Opinion
CIVIL ACTION No: 99-210 SECTION: "R" (3).
April 27, 2000. Date of Entry April 28, 2000.
ORDER AND REASONS
The United States of America, moves the Court in limine to hold a hearing prior to trial to determine the admissibility of certain business records under Federal Rule of Evidence 803(6) and, in the alternative, to admit the records or to hold a hearing to determine their admissibility under Rule 807. For the following reasons, the Government's motion is DENIED.
I. BACKGROUND
On January 21, 2000, a grand jury sitting in the Eastern District of Louisiana returned a 47-count superseding indictment against defendants, Nhu Nguyen and American Rose Discount and Wholesale, Inc. The superseding indictment charges Nguyen, the former president of American Rose Discount, with conspiracy to possess pseudoephedrine with reason to believe that the listed chemical would be used to manufacture a controlled substance in violation of 21 U.S.C. § 841 (d)(2) and 846, and knowing and intentional failure to report distribution of pseudoephedrine to the Drug Enforcement Agency as required under 21 U.S.C. § 830, in violation of 21 U.S.C. § 824 (a) (10). (See Sup. Indict., Jan. 21, 2000, Counts 1, 43-47.) The superseding indictment further charges both Nguyen and American Rose Discount with numerous counts of the possession and distribution of pseudoephedrine with reason to believe that the listed chemical would be used to manufacture a controlled substance in violation of 21 U.S.C. § 841 (d)(2). (See Id. Counts 2-42.)
The charges in this case arise out of an investigation by the DEA into methamphetamine production and the illegal diversion of precursor chemicals used to manufacture methamphetamine in Las Vegas, Nevada. During the investigation, the DEA observed Nguyen purchasing large quantities of pseudoephedrine for cash. Specifically, Nguyen allegedly purchased 3,110,400 dosage units for $216,000 on June 22, 1998; 3,974,400 dosage units for $276,000 on June 23, 1998; and 3,888,000 dosage units for $270,000 on August 10, 1998. Although Nguyen had previously been licensed to distribute pseudoephedrine through her business and had been instructed regarding the possible abuses of pseudoephedrine and DEA reporting requirements for regulated transactions, American Rose Discount did not report the distributions alleged in the indictment.
To prove its case against defendants, the Government will rely primarily on invoices, shipping receipts, bills of lading, and copies of checks which allegedly detail the purchase and sales of pseudoephedrine by Nguyen and American Rose Discount. Accordingly, the Government now moves the Court in limine to admit these records after pretrial testimony of the custodians of the records pursuant to Federal Rule of Evidence 803(6) and, in the alternative, to admit the records without the testimony of their custodians under Rule 807. Nguyen does not contest the records' admissibility under Rule 803(6). However, she argues that a pretrial admissibility hearing would deprive her of her constitutional right to confront and cross-examine the custodians of the records in the presence of the jury and to thereby demonstrate the absence of certain entries in the records under Rule 803(7). Nguyen also argues that because the business records can be admitted in accordance with Rule 803, the Court should not allow their admission without custodian testimony under the residual exception. American Rose Discount opposes the motion on the grounds that the government has failed to affirmatively establish the prerequisites to admission under Rule 803(6) and to provide any information concerning the relationship between the identified custodians and the respective business entities and records.
II. DISCUSSION
A. Business Records Exception, FRE 803(6)
The Government moves the Court to hold a pretrial hearing to determine the admissibility of all sales and purchase invoices, bills of lading, shipping receipts, copies of checks, and other documents relating to American Rose Discount's pseudoephedrine transactions under Federal Rule of Evidence 803(6), the business records exception to the hearsay rule. Under Federal Rule of Evidence 104, the district court must resolve preliminary questions regarding the admissibility of evidence. See FED. R. EVID. 104(a). Rule 104 further provides that hearings on preliminary matters shall be conducted outside of the hearing of the jury "when the interests of justice require." See id. 104 (C). The Advisory Committee Notes to Rule 104(c) recognize that allowing counsel to question witnesses on preliminary matters outside of the presence of the jury is time-consuming and, in many cases, testimony given in such a hearing must later be presented to the jury.
Rule 803(6) creates an exception to the hearsay rule for "records kept in the course of a regularly conducted business activity," upon the testimony of the custodian of the records or a qualified witness. See United States v. Iredia, 866 F.2d 114, 119-20 (5th Cir. 1989) ( citing Coughlin v. Capitol Cement Co., 571 F.2d 290 (5th Cir. 1978)). Based upon this testimony, the Court must preliminarily determine (1) whether the records were made contemporaneously with the acts that were the subject of the records; (2) whether the custodian or qualified witness had personal knowledge; (3) whether the records were kept in the course of a regularly conducted business activity; and, (4) whether the records-were regularly kept by the business. See FED. R. EVID. 803(6); 1 JACK B. WEINSTEIN MARGARET A. BERGER, WEINSTEIN'S FEDERAL EVIDENCE § 104.14[4] (2d ed. 2000). The Court has broad discretion to determine the admissibility of business records and will be reversed on appeal only for abuse of that discretion. See United States v. Parsee, 178 F.3d 374, 380 (5th Cir.), cert. denied, 120 S.Ct. 450 (1999) and cert. denied sub. nom. Harrison v. United States, 120 S.Ct. 465 (1999); United States v. Vela, 673 F.2d 86, 90 (5th Cir. 1982) ( citing Rosenberg v. Collins, 624 F.2d 659, 665 (5th Cir. 1980)); United States v. Veytia-Bravo, 603 F.2d 1187, 1189 (5th Cir. 1979) (citations omitted)
The notes to Rule 104(c) state as follows:
Not infrequently the same evidence which is relevant to the issue of establishment of fulfillment of a condition precedent to admissibility is also relevant to weight or credibility, and time is saved by taking foundation proof in the presence of a jury. Much evidence on preliminary questions, though not relevant to jury issues, may be heard by the jury with no adverse effect. A great deal must be left to the discretion of the judge who will act as the interests of justice require.
