Versata Software, Inc. et al v. Internet Brands, Inc. f/k/a CarsDirect.com et al

Filing 330

MEMORANDUM AND ORDER - The Court concludes that the manner in which the jury was informed that PX 310 had been withdrawn from evidence was not prejudicial to Versata. For all of the foregoing reasons, the Court confirms its prior ruling that PX 310 was properly excluded at trial. Signed by Judge William C. Bryson on 7/5/12. (ehs, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION
VERSATA SOFTWARE, INC., f/k/a
TRILOGY SOFTWARE, INC.; and
VERSATA DEVELOPMENT GROUP, INC.,
f/k/a TRILOGY DEVELOPMENT GROUP,
INC.
Plaintiffs,
v.
INTERNET BRANDS, INC., f/k/a
CARSDIRECT.COM, INC.,
AUTODATA SOLUTIONS COMPANY,
and AUTODATA SOLUTIONS, INC.
Defendants.

§
§
§
§
§
§
§
§
§
§
§
§
§
§
§
§

CIVIL ACTION No. 2:08-cv-313-WCB

MEMORANDUM AND ORDER
In the course of trial held during the week of June 11th, 2012, the Court excluded a
document that the plaintiffs sought to have admitted into evidence. The Court excluded the
document on hearsay grounds and under Fed. R. Evid. 403.

This Order describes the

background against which the issue arose and sets forth the legal grounds for the Court’s ruling.
I.

Background
This evidentiary issue arose during litigation between plaintiffs (collectively “Versata”)

and defendants (collectively “Autodata”), both of which are providers of website software and
services to automobile manufacturers. Among Versata’s claims in the litigation were claims
accusing Autodata of breach of contract and tortious interference with a prospective business
relationship by misrepresenting to Chrysler Corporation the scope of a license that Autodata had
from Versata.

1

At trial, Versata sought to introduce into evidence PX 310, an e-mail sent by Versata
employee Mike Biwer to several other Versata employees. The e-mail was sent at 5:59 pm on
Wednesday, June 25, 2008. The subject line reads, “Update from Randy on his meetings in
Detroit today.” The text reads, in pertinent part, as follows (ellipses in original):
Just a quick update from my conversation with Randy this afternoon....he is going
to send out more complete notes later today or tomorrow....
1. Chuck Sullivan – lunch
-cordial meeting
-Chuck likes Versata...inherited decision from Chrysler to move in a different
direction...i.e., AutoData (AD)...the ship has set sail
-feedback he has gotten is that there is little to no IP risk given the approach they
are taken
>Chuck was told that AD has a license to our broader portfolio (not true)
>Randy does not feel Chuck fully understands the complexity of the issue
or perhaps is not worried given what he’s been told internally
-this one is going to take several cycles to resolve
-we need to work with Lance on developing options and next steps
More to follow...
Mike
The substance of the luncheon meeting between Mr. Jacops (“Randy”) of Versata and Mr.
Sullivan (“Chuck”) of Chrysler was an important issue during the trial. Mr. Jacops testified at
trial regarding the meeting, and Mr. Sullivan testified by deposition about the same meeting.
The contents of the Biwer e-mail, and in particular the line stating, “Chuck was told that AD has
a license to our broader portfolio (not true),” were therefore potentially significant. The problem
is that the e-mail consisted of hearsay, several layers deep.
First, the e-mail was an out-of-court statement by its author, Mr. Biwer. It is therefore
hearsay to the extent it was offered to prove the truth of any of the assertions contained within it.
Fed. R. Evid. 801(c). Second, Mr. Biwer’s e-mail purported to report statements made to him
earlier in the day by Mr. Jacops. Mr. Jacops’s statements constitute a second layer of hearsay.

2

Third, Mr. Biwer reported in the e-mail that Mr. Jacops had passed along statements made by
Mr. Sullivan of Chrysler.

The statements purportedly made by Mr. Sullivan regarding

Autodata’s rights with regard to Versata’s intellectual property constitute a third layer of hearsay.
Fourth, Mr. Biwer reported that Mr. Jacops said that Mr. Sullivan “was told” that Autodata had a
license to Versata’s “portfolio.”

That statement is supplemented in the e-mail by the

parenthetical comment, “not true.” The statement of the unknown declarant who purportedly
told Mr. Sullivan that Autodata had a license to Versata’s portfolio constitutes a fourth level of
hearsay. It is not clear whether the fourth declarant was the last in the chain of declarants, as the
statement that Mr. Sullivan “was told” that Autodata had a license to Versata’s portfolio does not
make clear whether that statement came from someone at Autodata or someone at Chrysler who
was passing on information obtained, directly or indirectly, from Autodata. The use of the
passive voice (“was told”) leaves that issue unclear. Finally, as to the parenthetical comment, it
is entirely unclear who the declarant was—Mr. Biwer, Mr. Jacops, Mr. Sullivan, or someone
else.
When the issue of the admissibility of PX 310 first arose prior to trial, Versata argued
that the e-mail was admissible either as non-hearsay, to supply context for other statements
purportedly made at the luncheon meeting between Mr. Jacops and Mr. Sullivan, or under the
hearsay exception for statements of present sense impression, Fed. R. Evid. 803(1). At that time,
the Court ruled that the e-mail was not admissible under the “present sense impression”
exception; however, the Court ruled that it could be admissible for non-hearsay purposes if its
admission were accompanied by a limiting instruction advising the jury that the e-mail could not
be considered for the truth of any assertions contained within it. As an example of the possible
relevance of the document for non-hearsay purposes, the reference to the luncheon meeting

