505 F. Supp. 1190 (E.D. Pa. 1980)
Rule 803(6) requires not only that a document must be “kept in the course of a regularly conducted business activity,” but also that it must be “the regular practice of that business activity to make the memorandum, report, record, or data compilation” (we refer to this hereinafter as the “regular practice” requirement). It is the regular practice requirement which is mainly at issue. We address it at length because of the significant dispute between plaintiffs and defendants as to its meaning.
Defendants’ approach to the language is literal, and rigorous. In defendants’ submission, the rule says just what it means and means just what it says because of its underlying rationale. On their view “business records” can come in without the necessity of calling all the persons with personal knowledge of their construction precisely because their reliability is demonstrated by evidence of their making pursuant to established and routine company procedures for the systematic conduct of its business. Plaintiffs, on the other hand, despite lip service to the text of the rule, downplay the “regular practice” terminology, virtually excising notions of “routineness” from the rule, and instead appear to substitute therefor a requirement of reliability. Plaintiffs’ theory is that no more need be shown to require admission of a business-related document under 803(6) than that it is business-related and that its sources of information or other circumstances indicate reliability and trustworthiness. As will be seen, we conclude that the defendants’ view of the Rule is the correct one.
The regular practice requirement originated in the Business Records Act, 28 U.S.C. § 1732 (a), which governed the admissibility into evidence of business records in federal courts until the Federal Rules of Evidence took effect in 1975. Rule 803(6) as submitted to Congress did not include this requirement in its text, although a comparable requirement might well have been inferred from the Advisory Committee Note, which commented that “[t]he element of unusual reliability of business records 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.” The House Judiciary Committee restored the explicit regular practice requirement, and commented that “the additional requirement of Section 1732 that it must have been the regular practice of a business to make the record is a necessary further assurance of its trustworthiness.”1 (emphasis added). Thus it is plain that the regular practice requirement was taken by the House Judiciary Committee directly from existing law. Accordingly, we may appropriately consult pre-F.R.E. decisions interpreting the Business Records Act, as well as post-F.R.E. decisions, to determine the content of the requirement.
Plaintiffs argue that “Congress, in enacting Rule 803(6), intended to liberalize the business records exception rather than to restrict prior practice.”2 Although the rule did liberalize the definition of what constitutes a “business,” to the extent that they argue that there is a liberalization of foundational requirements over prior practice, we note our disagreement. We find nothing in the Advisory Committee Notes or congressional debates suggesting otherwise. The House Judiciary Committee’s action and the requirements of 803(6) relating to personal knowledge, see Part II.B.5, infra, support our view.
In Gordon v. Robinson, 210 F.2d 192, 196 (3d Cir. 1954), the Court of Appeals commented:
The legislative history of the Business Records Act clearly shows that it was not the intent of the draftsmen to make admissible all evidence, no matter how incompetent or irrelevant, merely by virtue of the fact that it appeared in a record made in the regular course of business. Rather it was Congress’ purpose to admit into evidence entries of a purely clerical or routine nature not dependent upon speculation, conjecture or opinion, where “accuracy is substantially guaranteed by the fact that the record is an automatic reflection of observations” without the necessity of calling the various entrants to identify the entries as their own, as was required under the common law shop book rule.
In Standard Oil Company of California v. Moore, 251 F.2d 188 (9th Cir. 1957), cert. denied, 356 U.S. 975, 78 S.Ct. 1139, 2 L.Ed.2d 1148 (1958), the Court of Appeals considered the admissibility of a number of memoranda, letters, and reports dealing with the pricing and marketing policies of oil companies other than the ones in whose files the writing was found. The Court of Appeals excluded the documents because of its finding that the plaintiff had failed to meet the burden of proving that the memoranda were made pursuant to any systematic or routine procedure. In so holding the Court discussed the regular practice requirement of § 1732:
A memorandum or record cannot be considered as having been made in the “regular course” of business, within the meaning of § 1732, unless it was made pursuant to established company procedures for the systematic or routine and timely making and preserving of company records....
Concerning almost all of the items comprising the grist of interoffice memoranda and letters which were introduced, the nonexistence of any such company procedure seems almost self-evident. They were patently intended as communications between employees, and not as records of company activity. Many of them were casual and informal in nature, seeking or providing information of a kind which could be, and no doubt often was, communicated by telephone or in conference. Most of them were apparently written as a result of the exercise of individual judgment and discretion.
If there was any systematic or routine procedure being followed in the preparation and filing of such writings, the burden was upon appellee to prove it. He failed to do so, at least with regard to most such exhibits. Where this foundation was lacking, the exhibit was not admissible under § 1732.
Id. at 215 (footnotes omitted).3
The more recent decisions interpreting the regular practice requirement in Rule 803(6) have adhered to the standards articulated in Gordon and Standard Oil. E. g., United States v. Kim, 595 F.2d 755, 761 (D.C.Cir.1979); United States v. McPartlin, supra, 595 F.2d at 1347-50; Coughlin v. Capitol Cement Company, 571 F.2d 290, 307 (5th Cir. 1978). We endorse these standards too. Plaintiffs rely heavily upon McPartlin, an action involving conspiracy to violate the wire and travel statutes arising from Ingram Corporation’s bribery of city officials in connection with a sludge-hauling contract. The Court of Appeals for the Seventh Circuit upheld the trial court’s determination that desk-calendar appointment diaries of William Benton, an unindicted co-conspirator, and a witness for the government, who was also a vice-president of Ingram Corporation, were admissible business records pursuant to Fed.R.Evid. 803(6). However, the McPartlin decision did not depart from the rule that the proponent of a business record must show that it *was a regular practice to make the entries in question. As a foundation for admission, Benton testified at trial that he kept the diaries and made entries in them as a regular part of his business activity as a vice-president of Ingram. Moreover, he testified that he relied upon them, thereby establishing the important element of reliability. Also worthy of note is the fact that the diaries were used at trial not independently, but for corroboration of details.
Plaintiffs, in their Post-Hearing Supplemental Memorandum, argue that the courts have permitted documents to qualify as business records without regard to whether the particular type of record was routinely made. In support of this proposition they cite several cases, mostly pre-F.R.E., none of which support their position. In United States v. Hyde, 448 F.2d 815, 846 (5th Cir. 1971), cert. denied, 404 U.S. 1058, 92 S.Ct. 736, 30 L.Ed.2d 745 (1972), the Court admitted handwritten notes on the details of a certain settlement made at a meeting at which the notewriter, Branum, was present. However Branum testified at trial that he regularly kept informal notes of transactions on note cards in such situations which he turned over to another officer of his company for safekeeping. In United States v. Moran, 151 F.2d 661 (2d Cir. 1945), the Court admitted a memorandum of a telephone conversation made by a bank employee. However, the court found that the memorandum was a “routine record made for the bank’s business as such,” id. at 662, thereby satisfying the regular practice requirement. Magnus Petroleum Co. v. Skelly Oil Co., supra, involved notes made in the course of negotiations for a business opportunity. However, based on the testimony of the scrivener, who was subject to cross-examination, the Court found them to be a part of a regularly conducted business activity.
Thus, we hold that for the diaries and memoranda to be admissible under 803(6), the plaintiffs must show4 that their entries were made pursuant to a systematic and routine procedure for the conduct of business, one characterized by careful checking and habits of precision and regularity such as will justify confidence in the reliability of the record keeping. At the least there must be a detailed showing of the nature of the business practice creating the document, the method of record-keeping, the source of the information, and the author’s reliance on it. We will review the evidence of regular practice as we proceed through the documents one-by-one in our subsequent discussion. We turn now to a cognate question, the method of establishing that regularity of practice.