Fed.R.Evid. 104 Adv. Comm. Notes (1994).
The Government asserts that the Court should conduct an admissibility hearing prior to jury selection in order to avoid encumbering the presentation of evidence at trial with repetitive questions designed solely to lay the foundation for each document's admission. The Government has named eleven individuals from alleged suppliers of defendants, including representatives of American Rose Discount, whom it has subpoenaed to testify as record custodians. Defendants assert that a hearing on admissibility held outside of the jury's presence would deprive them of their right to cross-examine the custodians of the records and to thereby introduce evidence of the absence of certain entries from the records under Rule 803(7).
The Court finds that the interests of justice do not warrant holding a hearing on the admissibility of the Government's proffered business records prior to trial. First, the Court does not believe that the jury would be prejudiced by hearing foundation evidence at trial, even if the Court subsequently rules that the business records are inadmissible. Second, a Rule 104(a) hearing would be time-consuming and duplicative of later testimony before the jury. Nguyen has indicated that she has substantive questions for the custodians regarding the contents of the records, apart from the foundation requirements. Specifically, Nguyen intends to cross-examine the custodians at trial in order to point out the absence of certain entries in the records pursuant to Rule 803(7). As the Court appreciates, this testimony goes to the merits of the case. Accordingly, if the Court held a Rule 104(a) hearing prior to trial, Nguyen would have to recall these witnesses at trial to testify on the merits. Such a result would inconvenience the nearly one dozen witnesses identified by the Government and delay the trial proceedings.
For the following reasons, the Court denies the Government's motion to hold a pretrial hearing to determine the admissibility of business records under Rule 803(6). In so concluding, the Court notes that the business records' foundation can be laid expeditiously. The Government need only ask the custodians or other qualified witnesses a few questions to establish foundation. The Court therefore sees no reason to hold a separate evidentiary hearing prior to trial.
B. Residual Exception, Rule 807
The Government also moves the Court to admit its documentary evidence under Rule 807's residual hearsay exception and, alternatively, to hold a hearing to determine admissibility under that exception. The Government's motion is premature.
The residual hearsay exception permits the admission of an out-of-court statement not covered by Rules 803 or 804 if the court determines that
(A) the statement is offered as evidence of a material fact; (B) the statement is more probative on the point for which it is offered than any other evidence which the proponent can procure through reasonable efforts; and (C) the general purposes of these rules and the interests of justice will best be served by admission of the statement into evidence.
FED. R. EVID. 807. Notably, the residual exception applies only to statements "not specifically covered by Rule 803 or 804." Id. The majority of circuits interpret this phrase to mean that, "if a statement is admissible under one of the hearsay exceptions, that exception should be relied on instead of the residual exception." 5 JACK B. WEINSTEIN MARGARET A. BERGER, WEINSTEIN'S FEDERAL EVIDENCE § 807.03[4] (2d ed. 2000). See also United States v. Earles, 113 F.3d 796, 800 (8th Cir. 1997) (statement found inadmissible under other hearsay exceptions can then be considered under residual exception). ( citing United States v. Deeb, 13 F.3d 1532, 1536- 37 (11th Cir. 1994); United States v. Clarke, 2 F.3d 81, 84 (4th Cir. 1993); United States v. Guinan, 836 F.2d 350, 354 (7th Cir. 1988); United States v. Marchini, 797 F.2d 759, 763 (9th Cir. 1986)). Thus, when faced with evidence potentially admissible under the business records exception or the residual exception, the district court should first determine whether the evidence is specifically covered by the former before reaching the latter. See, e.g., United States v. Ismoila, 100 F.3d 380, 392-93 (5th Cir. 1996) (finding credit cardholder statements admissible under residual exception after determining that statements were inadmissible as business records); United States v. Hitsman, 604 F.2d 443, 447 (5th Cir. 1979) (college transcript not admissible as business record under Rule 803(6) because neither custodian nor qualified witness available to testify properly admitted under residual exception). Because the Government has also moved the Court to determine the admissibility of the records under Rule 803, and the Court has declined to reach that issue at this time, it is premature to determine whether the residual exception applies. The Government may reurge its motion at trial if the Court finds the records inadmissible under the business records exception.
III. CONCLUSION
For the foregoing reasons, the Government's motion in limine is DENIED.