3

between Mr. Jacops and Mr. Sullivan in the e-mail, which was dated June 25, 2008, helped
identify the date of that meeting. Accordingly, when the e-mail was first offered during trial, the
court admitted it subject to a limiting instruction directing the jury not to consider the e-mail for
the truth of any of its contents.
Later in the trial, it became clear that the relevance of the e-mail for non-hearsay
purposes was marginal and the issue of what Autodata told Chrysler about its rights vis-à-vis
Versata’s intellectual property was important. The Court therefore reconsidered its decision to
admit the e-mail subject to a limiting instruction and instead ruled the e-mail inadmissible for all
purposes. The Court based its ruling on Fed. R. Evid. 403, finding that the risk of prejudice and
the difficulty the jury would likely have in following the Court’s limiting instruction under the
circumstances outweighed the minimal relevance of the e-mail for any legitimate non-hearsay
use at trial. See Nash v. United States, 54 F.2d 1006, 1007 (2d Cir. 1932) (L. Hand, J.)
(sometimes a limiting instruction amounts to a “recommendation to the jury of a mental
gymnastic which is beyond, not only their powers, but anybody’s else”).
When the Court decided to exclude the e-mail, Versata changed its position with regard
to the admission of the e-mail for non-hearsay purposes only and argued that the e-mail should
be admitted without restriction. After giving Versata an opportunity to make an evidentiary
proffer and hearing argument on the issue, the Court held that PX 310 was inadmissible as
hearsay. At the close of all the evidence, the Court advised the jury that although PX 310 had
previously been admitted subject to a limiting instruction, that exhibit was now excluded and
was not to be considered by the jury for any purpose.

4

II.

Discussion
The critical statement in the Biwer e-mail (“Chuck was told that AD has a license to our

broader portfolio (not true)”) presents multiple layers of hearsay. At trial, Versata argued that
the e-mail was admissible either as non-hearsay or based on the sequential application of several
hearsay exceptions, and it made a proffer and offered legal argument in support of admissibility.
The Court disagreed and excluded the e-mail. Because the issue arose at a point during trial
when there was no opportunity for the Court to set forth the grounds for its ruling in detail, the
Court stated at the time that it would likely issue an order on this issue to provide a fuller
explanation of its ruling. This is that order.
A. Non-Hearsay
Versata argued at trial that the Biwer e-mail was admissible to provide context for
statements made at the luncheon meeting. To the extent context was important, the e-mail was
not necessary to supply the context in which various statements may have been made at the
luncheon meeting, as both parties to the meeting testified at trial—Mr. Jacops through live
testimony and Mr. Sullivan by way of deposition. Moreover, the Court stated that if the e-mail
were admitted for non-hearsay purposes, it would have to be accompanied by a limiting
instruction, a proposition with which Versata agreed. Trial Tr. (June 13, AM session) 165. Yet
the Court had previously concluded that the relevance of the e-mail for non-hearsay purposes
was outweighed by the risk of prejudice and confusion that would result from the admission of
the e-mail subject to a limiting instruction. The Court reaffirmed that view during Versata’s
argument. Id. at 165-66. The Court continues to be of the view that the non-hearsay purposes
for which Versata offered the e-mail were swamped in significance by the hearsay aspects of the

5

e-mail and that it was proper to exclude the e-mail from evidence even if it had been
accompanied by a limiting instruction directing the jury to use it only for non-hearsay purposes.
B. Hearsay Exceptions
Versata argued that various hearsay exceptions would apply to the e-mail, including the
“business records” exception, Fed. R. Evid. 803(6), and the “present sense impression”
exception, Fed. R. Evid. 803(1). The Court and counsel for Versata also discussed the exception
for “then existing mental, emotional, or physical condition,” Fed. R. Evid. 803(3).
None of those exceptions—separately or in conjunction—provides a sufficient platform
for the admission of the Biwer e-mail. First, the e-mail was not shown to be a record of the sort
that qualifies for admission under the business records exception, as it was not prepared and
retained as part of a routine recordkeeping system, but was simply an example of an occasional
communication among Versata employees regarding events of interest affecting the company.
Second, even if Mr. Biwer’s e-mail satisfied the formal requirements of the business records
exception, Mr. Jacops’s statements to Mr. Biwer that were reported in the e-mail do not qualify
for admission under the present sense impression exception, as the critical portion of his
statement to Mr. Biwer was not shown to have been made during the occurrence of the event
reported or immediately thereafter. Third, even if Mr. Jacops’s statements were admissible
under the present sense impression exception, Versata has pointed to no convincing reason to
conclude that Mr. Sullivan’s statements contained in the e-mail would be admissible, either
under that exception or any other.
The following is a more detailed discussion of each of Versata’s proposed theories of
admissibility.

