United States Court of Appeals
Fifth Circuit
F I L E D
In the November 6, 2006
United States Court of AppealsCharles R. Fulbruge III
Clerk
for the Fifth Circuit
_______________
m 05-50673
_______________
BRAZOS RIVER AUTHORITY,
Plaintiff-Appellant,
VERSUS
GE IONICS, INC.,
ALSO KNOWN AS IONICS, INCORPORATED, ET AL.,
Defendants,
GE IONICS, INC.,
ALSO KNOWN AS IONICS, INCORPORATED;
CAJUN CONSTRUCTORS, INC.,
FORMERLY KNOWN AS CAJUN CONTRACTORS, INC.,
Defendants-Appellees.
_________________________
Appeal from the United States District Court
for the Western District of Texas
______________________________
Before SMITH and STEWART, Circuit Judges, adjacent to the electrodes; and stack siding,
and HANEN, District Judge.* which are large plastic protective coverings for
the stacks.
JERRY E. SMITH, Circuit Judge:
In the 1990’s Ionics developed the “Mark
The Brazos River Authority (“BRA”) ap- IV” or third generation (“3G”) spacers for its
peals a judgment after a jury trial in its suit for next generation Mark IV EDR stack systems.
breach of contract, breach of implied warran- Ionics also made a retrofit version of the spac-
ties, and fraud against GE Ionics, Inc. (“Ion- er for use in older Mark III systems known as
ics”), and Cajun Constructors, Inc. (“Cajun”), the “3G retrofit,” “retrofit screen,” and the
arguing that the district court improperly ex- “retrofit” spacer. In 1996 BRA concluded that
cluded evidence. Finding reversible error, we it needed to expand the capacity of SWATS to
vacate and remand. meet customer demand. The parties disagree
about many of the details after this point.
I.
BRA is responsible for developing and Ionics proposed that BRA could increase
managing the water resources of the Brazos its capacity by using the retrofit spacers. BRA
River Basin; as part of its duties it operates the accepted the proposal and announced the job
Lake Granbury Surface Water and Treatment for public bid. Cajun Constructors, Inc. (Ca-
System (“SWATS”). Because Lake Granbury jun”), submitted a bid and was awarded the
has a high concentration of salts, SWATS used prime contract, then entered into a subcontract
a process called electrodialysis reversal with Ionics whereby Ionics agreed to retrofit
(“EDR”) to reduce the salt content of the wa- the stacks with the new spacers. Cajun and
ter. Ionics designed and manufactured the or- Ionics performed the retrofit in 1998 and
iginal “Mark III” EDR system installed at 1999. BRA alleges, and brought evidence at
SWATS in 1989. trial, that after the retrofit it began experienc-
ing problems with the plant (so that the water
The fundamental working unit of the EDR qualitydecreased), problems that culminated in
system is a “stack,” which consists of alternat- fires in June 2001 and March and April 2002.
ing layers of membranes and plastic spacers. BRA closed the SWATS plant in December
The spacers contain channels through which 2002.
water flows. Electric current is applied to the
stack, and the resulting electrical field sepa- BRA sued in state court, inter alia, Ionics
rates the salt ions out of the water, reducing and Cajun, alleging negligence, negligent mis-
the mineral content. Other EDR components representation, fraud, breach of implied war-
relevant in this appeal are the electrodes, ranty of good and workmanlike performance,
which are large metal plates that transfer elec- breach of implied warranty of merchantability,
tricity; electrode cable assemblies, by which breach of implied warranty of fitness for a par-
voltage is supplied to the electrodes; electrode ticular purpose, strict liability in tort, and
spacers, which are special thicker spacers breach of contract. The suit was removed to
federal court. Before trial the district court
dismissed the tort claims on account of the
*
District Judge of the Southern District of
contractual relationship among the parties; the
Texas, sitting by designation. dismissal of the tort claims was not appealed.