F.R.E. 803(6) provides that its requisites be shown “by the testimony of the custodian or other qualified witness.” This provision not only places the burden of laying a proper foundation upon the proponent of the document, but appears to require that the foundation be laid in a specific way. The plaintiffs have not sought to establish that the diaries are business records by such testimony. Rather the plaintiffs have relied upon a variety of other means and contentions: (1) evidence from the protocols and to a lesser extent from the JFTC testimony; (2) the fact that the diaries, memoranda, and other materials were produced by defendants pursuant to certain answers to interrogatories in which they invoked F.R.Civ.P. 33(c); (3) alleged estoppel to deny business records status because of the text and terms of certain answers to interrogatories; (4) cross references to other diaries, documents, and answers to interrogatories in the case; and (5) evidence from the diaries and other documents themselves, i. e., the fact that they refer to important business matters; relate information supposedly relied upon by the employers of the diarists; and are said to look like business records (we have dubbed this the “res ipsa loquitur” theory of business records).
Because of plaintiffs’ failure to comply with the literal terms of F.R.E. 803(6) the defendants maintain that the diaries and memoranda do not qualify as business records. As evidence of the rigor of the requirement, the defendants point to the fact that the Business Record Act, 28 U.S.C. § 1732, which, as we have noted, governed the admission of business records into evidence in federal courts from 1936 until the F.R.E. became operative in 1975, contained no such requirement. They contend that this change in the law was carefully considered, and reflects a desire to be more rigorous in connection with the qualification of documents as business records, by requiring testimony of some qualified witness. Cf. p.-, supra.
The defendants cite a number of cases which, on their reading, hold that such testimony is required. E. g., Coughlin v. Capitol Cement Company, 571 F.2d 290 (5th Cir. 1978); United States v. Jones, 554 F.2d 251 (5th Cir.), cert. denied, 434 U.S. 866, 98 S.Ct. 202, 54 L.Ed.2d 142 (1977); United States v. Carranco, 551 F. 2d 1197 (10th Cir. 1977). Defendants also cite a number of pre-F.R.E. cases to similar effect. See, e. g., United States v. Rosenstein, 474 F.2d 705 (2nd Cir. 1973); Hagans v. Ellerman and Bucknall Steamship Company, 318 F.2d 563, 574-77 (3d Cir. 1963).
Coughlin, for instance, appears to be quite specific on the point:
There can be no doubt but that the party who seeks to introduce written evidence must in some way authenticate it. We agree that under the exception, “[t]he testimony of the custodian or other qualified witness who can explain the record-keeping of the organization is essential. If the witness cannot vouch that the requirements of Rule 803(6) have been met, the entry must be excluded.”
571 F.2d at 307 (citation omitted). There are similar statements in Hagans v. Ellerman (“no foundation was offered to qualify the document as a record kept in the ordinary course of business ... or that such surveys were systematically ordered for it”). See also Lewis v. Baker, 526 F.2d 470, 474 (2d Cir. 1975) (“All that is required is that someone who is sufficiently familiar with business practices be able to testify that the record was made regularly as part of those business practices and that the record is a truly authentic one”); United States v. Blake, 488 F.2d 101, 105 (5th Cir. 1973) (“testimony must be given by a custodian”); National Research Development Co. v. Great Lakes Carbon Corp., 410 F.Supp. 1108, 1113 n. 20 (D.Del.1975) (M. Schwartz, J) (“basic elements of the Federal Rules of Evidence 803(6) exception .. . are lacking in that there has been no showing by a ‘custodian or other qualified witness’ that the notes were either made or kept in the regular practice of investors’ professional activity”). Plaintiffs, on the other hand, counter with the argument that the literal approach to 803(6) has been discarded by courts under appropriate circumstances. Plaintiffs cite a number of cases where records were qualified by courts under 803(6) in the absence of a custodian. E. g., United States v. Hines, 564 F.2d 925 (10th Cir. 1977), cert. denied, 434 U.S. 1022, 98 S.Ct. 748, 54 L.Ed.2d 770 (1978) (vehicle bill of sale); United States v. Holladay, 566 F.2d 1018 (5th Cir.), cert. denied, 439 U.S. 831, 99 S.Ct. 108, 58 L.Ed.2d 125 (1978) (seized gas station notebooks demonstrating themselves to be part of single entry bookkeeping system continually maintained since 1967 for purpose of accounting for receipts and disbursements held admissible under 803(6)). Accord, 4 Weinstein ¶ 803(6)[02] at 803-152. Plaintiffs also cite pre-F.R.E. decisions in support of their position. United States v. Leal, 509 F.2d 122 (9th Cir. 1975) (hotel registration forms required by Hong Kong law supported by affidavit of assistant manager); United States v. Ragano, 520 F.2d 1191 (5th Cir. 1975) (corporate reports required by state law admitted without testimony). Plaintiffs submit that this result is supported by the modern and flexible approach of the Federal Rules which favor the submission rather than the exclusion of probative evidence, citing F.R.E. 102.
Close examination of the cases cited by both parties reveals that none of them have come squarely to grips with the question with which we are faced: may the proponent of materials sought to be qualified under F.R.E. 803(6) meet his burden without introducing testimony of the “custodian or other qualified witness.” In the cited cases upholding exclusion there was plainly an inadequate basis to meet 803(6), whether or not live testimony was supplied.5 In the cases admitting the documents, the court had no difficulty in finding the test met, but did not expressly resolve the question whether the evidence which qualified the document must be disregarded because of the absence of the witness. See also E. C. Ernst, Inc. v. Koppers Co., 626 F.2d 324 at 330 (3d Cir. 1980) (rule satisfied by testimony of the custodian). Indeed, defendants correctly distinguish the cases relied upon by plaintiffs in this area (some but not all of which are cited in the text) on one of three grounds: (1) there was some form of testimony-or stipulation-establishing foundation; (2) unlike diaries or memoranda of meetings, the records involved in those cases were on their face routine and regular clerical or financial documents such as hotel receipts, purchase orders, financial statements, stock transfer records, or filings with government agencies; and (3) the courts did not discuss the precise issue before us.
In order to resolve this question of law, we look first to the Advisory Committee Note to Rule 803(6). After listing a number of business records statutes drafted or enacted in the 1920’s and 1930’s, including the federal Business Records Act, 28 U.S.C. § 1732, which was based on the so-called Commonwealth Fund Act, the committee continued:
These reform efforts . .. concentrated considerable attention upon relaxing the requirement of producing as witnesses, or accounting for the nonproduction of, all participants in the process of gathering, transmitting, and recording information which the common law had evolved as a burdensome and crippling aspect of using records of this type. In their areas of primary emphasis on witnesses to be called and the general admissibility of ordinary business and commercial records, the Commonwealth Fund Act and the Uniform Act appear to have worked well. The exception seeks to preserve their advantages.
On the subject of what witnesses must be called, the Commonwealth Fund Act eliminated the common law requirement of calling or accounting for all participants by failing to mention it. [citations omitted]. Model Code Rule 514 and Uniform Rule 63(13) did likewise. The Uniform Act, however, abolished the common law requirement in express terms, providing that the requisite foundation testimony might be furnished by “the custodian or other qualified witness.” Uniform Business Records as Evidence Act, § 2; 9A U.L.A. 506. The exception follows the Uniform Act in this respect.
(Emphasis added). There is no indication in the Advisory Committee Note that the *Committee intended, by following the language of the Uniform Business Records as Evidence Act, to change federal law by requiring live testimony where none had been required before. To the contrary, the committee strongly endorsed the liberalization of common-law requirements as to the production of witnesses to qualify documents as business records. Moreover, the committee’s adoption of the language of the Uniform Act appears to reflect a determination that the “burdensome and crippling” common-law rules should be abolished “in express terms,” instead of implicitly as in the Business Records Act.
