Tuesday, April 21, 2009
Trying Over Spilt Milk: Ninth Circuit Finds District Court Improperly Admitted Fault Letter As Business Record
In relevant part, Federal Rule of Evidence 803(6), the business records exception to the rule against hearsay, allows for the admission of
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.
The rationale behind this exception is that members of a business generally record things accurately to ensure the smooth functioning of the business. When, however a business prepares a record/report or has a record/report prepared for it, not in the course of regularly conducted activity, but after an accident, there is no such expectation of reliability. Instead, because the business in this situation likely anticipates suing or being sued, there is the strong possibility that the report/record will be unreliability slanted in favor of the business. And this was exactly the problem with a district court opinion, according to the Ninth Circuit's recent opinion in Millenkamp v. Davisco Foods Intern., Inc., 2009 WL 982787 (9th Cir. 2009).
[t]he Millenkamps raise[d] bovine calves in Idaho...[while] Davisco operate[d] the "Jerome Cheese Company," which produces milk permeate as a byproduct of its cheese-making operation. Because milk permeate is sometimes used as a source of dietary energy, protein, and minerals in livestock feeding programs, Davisco sells milk permeate to several dairies near Jerome, Idaho.
Given the use of milk permeate in other feeding programs, the Millenkamps decided to investigate using it as part of their calf feeding operation. They discussed its use in their operation with Davisco employee, Steven Ewing. Ewing admit[ted] that he provided the Millenkamps an analysis sheet that set forth the contents of Davisco's milk permeate and represented that it had a pH level of at least 6. The Millenkamps also assert[ed] that Ewing told them that (1) he "thought" the milk permeate "would be good to feed" the calves; and (2) it should be stored in plastic tanks similar to tanks Ewing observed while touring the Millenkamps' facilities. The Millenkamps then consulted nutritionist Matt Schmitt of Cargil, Inc. After such investigation, the Millenkamps purchased milk permeate from Davisco, stored it in plastic tanks, and, beginning on May 25, 2002, incorporated it into the feed for their calves.
Within days, Bill Millenkamp noticed that several calves became sick, so he stopped feeding them milk permeate. Soon thereafter, many of the Millenkamps' calves died or failed to gain weight at a desirable rate. On June 3 and 4, 2002, the Millenkamps' veterinarian, Dr. Michael Mihlfried, conducted necropsies on three dead calves. He concluded that two of them died from rumin acidosis and the third died from a disease to which acidosis can predispose calves. Mihlfried posited that the Millenkamps stored the milk permeate at an improper temperature, which allowed lactose to ferment into a harmful lactic acid that caused the calves to fall prey to rumen acidosis.
The Millenkamps thereafter sued Davisco, claiming that the company breached express and implied warranties to them, and Cargil, Inc., with whom it reached a settlement. After the jury found in favor of the Millenkamps in their action against Davisco, the company appealed, claiming, inter alia, that the district court improperly allowed for the admission of Exhibit 18, a letter from Cargill's nutritionist, Matt Schmitt, to Bill Millenkamp, discussing the cause of the Millenkamps' calves' illnesses. The Ninth Circuit agreed, finding that
In order to be admissible under Rule 803(6), a document must have been “made at or near the time” of the events it records or describes, “by, or from information transmitted by, a person with knowledge” of those events, “kept in the course of a regularly conducted business activity,” and part of a business's “regular practice.” Fed. R. Evid. 803(6). Exhibit 18 fails to meet the requirements of Rule 803(6) for admission. It was not generated in the ordinary course of...business, nor kept in the course of the regularly conducted business activity. Instead, Exhibit 18 appears to have been generated in anticipation of litigation, rather than as part of a regular business practice. It places the blame for the calves' illness on Davisco. Moreover, there is no testimony from the letter's author nor other evidence that Exhibit 18 would have been generated, but for the Millenkamps' request.
In other words, there was every reason to believe that a letter prepared by one defendant (which later reached a settlement agreement with the plaintiff) which shifted the blame to the other defendant and which was prepared after the incident giving rise to the lawsuit would be both unreliable and slanted in favor of the plaintiff and against the other defendant.