6

1.

Business Records

Versata argued at trial that the Biwer e-mail was admissible as a record of regularly
conducted business activity under Rule 803(6).

The Fifth Circuit has characterized that

exception to the hearsay rule as requiring the following:
(a) That the document have been made “at or near” the time of the matters
recorded therein; (b) that the document have been prepared by, or from
information transmitted by a person “with knowledge of the matters recorded”;
(c) that the person or persons who prepared the document have been engaged in
preparing it, in some undertaking, enterprise or business which can fairly be
termed a “regularly conducted business activity”; (d) that it have been the “regular
practice” of that business activity to make documents of that nature; and (e) that
the documents have been retained and kept in the course of that or some other
regularly conducted business activity.
Wilander v. McDermott Int’l, Inc., 887 F.2d 88, 91 (5th Cir. 1989), aff’d, 498 U.S. 337 (1991);
see also United States v. Ned, 637 F.3d 562, 569 (5th Cir. 2011).
The reliability of business records—and the reason they are excluded from hearsay—“is
said variously to be supplied by systematic checking, by regularity and continuity which produce
habits of precision, by actual experience of business in relying upon them, or by a duty to make
an accurate record as part of a continuing job or occupation.” Fed. R. Evid. 803(6) advisory
committee’s note; see also 5 Jack B. Weinstein & Margaret A. Berger, Weinstein’s Federal
Evidence § 803.08[2] (Joseph M. McLaughlin 2d ed. 1997) (“Memoranda that are casual,
isolated, or unique do not qualify as business records.”).
Tracing the business records exception back to its origins, Wigmore emphasized the
importance of the requirement that the record in question be made as part of a “habit and system
of making such a record with regularity.”

5 John Henry Wigmore, Evidence in Trials at

Common Law § 1522, at 442 (Chadbourn rev. 1974). He explained that the entry must be “part
of a series of entries or reports, not a casual or isolated one. . . . [A] memorandum casually

7

made, would not answer this requirement.” Id. § 1525, at 446. Likewise, the Supreme Court in
its classic business records case, Palmer v. Hoffman, 318 U.S. 109, 113-14 (1943), explained
that the critical element in making particular entries eligible for admission is whether the entries
were “made systematically or as a matter of routine to record events or occurrences, to reflect
transactions with others, or to provide internal controls” for the business, such as “payrolls,
accounts receivable, accounts payable, bills of lading and the like.” As the Fifth Circuit put it,
the rationale for the business records exception “rests on the assumption that business records are
reliable because they are created on a day-to-day basis and ‘[t]he very regularity and continuity
of the records are calculated to train the recordkeeper in habits of precision.’” Rock v. Huffco
Gas & Oil Co., 922 F.2d 272, 279 (5th Cir. 1991), quoting McCormick on Evidence § 306 at 872
(3d ed. 1984).
Applying those standards, the Court found at trial that Mr. Biwer’s e-mail was not a
regularly kept record within the meaning of the business records exception and thus lacked the
features courts have identified as giving business records the reliability necessary to render them
admissible against a hearsay objection. The Court reaffirms that finding now and concludes, for
the following reasons, that the Biwer e-mail was not admissible under the business records
exception to the hearsay rule.
1. First, Versata has failed to show that the Biwer e-mail was made and kept in the
course of a regularly conducted business and as a regular practice of the business. To be sure, in
the course of Versata’s proffer in support of the admission of PX 310 Mr. Jacops testified that
communication via e-mail was a “regular business practice” at Versata and that one of the
responsibilities of Versata employees was to “regularly send e-mails around that would recount
. . . meetings and conversations.” Trial Tr. (June 13, AM session) 155:21-156:16. He also

8

testified, however, that such e-mail updates were sent only “if there was something substantive
which you’d want to communicate to the team, you would do it at the end of the day when you
had time or wrapping things up.” Trial Tr. (June 13, PM session) 14:12-24. While he testified
that e-mails were used “to keep the team informed” as to matters of concern to the company, and
“so that we would remember what we talked about and understood,” Trial Tr. (June 13, AM
session) 156:8-16, he did not testify that the e-mails were retained as company records to be
consulted later and relied upon for purposes of company operations.
The essence of Mr. Jacops’s testimony was that e-mails reporting on events pertinent to
the business would be sent at a time convenient to the sender if the sender regarded the subject
matter of the e-mail as worthy of communicating to others. That evidence reflects the use of
internal communications for information-sharing purposes based on instances of perceived need
and convenience, not a system for preparing and retaining business records as a regular and
routine practice. In that regard, Versata failed to show that documents such as Mr. Biwer’s email were prepared as a matter of business routine as opposed to sporadically, subject to the
judgment of the maker of the document. See Wilander, 887 F.2d at 92 (concluding that hearsay
statement should not have been admitted as a business record when “there was no showing that
the document was kept in the course of some regularly conducted business activity or that it was
the regular practice of the business to make such reports”); United States v. Robinson, 700 F.2d
205, 209-10 (5th Cir. 1983) (notes of meetings were not admissible under Rule 803(6) because
proponent never established that “it was the regular practice of that business activity” to have the
notes made); see also United States v. Ramsey, 785 F.2d 184, 192 (7th Cir. 1986) (“Occasional
desk calendars, in which entries may or may not appear at the whim of the writer, do not have
the sort of regularity that supports a reliable inference.”).