Because we believe that the Federal Rules of Evidence favor a flexible approach, see Rule 102, and in the absence of a clear indication to the contrary in the Advisory Committee Note, we opt for the view that the testimony of the custodian or other qualified witness is not a sine qua non of admissibility in the occasional case where the requirements for qualification as a business record can be met by documentary evidence, affidavits, or admissions of the parties, i. e., by circumstantial evidence, or by a combination of direct and circumstantial evidence.
It is clear from the express language of F.R.E. 803(6) that before a document can be admitted into evidence a proper foundation for its admission must be laid and that the burden of laying such a foundation is on the party seeking to introduce the document. Accord, United States v. McPartlin, supra; Standard Oil Co. of California v. Moore, supra; Hagens v. Ellerman & Bucknail Steamship Company, supra; Coughlin v. Capitol Cement Co., supra.
We hold that to meet this burden in the absence of a “custodian or other qualified witness,” plaintiffs must show regularity of practice in some precise and explicit manner, either by external evidence or from the documents themselves plus surrounding circumstances. To require less would strip the regularity of practice requirement of vitality, at least in a case such as this where what are proffered are not routine clerical or financial documents such as hotel registration forms or vehicle bills of sale or bank statements, but rather diaries and memoranda heavily laden with cryptic and half-expressed statements which cannot, we find, be interpreted without the testimony of the author explaining what he meant by each entry. We will consider plaintiffs’ proffer, notwithstanding the lack of “custodian or other qualified witness,” but against this rigorous standard.
Plaintiffs contend that by producing the diaries and memoranda pursuant to F.R.Civ.P. 33(c) the defendants have conceded that they are business records. They rely in this respect upon the language of Rule 33(c), of the Civil Rules which is entitled “Option to Produce Business Records.”6 They also rely upon the wording of their interrogatories 8 and 42-44 to each of the producing defendants and their responses thereto.
The first problem with this argument is that the answers to the interrogatories make clear that the defendants are not conceding that the materials produced are business records within the meaning of 803(6). Secondly, we think that the bar and the courts would be startled if they were retrospectively to find that a production under Rule 33(c) constituted an admission that everything that was produced qualified as a record of regularly conducted activity within the meaning of F.R.E. 803(6). There is nothing in the language of Rule 33(c) which suggests that the very specific requirements of 803(6) are waived by its invocation. That invocation is considered a convenience to the bar and a means to facilitate the discovery process. The problems of federal discovery are great enough without rendering Rule 33(c) into a trap for the unwary.7
Rule 803(6) requires as a condition of admissibility that business records be “made at or near the time by, or from information transmitted by, a person with knowledge.” This provision represents a change from the Business Records Act, which provided that “lack of personal knowledge by the entrant or maker” could be shown to affect weight but not admissibility. 28 U.S.C. § 1732 (a) (repealed 1975).
This provision of the rule was intended to deal with the problem of business records which merely record information transmitted by an informant. The Advisory Committee Note comments:
An illustration is the police report incorporating information obtained from a bystander; the officer qualifies as acting in the regular course but the informant does not. The leading case, Johnson v. Lutz, 253 N.Y. 124, 170 N.E. 517 (1930), held that a report thus prepared was inadmissible. Most of the authorities have agreed with the decision . .. The rule . .. requires] an informant with knowledge acting in the course of the regularly conducted activity.
The Senate Judiciary Committee stated its view that the personal knowledge requirement not be interpreted to require the identification of the particular person upon whose knowledge the record was based, so long as the proponent of the evidence could show that it was the regular practice of the activity to base its records upon information transmitted by a person with knowledge:
It is the understanding of the committee that the use of the phrase “person with knowledge” is not intended to imply that the party seeking to introduce the memorandum, report, record, or data compilation must be able to produce, or even identify, the specific individual upon whose first-hand knowledge the memorandum, report, record or data compilation was based. A sufficient foundation for the introduction of such evidence will be laid if the party seeking to introduce the evidence is able to show that it was the regular practice of the activity to base such memorandums, reports, records, or data compilations upon a transmission from a person with knowledge, e. g., in the case of the content of a shipment of goods, upon a report from the company’s receiving agent or in the case of a computer printout, upon a report from the company’s computer programmer or one who has knowledge of the particular record system.
Senate Report, U.S.Code Cong. & Admin. News 1974, p. 7063. Thus, in order to meet the personal knowledge requirement of the rule, plaintiffs must show either (1) that the author of the document had personal knowledge of the matters reported, or (2) that the information he reported was transmitted by another person who had personal knowledge, acting in the course of a regularly conducted activity, or (3) that it was the author’s regular practice to record information transmitted by persons who had personal knowledge. In the absence of a showing of personal knowledge, made in one or more of these three ways, a document cannot qualify as a business record.
A related provision of Rule 803(6) denies admissibility even to evidence which meets every other requirement of the rule, if “the source of the information or the method or circumstances of preparation indicate lack of trustworthiness.” The burden of showing the untrustworthy nature of evidence which is otherwise admissible under 803(6) is on the opponent of the evidence. In assessing the trustworthiness of the documents before us, we would look, inter alia, to factors analogous to those enumerated in our Public Records Opinion at 26-27. Thus, we might find that a document which is obviously riddled with hearsay statements which were not transmitted by a person with knowledge is so untrustworthy as to fail to qualify under the 803(6) exception. See Part II-G, infra (discussion of Rule 805).
We also think that a document which is unintelligible is for that reason untrustworthy if offered to prove the truth of one interpretation out of many possible interpretations which could be put on the document. The requirement of trustworthiness is intended to prevent the trier of fact from deciding cases on the basis of mere speculation rather than probative evidence. When a document which is unintelligible on its face is presented to the trier of fact, it is not probative evidence, but merely an invitation to engage in unfounded speculation. In such a situation, the document itself reveals its own “method or circumstances of preparation” sufficiently to make it untrustworthy under the 803(6) proviso.
Having completed our analysis of Rule 803(6), we turn to the issues presented by plaintiffs’ proffer of the documents as admissions under Rule 801(d)(2)(B), (C) and (D).
In addition to asserting admissibility under 803(6), supra, upon which plaintiffs place primary reliance, they offer many of the documents being considered here as Admissions by Party-Opponent under Rules 801(d)(2)(B), (C) and (D):
(d) Statements which are not hearsay. A statement is not hearsay if ...
(2) Admission by party-opponent. The statement is offered against a party and is ... (B) a statement of which he has manifested his adoption or belief in its truth, or (C) a statement by a person authorized by him to make a statement concerning the subject, or (D) a statement by his agent or servant concerning a matter within the scope of his agency or employment, made during the existence of the relationship ...
Unlike statements admitted under Rule 803(6), which would be admissible against all parties, statements admitted under 801(d)(2)(B), (C) and (D) are admissible only against parties who have adopted the statement, or who bear the specified relationship to the declarant.
As a preliminary matter we must decide whether we are to determine admissibility under 801(d)(2) according to the provisions of 104(a) alone, i. e., whether inadmissible evidence may be considered, or whether 104(b) also applies, limiting our decision to admissible evidence. See generally pp. 1219-1220, supra.
