Business litigants rely upon their records to prove what they did and when they did it in fulfilling their obligations and otherwise conducting their affairs. The first place business lawyers start the process of proving or disproving a claim or defense is the business’ documents and records. But not all the records and documents of a business are admissible in evidence. In fact, if intended to prove the facts set out in those documents – and that, after all, is exactly why lawyers seek to look at those documents — the documents are hearsay: out of court statements intended to prove the matters asserted in them. An exception to the hearsay exclusion must apply for the documents to be admissible.
Although the business records exception to the hearsay rule is something most lawyers are well aware of, what is required to prove the elements of the exception can render the most straightforward case a nightmare, as shown by the recent case of Holt v. Calchas, LLC, ____ So.3d ____, 2014 WL 5614374 (Fla. 3d DCA, Nov. 5, 2014). InHolt, the Third District Court of Appeal reversed a trial court grant of summary judgment to a lender on the grounds that the lender’s proof of the borrower’s payment history did not meet the elements of the business records exception. The lender did not have a witness testify from personal knowledge about the procedures the original lender used to create and maintain the record and, therefore, could not prove that the records in the original lender’s computer satisfied the business records exception.
The elements to prove that evidence is admissible under the business records exception are straightforward. If the record (1) was made at or near the time of the event; (2) was made by or from information transmitted by a person with knowledge; (3) was kept in the ordinary course of a regularly conducted business activity; and (4) it was a regular practice of that business to make such a record, then it is a business record that may be admitted to prove the facts contained in the record. All the elements must be established.
This all sounds simple enough, but as the Holt case demonstrates, it is necessary that someone with personal knowledge testify how the data was recorded, when it was recorded, by whom it was recorded (i.e., by a person with actual knowledge of what was being recorded), and whether it was done “at or near the time of the event” in conformity with the set procedures of the party (i.e., in the regular course of that company’s business). As Holtmakes clear, relying upon the mere existence of records within a computer system renders it virtually impossible to meet the business records exception requirements.
Holt raises the specter of evidentiary difficulty in a myriad of litigation matters. In today’s world there is significant employee turnover, the melding of old (sometimes paper) record systems into new electronic record systems, the use of personal email devices to carry on business activities, the merger of businesses and the wholesale transfer of significant business segments from one company to another. Maintaining an evidentiary trail of a proper records system, with people capable of testifying from personal knowledge as to the required elements of the business records exception can create a significant issue for business litigants and their lawyers.