2
The jury rendered a verdict in favor of Ionics defendant’s having taken proprietary trade se-
and Cajun on all the remaining claims. crets before from a prior employer (because
this would prove “propensity” to commit mis-
II. appropriation).
The standard of review for evidentiary rul-
ings is abuse of discretion. If, however, the As BRA correctly points out, the propensi-
district court applies the wrong legal rule, the ties of a particular person to act a certain way
standard is de novo. Moss v. Ole S. Real Es- are not at issue in this case, which involves the
tate, Inc., 933 F.2d 1300, 1305-06 (5th Cir. properties and functions of inanimate objects
1991).1 (EDR components) at various facilities. The
rule talks about the character of a “person,”
A. and there is no person whose character BRA is
BRA argues that the district court incor- trying to prove.
rectly applied Federal Rule of Evidence
404(b), by excluding, as to an inanimate object Given that it was error to exclude evidence
as distinguished from a natural person, evi- of similar occurrences on the basis of rule
dence meant to prove action in conformity 404(b), we ask whether that error is harmless.
with character. We agree this was serious er- Compaq Computer Corp. v. Ergonome Inc.,
ror. Specifically, the court erred in excluding 387 F.3d 403, 408 (5th Cir. 2004). We “may
evidence of fires at other facilities on the basis not disturb the district court’s exclusion of the
of rule 404(b). evidence . . . if that ruling can be upheld on
other grounds, regardless of whether the court
Rule 404(b) provides that “[e]vidence of relied on those grounds.” Metallurgical In-
other crimes, wrongs, or acts is not admissible dus., Inc. v. Fourtek, Inc., 790 F.2d 1195,
to prove the character of a person in order to 1207 (5th Cir. 1986). We “will not reverse er-
show action in conformity therewith” (empha- roneous evidentiary rulings unless the ag-
sis added). This rule is applied most frequent- grieved partycan demonstrate ‘substantial pre-
ly in the criminal law context, Aetna Cas. & judice.’” Viazis v. Am. Ass’n of Orthodontists,
Sur. Co. v. Guynes, 713 F.2d 1187, 1193 (5th 314 F.3d 758, 767 (5th Cir. 2002) (citation
Cir. 1983), and we have limited its application omitted).
to civil actions “where the focus is on essen-
tially criminal aspects,” Crumpton v. Confed- In Davidson Oil Country Supply v. Klock-
eration Life Ins. Co., 672 F.2d 1248, 1253-54 ner, Inc., 917 F.2d 185 (5th Cir. 1990) (per
n.7 (5th Cir. 1982). An example is a civil ac- curiam) (on petition for rehearing), we held
tion for trade secret misappropriation in which that exclusion of evidence of similar occur-
the plaintiff seeks to introduce evidence of the rences was not harmless, so a new trial was re-
quired. We explained that exclusion of similar
occurrences seriously hindered the presenta-
1
Alternatively, this standard can be phrased as tion of plaintiff’s case and that the “scarcity of
stating that an error of law is an abuse of discre- instances of Ferrotubi pipe failure” turned into
tion. See United States v. Buck, 324 F.3d 786,
“affirmative proof” of the lack of defect, dis-
791 (5th Cir. 2003) (noting that district court abus-
crediting the plaintiffs’ witnesses and creating
es discretion where decision to admit evidence is
based on error of law).
“an atmosphere so unreal and so prejudicial”
as to require remand: “Our original opinion
3
reflects the exclusion of a substantial volume assurance that the jury would have decided the
of relevant evidence which created an atmo- same way had it been admitted.2
sphere of disbelief for the claims and defenses
of DOCS. This atmosphere of disbelief per- We agree with BRA that a crushing major-
meated the entire trial and tainted the jury find- ity of the evidence of other fires was excluded,
ings.” Id. at 186. We noted that against the so the excluded evidence is not merely cumu-
two isolated failures, the proffered and exclud- lative. In Johnson v. William C. Ellis & Sons
ed evidence reflected approximately thirteen Iron Works, Inc., 609 F.2d 820 (5th Cir. 1980)
failures of Ferrotubi tubingAthat contributed to (on petition for rehearing), it was reversible
the discrediting of DOCS’s witnesses, who error to exclude certain treatises, because al-
were limited to telling of only two failures in though “the substance of these publications
Klockner-supplied Ferrotubi materials. Id. was effectively placed before the jury,” id. at
We explained that “this atmosphere of disbelief 823, by expert evidence, the “direct quotation
permeated the entire trial and tainted the jury from a number of sources would have been
findings,” permitting it to find for Klockner more dramatic and might have been more per-
despite “spectacular admissions” that it had suasive,” id. “[It] is not for us to decide that
made, id., as shown by (for example) admitted the effect of what was excluded might not
Klockner documents acknowledging a “tre- have altered the jury’s views,” id., because
mendous quality problem with the Ferrotubi there was a “reasonable likelihood,” id., that a
material,” Davidson Oil Country Supply v. substantial right was affected.
