Evidentiary Issues That Every Business Should Know

Lerch, Early & Brewer's Legal Update

Most business people would prefer not to participate in litigation. Sometimes, however, becoming a participant in civil litigation, as a plaintiff, defendant or third-party witness, is unavoidable. This article looks to discuss some fairly common evidentiary issues that business people should be aware of before they end up in litigation.

Objection, Hearsay!

This oft-heard staple of TV courtroom dramas and legal thrillers may seem more suited for criminal trials, but it and other evidentiary issues arise every day in civil litigation involving businesses. The objection is asserted because the general rule is that hearsay generally is not admissible into evidence.

What then exactly is hearsay? The dictionary states "something heard from another." For example, in every day conversation, you might hear someone say "I really don't know it firsthand, only as hearsay." When the term "hearsay" is used in the legal arena, however, the definition becomes much more precise. The Maryland Rules of Court state, hearsay as: a statement, other than one made by the person who makes the statement while testifying at the trial or hearing (such person being known as the "declarant"), offered in evidence, to prove the truth of the matter asserted. The statement need not be oral; it also can be written or be a non-verbal gesture intended as a substitute for words (e.g., a shake of the head).

Hearsay is not generally admissible unless a recognized exception exists, but why? The primary reason is that society deems such statements to lack reliability. Since the person who made the statement is not available to be cross-examined and his/her demeanor cannot be observed in an effort to determine the statement's reliability, the law provides that the statement should be excluded.

Just because something is hearsay, however, does not mean that it can never come into evidence. There are several exceptions; we will focus here on those most likely encountered in a business setting.

The law allows an out-of-court statement to be admitted, for the truth of the matter asserted, if it is a prior statement of a witness who is giving testimony and is either (a) inconsistent with testimony having been given by such witness now, or (b) is consistent but is being offered to rebut a charge against recent fabrication or improper influence or motive. For example, if in a prior matter an employee testified under oath that she was paid X and now testifies that she was paid Y, the prior statement can be admitted as an inconsistent statement. Likewise, an admission of an adverse party is also admissible. The admission need not have been under oath to be admissible. Again, an example might help—let's say that sometime prior to commencing litigation for damages resulting from an alleged breach of contract, the plaintiff made an admission that he was not really upset by defendant's failure to complete the contract because he was able to use the money not spent to invest in another, more successful venture. Obviously, such a statement would be admissible to undercut the plaintiff's assertion of damages in the present lawsuit.

Other exceptions also exist. One such exception is known as recorded recollection. Recorded recollection is a memorandum record concerning a matter about which a witness once had knowledge, but now has insufficient recollection to enable the witness to testify fully and accurately. So, for example, suppose a customer complaint was received and a memorandum was prepared by the company employee at the time, but the employee now on the witness stand has trouble remembering the incident recounted in the memorandum. To be admissible, the memorandum must be shown to have been made or adopted by the witness when the matter was fresh in the witness' memory and to reflect that knowledge correctly. The memorandum itself is not received as evidence, but if admitted, the memorandum or record may be read into evidence.

Another exception, probably the one most commonly used in business litigation, is for records of regularly conducted activity. This exception allows the admissibility of a memorandum, report, record, or data compilation of acts, events, conditions, opinions, or diagnoses, made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course of a regularly conducted business activity, and if it was the regular practice of that business activity to make the record, as shown by the testimony of the custodian or other qualified witness. This exception allows a business to be able to place into evidence records kept by the company showing the dates and amounts of payments to prove that there remains an outstanding balance.

Enough about hearsay—what other evidentiary rules are businesses likely to encounter?

Hard Habit to Break

Under Maryland Court Rules evidence of the habit of a person or of the routine practice of an organization is relevant (and admissible) to prove that the conduct of the person or organization on a particular occasion was in conformity with the habit or routine practice. Let's say that it is the practice in your office to have an employee date and time stamp every piece of incoming mail. If a key issue in the litigation is when, or even whether, such a document was received, testimony regarding the fact that this habit was used could permit the time stamp of a document to come into evidence.

The Art of Compromise

Many times when clients ask their attorney to send letters trying to resolve a dispute before litigation is filed, the following language is prominently displayed: "For Settlement Purposes Only." The reason for this language arises from another rule of evidence. Evidence of compromise negotiations or offers to compromise "is not admissible to prove the validity, invalidity or amount of a civil claim in dispute." Although you cannot exclude the admission of otherwise admissible evidence by including it in such an offer of compromise, the fact that you may have offered to settle or offered a certain monetary amount to settle will not be admissible as an admission of liability.
Obviously, there are many other rules of evidence that may come into play in a particular litigation matter. With knowledge of the important rules discussed above, businesses can take steps before, litigation to help ensure that admissible evidence will be available when it is needed most.

Stuart A. Schwager is a principal in the firm's Litigation and Business and Taxation groups. He can be reached at (301)347-1271 or


This content is for your information only and is not intended to constitute legal advice. Please consult your attorney before acting on any information contained here.


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