9

2. A further problem with Versata’s business records theory regarding the Biwer e-mail
is that while Mr. Jacops testified that e-mails were created in the ordinary course of Versata’s
business, he did not testify that e-mails were routinely retained so as to be available for later use.
That omission is important. The Fifth Circuit has emphasized the importance, for purposes of
the business records exception, of showing that the records in question were “retained and kept
in the course of . . . regularly conducted business activity.” Wilander, 887 F.2d at 91; see United
States v. Holladay, 566 F.2d 1018, 1020 (5th Cir. 1978) (holding that notebooks were admissible
upon showing that they were part of a bookkeeping system that was “continuously maintained”
by defendant’s business); United States v. Jones, 554 F.2d 251, 252 (5th Cir. 1977) (record must
be “made and preserved in the regular course of business”). In fact, the Fifth Circuit has noted
that the fact that particular ledgers were destroyed at the end of each week might by itself defeat
a showing that the ledgers were kept “in the course of a regularly conducted business activity.”
United States v. Wells, 262 F.3d 455, 460 n.3 (5th Cir. 2001). See also id. at 462 n.8 (Rule
803(6) requires that a record be “made pursuant to established procedures for the routine and
timely making and preserving of business records”) (emphasis added); Rambus, Inc. v. Infineon
Techs. AG, 348 F. Supp. 2d 698, 705 (E.D. Va. 2004) (business records exception requires that it
be the regular practice of the business “to make and keep the record at issue”; declaration in
support of admission of e-mail evidence as a business record “must show that the proffered
record was made and kept as a regular practice by the business activity from which the document
comes”) (emphasis added).
The careful analysis by Judge Rosenthal in Canatxx Gas Storage Ltd. v. Silverhawk
Capital Partners, LLC, No. H-6-1330, 2008 WL 1999234 (S.D. Tex. May 8, 2008), makes this

10

point clear. In that case, which involved a question as to the admissibility of an e-mail under the
business records exception, the court explained that the proponent of an email
made by an employee about a business matter [under Rule 803(6)] must show that
the employer imposed a business duty to make and maintain such a record.
Courts examine whether it was the business duty of an employee to make and
maintain emails as part of his job duties and whether the employee routinely sent
or received and maintained the emails.
Id. at *12 (emphasis added). Judge Rosenthal then cited with approval three other cases in which
the admissibility of emails under the business records exception was discussed. In the first,
DirectTV, Inc. v. Murray, 307 F. Supp. 2d 764 (D.S.C. 2004), Judge Rosenthal characterized the
ruling of the court as holding that sales records contained in emails were admissible “when the
sales orders were regularly received by email and the emails were retained as records of each
order” (emphasis added). In the second, New York v. Microsoft Corp., No. Civ A. 98-1233,
2002 WL 649951 (D.D.C. Apr. 12, 2002), she characterized the court’s ruling as declining to
admit e-mails under the business records exception because “there was a ‘complete lack of
information regarding the practice of composition and maintenance of’ the emails” (emphasis
added).

In the third, United States v. Ferber, 966 F. Supp. 90, 98 (D. Mass. 1997), she

characterized the court’s decision as holding that in order for an e-mail to be admissible under
Rule 803(6), “there must be some evidence of a business duty to make and regularly maintain
records of this type”; she noted that the court in that case excluded the proffered e-mails because,
“while it may have been [an employee’s] routine business practice to make such records, there
was no sufficient evidence that [the employer] required such records to be maintained”
(emphasis added).
In this case, Versata adduced evidence that Mr. Biwer prepared e-mails to update others
within the company, but it did not introduce any evidence that he or the company routinely