Klockner, Inc., 908 F.2d 1238, 1244 (5th Cir.
1990). We also held that the evidence of simi- We also do not view lightly the evidence
lar failures was not irrelevant, because it was Ionics presented to the jury to the effect that
offered to prove that the Ferrotubi products BRA had failed to maintain the EDR plant to
contained a latent manufacturing defect and specifications (e.g., had failed to maintain re-
because it was “clearly relevant to the ques- quired pressures; to perform required mainten-
tions of merchantability and good faith.” Id. at ance tasks such as salt CIP’s; to tend to hot
1245. spots timely; and to replace corroded compon-
ents) and to the further effect that this created
Ionics contends that Davidson is distin- a propensity for product malfunction. But we
guishable because, unlike the situation there, in cannot say with positive assurance that the evi-
the instant case significant evidence against dence of other fires would not have influenced
Ionics has been introduced at trial. Nonethe- the jury in believing BRA’s rebuttal of some of
less, although there was evidence acknowl- Ionics’ maintenance arguments3 by indicating
edging, as in Davidson, a tremendous quality
problem with Ionics material, that evidence, as
2
in Davidson, could not dispel the atmosphere See EEOC v. Manville Sales Corp., 27 F.3d
of disbelief created by the exclusion of evi- 1089, 1095 (5th Cir. 1994) (“[W]e cannot say with
dence of the failure of Ionics equipment. Al- conviction that this [excluded] evidence would not
though this case is slightly closer than was have affected the jury’s determination.”).
Davidson, because more evidence against the 3
Some of the rebuttal evidence provided by
defendants appears to have been introduced
BRA seems to indicate that the failure to maintain
here, the exclusion of this evidence is not the required pressures was a result of tending to the
harmless, because we cannot say with positive (continued...)
4
that there was a problem with Ionics’s equip- pre-existing components is included in BRA’s
ment independently of the maintenance issues. claim for breach of implied warranty of fitness
for a particular purpose. We reject defen-
Ionics also argues that Davidson is inappli- dants’ argument that the warranties claims fail
cable because it dealt with merchantability is- because no defect existed at the time of deliv-
sues arising from the sale of a product (the ery; like Davidson, this case deals with a latent
pipe), while this case deals with claims about defect.
system design, which are not covered by UCC
implied warranties. We disagree. B.
As we have said, we will not remand for a
The law implies a warranty that goods are new trial if the evidence erroneously excluded
fit for some particular purpose where the sell- could nonetheless be barred on another
er, at the time of the transaction, has reason to ground. Ionics argues that the evidence was
know of the particular purpose for which the properly excluded under rules 402 and 403 of
goods are required and the buyer is relying on the Federal Rules of Evidence as irrelevant or
the seller’s skill or judgment to select or fur- prejudicial. For this analysis, it is immaterial
nish suitable goods. See TEX. BUS. & COM. whether the district court actually rejected ev-
CODE ANN. § 2.315 (Vernon 1994). The par- idence on these grounds.4
ticular purpose must be a particular non-ordi-
nary purpose. The complex and specialized Relevant evidence means evidence having
nature of the retrofit makes its purpose non- any tendency to make the existence of any fact
ordinary. that is of consequence to the determination of
the action more probable or less probable than
BRA purchased goods from Ionics during it would be without the evidence. FED. R.
the retrofit and allegedly relied on Ionics’s spe- EVID. 401. “Evidence of similar accidents
cial skills and representations that the retrofit might be relevant to the defendant’s notice,
goods (the new thin membranes) were fit to magnitude of the danger involved, the defen-
replace the goods that were changed during dant’s ability to correct a known defect, the
the retrofit (thicker membranes) and would lack of safety for intended uses, strength of a
work with BRA’s other existing components product, the standard of care, and causation.”
to produce more water at the same or higher Ramos v. Liberty Mut. Ins. Co., 615 F.2d 334,
quality than previously was the case. There- 338-39 (5th Cir. 1980).
