Law Court Adopts Integrated Business Records Exception to Hearsay Rule

Late last week, the Law Court unequivocally adopted the integrated business records exception to the hearsay rule under Rule 803(6) of the Maine Rules of Evidence in The Bank of New York Mellon v. Shone. It held:

“[A] record that one business has received from another is admissible under Rule 803(6) without testimony about the practices of the business that created the record, provided, first, that the proponent of the evidence establishes that the receiving business has integrated the record into its own records, has verified or otherwise established the accuracy of the contents of the record, and has relied on the record in the conduct of its operations, and second, that the opponent of admission has not shown that the record is nonetheless not sufficiently trustworthy to be admitted.”

Shone finally resolves the conflict between two competing interpretations of Rule 803(6) that had arisen over the last 35 years, returning the business records exception to the rule originally adopted by the Law Court in Northeast Bank & Trust Co. v. Soley, and consistent with the federal court’s interpretation of the identical Federal Rule of Evidence 803(6).

The facts of Shone are straightforward.  At a bench trial on the bank’s foreclosure complaint, the bank offered evidence of a notice of default and right to cure, required by statute, through the testimony of an employee of the bank’s loan servicer.  The bank argued that although the notice was prepared by its counsel, it had been integrated into the servicer’s business records in overseeing the borrower’s loan obligations.  The trial court excluded the evidence as hearsay. The court concluded that the documents did not comply with Rule 803(6) because the employee did not have personal knowledge about the law firm’s record-keeping practices as well as the record-keeping practices of the servicer itself. In applying this “both businesses” standard, the trial court relied upon a Law Court decision from 2011, Beneficial Maine Inc. v. Carter.

After the Bank filed its notice of appeal, the First Circuit issued a decision reaffirming the integrated business records exception to the hearsay rule in U.S. Bank Trust, N.A. v. Jones.  In Jones, applying Federal Rule of Evidence 803(6), the First Circuit held that integrated records are admissible once incorporated and relied upon by the business entity offering the evidence.  The First Circuit specifically rejected the argument that an integrated business record is only admissible if there is foundational testimony from a qualified witness with personal knowledge of the record keeping practices of the record’s originating entity.

Following initial briefing by the parties in Shone, the Law Court invited amici to brief the question of whether the Law Court should adjust its application of Rule 803(6) “as addressed in U.S. Bank Trust, N.A. v. Jones.” On behalf of the Maine Bankers Association, Pierce Atwood submitted an amicus brief in support of the rule ultimately adopted by the Law Court in Shone.

By a 6-1 majority, the Law Court vacated the trial court’s judgment.  After an in-depth review of its prior conflicting interpretations of Rule 803(6), as well as the application of the Rule’s federal counterpart in other jurisdictions, the Law Court determined that Soley remained good law and that integrated business records must only meet the requirements of integration, verification, and reliance by the entity receiving the record from the originating entity—without the need for testimony from the originating entity—to fall within the ambit of Maine Rule of Evidence 803(6).

In so holding, the Law Court effectively overruled more recent decisions, starting with Carter, which required testimony about both the originating and receiving entities’ record-keeping practices to lay the foundation for the business records exception. The Law Court further noted that its holding reaffirming Soley aligns Maine’s interpretation of Rule 803(6) with the identical federal rule, thereby promoting uniformity of application of the exception and discouraging forum shopping.

Shone is a significant decision for any organization that must rely on records of an acquired entity to prove its case in court.  Businesses still must satisfy the requisite criteria—integration, verification, and reliability—and opponents may still challenge the trustworthiness of the document sufficiently to warrant its exclusion. However, removing the impractical and sometimes impossible Carter standard of requiring testimony from a separate qualified witness to testify to the record-keeping practices of each existing and former business in the creation and custody chain of a document is a significant benefit, and one that will discourage litigants from forum shopping between Maine state and federal courts.

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