Thursday, February 27, 2014
You Took The Words Out of My Mouth: 4th Circuit Funds Profit and Loss Statement Admissible as Adoptive Admission
Federal Rule of Evidence 801(d)(2)(B) provides that
A statement that meets the following conditions is not hearsay:....
The statement is offered against an opposing party and:....
(B) is one the party manifested that it adopted or believed to be true....
Often, it is difficult to determine whether a party adopted a statement, such as when a party respond's to a declarant's incriminatory statement with silence. There was no such difficulty, however, in F.T.C. v. Ross, 2014 WL 703739 (4th Cir. 2014).
In Ross, the Federal Trade Commission sued Kristy Ross for engaging in deceptive internet advertising practices.
After a bench trial, the district court entered judgment enjoining Ross from participating in the deceptive practices and holding her jointly and severally liable for equitable monetary consumer redress in the amount of $163,167,539.95.
After this judgment, Ross appealed, claiming, inter alia, that the district court erred in allowing the F.T.C. to admit "a 2004 to 2006 profit and loss statement...."
The documents were produced during discovery in corporate litigation involving some of Ross' co-defendants in Canada. Daniel Sundin and Sam Jain sued Marc D' Souza, all of whom were co-defendants of Ross in this case and executives at IMI. Jain submitted an affidavit along with a profit and loss summary for the company for the period of 2004 to 2006; the documents were “litigation-purpose financial summaries [of IMI's profits] described in [Jain's] affidavit as a Quickbooks printout.”
On appeal, the Fourth Circuit noted that the district court allowed for the admission of the profit and loss statement under Federal Rule of Evidence 807, the residual hearsay exception. The Fourth Circuit, however, found that the statement was alternately admissible under Rule 801(d)(2)(B) because
Ross expressly adopted Jain's affidavit: she swore in her own affidavit produced during the Canadian litigation that she had read Jain's affidavit and was “in agreement with [its] contents.”...She did take some exceptions, but she did not object to the profit and loss statement attached to Jain's affidavit, nor did she object to the authenticity or reliability of the statements.