Utility Collection and the Business Records Rule: What You Need to Know
In a perfect world, when you go to trial on a utility collection matter, be it a claim for unpaid utility service or damage to the utilities property, the witnesses you bring to testify at the trial would have personal knowledge of the transaction. For example, they were the representative who set up or billed the account, or the representative who performed the repair to the damage, and investigated the cause of the damage. However, it is unlikely that one person was assigned responsibility for the account for its entire life, that one person performed the repair and investigation, or that this person remains employed and able to attend the trial. Often times the person who is going to appear at trial had no interaction with the debtor or with the account at all, but is bringing with them the utilities records to show the handling of the account from its inception. The rules of evidence recognize that business records kept by an entity should be admissible, despite the fact that the person who created that record- the person who processed the payment, took a phone call or negotiated the terms of the account, investigated the accident, or performed the repair, is not available to testify.
To qualify for the business records exception to the hearsay rule, a record must meet the following criteria1: (1) the record must be one recorded regularly in a regularly-conducted activity; (2) a person with knowledge of the act, event or condition recorded must have made the record; (3) it must have been recorded at or near the time of the act, event or condition; and (4) the party who seeks to introduce the record must lay a foundation through testimony of the record custodian or some other qualified witness.2 Even when these prerequisites are met, however, the trial court may exclude a record "if 'the source of information or the method or circumstances of preparation indicate [a] lack of trustworthiness.'"3
A qualified witness must "'demonstrate that he or she is sufficiently familiar with the operation of the business and with the circumstances of the preparation, maintenance, and retrieval of the record in order to reasonably testify on the basis of this knowledge that the record is what it purports to be, and was made in the ordinary course of business.'"4 However, the Rule does not require this witness to have personally participated in the creation of the document. To do so, "'would eviscerate the business records exception, since no document could be admitted unless the preparer (and possibly others involved in the information-gathering process) personally testified as to its creation.'"5
Going further, a recent Ohio Tenth District Court of Appeals decision makes clear that even a business record prepared by another business, that was incorporated into the business records maintained by your company, can be introduced by a qualified holder of the business records from your company.6 In this case, the Court considered whether an estimate prepared by a third party repair shop could be introduced as a business record of State Farm, where only a witness from State Farm testified to create a foundation for its introduction. The Tenth District Court of Appeals looked to Federal Court precedent, acknowledging that Ohio's business records rule was nearly identical to the Federal version. In each case reviewed, the records prepared by a third party were admissible as the business records of another entity, where that entity can establish through a qualified holder of the business records that: (1) the business integrated the document into its records; (2) relied upon the record, and; (3) there exists circumstances indicating the document's trustworthiness.
In cases where Courts have allowed this type of third party created business record, under what has been called the adopted business record rule, the Court has found some indicia of the trustworthiness of the record. For example, a record created under circumstances where criminal penalties for a false record exist7, or one created where there is an ongoing business relationship between the business that created the record and the incorporating business.8
While this recent Tenth District Court ruling is specific to an estimate created by an auto body shop adopted as the business record of an insurance company, the Court also reviewed the Ohio First District Court of Appeals decision in Great Seneca Financial v. Felty.9 In that case, the credit card application and statements created by the prior owner of the account were admissible as a business record of Great Seneca Financial, where the account at issue had been assigned to Great Seneca Financial. Great Seneca established by affidavit that the records had been transferred to Great Seneca, were kept by Great Seneca in its regular course of business, had been certified by an intermediary of the first owner, and had been relied upon by Great Seneca. Though the Great Seneca employee had no first hand knowledge of the creation of the documents by the first owner or it procedure for their creation, where Great Seneca showed its adoption and reliance on the first owner's business records, and where there appeared evidence of the records trustworthiness as a result of the certification, the records met the adopted business records exception to the hearsay rule.
A utility should send a witness to trial who is prepared to testify that the records they are seeking to introduce meet the business records rule. They should be sufficiently familiar with the utility's policies and procedures that they can testify not just that the record is kept in the ordinary course of business, but also to how and when it was created, retained and retrieved. If the records the utility is seeking to introduce contain records provided by a third party, the witness will need to be prepared to describe the utility's adoption and reliance upon those records as well as why those records in particular are trustworthy.
2 See State Farm Mut. Auto. Ins. Co. v. Anders, 2012 Ohio 824 (10th Dist., Franklin County, Mar.1., 2012) citing State v. Davis, (2008) 116 Ohio St.3d 404.
3 Id., quoting Evid.R. 803(6).
4 State Farm Mut. Auto. Ins. Co. v. Anders, 2012 Ohio 824 (10th Dist., Franklin County, Mar.1., 2012) quoting Keeva J. Kekst Architects, Inc. v. George, 8th Dist. No. 70835, 1997 Ohio App. LEXIS 2077 (May 15, 1997); see also Discover Bank v. Poling, 10th Dist. No. 04AP-1117, 2005 Ohio 1543, ¶ 12.
5 State Farm Mut. Auto. Ins. Co. v. Anders, 2012 Ohio 824 (10th Dist., Franklin County, Mar.1., 2012) citing State v. Goines, 10th Dist. No. 89AP-916, 1990 Ohio App. LEXIS 5731 (Dec. 20, 1990), quoting United States v. Keplinger, 776 F.2d 678, 693-94 (7th Cir.1985).
6 State Farm Mut. Auto. Ins. Co. v. Anders, 2012 Ohio 824 (10th Dist., Franklin County, Mar.1., 2012)
7 Air Land Forwarders, Inc. v. United States, 172 F.3d 1338 (Fed. Cir. 1999).
8 White Industries, Inc. v. Cessna Aircraft Co., 611 F.Supp. 1049 (W.D.Mo. 1985)
9 170 Ohio App.3d 737, 2006 Ohio 6618