11

retained copies of those e-mails for later consultation.1 In fact, the intrinsic evidence from the
Biwer e-mail tends to rebut any contention that the e-mail was part of a system of regularly
maintained business records. The text of the e-mail strongly suggests that it was not intended to
become a permanent record of the luncheon meeting, as Mr. Biwer wrote that the e-mail was
“[j]ust a quick update on my conversation with Randy this afternoon....he is going to send out
more complete notes later today or tomorrow.” In sum, Versata has failed to satisfy its burden of
showing that the Biwer e-mail was one of a series of e-mails that were routinely “made and
maintained in the normal course” of Versata’s business. Canatxx, 2008 WL 1999234, at *13.
Versata argued at trial that in an age of ever-increasing reliance on electronic
communication, the definition of business records must be broadened to encompass e-mails such
as the one in question. The issue, however, is not the medium used to create the record, but the
practice and process of the business in preparing the records in question. If the record—
regardless of form—is made with regularity as part of the business’s conduct of its affairs, it is
regarded as more likely that the record will be accurate and complete, as the business’s

1

The fact that a copy of the Biwer e-mail was produced for trial purposes does not establish
that such e-mails were routinely retained for consultation and use. Copies of electronic
correspondence are frequently subject to retrieval, at least absent affirmative steps to eradicate
them from a computer system. However, the fact that a party may be able to retrieve an
electronic record, such as in connection with litigation, does not mean that the party has retained
that document in a system of records that have been “kept” or “maintained” as business records
for subsequent use and consultation. See United States v. Jackson, 208 F.3d 633, 637 (7th Cir.
2000); Michael H. Dore, Forced Preservation: Electronic Evidence and the Business Records
Hearsay Exception, 11 Colum. Sci. & Tech. L. Rev. 76 (2010) (“Many electronic records . . .
remain in a company’s files only because the company had a duty to preserve them once it
reasonably anticipated litigation or a government subpoena. The company otherwise typically
would have deleted those electronically stored data in the regular operation of its business to
make room on its burdened servers. . . . [S]uch presumptive deletion undermines the
trustworthiness and reliability of a business record, and thus the rationale of Rule 803(6). Courts
should therefore focus on the unique elements of the creation and preservation of electronic
evidence, and consider whether a company truly kept the record at issue in the course of
business, or simply because a duty to preserve required it.”).
12

operations may depend on such records being maintained accurately. That rationale applies with
less force to occasional communications among representatives of the business. In that setting,
there is no special degree of reliability that is associated with the record—beyond the usual
expectation that people will be honest and accurate in their business-related communications
with others.
If occasional communications among employees of a business that relate to the operation
of the business were to qualify as business records for purposes of Rule 803(6), that would
convert the exception for “business records” into an exception for “business communications”
and would open the door to a vast array of communications within a business, contrary to the
conventional understanding of the business records exception. See Monotype Corp. PLC v. Int’l
Typeface Corp., 43 F.3d 443, 450 (9th Cir. 1994) (distinguishing between computer printouts of
bookkeeping records and e-mails; “E-mail is far less of a systematic business activity than a
monthly inventory printout. E-mail is an ongoing electronic message and retrieval system
whereas an electronic inventory recording system is a regular, systematic function of a
bookkeeper prepared in the course of business.”).
3. Of course, even if the Biwer e-mail had satisfied the formal requirements of the
business records exception, that would not render it admissible without more. As a general rule,
the business records exception requires a showing that “each actor in the chain of information is
under a business duty or compulsion to provide accurate information.”

United States v.

McIntyre, 997 F.2d 687, 699 (10th Cir. 1993); see also Fed. R. Evid. 803(6) advisory
committee’s note (“If, however, the supplier of the information does not act in the regular course,
an essential link is broken; the assurance of accuracy does not extend to the information itself,

13

and the fact that it may be recorded with scrupulous accuracy is of no avail.”); 2 Kenneth S.
Broun, McCormick on Evidence § 290 (6th ed. 2006).
The Fifth Circuit has held that a document that otherwise qualifies as a business record
but contains hearsay statements not within the personal knowledge of the maker of the record
may be admitted if the hearsay statement or statements contained within the record are subject to
other hearsay exceptions. Wilson v. Zapata Off-Shore Co., 939 F.2d 260, 271 (5th Cir. 1991)
(“[I]f the source of the information is an outsider, . . . Rule 803(6) does not, by itself, permit the
admission of the business record. The outsider’s statement must fall within another hearsay
exception to be admissible because it does not have the presumption of accuracy that statements
made during the regular course of business have.”); accord United States v. Patrick, 959 F.2d
991, 1000 (D.C. Cir. 1992). In this case, even assuming that Mr. Biwer was acting pursuant to a
business-imposed reporting duty, there was no showing that any of the other declarants were
subject to a similar duty. And, as is discussed in the following sections, there was no other valid
basis for overcoming the hearsay problems with those declarants’ statements. The Biwer e-mail
is therefore inadmissible as containing multiple hearsay, even if it otherwise qualifies as a
business record.
4.