fore, the so-called “design” claim relating to
the compatibility of the retrofit goods with the The excluded documents show that most
fires occurred in high-voltage environments;
that many may have occurred as a result of
3
(...continued) failure of the shrink-wrap insulated bars; and
hot spots, which were a natural result of the plas-
tics used during, and the higher voltage of, the re-
4
trofit; that the failure to do the CIP’s was a result Although the district court noted at the pretrial
of the fact that Ionics had failed to supply the need- conference that it would admit evidence of similar
ed pump for a considerable amount of time; that occurrences if BRA proved similarity (which sug-
manual, non-pump CIP’s were not feasible because gests the court was concerned about rules 402 and
of some barriers created by the retrofit; and that 403), at trial it seemed to rely mostly on rule
components corroded faster than before the retrofit. 404(b).
5
that all involved the same flammable stack sid- of the evidence (for the jury), not to admissi-
ing as that at BRA. Therefore, the evidence is bility. As long as there are similarities (as
not excludable as irrelevant under rule 402. there are here), the differences are for the jury
The higher voltage environment is not merely to decide.5 Similarly here, the issue, which is
problematic as a design flaw, but relates, as whether possible unique circumstances of the
explained, to the warranty of fitness for a par- BRA fire (e.g., hot spots) made the BRA event
ticular purpose. distinguishable from other fires, goes to the
weight of the evidence, not to admissibility.
The higher voltage was required by the new
thin membranes installed during the retrofit: “Evidence of similar accidents occurring
Because the membranes were thinner, there under substantially similar circumstances and
were more of them occupying the space than involving substantially similar products may be
before the retrofit, so they held a larger vol- probative . . . [of any number of factors].”
ume of water per minute, which in turn re- Jackson v. Firestone Tire & Rubber Co., 788
quired more voltage for desalination. This F.2d 1070, 1082 (5th Cir. 1986). The ques-
larger volume was the express purpose of the tion of admissibility of substantially similar
retrofitSSto enable BRA to produce more de- accidents is necessarily determined on a case-
salinated water per unit of time. by-case basis, with consideration to be given
to any number of factors, including the prod-
Thus, BRA is not attempting to bring uct or component part in question, the plain-
breach of warranty claims as to the stack sid- tiff’s theory of recovery, the defenses raised by
ing and shrink-wrap bars that were installed the defendant, and the degree of similarity of
before 1998 and that would be barred by the the products and of the other accidents:
statute of limitations. Rather, BRA is arguing
that the components installed during the retro- [T]he court’s order in effect limits “similar
fit were not fit for the purpose of working to- accidents” to those involving the Firestone
gether with the pre-existing stacks to desali- 5/ rim base and the Goodyear LW side
nate water, as shown by BRA’s obtaining a ring. At trial plaintiff’s expert testified that
variance after the retrofit because the water he was not aware of any other accidents in-
exceeded the acceptable salinity levels. That volving those exact components. Appellees
is, given BRA’s special needs resulting from conclude rather disingenuously from this
the tendency of some of its existing compo- that “Mr. Jackson’s accident was unique,
nents to fail in high-voltage environments, Ion- and no other accidents were admissible.” .
ics should not have recommended the retrofit . . We decline to take such a narrow and
a product, such as the thin membranes, that
required a high voltage environment.
5
Davidson, 908 F.2d at 1246 (holding that
Although Ionics urges that the district court much of the excluded evidence “showed similarity”
properly excluded evidence of other fires be- and that “[t]he weight of that showing was for the
cause the circumstances of the BRA fires were jury”); see also Jones & Laughlin Steel Corp. v.
Matherne, 348 F.2d 394, 400-01 (5th Cir. 1965)
unique, the law in this circuit with respect to
(“The differences between the circumstances of the
cases, such as this case or Davidson, that are
two accidents could have been developed to go to
not product liability cases, is that the degree of the weight to be given such evidence. It cannot be
similarity is a question that goes to the weight held inadmissible[].”).