While Rule 801(d)(2) is not a hearsay exception (see discussion infra), the same types of “competency” issues must be evaluated in establishing “authority,” “agency," or “scope of employment” as are considered in ruling on hearsay exceptions. These issues are not ones of conditional relevancy within the meaning of Rule 104(b), for the reasons stated in our discussion of the interface between Rules 104 and 803(6), at pp. 1229-1230, supra. In accordance with our reasoning stated there, we shall determine preliminary issues of fact under Rule 801(d)(2) on the basis of both admissible and inadmissible evidence, and shall apply a preponderance of the evidence standard of proof.8
Subdivision (d) of Rule 801 is a marked departure from the common law in that all of the statements it defines as “not hearsay” were considered hearsay under preexisting law. Saltzburg at 457. The subsection we are dealing with, (d)(2) Admission by Party Opponent, was an “exception” under the traditional hearsay rule.9 The rationale for admitting this type of statement has been the subject of lengthy academic dispute.10
The Advisory Committee Notes explain the treatment of admissions in the Federal Rules as follows:
Admissions by a party-opponent are excluded from the category of hearsay on the theory that their admissibility in evidence is the result of the adversary system rather than satisfaction of the conditions of the hearsay rule. Strahorn, A Reconsideration of the Hearsay Rule and Admissions, 85 U.Pa.L.Rev. 484, 564 (1937); Morgan, Basic Problems of Evidence 265 (1962); 4 Wigmore § 1048. No guarantee of trustworthiness is required in the case of an admission. The freedom which admissions have enjoyed from technical demands of searching for an assurance of trustworthiness in some against-interest circumstance, and from the restrictive influences of the opinion rule and the rule requiring firsthand knowledge, when taken with the apparently prevalent satisfaction with the results, calls for generous treatment of this avenue to admissibility.
Congress enacted the proposed Rule 801(d)(2) without change.11
The most important change from the common law made by Rule 801(d)(2), apart from denominating admissions as non-hearsay rather than a hearsay exception, was the addition of subsection (D), making admissible against a party “a statement by his agent or servant concerning a matter within the scope of his agency or employment, made during the existence of the relationship.” Statements in this category, commonly known as “vicarious admissions,” were not admissible under the traditional *common law rule, which required “speaking authority” as codified in subsection (C). See infra.
The Advisory Committee explained this change as follows:
The tradition has been to test the admissibility of statements by agents, as admissions, by applying the usual test of agency. Was the admission made by the agent acting in the scope of his employment? Since few principals employ agents for the purpose of making damaging statements, the usual result was exclusive of the statement. Dissatisfaction with this loss of valuable and helpful evidence has been increasing. A substantial trend favors admitting statements related to a matter within the scope of the agency or employment.
Grayson v. Williams, 256 F.2d 61 (10th Cir. 1958); Koninklijke Luchtvaart Maatschappij N. V. KLM Royal Dutch Airlines v. Tuller, 110 U.S.App.D.C. 282, 292 F.2d 775, 784 (1961); Martin v. Savage Truck Lines, Inc., 121 F.Supp. 417 (D.D.C.1954).
The broad rule requiring receipt into evidence of the statements of a party’s employee seems to rest on a slightly different foundation from the rule favoring receipt of a party’s own statements. As Judge Weinstein has observed, “[vicarious admissions do not lend themselves readily to any of the analyses proposed” to explain the receipt of admissions generally. He feels that vicarious admissions are received under the Rules because of the “practical need for pertinent evidence” and represent a judgment by the draftsmen that such statements would “on balance, be more helpful than harmful in determining truth.” 4 Weinstein ¶ 801(d)(2)[01] at 801-137 & 138. This view is supported by the Advisory Committee Note, which explains the inclusion of vicarious admissions as the result of “[dissatisfaction with [the] loss of valuable and helpful evidence.” (emphasis added).12
Under Rule 801(d)(2), an admission is defined as a “statement” which possesses certain attributes. The term “statement” is defined in Rule 801(a) to include oral and written assertions as well as nonverbal conduct, if intended as an assertion. Since all of the hearsay evidence before us is in written form, for our present purposes the term “statement” is equivalent to the term “written assertion.”
The fact that admissions are defined as types of “statements” probably would not be of much import in the ordinary case. The term assumes prominence in this case, however, because the diaries of a number of Japanese executives offered by the plaintiffs are compilations of written notations. Some of the diary entries are comprehensible to the reader, but most are not, and are, in any event, recordation not of utterances or “statements” of the diarist, but “statements” or thoughts of a third party. Plaintiffs also offer a number of memoranda which are equally unclear. We are thus presented with two questions: (1) can a document which is, at best, a compilation of “statements” be admissible as a whole under 801(d)(2), without separate analysis of each statement therein; and (2) can a written notation which does not clearly assert the truth of some proposition be admissible under 801(d)(2)? We answer both questions in the negative.
First, as to whether or not a compilation can be admissible as a whole without separate analysis of each statement within it, we think that Rule 801(d)(2) requires that each statement be separately admissible. Unlike Rule 803(6), for example, which expressly authorizes the admission of a “data compilation” as a whole, Rule 801(d)(2) speaks in terms of individual “statements.” Obviously, in some situations a compilation might be admissible because each of the statements within it is separately admissible. E. g., United States v. Evans, 572 F.2d 455, 488 (5th Cir.), cert. denied, 439 U.S. 870, 99 S.Ct. 200, 58 L.Ed.2d 182 (1978) (defendant’s appointment calendar admitted under 801(d)(2)(A)). The diaries before us are not of this character, however. Quite apart from the problem of entries *which are incomprehensible, the diaries include at least two types of statements which may fail to qualify as admissions. First, there are entries which have been shown to be outside the scope of the diarist’s employment by evidence extrinsic to the diaries themselves. For instance, some of the Japanese executives testified before the JFTC that their responsibilities related solely to the domestic Japanese market, but their diaries included scattered references to matters interpreted by plaintiffs as relating to exports. Secondly, there are a great many internal hearsay statements within the diaries. See infra.
Under these circumstances, we cannot determine the admissibility of the diaries without a separate analysis of the individual statements in them.
Of equal importance is the question whether a written notation which cannot reasonably be characterized as an assertion can be admissible under 801(d)(2). The diary entries and memoranda which the plaintiffs seek to qualify under that rule differ greatly in their form from the usual type of statements which the courts have allowed into evidence as admissions. It is instructive, for example, to examine the three cases cited favorably by the Advisory Committee in its notes explaining the admissibility of vicarious admissions under 801(d)(2)(D). In Grayson v. Williams, 256 F.2d 61 (10th Cir. 1958), the court of appeals upheld the admissibility of hearsay statements made by a truck driver concerning the collision which had given rise to the action:
The judgment is challenged on the further ground that the court erred in allowing admissions of appellant Grayson [the driver] to be admitted in evidence against Southern Freightways, Inc. Three persons visited Grayson in the hospital several hours after the accident. They asked him if appellee’s truck was in its proper lane. Lockhead testified in substance that Grayson replied that it was and stated further that he didn’t see the Union Pacific truck until the last minute and couldn’t avoid striking it. Minardi testified that he said both trucks were in their proper lane and “I just didn’t see the truck in time enough to avoid striking it.” Sgt. Schwarting testified that Grayson said he didn’t see the other truck until it was right on him; that he cramped his wheels to the left but was too late and they hit.
Id at 66. In Martin v. Savage Truck Line, Inc., 121 F.Supp. 417 (D.D.C.1954), the court admitted “a statement made by the driver of the truck to an investigating police officer at the scene of the collision ... to the effect that he was driving at the rate of thirty miles an hour, but that the green light was with him.” Id at 418. In Koninklijke Luchtvaart Maatschappij N.V. KLM Royal Dutch Airlines v. Tuller, 292 F.2d 775 (D.C.Cir.), cert. denied 368 U.S. 921, 82 S.Ct. 243, 7 L.Ed.2d 136 (1961), the court of appeals upheld the admissibility of a statement made by an aircraft radio operator to an investigator concerning the operator’s own conduct during the airplane crash which was the subject of the lawsuit. In each of these cases, which the Advisory Committee cited as archetypal admissions, it was clear that the declarant was asserting certain facts, and it was equally clear what the facts were which he was asserting.