Finally, Rule 803(6) provides that even if a document satisfies the formal

requirements of the rule, it may not be admitted if “the source of information or the method or
circumstances of preparation indicate lack of trustworthiness.” Certain factors surrounding the
preparation of the Biwer e-mail cast further doubt on the trustworthiness of that document as an
accurate record of what transpired at the luncheon meeting. First, Mr. Jacops testified that he
and Mr. Sullivan did not discuss Autodata by name, see Trial Tr. (June 11, PM session) 48:13-14
(“[W]e didn’t specifically discuss AutoData”); see also Trial Tr. (June 13, AM session) 159:7-12

14

(“Q: Now, at that meeting, you testified earlier names were never mentioned between [you] and .
. . Chuck; is that correct? . . . A: Yes.”). Yet the e-mail reports Mr. Sullivan as having said that
he “was told that AD has a license to our broader portfolio.” The insertion of Autodata into the
statement constitutes a striking departure from Mr. Jacops’s characterization of the Sullivan
meeting in his testimony and gives rise to doubt as to how accurately Mr. Biwer reported the
statements that were passed on to him. Second, the addition of the “not true” parenthetical
indicates that the e-mail did more than merely recount the conversation with Mr. Sullivan; it also
contained editorial comments of either Mr. Jacops or Mr. Biwer. Third, as noted, the e-mail
indicated that Mr. Jacops was “going to send out more complete notes later today or tomorrow.”
That statement suggests that the account of the lunch in the e-mail was necessarily abridged and
incomplete. All of those factors indicate that Mr. Biwer’s report of the meeting between Mr.
Jacops and Mr. Sullivan may have been essentially a “rough translation” accompanied by
editorial commentary, rather than a faithful account of the facts of the event.
2.

Present Sense Impression

Versata seeks to address the problem of the second declarant, Mr. Jacops, by invoking
Fed. R. Evid. 803(1), the exception for statements setting forth the declarant’s “present sense
impression.” Rule 803(1) provides an exception to the hearsay rule for “[a] statement describing
or explaining an event or condition, made while or immediately after the declarant perceived it.”
Fed. R. Evid. 803(1).

“The justification for this hearsay exception relies on the

contemporaneousness of the event under consideration and the statement describing that event.
Because the two occur almost simultaneously, there is almost no ‘likelihood of [a] deliberate or
conscious misrepresentation.’” Rock, 922 F.2d at 280, quoting Fed. R. Evid. 803(1) advisory
committee’s note; see also United States v. Peacock, 654 F.2d 339, 350 (5th Cir. 1981)

15

(statement that was otherwise hearsay was properly admitted because it was immediately
repeated to a third party and “[t]here was no time for [the declarant] to consciously manipulate
the truth”).
Mr. Jacops testified that he called Mr. Biwer within “a matter of minutes” after the
conclusion of the luncheon meeting. See Trial Tr. (June 13, AM session) 155:15. That by itself,
however, does not establish that Mr. Sullivan’s statement, which was made at some point during
the luncheon, was reported to Mr. Biwer “while or immediately after the declarant perceived it,”
as required by the rule. Mr. Jacops did not say at what point in the course of the lunch Mr.
Sullivan made the statement about Autodata’s alleged license rights. But his testimony makes
clear that the period of delay between the statement and Mr. Jacops’s report to Mr. Biwer was a
combination of the time it took to complete the luncheon after the “license rights” comment, plus
the “matter of minutes” that Mr. Jacops said went by after the conclusion of the luncheon and
before he reported the events of the meeting to Mr. Biwer. The cases on which Versata relied at
trial to establish the contemporaneity of the events and the declarant’s present sense impression
of those events, United States v. Portsmouth Paving Co., 694 F.2d 312, 323 (4th Cir. 1982), and
United States v. Danford, 435 F.3d 682, 687 (7th Cir. 2005), both involved a declarant’s
reporting of the contents of a telephone conversation immediately upon its conclusion (in
Portsmouth, “no more than a few seconds” after the conversation ended; in Danford, “less than a
minute after the conversation ended). The Fifth Circuit, in a case involving Rule 803(1), agreed
with the District of Columbia Circuit that a delay of 15 to 45 minutes in reporting an incident
does not qualify reporting the incident “immediately” after it occurred. See United States v.
Cain, 587 F.2d 678, 681 (5th Cir. 1979), citing Hilyer v. Howat Concrete Co., 578 F.2d 422, 426
n.7 (D.C. Cir. 1978) (“an out-of-court statement made at least fifteen minutes after the event it

16

describes is not admissible unless the declarant was still in a state of excitement resulting from
the event [which would render the statement admissible under the ‘excited utterance’ exception
to the hearsay rule, Fed. R. Evid. 803(2)]”).

The rationale for the requirement of

contemporaneity is that the “substantial contemporaneity of event and statement negate the
likelihood of deliberate or conscious misrepresentation.”

