A business trial lawyer’s case lives and dies on getting communications and records into evidence. While injury cases may focus on accident or surgical reconstruction, photos and videos, medical records and lost wages, business evidence weighs toward communications, contracts, financial statements and expert damage calculations. The challenge is getting those records into evidence over objections that they constitute inadmissible hearsay.
Let’s start with hearsay basics: Hearsay evidence is a statement made other than by a witness testifying at the trial offered to prove the truth of the matter stated. Cal. Ev. Code § 1200(a).
Statement of independent or operative significance
Certain statements may have independent legal significance and are therefore not offered for the truth of the matter stated. Examples include evidence of a defamatory statement, Russell v. Geis, 251 Cal.App.2d 560, 571-72 (1967), or threats or discriminatory statements. People v. Diaz, 60 Cal.4th 1176, 1184 (2015).
Some documents are admitted as “operative documents,” those affecting the parties’ rights. A common example in business cases is a signed contract or an exchange of communications resulting in contract formation. The point is not to show the truth of the statements in the contract but that the parties altered their legal rights. “Operative facts draw their significance from having been said or written regardless of whether they are true, and such facts lie outside the hearsay rule.” J&A Mash & Barrel, LLC v. Superior Court of Fresno County, 74 Cal.App.5th 1, 18–19 (2022).
Party admissions
If one seeks to introduce the out-of-court statements of one’s opponent, these would be admitted as party admissions, a statement “offered against the declarant in an action to which he is a party in either his individual or representative capacity.” Cal. Ev. Code § 1220. If the proposed exhibit contains both party admissions and responses, the entire document could be offered under the “rule of completeness,” entering the entire “act, declaration, conversation or writing” into evidence. Cal. Ev. Code § 356 (“when a letter is read, the answer may be given”.) Thus, an email from the other side saying “agreed” cannot be understood in isolation unless read together with the communication that elicited the response.
Business records
A common misconception holds that if a party is in business, then every electron or piece of paper maintained on a business server or in a file cabinet is admitted under the “business records” hearsay exception. Not true.
The “business records” hearsay exception contains multiple requirements. First, the record must be “made in the regular course of business.” Second, the writing must be “recorded at or near the time of the act, condition, or event.” Third, the custodian must qualify the record. Finally, the sources and methods of preparation are “such as to indicate its trustworthiness.” Cal. Ev. Code § 1271.
A properly admitted “business record” would include a ledger intended to contemporaneously and accurately record customer transactions in the regular course of business. An automobile insurer’s claims log with entries made at the time of the conversation or action and maintained in the regular course of business was admissible under the business records hearsay exception. Klem v. Access Ins. Co., 17 Cal.App.5th 595 (2017). Loan agreements executed through Docusign were admitted as records satisfying each element of Section 1271. Jones v. Solgen Construction, LLC, 99 Cal.App.5th 1178, 1189 (2024).
A party’s own individualized communications would not be admitted under the business records exception, nor individualized statements from third parties. In LAOSD Asbestos Cases, 87 Cal.App.5th 939, 952 (2023), memoranda summarizing telephone conversations that were not prepared in the ordinary course of business were not admitted. “When a record is not made to facilitate business operations but, instead, is primarily created for later use at trial, it does not qualify as a business record.” People v. McVey, 24 Cal.App.5th 405, 415 (2018).
Expert reports
A common theory is that expert reports constitute out-of-court statements offered for the truth, and are thus inadmissible hearsay. This tendency is underscored by People v. Sanchez, 63 Cal.4th 665 (2016), limiting the ability of experts to rely upon case-specific hearsay in forming their opinions.
Graphs, charts or summaries of calculations prepared by the expert, however, might be extracted from the report and introduced into evidence as summaries of voluminous records, or as demonstrative exhibits. See Federal Rule of Evidence 1006; El Dorado Meat Co. v. Yosemite Meat & Locker Service, Inc., 150 Cal.App.4th 612, 615 (2007), (trial court admitted charts and graphs of voluminous business records). “Trial courts have broad discretion to admit demonstrative evidence such as maps, charts, and diagrams to illustrate a witness’s testimony.” People v. Mills, 48 Cal.4th 158, 207 (2010).
Successful business trial lawyers anticipate hearsay issues early and identify the hearsay objections prior to trial. By understanding which documents qualify as operative documents, party admissions, or admissible business records — and preparing appropriate foundations — counsel can ensure their documentary evidence reaches the jury.