The statements which have come into evidence as admissions since the enactment of the Federal Rules of Evidence are for the most part equally clear. To take only one graphic example, in Mahlandt v. Wild Canid Survival & Research Center, Inc., 588 F.2d 626 (8th Cir. 1978), the plaintiffs claimed that their 3-year-old child had been bitten by a wolf named Sophie, who was kept by a naturalist in his back yard. The court of appeals reversed the trial court’s exclusion of hearsay statements, including the wolf’s custodian’s written assertion that “Sophie bit a child that came in our back yard.” Id. at 629. A clearer assertion of fact could hardly be imagined.
There are two reported decisions in which diary entries which may have been similar to those offered here have been allowed into evidence as admissions. United States v. McPartlin, 595 F.2d 1321, 1347-51 (7th *Cir.), cert. denied, 444 U.S. 833, 100 S.Ct. 65, 62 L.Ed.2d 43 (1979); United States v. Evans, supra. The opinions in those cases do not provide sufficient information about the contents of the diaries offered there for us to determine whether they were as inscrutable as those offered here. In any event, both cases are plainly distinguished from the situation now before us by one crucial circumstance: in both cases the diarist himself was present at the trial and could clarify the meaning of any unclear diary entries. In McPartlin, the diarist testified at length as “the principal government witness.” 595 F.2d at 1345. In Evans, the diarist was one of the defendants and could have challenged the government’s interpretation of any entries which were unclear by testifying or by his counsel’s objections. We are aware of no decisions holding that written notations which are not clearly assertions can come into evidence in the absence of testimony to explain their meaning.
The plaintiffs argue that a diary entry which is not an assertion is ipso facto not hearsay, since “hearsay” is defined in Rule 801(c) as “a statement .. . offered in evidence to prove the truth of the matter asserted.” Although this argument has a superficial plausibility, it is fatally flawed as it applies to the documents involved here. Apart from a few entries which plaintiffs purport to offer for a non-hearsay purpose, i. e. not to prove the truth of the matter asserted,13 the plaintiffs’ theory of the relevance of the diary entries is that the entries are susceptible to a certain interpretation which supports the plaintiffs’ case. In other words, whatever the plaintiffs from time to time say, the fact is that plaintiffs’ offer of the diary entries is for the truth of the matter which they claim to be asserted therein. Thus if the entries are not assertions, they are not probative evidence of any fact which is material to the determination of the action. Therefore any entries which are not assertions will be excluded as irrelevant under Rules 401 and 402, except insofar as they can be demonstrated to have been truly offered for a non-hearsay purpose.
We think that the plaintiffs, as proponents of the diary entries, bear the burden of establishing that they are assertions and of ascertaining, with reasonable clarity, what the facts are which are asserted therein. The mere claim, in the form of counsel’s argument, that entries which are on their face unclear and inscrutable are susceptible of a certain interpretation which supports plaintiffs’ case, and that a jury should be permitted to decide what they mean, is not a sufficient foundation. Instead, the plaintiffs should have established the meaning of unclear diary entries through foundational evidence, in the form of testimony or otherwise. In the absence of such a foundation, the entries cannot qualify as admissions under Rule 801(d)(2).
The defendants have argued that an admission must be “clear and concise,” citing Pulver v. Union Inv. Co., 279 F. 699, 705 (8th Cir. 1922); Evis Manufacturing Co. v. FTC, 287 F.2d 831, 839-40 (9th Cir.), cert. denied, 368 U.S. 824, 82 S.Ct. 43, 7 L.Ed.2d 28 (1961). Although we find their authorities inapposite, we are in substantial agreement with their teaching that an unclear notation cannot be an admission, at least in the absence of foundation evidence, for the reasons stated. The defendants also argue that an admission must be communicated to someone. This is apparently an extension of their argument that an agent’s statement cannot be an admission unless it was communicated to someone other than the agent’s principal. While the latter contention has ample support in pre-F.R.E. law, we have determined that the decisions upon which defendants rely were overruled by the enactment of the Rules. See pp. 1246-1247, infra. We recognize the force of defendants’ argument that a statement or notation which is never communicated by the declarant to anyone is less likely to be trustworthy than a statement which is so communicated. However, we see no reason to read into Rule 801(d)(2) a requirement which would preclude all uncommunicated statements, including, for example, all entries made in a private diary, from ever coming into evidence as admissions.14
In accordance with the overall plan of this opinion, we defer our consideration of specific diaries and entries until after our discussion of all the legal issues raised by the parties.
Although the particular legal issues which now confront us under 801(d)(2)(B) were never sharply drawn in argument or briefs, a major difference in the positions of the parties surfaced in the outlining of those factual patterns which, in plaintiffs’ . submission satisfied the criteria for adoption but which defendants claimed were insufficient. This disagreement involves the circumstances in which a party’s reference to a document, in a protocol, testimony, or interrogatory, constitutes an adoption of all or part of the writing referred to.
Rule 801(d)(2)(B) provides for the admissibility of a statement of which a party has “manifested his adoption or belief in its truth.” We agree with Judge Weinstein that the language of the rule requires evidence that the party’s conduct was “intended” as an adoption. Weinstein ¶ 801(d)(2)(B)[01] at 801-144.15
In United States v. Coppola, 526 F.2d 764 (10th Cir. 1975), for example, the Court of Appeals distinguished the improper admission of evidence in defendant’s first trial from the proper admission of the same statements in defendant’s second trial:
It is not enough that Herman recounted Molina’s statements in Coppola’s presence and Coppola was silent or did not otherwise respond. Testimony that an accused adopted statements of another person may be let in as an adoptive admission only if it appears the accused understood and unamibiguously assented to those statements.
Id. at 769 n. 2 (citation omitted).
One of the most interesting questions posed in regard to 801(d)(2) admissions is the extent to which production of documents in response to interrogatories, as permitted under F.R.Civ.P. 33(c), constitutes an “admission of” or “adoption of” the contents of the documents so produced. Written answers to interrogatories may be utilized as admissions,16 although they are not conclusive on the issues addressed.17 We agree with the Court in National Research Development Corp. v. Great Lakes Carbon Corp., 410 F.Supp. 1108 (D.C.Del.1975) that “the language of each interrogatory and the wording of the corresponding reply becomes significant” when it is not the written answers themselves, but documents referenced in the answers or produced in lieu of such answers, which the opposing party seeks to use.
In the National Research case the plaintiff sought to introduce an inventor’s notebook to support its contentions concerning the meaning of a technical term used in a patent. Although the information plaintiff wished to use was apparently on a page of the notebook which had been referenced by defendants in their answers to interrogatories, the Court concluded that the broad and alternative wording of the questions created an “ambiguity in the interpretation of the corresponding response” which rendered it impossible to determine whether any “adoptive connotation” existed. As a second ground for exclusion, the court noted that the question asked did not concern the use of the term involved, and stated that the scope of any “admission,” if one existed, “would be narrowly limited by the wording” of the question, and would neither constitute a concession of any other points nor “embrace the truth of the designated documents’ total contents.”18
We conclude that for a document produced under F.R.Civ.P. 33(c) to qualify as an admission, the question and answer when taken together must manifest an “adoptive” rather than merely a “referential” connotation. Further, the only issues conceded by such an “admission” are issues specifically addressed in the question, and responded to by the document.
