the witness' character for truthfulness or untruthfulness, or (2) concerning the character for truthfulness or untruthfulness of another witness as to which character the witness being cross-examined has testified." (emphasis added).

So, let's say that Gaillard gave no testimony at trial about receiving any awards for his pastries.  And let's say that defense counsel learned that Gaillard had gone around Sturges claiming that he won the 2007 Golden Scoop Award for his beignets when in fact he had won no such award.  Defense counsel could ask Gaillard whether he lied to people at Sturges about winning the Golden Scoop Award, but if Gaillard denied making such claims, defense counsel could not introduce a list of 2007 Golden Scoop Award winners to prove that Gaillard was lying.  Thus, Federal Rule of Evidence 608(b) did not support the admission of Gaillard's supplemental tax returns, but Federal Rule of Evidence 613 did. 

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