Monday, November 23, 2020
Supreme Judicial Court of Maine Grapples With Integrated Records Doctrine Under the Business Records Exception
Records of a regularly conducted activity. A record of an act, event, condition, opinion, or diagnosis if:
(A) The record was made at or near the time by—or from information transmitted by—someone with knowledge;
(B) The record was kept in the course of a regularly conducted activity of a business, organization, occupation, or calling, whether or not for profit;
(C) Making the record was a regular practice of that activity;
(D) All these conditions are shown by the testimony of the custodian or another qualified witness, or by a certification that complies with Rule 902(11), Rule 902(12) or with a statute permitting certification; and
(E) The opponent does not show that the source of information or the method or circumstances of preparation indicate a lack of trustworthiness.
Typically, this "business records" hearsay exception applies to documents produced by a business itself (e.g., Burger King is sued and seeks to introduce its business records, or the adverse party seeks to introduce business records that Burger King produced during discovery). But what happens in a case in which a business creates business records and sends them to a second business, with that second business integrating those records into its own business records? That was the question addressed by the Supreme Judicial Court of Maine in Bank of New York Mellon v. Shone, 2020 WL 6165853 (Me. 2020)
In 2015, The Bank of New York Mellon commenced [a] foreclosure action against Danielle Shone and Michael Buck. The Bank's complaint alleged that in 2005, Buck had taken out a loan from America's Wholesale Lender and that, to secure Buck's performance pursuant to the promissory note for that loan, Shone and Buck had executed a mortgage on a Portland property they owned. Although the original lender and mortgagee were third-party entities, the Bank alleged that it ultimately acquired the note and mortgage. The Bank also alleged that Buck had stopped making payments on the loan in 2008.
The court held a bench trial on the complaint in October 2018. There, the Bank offered an exhibit containing a notice of default and right to cure purportedly sent to Shone and Buck by the law firm retained by Bayview Loan Servicing, which serviced the note and mortgage for the Bank, along with a purported U.S. Postal Service certificate of mailing.
The trial court excluded this exhibit due to the lack of any first-hand testimony about the practices of the law firm that purportedly created and mailed the notices of default. On appeal, the Supreme Judicial Court of Maine thus had to determine whether the Bank could introduce the exhibit under Rule 803(6) even though it did not create it. The court began by observing that
The traditional method of admitting business records in evidence pursuant to Rule 803(6) is through the testimony of a witness with personal knowledge of the practices of the business or other entity that created the record. The integrated records method is a different method that applies when the record has, in effect, become a business record of a business other than the business that created the record....Thus, the integrated records approach eliminates the need for testimony about the practices of the entity that created the record and shifts the focus to the record's status within the receiving entity.
And, in terms of that status, the receiving party needs to prove reliance and verification:
Evidence of the receiving entity's reliance on the record in the regular course of its business is important because a business's reliance on information in a record it did not create helps demonstrate the trustworthiness of the record....
The verification element of the integrated records approach requires simply that the business receiving a record establish or confirm the accuracy of the record in some way.
Moreover, the court noted that "[m]ultiple federal circuit courts and numerous other states have upheld the admission of integrated business records upon a showing of verification and reliance on the part of the receiving business, without the need for testimony from the originating business."
That said, the Supreme Judicial Court of Maine noted that in Beneficial Maine Inc. v. Carter, 25 A.3d 96 (Me. 2011), it required "that the qualified witness have personal knowledge of the practices of both the business that created the record and the business that received it." Applying Carter, the Supreme Judicial Court of Maine concluded that "the trial court's exclusion of the exhibit at issue was consistent with the Carter line of cases, because the Bank did not present any first-hand testimony about the practices of the law firm that purportedly created and mailed the notices of default."