The plaintiffs contend that certain documents are adoptive admissions because of a party’s or a person’s failure to disavow the documents. The Advisory Committee Notes to 801(d)(2)(B) recognize the possibility of an adoption by silence and state that “the theory is that the person would, under the circumstances, protest the statement made in his presence if untrue.” The Notes caution, however, that the inference is a fairly weak one. In United States v. Flecha, 539 F.2d 874 (2d Cir. 1976), the Second Circuit held that the facts that a party has heard a statement and that he has failed to deny it are not in themselves sufficient to establish adoption by silence, but that the circumstances involved must be considered. The court of appeals quoted Lord Justice Bowen in Wiedemann v. Walpole, 2 Q.B. 534, 539 (1891):
Silence is not evidence of an admission, unless there are circumstances which render it more reasonably probable that a man would answer the charge made against him than that he would not.
539 F.2d at 877. We agree.19
Another disputed point is whether a statement which is written by someone else but signed by a party opponent or his agent constitutes an admission of the party under 801(d)(2)(B). In a criminal case, United States v. Johnson, 529 F.2d 581, 584 (8th Cir.), cert. denied, 426 U.S. 909, 96 S.Ct. 2233, 48 L.Ed.2d 835 (1976), the Court of Appeals upheld the trial judge’s admission of a statement made by the defendant, taken down in longhand by a Secret Service Agent, and read and signed by the defendant at the conclusion of his interview with the agent. With respect to the hearsay aspects involved, the court stated:
The objections must fail. A statement which is reduced to writing by one other than the accused is generally admissible where the accused reads it over and signs it. See United States v. Evans, 320 F.2d 482, 484 (6th Cir. 1963); United States v. Del Porte, 357 F.Supp. 969, 976 (S.D.N. Y.), aff’d 483 F.2d 1399 (2nd Cir. 1973). Moreover, under the Federal Rules of Evidence, which became effective on the date of Johnson’s trial, the statement is not hearsay. Fed.R.E. 801(d)(2)(A), (B).
We find no cases or commentary to the contrary.20
Subsection (C) of 801(d)(2) is mainly a codification of prior common law, under which an authorized statement by a party’s agent was receivable to the same extent as the authorizing party’s own statement. Wigmore explains that the basis for this rule is the principle that:
[h]e who sets another person to do an act in his stead as agent is chargeable in substantive law by such acts as are done under that authority; so too, properly enough, admissions made by the agent in *the course of exercising that authority have the same testimonial value to discredit the party’s present claim as if stated by the party himself.
IV Wigmore § 1078 at 162 (Chadbourn rev. 1972). The “speaking authority" required by subsection (C) may represent either express or implied authority, and the authority questions involved are to be determined under the law of agency. Baughman v. Cooper-Jarrett, 530 F.2d 529, 532 (3d Cir.), cert. denied, 429 U.S. 825, 97 S.Ct. 78, 50 L.Ed.2d 87 (1976).
The Advisory Committee Notes state that the wording of Rule 801(d)(2)(C) was intended to resolve a division among the circuits as to whether an agent’s statements were only admissible if made to a third person, or whether statements to the principal himself or itself could also be authorized admissions. See United States v. Lykes Bros. Steamship Co., 432 F.2d 1076, 1078 (5th Cir. 1970) (citing cases from several circuits on both sides of the dispute). Prior to the adoption of the Rules, the Third Circuit had held that an employee’s statement made to his employer rather than to a third party could not constitute an admission by the employer. Nuttall v. Reading Co., 235 F.2d 546, 550 (3d Cir. 1956). The Advisory Committee Notes to Rule 801(d)(2)(C) make it clear that under that Rule a statement may be an authorized admission even though it was never communicated to a third party. Thus we view Nuttall as legislatively overruled on this point by the enactment of the Federal Rules of Evidence.
As we have mentioned, subsection (D) represents a departure from the common law. As the Advisory Committee Notes state, the traditional test was whether the statement was made by the agent within the scope of his employment. They pointedly note that few agents were employed to make damaging statements, and thus most such remarks were excluded. The Rules, however, follow a trend which allows statements to be admitted so long as they are related to a matter which is within the scope of the agent’s employment. Advisory Committee Notes to 801(d)(2)(D). The phrase “during the existence of the relationship” makes it quite clear that the statement must relate to a matter which was within the agent’s scope of employment at the time he made the statement. Thus, we must exclude statements made after the termination of employment, or about matters with which an employee was not, or was no longer, involved.
The defendants have argued that two additional criteria must be met to satisfy 801(d)(2)(D): first, the statement must have been communicated to someone outside of the company which employed the declarant, and second, the declarant must be an employee with managerial responsibility. Since neither of these requirements are found in the language of the Rule, or in the Advisory Committee Notes, the defendants base their contention on two pre-Rules cases, Nuttall v. Reading Company, 235 F.2d 546 (3d Cir. 1956), and Gilmour v. Strescon Industries, Inc., 66 F.R.D. 146 (E.D.Pa.), aff’d mem. 521 F.2d 1398 (3d Cir. 1975).
The Nuttall case was decided on the basis of the “authorized” admission exception, discussed supra. As we stated there, the Advisory Committee Notes to Subsection (C) make it clear that under that Rule there is no requirement that a statement must be communicated outside of the company against which it is offered. In Gilmour, Judge Broderick quoted Nuttall, but recognized that the then proposed Rule 801 might alter the common law rule, and decided the issue on other grounds.
The defendants acknowledge that the Nuttal rule is no longer valid with respect to authorized admissions under subsection (C), but contend that it retains force with respect to vicarious admissions under subsection (D), since the only discussion of the issue is in the Advisory Committee Notes to subsection (C). We reject that contention. It is plain that the committee viewed subsection (D) as an extension of common-law authorized admissions, which *were codified in subsection (C). Thus the discussion in the note to subsection (C) of whether a statement must be communicated to a third party is equally applicable to subsection (D), as the Eighth Circuit expressly held in Mahlandt, supra, 588 F.2d at 630. We conclude that Nuttall retains no vitality with respect to either type of admission.
The defendants also contend that a vicarious admission can be made only by an employee who has managerial responsibilities. This requirement is found only in decisions concerning who is authorized to make an admission for a corporate employer. See Moran v. Pittsburgh-Des Moines Steel Co., 183 F.2d 467 (3d Cir. 1950); Gilmour, supra, 66 F.R.D. at 150. Thus the requirement of managerial responsibilities, if it remains valid after the enactment of the Rules, is pertinent only to authorized admissions, not to vicarious admissions. In any event, it is clear that every employee whose statements the plaintiffs offer did have managerial responsibilities.
Since the plaintiffs offer DSS 1029, the so-called Japan Victor document, against MEI on the basis of MEI’s ownership of the majority of the stock of Japan Victor Co., a brief word is in order about the attribution to a parent corporation of a statement which would be an admission if offered against its subsidiary.21
The facts and contentions surrounding the document are adequately stated in Part XIII, infra, and will not be restated here.
The issue to be considered is whether, assuming that a statement could come into evidence as an admission against the subsidiary, it may likewise be admitted into evidence against the parent corporation. While there is no precedent precisely on point, we think the answer is clear: the proponent of the evidence must show either that the subsidiary had authority to make a statement concerning the subject, under Rule 801(d)(2)(C), or that the subsidiary acted as the parent’s agent and the statement concerned a matter within the scope of its agency, under Rule 801(d)(2)(D). Under either subsection of the rule, the proponent of the evidence must establish the existence of an agency relationship between the parent and the subsidiary under the applicable principles of agency law.
The principles relevant to deciding whether or not a subsidiary is the agent of a parent corporation have recently been reviewed by Judge Caleb Wright in Japan Petroleum Co. (Nigeria) Ltd. v. Ashland Oil Co., 456 F.Supp. 831, 840-41 (D.Del.1978):
Whether an agency relationship exists between a parent corporation and its subsidiary is normally a question of fact. The central factual issue is control, i. e., whether the parent corporation dominates the activities of the subsidiary.
