CASWELL BELL & HILLISON LLP
FRESNO, CALIFORNIA

COMPUTERIZED RECORDS ARE HARDER TO GET INTO COURT

The admissibility of records and documents is crucial to success at trial.  In a business case, for example, the plaintiff needs to prove that the parties entered into an agreement, and that the defendant failed to pay for the outstanding invoices.

What is a Foundation for Business Records?

“Foundation” is a legal term meaning that the records maintained by a business are true and accurate.  In a case involving traditional printed records, the “foundational” elements are straight-forward.  As explained by law professor Edward Imwinkelried, a business record can be admitted as evidence when:

● The written record was made by a person with knowledge of the matter.

● The written record was made pursuant to a regular business practice.

● The witness has personal knowledge of the filing system used by the business.

● The witness has removed a record from a certain file.

● The witness recognizes the exhibit as the record he or she removed from the file.

● The witness demonstrates that the business uses an accurate system in order to maintain its files.

How Do Foundational Requirements Apply to Computerized Records?

The rules become more complex when the evidence consists of computerized records, not pieces of paper in a file.  A recent case from the influential Ninth Circuit Bankruptcy Appellate Panel illustrates the problem.  In In re Vee Vinhnee (December 16, 2005), the Ninth Circuit BAP was confronted with an issue involving the admissibility of electronic records maintained by American Express.  The court found that an adequate foundation was not laid, with the result that American Express was denied recovery on the majority of its claim.

In the Vinhnee case, “an American Express employee testified that he was the custodian of records for the monthly statements, that the entries thereon were made at or about the time of the transactions, that the records were kept in the regular course of business, and that the regular practice was to retain the records.”

The Wheels Fall Off the Cart

The witness also testified that the records were maintained electronically.  Here, the wheels fell off the cart for American Express.  “The court then explained that the electronic nature of the records necessitated, in addition to the basic foundation for a business record, an additional authentication foundation regarding the computer and software utilized in order to ensure the continuing accuracy of the records.”

Unfortunately, the witness “knew little about the computer software or hardware.” 

And Now, the Eleven Step Program

The Bankruptcy Appellate Panel broke new ground by setting forth the following foundational requirements for the admissibility of computerized documents.  First, an eleven-step foundation is required for computer records, as follows:

1. The business uses a computer.
2. The computer is reliable.
3. The business has developed for procedure for imputing data into the computer.
4. The procedure uses built-in safeguards to insure accuracy and identify errors.
5. The business keeps the computer in a good state of repair.
6. The witness had the computer readout data from the computer.
7. The witness used the proper procedures to obtain the data.
8. The computer was in working order at the time the witness obtained the data (it’s hard to understand what this means – if the computer wasn’t working, you could not get the output).
9. The witness recognizing the exhibit as the data output.
10. The witness explains how he or she recognizes the output.
11. If the readout contains strange symbols or terms, the witness explains with meaning of the symbols or terms for the trier of fact.

Even More is Required

The Vinhnee court also required that the foundational witness must be able to testify as to “details regarding computer policy and system control procedures, including control access to the database, control of access to the program, recording and logging of changes, backup practices, and audit procedures to assure the continuing integrity of the records . . . All of these matters are pertinent to the accuracy of the computer in the retention and retrieval and information at issue.”

This writer likes to believe that he has developed and expertise in using computers.  Yet he cannot testify as to the manner by which his computer software is maintained, nor testify as to the manner by which the accuracy of computerized data can be verified.  Certainly, the average bookkeeper could not do so for a business client.

The Vinhnee decision raises the bar for the admissibility of computerized records at trial.  Many businesses discard their paper records, and rely on computerized information.  While Vinhnee raises important issues, it also seems to set the standard too high, such that many legitimate records may be excluded for want of foundation.  Stay tuned for future developments in this area.

© Caswell Bell & Hillison LLP          Attorneys and Lawyers, Fresno, California