6
unrealistic view of the matter. nesses) that its goods were merchantable and
that the fires were not caused by its products,
. . . The “substantially similar” predicate for but by BRA’s poor maintenance of the prod-
the proof of similar accidents is defined, ucts.6
again, by the defect (or, as we have also
termed it, the product) at issue. If the Nor was the excluded evidence unfairly
disputed defect were restricted to the mis- prejudicial. “Unfair prejudice” as used in rule
match of these two parts, then the trial 403 is not to be equated with testimony that is
court’s ruling would have been correct. merely adverse to the opposing party. Virtual-
But if that defect is the danger of all mul- ly all evidence is prejudicial; otherwise it
ti-piece parts because of the great risk of would not be material. The prejudice must be
poor fit, then some proof of other accidents “unfair.” Dollar v. Long Mfg., N.C., Inc., 561
involving multi-piece rims is admissible on F.2d 613, 618 (5th Cir. 1977). The evidence
the issue of the magnitude of the danger. here was not inflammatory.7
Id. at 1082–83. Although there is some prejudice from forc-
ing defendants to explain why the other fires
The mere fact that some but not all of the were dissimilar, that burden is not unfair in this
fires involved the rather unique MK III-4 re- case, in which the similarities are not insignifi-
trofit spacers (or hot spots) does not mean that cant. In Ramos, although we noted that the
they are not relevant and therefore admissible GO-4 was installed vertically with a crane,
under the factors outlined above. BRA is ar- while B-30 was scoped out horizontally and
guing that the high voltage of the retrofit sys- then lifted, we held that
temSSa consequence of the thinner membranes
installed during the retrofitSStogether with the
6
propensityof the shrink-wrap cable-bar assem- For instance, one Ionics witness testified that
blies and stack siding to ignite in high voltage the stack siding material was not a contributing
environmentSSwas a breach of the implied factor to BRA’s fires, and another witness said the
shrink shrink-wrap assemblies were not involved.
warranties of fitness for a particular purpose
Multiple Ionics witnesses testified that BRA im-
and merchantability. Because all the other properly maintained the EDR stacks.
fires appeared to involve at least two of these
characteristics, they are “similar” to the occur- 7
See also Jackson, 788 F.2d at 1082–83:
rence at BRA; the jury is to decide the weight
to be given to any distinguishing factors. While [Firestone’s officer belief that the prod-
uct will be outlawed in the future was] no doubt
Additionally, because the cause of the fires “prejudicial” to Firestone’s cause, it does not
was a disputed issue at trial, the exclusion of strike us as likely to induce an emotional re-
some of this evidence may have prevented sponse on the part of the jury, unless righteous
BRA from rebutting Ionics’s argument that indignation be classed as such. On the con-
poor maintenance was the cause. See Ramos, trary, DiFederico’s memo reveals a very ratio-
nal and calculated approach to corporate deci-
615 F.2d at 338-39. Causation is relevant in
sion-making that a jury should have no difficul-
this case (even if the tort claims were dis-
ty understanding and evaluating. If the jury’s
missed), because Ionics opened the door to reaction is not a favorable one, then Firestone
that evidence by arguing (and presenting wit- and DiFederico have only themselves to blame.
7
the evidence of the GO-4 failure was rele- occurred.
vant and that the mast and collapse were
sufficiently similar to be admitted. In ad- By definition, rule 407 would not apply in
dition, the GO-4 failure was not too remote these circumstances. Under that rule, when,
in time from the B-30 collapse. The trial
court generally has broad discretion in the after an injury or harm allegedly caused by
admission of evidence, but that discretion an event, measures are taken that, if taken
does not sanction exclusion of competent previously would have made the injury or
evidence without a sound, practical reason. harm less likely to occur, evidence of the
Bailey v. Kawasaki-Kisen, K.K., 455 F.2d subsequent measures is not admissible to
392, 398 (5th Cir. 1972). prove negligence, culpable conduct, a de-
fect in a product, a defect in a product’s de-
Ramos, 615 F.2d at 339-40. sign, or a need for a warning or instruction.
III. FED. R. EVID. 407. We now examine each of
BRA argues that the district court errone- these reasons in turn:
ously excluded, under Federal Rule of Evi-
dence 407, evidence of Ionics documents A.
showing its investigations of and recognition BRA does not seek recovery for the dam-
of component problems. BRA explains that age caused by the fires, but for the failure of
rule 407 applies only to measures taken after the products it purchased to achieve their in-
the injury for which the plaintiff sues; that the tended purposes—to desalinate and produce
remedial measure has to be actually taken; and water of acceptable quality. The cause of ac-
that post-accident plans, investigations, and tion is breach of warranty for the failure of the
testing do not constitute subsequent remedial product to perform its intended purpose or a
measures. particular purpose.