In order to determine whether or not a sufficient degree of control exists to establish an agency relationship, the Court must look to a wide variety of factors, such as stock ownership, officers and directors, financing, responsibility for day-to-day operations, arrangements for payment of salaries and expenses, and origin of subsidiary’s business and assets, (citations and footnote omitted).
See also Walker v. Newgent, 583 F.2d 163, 167 (5th Cir. 1978), cert. denied, 441 U.S. 906, 99 S.Ct. 1994, 60 L.Ed.2d 374 (1979); Pacific Can Co. v. Hewes, 95 F.2d 42 (9th Cir. 1938); Murphy Tugboat Co. v. Shipowners & Merchants Towboat Co., 467 F.Supp. 841 (N.D.Cal.1979).
As Judge Wright noted, the existence of an agency relationship is a conceptually distinct question from the notion of “piercing the corporate veil.” 456 *F.Supp. at 839. However, the mere fact that one corporation owns a controlling interest in another does not render the subsidiary the agent of the parent:
“A corporation does not become an agent of another corporation merely because a majority of its voting shares is held by the other”. Restatement (Second) of Agency, supra § 14M.
See also, Pacific Can Co., supra, 95 F.2d at 46; Eastern Industries [Inc. v. Traffic Controls, Inc.], supra, 142 F.Supp. [381] at 384 [D.Del.]; Owl Fumigating Corp. v. California Cyanide Co., 24 F.2d 718, 719 (D.Del. 1928), aff’d., 30 F.2d 812 (3d Cir. 1929); Scott-Douglas Corp. v. Greyhound Corp., 304 A.2d 309, 314 (Del.Super.1973). Nor does the fact that a parent and a subsidiary have common officers and directors necessarily indicate an agency relationship.
See, Pacific Can Co., supra; Eastern Industries, supra; Owl Fumigating, supra; Scott-Douglas, supra.
456 F.Supp. at 841.
We agree with Judge Wright’s analysis, and adopt it. In the absence of any showing of express authority, we think that the plaintiffs, as proponents of the evidence, should be required to make the same kind of showing as would be required to impose vicarious liability upon the parent corporation: that the parent corporation “directly intervenes in the management” of the subsidiary so as to treat it as a “mere department of its own enterprise.” Consolidated Rock Products Co. v. DuBois, 312 U.S. 510, 524, 61 S.Ct. 675, 685, 85 L.Ed. 982 (1940). In conformity with the overall organization of this opinion, we defer our discussion of the facts pertaining to the relationship between MEI and the Japan Victor Company until Part XIII, infra.
Plaintiffs seek to introduce into evidence under Rule 804(b)(1) the prior testimony of approximately 16 witnesses, employees of the Japanese manufacturer defendants, who testified before the JFTC in the 1966 “Six Company Case.” Rule 804(b)(1) provides:
(b) Hearsay exceptions.-The following are not excluded by the hearsay rule if the declarant is unavailable as a witness: (1) Former testimony .-Testimony given as a witness at another hearing of the same or a different proceeding ... if the party against whom the testimony is now offered, or, in a civil action or proceeding, a predecessor in interest, had an opportunity and similar motive to develop the testimony by direct, cross, or redirect examination.
If admitted, the testimony would be offered against the six defendants who were present at the JFTC Six Company Case hearings to prove a conspiracy to fix prices in Japan, the home market aspect of the alleged “unitary conspiracy.” It would also be offered against all other defendants on the ground that the “six companies” are their predecessor in interest. Moreover, plaintiffs propose to offer the testimony against all defendants insofar as it authenticates the diaries. Defendants object to the admission of the former testimony on the grounds that plaintiffs have failed to show: (1) that the declarants are “unavailable” as witnesses in the present trial, within the meaning of Rule 804(a); (2) that the six defendants who were respondents in the Six Company Case had a “similar motive to develop the testimony” in the JFTC hearings; and (3) that those six defendants qualify as “predecessors in interest” of the other eighteen defendants who were not represented at the JFTC hearings. We discuss the legal aspects of these issues in the order mentioned.
The first requirement for application of all the Rule 804 hearsay exceptions, including 804(b)(1), is that the declarant be unavailable.22 Unavailability is defined in Rule 804(a) as follows.
(a) Definition of unavailability.-
“Unavailability as a witness” includes situations in which the declarant-
(1) is exempted by ruling of the court on the ground of privilege from testifying concerning the subject matter of his statement; or
(2) persists in refusing to testify concerning the subject matter of his statement despite an order of the court to do so; or
(3) testifies to a lack of memory of the subject matter of his statement; or
(4) is unable to be present or to testify at the hearing because of death or then existing physical or mental illness or infirmity; or
(5) is absent from the hearing and the proponent of his statement has been unable to procure his attendance (or in the case of a hearsay exception under subdivision (b) (2), (3), or (4), his attendance or testimony) by process or other reasonable means.
A declarant is not unavailable as a witness if his exemption, refusal, claim of lack of memory, inability, or absence is due to the procurement or wrongdoing of the proponent of his statement for the purpose of preventing the witness from attending or testifying.
Rule 804(a) codifies the historically diverse bases for finding a witness “unavailable” for the purpose of admitting (under subsection (b) of the rule) evidence otherwise excluded by the hearsay rule. The burden of demonstrating unavailability falls, of course, on the proponent. 11 Moore’s Federal Practice § 804.02 at 239.
Plaintiffs contend that the witnesses whose testimony they seek to introduce are unavailable within the meaning of subsections (3), (4), and (5) of 804(a). Plaintiffs’ only claim under 804(a)(4) is that one of the declarants, Mr. Yajima, is unavailable because of his death in 1968, prior to commencement of this litigation. The defendants concede that Yajima is dead, hence unavailable, so that a discussion of 804(a)(4) is unnecessary. We can defer our discussion of 804(a)(3) until we reach the discussion of other hearsay exceptions because we find that the 804(a)(5) requirement is satisfied with respect to former testimony, and that is sufficient to establish unavailability.
Rule 804(a)(5) provides that a declarant of former testimony is unavailable if the proponent “has been unable to procure his attendance ... by process or other reasonable means.” In civil cases, it has long been the rule that inability to procure attendance by “process or other reasonable means” is satisfied by demonstration of inability to serve a subpoena. 4 Weinstein ¶ 804(a)[01] at 804-41; Saltzburg at 600; McCormick § 253 at 609; Trade Development Bank v. Continental Insurance Co., 469 F.2d 35, 42 (2d Cir. 1972); McIntyre v. Reynolds Metals Co., 468 F.2d 1092, 1093 n. 2 (5th Cir. 1972); United States v. Squella-Avendano, 478 F.2d 433, 439 (5th Cir. 1973). We have found nothing to indicate that the adoption of the Federal Rules of Evidence altered this longstanding rule.
The declarants in this case, Japanese citizens living in Japan, are beyond the subpoena power of this court as governed by Fed.R.Civ.P. 45(e). The statute governing federal courts’ subpoena power over persons in a foreign country, 28 U.S.C. § 1783, extends that power only to “a national or resident of the United States” in a foreign country, and therefore plainly does not reach Japanese citizens residing in Japan. Nor do we find in Rule 804(a)(5) any requirement that plaintiffs seek the voluntary attendance of witnesses residing abroad whose attendance cannot be compelled by process. It would be anomalous to apply in a civil case a requirement which the Supreme Court has found inapposite under the stricter standards applied in criminal cases. See Mancusi v. Stubbs, 408 U.S. 204, 92 S.Ct. 2308, 33 L.Ed.2d 293 (1972).