Fed. R. Evid. 803(1) advisory

committee’s note. When a statement is made while the declarant is observing the event being
perceived or immediately thereafter, the declarant will have no time for reflection. McCormick
emphasizes the requirement that the statement be made “immediately” after the event being
reported, noting that “[w]hile principle might seem to call for a limitation to exact
contemporaneity, some allowance must be made for the time needed for translating observation
into speech. Thus, the appropriate inquiry is whether sufficient time elapsed to have permitted
reflective thought.” McCormick on Evidence § 271, at 254.
In this case, it seems highly likely that the period of time between when the statement
was made during the luncheon meeting and when Mr. Jacops reported the statement to Mr.
Biwer after the conclusion of the meeting was sufficient for reflection; it was certainly longer
than the period needed “for translating observation into speech.” In any event, the burden of
showing the elements of admissibility for a statement under the present sense impression
exception, like the burden on evidentiary issues generally, is on the proponent of the evidence.
See Bemis v. Edwards, 45 F.3d 1369, 1373 (9th Cir. 1995); Miller v. Keating, 754 F.2d 507, 511
(3d Cir. 1985); see also Bourjaily v. United States, 483 U.S. 171, 176 (1987); United States v.
Two Shields, 497 F.3d 789, 793 (8th Cir. 2007); Lewis v. CITGO Petroleum Corp., 561 F.3d
698, 705 (7th Cir. 2009). Versata’s evidence of contemporaneity, limited to Mr. Jacops’s
testimony that he called Mr. Biwer within “a matter of minutes” after the conclusion of his

17

luncheon with Mr. Sullivan, did not satisfy its burden of establishing that Mr. Jacops’s
statements to Mr. Biwer were made at the time of Mr. Sullivan’s comments or “immediately
thereafter,” as that term is used in Rule 803(1).
While all this may appear to have a hypertechnical flavor to it, the passage of time
between event and statement is vitally important to the applicability of the present sense
impression exception. “The idea of immediacy lies at the heart of the exception, thus, the time
requirement underlying the exception is strict because it is the factor that assures
trustworthiness.” See United States v. Green, 556 F.3d 151, 155 (3d Cir. 2009) (citations and
internal quotations omitted). In that context, the imprecision of Versata’s evidence as to the
period of delay between Mr. Sullivan’s statement during the luncheon and Mr. Jacops’s report of
that statement in his post-luncheon telephone call to Mr. Biwer is fatal.
To the extent that Versata argues that the present sense impression exception applies to
Mr. Biwer’s declarations, 2 the evidence indicates that Mr. Biwer’s e-mail was not prepared until
several hours after his conversation with Mr. Jacops. Mr. Jacops and Mr. Sullivan met for lunch,
but Mr. Biwer’s e-mail was sent at approximately 6 p.m. that evening, presumably long after the
luncheon meeting had ended. That span of time destroys the contemporaneousness that is
required to make the statements fall under the exception in Rule 803(1). See Rock, 922 F.2d at
280 (affirming trial court’s inadmissibility ruling for accident reports that were “not filed
immediately following [the] alleged accident, but only after two days had passed”); Cain, 587
F.2d at 681; cf. First State Bank of Denton v. Md. Cas. Co., 918 F.2d 38, 42 (5th Cir. 1990)

2

“Present sense impression” was the sole hearsay exception that Versata invoked in its pretrial
submission in support of the admission of PX 310, although it also argued that the e-mail should
be admitted as non-hearsay to show the context of statements reportedly made at the luncheon
meeting.

18

(statements to dispatcher about whether a person was at home satisfied Rule 803(1) when made
“virtually on the heels of the discovery that [that person] was not at home”); Canatxx, 2008 WL
1999234, at *14 (e-mail admissible as present sense impression where writer “stated in his
affidavit that the email was sent ‘[a]s soon as I finished my conversation with Blackmon,’” and
“[t]he email itself states that Blackmon had ‘just called’”).
3.

State of Mind

Versata faces an even bigger hurdle in attempting to show why Mr. Sullivan’s statements
are not excludable as hearsay. Mr. Biwer’s e-mail reports that Mr. Sullivan told Mr. Jacops that
he (Mr. Sullivan) had been told that Autodata “has a license to [Versata’s] broader portfolio.”
To the extent the statement was offered to show the truth of the matter asserted—i.e., that Mr.
Sullivan had been told that Autodata had a broad license to Versata’s intellectual property—the
statement was plainly hearsay. Versata made clear at trial that it wished to use the statement for
that purpose. As such, Mr. Sullivan’s statement was inadmissible, as none of the hearsay
exceptions apply. The statement was obviously not a business record, it was not a statement of
present sense impression by Mr. Sullivan, and it was not a party admission, see Fed. R. Evid.
801(d)(2), because Chrysler (Mr. Sullivan’s employer) was not a party to the lawsuit. 3
To the extent that Versata argues that Mr. Sullivan’s statement was admissible under Fed.
R. Evid. 803(3) as a statement reflecting Mr. Sullivan’s state of mind, the statement clearly fails
to satisfy the requirements of that rule. Rule 803(3) provides an exception to the hearsay rule for
a “statement of the declarant’s then-existing state of mind (such as motive, intent, or plan) or