For one of the following reasons, the evi- Although the parties have not directed us to
dence of changes made related to the products a rule 407 case on point, we note that a prod-
in question should not have been excluded: uct can fail to perform as warranted without
necessarily creating an “injury or harm” as
(A) The injuries and/or harm to which any contemplated by the rule 407. A “lemon” is
remedial measure might apply were the not necessarily a safety hazard. Further, in a
fires, but the claim for damages is for the situation in which a “lemon” could present a
alleged failure of the product to conform to safety hazard, a party could forego a recovery
the warranty of fitness for a particular for that safety-related “injury or harm” and
purpose; merely seek to recover the benefit of its bar-
gain; the safety-related claim could be elimin-
(B) the evidence was offered to rebut a de- ated either voluntarily by a party narrowing its
fensive theory of causation; and pleading, or involuntarily pursuant to rulings
by the trial court.
(C) many of the “remedial measures” either
were not actual measures, or the measures In these instances, the primary rationale un-
were initiated before the problems derlying rule 407 does not apply. The com-
8
mentary to the rule makes it plain that “the B.
more impressive[] ground for exclusion rests Rule 407 does not preclude the admission
on a social policy of encouraging people to of subsequent remedial measures on grounds
take . . . steps in furtherance of added safety.” other than to prove culpability. Defendants
Advisory Committee’s Note to Rule 407. countered BRA’s breach of warranty conten-
Thus, courts have excluded remedial measures tion by arguing that the fires resulted from
because their admission would unduly risk that poor maintenance. This court has long recog-
the factfinder would imply culpability for the nized that subsequent remedial measures can
injury or harm alleged. See Mills v. Beech be introduced on the issue of causation if that
Aircraft Corp., 886 F.2d 758, 763 (5th Cir. is in controversy.
1989). In the instant case, that would not be
an issue if recovery is not being sought for the In Bailey, 455 F.2d at 394, we were faced
injury or harm. The admission of evidence of with an analogous situation. The plaintiff
changes made merely to improve a product, as claimed a ship was unseaworthy because of a
distinguished from remedial measures that faulty crane. Id. The defendant countered
make an “injury or harm less likely to occur,” that the boom had failed because of improper
is not barred by the rule. handling by the longshoremen. Id. The dis-
trict court excluded, as a subsequent correc-
As noted, rule 407 bars the admission of re- tive measure, evidence that the boom subse-
medial measures to prove “negligence, culpa- quently fell and then operated appropriately
ble conduct, a defect in a product, a defect in when the excess grease was removed. Id. The
a product’s design, or a need for a warning or exclusion of the evidence that grease was re-
instruction.” FED. R. EVID. 407. The evidence moved was the issue on appeal. The evidence
at issue here does not go to the subject of neg- “was not offered to prove that by removing
ligence or culpability, because liability here is [the grease], Shipowner, in effect, acknowl-
based on the warranties made and the failure edged that it was negligent . . . . Rather, it
of the product to work as warranted. A was offered in the context of Shipowner’s suc-
breach of warranty is proven by comparing the cessful defensive theory to show the opera-
actual product’s condition with its warranted tional cause, not who was to blame . . . .” Id.
condition. “Rule 407 only applies when the at 396. This evidence rebutted defendant’s ar-
remedial measure is offered to prove negli- gument that the improper rigging of other
gence or culpable conduct ‘in connection with longshoremen caused the injury. Id. at 394-
the event.’ The reference is to the event that 96. Consequently, we held that the evidence
triggered the remedial measure.” 23 WRIGHT was offered not to prove culpability, but rather
& GRAHAM, FEDERAL PRACTICE AND PROCE- to rebut the theory on proximate cause, so it
DURE § 5285 (2006). But, because there is was admissible. Id. at 396.
some excluded evidence of product failure re-
lated to safety hazards in addition to that of Similarly, some of the evidence excluded in
product failure unrelated to that harm, we do the instant case also serves to rebut Ionic’s de-
not reverse the trial court’s evidentiary ruling fense that the fires were caused by poor main-
on this ground as to that evidence. tenance. The admission of the evidence was
not barred by rule 407, and it should have been
admitted to rebut defendant’s theory of causa-
tion.