Rule 804(a)(5) is written in the disjunctive. The rule, as promulgated by the Supreme Court, required only a showing of inability to procure attendance of the declarant with respect to all the 804(b) exceptions. However, the House Judiciary Committee added language to the Rule which provides that “in the case of a hearsay exception under subdivision (b)(2), (b)(3), or (b)(4),” a proponent must also be unable to procure the testimony of the declarant. The House Committee noted:
the amendment is designed primarily to require that an attempt be made to depose a witness (as well as to seek his attendance) as a precondition to the witness being deemed unavailable. The Committee, however, recognizes the propriety of an exception to this additional requirement when it is the declarant’s former testimony that is sought to be admitted under subdivision (b)(1).
House Report at 15, U.S.Code Cong. & Admin.News 1974, p. 7088. While the Senate deleted the language added by the House, the Conference Committee adopted the House version. Thus, in the Rule as enacted, there is no additional requirement that a proponent of former testimony attempt to depose the declarant.
Although the Senate Judiciary Committee rejected the House amendment, the Committee expressed its view that if the proponent of hearsay evidence had in fact taken the declarant’s deposition, the proponent’s failure to ask certain questions at the deposition might estop him from claiming subsequently that the declarant was unavailable at trial. The Committee stated:
The committee understands that the rule as to unavailability, as explained by the Advisory Committee “contains no requirement that an attempt be made to take the deposition of a declarant.” In reflecting the committee’s judgment, the statement is accurate insofar as it goes. Where, however, the proponent of the [hearsay] statement, with knowledge of the existence of the statement, fails to confront the declarant with the statement at the taking of the deposition, then the proponent should not, in fairness, be permitted to treat the declarant as “unavailable” simply because the declarant was not amenable to process compelling his attendance at trial. The committee does not consider it necessary to amend the rule to this effect because such a situation abuses, not conforms to, the rule. Fairness would preclude a person from introducing a hearsay statement on a particular issue if the person taking the deposition was aware of the issue at the time of the deposition but failed to depose the unavailable witness on that issue.
Senate Report, U.S.Code Cong. & Admin. News 1974, p. 7067. Although the House amendment imposed an attempt-to-depose requirement upon subsections (b)(2), (b)(3), and (b)(4), it did not alter the proposed rule with respect to former testimony. Defendants contend that the Senate Committee’s “estoppel” position therefore remains applicable to the proponent of former testimony under subsection (b)(1).
The plaintiffs did not in fact depose the declarants of the diaries and memos written in Japan. However, they did depose other officials of the companies which employ or employed the declarants in Japan. Those depositions (in two waves) related first to personal jurisdiction, venue, and service of process, and second, to identification of documents produced in discovery. The defendants contend that application of the Senate “estoppel” guideline bars the plaintiffs from claiming that the declarants are now unavailable. They argue that the plaintiffs had ample opportunity to depose the declarants when they deposed the Japanese defendants. Moreover, they say, in such depositions as were taken plaintiffs did not confront the deponents with issues addressed in the testimony of their employees in the JFTC proceedings and did not attempt to elicit foundation for the admissibility of any of the documents produced. Plaintiffs, in response, do not address the application of Senate guidelines, but maintain that a literal construction of the rule renders a proponent of 804(b)(1) testimony exempt from any requirement of attempting to take depositions.
We cannot accept the defendants’ reading of the Senate Committee’s comment. First, it must be noted that the Senate Committee guidelines address fairness questions which would arise under the rule as promulgated by the Advisory Committee. Unlike that proposed rule, the rule as enacted makes a distinction between former testimony and the other 804(b) exceptions. We cannot speculate as to what the Senate Committee would have said in direct response to the rule thus drawn.
Even if the Senate Committee’s view retains some vitality in the construction of the rule as enacted, the extension of the Senate guideline which defendants propose is contrary to the plain language of the rule itself. The defendants in effect contend that the Senate report should be read to impose on plaintiffs a requirement of taking depositions which they might not otherwise take, while the Senate report itself speaks only of a party’s willful failure to ask certain questions at a deposition which he has taken voluntarily. To read the Senate report as broadly as the defendants propose would be in effect to impose a requirement that the proponent of former testimony must take the deposition of the declarant, even though the rule as enacted clearly distinguishes in this regard between former testimony and the categories of hearsay treated in subsections (b)(2), (b)(3), and (b)(4). Thus we conclude that the declarants of former testimony are unavailable under Rule 804(a)(5) if they are outside the subpoena power of the court, even if the proponent of the former testimony has made no effort to take their depositions or to request their voluntary attendance at trial.
In addition to meeting the requirement of unavailability, former testimony under 804(b)(1) must have been given under circumstances such that “the party against whom the testimony is now offered, or in a civil action or proceeding, a predecessor in interest, had an opportunity and similar motive to develop the testimony by direct, cross, or redirect examination.” It is uncontroverted that the respondents in the JFTC proceedings had an opportunity to develop the witnesses’ testimony, as they were represented by counsel who engaged in extensive examination of the witnesses.23
In this section, we discuss the requirement of similarity of motive to develop the testimony, and in the following section we turn to a discussion of what renders one party a “predecessor in interest” of another.
At common law, the hearsay exception for former testimony originally required identity of parties and identity of issues. Both were intended to insure the adequacy of the present opponents’ opportunity to cross-examine the witness in the prior proceeding. Gradually the courts reduced these requirements to “predecessor in interest” and “substantial” identity of issues.24 Abandoning the old requirement of identity of issues, the Supreme Court promulgated, and the Congress adopted, the term “similar motive” in Rule 804(b)(1). The Advisory Committee explained its preference as follows:
The common law did not limit the admissibility of former testimony to that given in an earlier trial of the same case, although it did require identity of issues as a means of insuring that the former handling of the witness was the equivalent of what would now be done if the opportunity were presented. Modern decisions reduce the requirement to “substantial” identity. McCormick § 233. Since identity of issues is significant only in that it bears on motive and interest in developing fully the testimony of the witness, expressing the matter in the latter terms is preferable.
Advisory Committee Note to Rule 804. The rule thus embodies McCormick’s view that the requirement of identity of issues “should be restated, not as a mechanical one of identity or even of substantial identity of issues, but rather as a requirement that the issues in the first proceeding and hence the purpose for which the testimony was there offered, must have been such that the present opponent (or some person in like interest) had an adequate motive for testing on cross-examination the credibility of the testimony now offered.” McCormick § 257 at 622.
That similar motive is predicated, at least in part, upon the substantial similarity of issues and purpose for which testimony is offered is clear. But motive may also be influenced by other factors. As Saltzburg observes:
While common law jurisdictions require substantial identity of issues, the Federal Rule does not depart from the common law in its requirement of a similar motive to develop the testimony.
The way to determine whether or not motives are similar is to look at the similarity of the issues and the context in which the opportunity for examination previously arose.
Saltzburg at 602.
Such circumstances or factors which might influence motive to develop testimony in-elude (1) the type of proceeding in which the testimony is given,25 (2) trial strategy26 (3) the potential penalties or financial stakes,27 and (4) the number of issues and parties.28 Thus in determining whether a party or his predecessor in interest had the opportunity and similar motive to develop the testimony, the court must evaluate, in terms of both the prior and the present proceedings (1) the similarity of issues, (2) the purpose for which the testimony is offered, and (3) the context or circumstances in which the testimony is given.
Rule 804(b)(1) permits the introduction into evidence of prior testimony against a party which was not represented in the earlier action, so long as there was in the earlier action a “predecessor in interest” of the present party, whose motive to develop the testimony in the earlier action was sufficiently similar to that of the present party to satisfy that requirement of the rule. The plaintiffs offer the JFTC testimony against all defendants in this action, arguing that the six respondents were “predecessors in interest” of the other defendants.