The Eighth Circuit recently held that an internal “log” of instances of confusion was inadmissible double hearsay. In The First National Bank in Sioux Falls v. First National Bank South Dakota, Nos. 11-1568/1683 (8th Cir. May 25, 2012), the First National Bank South Dakota (South Dakota) appealed from the District of South Dakota’s entry of a permanent injunction against it as a remedy for trademark infringement and unfair competition claims brought by The First National Bank in Sioux Falls (Sioux Falls). One of the issues raised on appeal was whether a “confusion log” compiled by Sioux Falls employees should have been admitted into evidence.
Shortly before filing suit, Sioux Falls established a confusion log on its company intranet site and instructed employees to record all interactions with third-parties that suggest confusion with South Dakota. The resulting log consisted of 1,527 entries allegedly documenting confusion between Sioux Falls and South Dakota on the part of customers, vendors and delivery services. At trial, South Dakota objected to its admission as double hearsay. Sioux Falls argued that the log fell under Fed. R. Evid. 803(3), the so-called “then-existing state of mind” exception to the hearsay rule. The District Court admitted the log with the understanding that it would consider South Dakota’s concerns when weighing the evidence. However, because it was created in anticipation of litigation, the Court found that the log did not qualify as a business record under Fed. R. Evid. 803(6). Sioux Falls did not appeal that finding.
On appeal, the Eighth Circuit agreed with South Dakota and found that the confusion log was inadmissible double hearsay. The Court found that while many of the statements by third-parties likely fall under Rule 803(3), the statements of the employees who logged the third-party statements do not. According to the Eighth Circuit, the employees were documenting the third-parties’ state of mind as opposed to their own, and Rule 803(3) applies to the declarant’s then-existing state of mind. The Court also rejected Sioux Falls’ alternative argument that the log fell within the present-sense-impression exception (Fed. R. Evid. 803(1)) because the entries were often logged long after the incidents of confusion actually occurred.
Nevertheless, the Eighth Circuit found that the admission of the confusion log was harmless error because many of the Sioux Falls employees who drafted the log entries testified at trial about the incidents of confusion they had witnessed. The Eighth Circuit confirmed that live testimony from an employee regarding specific instances of confused customer behavior, witnessed first-hand by the testifying employee, is not hearsay.
Thus, while an internal log is helpful to keep track of instances of confusion, it is risky to rely on it as your smoking gun at trial. To have the best chance of getting your confusion log into evidence, it should be created in the ordinary course of business and entries should be recorded immediately after the confusion occurred. Even if it is excluded, a confusion log is useful to refresh an employee’s recollection to allow him or her to testify regarding instances of confusion personally witnessed in the past.