9
C. 598 F. Supp. 934, 940 (N.D. Ga. 1984), and
By definition, the rule excludes only post- Martel v. Mass. Bay Transp. Auth., 525
accident remedial measures, so to the extent N.E.2d 662, 664 (Mass. 1988), that the pur-
the district court excluded evidence of design pose of rule 407SSto encourage remedial
changes or investigations that started before measuresSSwould be thwarted if the investiga-
the June 2001 accident (e.g. the investigation tions from which such measures result were
of the shrink-wrapped clamping bar),8 that was not undertaken in the first place for fear they
error. We have declined to decide whether ev- would count as an admission.
idence of post-accident investigations is admis-
sible. See James v. Bell Helicopter Co., 715 Nonetheless, despite the appealing logic of
F.2d 166, 174-75 (5th Cir. 1983). Today, the rule 407 policy, the text of that rule “only
however, we have the benefit of the accumu- prohibits ‘evidence of A. . . subsequent mea-
lated wisdom of sister courts that have decided sures,’ not evidence of a party’s analysis of its
the question. product. Prentiss & Carlisle Co. v. Koeh-
ring-Waterous Div. of Timberjack, Inc., 972
Unfortunately, these courts are split. Some F.2d 6 (1st Cir. 1992). “The fact that the an-
take the strict literal interpretation that be- alysis may often result in remedial measures
cause, to be excluded under the rule, the mea- being taken (as occurred here) does not mean
sure must be one that could have been taken that evidence of the analysis may not be admit-
before the event that gave rise to the claim ted.”9 This argument is persuasive, because by
(and one cannot investigate an accident before themselves, post-accident investigations would
it occurs), an investigation and report taken in
response to an accident cannot be a measure
9
that is excluded from evidence under the rule. Prentiss & Carlisle, 972 F.2d at 9 (citing
Ensign v. Marion County, 914 P.2d 5 (Or. Benitez-Allende v. Alcan Alumino do Brasil, S.A.,
App. 1996). This position is subject to the 857 F.2d 26, 33 (1st Cir. 1988); see also Rocky
criticism expressed in Alimenta v. Stauffer, Mountain Helicopters, Inc. v. Bell Helicopters,
805 F.2d 907, 918 (10th Cir. 1986) (upholding
admission of helicopter manufacturer’s post-acci-
dent “stress test” of potentially defective part be-
8
For instance, exhibit P-110 was eventually ad- cause “[i]t would strain the spirit of the remedial
mitted as redacted, weeks after the start of trial. It measure prohibition in Rule 407 to extend its shield
appears that it should have been admitted in full, to evidence contained in post-event tests or re-
because it explains on the first page that the start- ports”). See Fasanaro v. Mooney Aircraft Corp.,
ing date of the project/investigation was May 2001, 687 F. Supp. 482, 487 (N.D. Cal. 1988) (holding
a month before the first fire at BRA. Other docu- that although “the policy considerations underlying
ments also show that Ionics was concerned about Rule 407 are to some extent implicated in the con-
the bars well in advance of the BRA fire. Exhibit text of post-event tests,[] it would extend the Rule
P-155 was never admitted, though it conveys ba- beyond its intended boundaries to include such tests
sically the same information as does exhibit P-110. within its ambit’ and that “[p]ost-event tests will
Number P-112 was similarly wrongly excluded on not, in themselves, result in added safety”); see
rule 407 grounds, because its first two pages indi- also Wilson v. Beebe, 770 F.2d 578, 590 (6th Cir.
cate that the investigation and testing of the mylar 1985) (“Beebe’s Rule 407 argument has no merit.
tape (the subject of the investigation/testing de- The report did not recommend a change in proce-
scribed in the document) started in 1999, well in dures following the shooting; it was a report of that
advance of the fires. incident and nothing more.”).