3

Nor would the statement reported in the e-mail be admissible under Fed. R. Evid. 801(d)(1),
even if it were regarded as inconsistent with Mr. Sullivan’s deposition testimony that was read at
trial. That is because Mr. Sullivan’s prior statement (the one reported in the e-mail) was not
“given under oath subject to the penalty of perjury at a trial, hearing, or other proceeding, or in a
deposition.” Fed. R. Evid. 801(d)(1)(A).
19

emotional . . . condition (such as mental feeling . . .).” Before a statement which would
otherwise be hearsay may be admitted under Rule 803(3) “to show the declarant’s then existing
state of mind, the declarant’s state of mind must be a relevant issue in the case.” Rock, 922 F.2d
at 279, quoting Prather v. Prather, 650 F.2d 88, 90 (5th Cir. 1981).
Even if Mr. Sullivan’s purported statement that he had been told that Autodata had a
license to Versata’s portfolio reflected something about Mr. Sullivan’s state of mind, his state of
mind was not a relevant issue in the case. Versata was seeking to use the statement to prove that
Autodata had made a claim regarding its rights to use Versata’s technology, not to show
something about Mr. Sullivan’s mental state. Moreover, even if the statement could be regarded
as relevant to Mr. Sullivan’s state of mind and even if Mr. Sullivan’s state of mind on that matter
were somehow material, the e-mail would have to have been admitted subject to a limiting
instruction “to insure that assertions as to particular facts contained in the statement will be
considered by the jury solely as bearing upon the declarant’s state of mind” and not for the truth
of the factual matter asserted. 30B Michael H. Graham, Federal Practice & Procedure § 7044, at
438 (2006). But, as indicated earlier, the Court did not (and does not) regard the limiting
instruction as adequate under the circumstances of this case and therefore excluded the evidence
under Rule 403.
The hearsay rules bar parties from using the state of mind exception as a means of
introducing statements of memory or belief in order to prove the matter remembered or believed.
In fact, the state of mind exception in the Federal Rules of Evidence contains an express
limitation designed to guard against the use of that exception as a vehicle for introducing
evidence for such purposes. The rule provides (with one exception not applicable here) that the
hearsay exception for statements reflecting the declarant’s state of mind does not include “a

20

statement of memory or belief to prove the fact remembered or believed.” Fed. R. Evid. 803(3).
As the advisory committee notes confirm, that provision was added because it was regarded as
necessary to avoid “the virtual destruction of the hearsay rule which would otherwise result from
allowing state of mind, provable by a hearsay statement, to serve as the basis for an inference of
the happening of the event which produced the state of mind.” Fed. R. Evid. 803(3) advisory
committee’s note. That proposition has been a mainstay of hearsay law for years and has been
applied faithfully since the enactment of the Federal Rules of Evidence. See Shepard v. United
States, 290 U.S. 96, 105-06 (1933); United States v. Liu, 960 F.2d 449, 452 (5th Cir. 1992);
Prather, 650 F.2d at 90; United States v. Cohen, 631 F.2d 1223, 1225 (5th Cir. 1980); United
States v. Samaniego, 345 F.3d 1280, 1283 (11th Cir. 2003).
Mr. Sullivan’s declaration therefore does not fall within any hearsay exception; the
hearsay nature of that declaration is sufficient by itself to render PX 310 inadmissible.
C.

The Timing of the Court’s Ruling

The Court informed the jury of its decision to exclude the e-mail from evidence at the
close of all the evidence in the trial. See Trial Tr. (June 15, AM session) 144:4-145:3. After the
jury left the courtroom, Versata objected to the Court’s instruction, arguing that the timing of the
instruction was prejudicial. In part, Versata’s objection stemmed from concern that Autodata
might comment on the withdrawal of the e-mail from evidence as reflecting adversely on
Versata. The Court, however, stated that it would not allow Autodata’s counsel to comment on
that matter, and Autodata faithfully complied. In part, Versata objected to the timing of the
Court’s informing the jury that the exhibit had been excluded, coming as it did at the close of the
evidence at trial and only a few hours before the jury retired for deliberations.

21

The reason the Court chose that time to inform the jury that PX 310 had been excluded
was to avoid possible prejudice to one side or the other. If the Court had informed the jury
during or at the end of the plaintiff’s case that the exhibit had been excluded, it is possible that
the jury would have inferred that some important element of the plaintiff’s case had been struck
from the record. Likewise, if the Court had given its explanation to the jury during or at the end
of the defense case, the jury might have inferred that the ruling reflected adversely on the
defense. Advising the jury about the disposition of PX 310 as part of the housekeeping matters
that came at the close of the evidence and before the jury’s luncheon break on the last day of trial
seemed to be the most neutral time. Following counsel’s objection, the Court invited counsel to
propose a curative instruction, but counsel declined. The Court concludes that the manner in
which the jury was informed that PX 310 had been withdrawn from evidence was not prejudicial
to Versata.
For all of the foregoing reasons, the Court confirms its prior ruling that PX 310 was
properly excluded at trial.
SIGNED this 5th day of July, 2012.

__________________________________________
WILLIAM C. BRYSON
UNITED STATES CIRCUIT JUDGE

22