10
not make the event “less likely to occur;” only We note that Specht v. Jensen, 863 F.2d
the actual implemented changes make it so.10 700, 701-02 (10th Cir. 1988), and Alimenta,
598 F. Supp. at 940, are distinguishable be-
Furthermore, as explained in Westmoreland cause they involved an attempt by one party to
v. CBS, Inc., 601 F. Supp. 66, 67-68 admit a document specifically for the subse-
(S.D.N.Y. 1984), although the logic expressed quent remedial measures it suggested. BRA
in cases such as Alimenta parallels that which offered to redact references to remedial mea-
underlies rule 407 (see Advisory Committee sures actually implemented. Therefore, we do
Note), not find persuasive the Third Circuit’s reliance
on those cases for the proposition that there is
The fault of the argument is not in its logic authority supporting the exclusion of evidence
but in that it goes too far and fails to credit of post-accident investigations even if offered
the social value of making available for trial with redactions of references to post-remedial
what is often the best source of informa- measures. See Complaint of Consolidation
tion. CBS’ argument really goes beyond Coal Co., 123 F.3d 126 (3d Cir. 1997).
the issue of the admissibility of the investi-
gative report; its logic addresses as well the We do not decide, however, whether re-
admissibility of the facts uncovered by the ports of post-event investigations are always
investigation. If the internal investigator admissible if the actually-implemented reme-
uncovered the “smoking gun,” it is often a dial measures are redacted. Rather, under the
cosmetic matter whether this evidence is circumstances of this case, excluding various
received as a part of the investigative report reports under rule 407 was erroneous because
or in some other manner. The question of it would have made the rule applicable to in-
social policy raised by CBS is whether in vestigations, which by themselves do not make
order to encourage such investigations, the accident less likely to occur, and, as to
their fruits should be shielded from use by some evidence, it would have stretched the
adverse claimants. There is, however, no rule to apply to improvements unrelated to
such doctrine either as to the internal inves- safety hazards.
tigative report or as to facts revealed by it.
In industrial and railroad accident litigation, Therefore, it was error to exclude exhibit
for example, it is commonplace that such P-41, discussing “corporate exposure to prod-
reports, or at least the facts revealed by uct components with marginal product perfor-
them, are used by the injured to establish mance,” such as the stack siding and the cable
the liability of the company that conducted assemblies, on the basis of rule 407 to the ex-
the investigation in spite of CBS’ argu- tent that actually implemented remedial mea-
ments. sures would have been redacted. Rule 407
prohibits evidence of measures, and those only
if actually implemented, but does not proscribe
10
See also 2 WEINSTEIN ET AL., FEDERAL EVI- discussions of causation and its relation to
DENCE (2d ed. 1997) § 407.06[1] (“It is only if poor product performance.
changes are implemented as a result of the tests
that the goal of added safety [under Fed. Rules
Exhibit P-390 also was erroneously exclud-
Evid., rule 407] is furthered; and even then, it is
only evidence of those changes that is precluded by
ed on rule 407 grounds. That document dis-
the rule.”). cusses problems with and improvements to the
11
MK-IV stacks and the MK-III retrofit. A which, as we have explained, is erroneous.11
number of the improvements discussed in the
document deal with improving product perfor- As with the excluded rule 404(b) evidence,
mance, not with increasing the safety of prod- the erroneously excluded rule 407 evidence
ucts to prevent accidents that may have oc- could not have been excluded on other
curred because of that product. grounds. The evidence was relevant and did
not engender any “unfair” prejudice. We do
For instance, the document discusses re- not decide whether, by itself, the exclusion of
ducing the voltage difference in MK-IV spac- the rule 407 evidence was harmless, because
ers so as to reduce the need for “better elec- in conjunction with the rule 404(b) exclusions
trode edge tape.” It also talks about designing the errors were not harmless.12 As we ex-
an electrode spacer specifically for the MK-III plained in Ramos, 615 F.2d at 343, “After a
retrofit. Although these improvements would long and hotly fought trial, an appellate court
also have the added benefit of increasing safe- is reluctant to overturn the rulings of a district
ty, there is no indication in the document that judge. Nevertheless, relevant evidence which
these design changes were proposed for any engenders no unfair prejudice and which re-
reason other that to make the products better lates to the core of the dispute should not be
and last longer for the purpose for which they summarily excluded.” Accordingly, we vacate
were made. and remand for retrial.
The case for admitting exhibit P-40, which IV.
was excluded based on rules 404(b) and 407, BRA argues that the district court improp-
is even stronger. That document begins by ex- erly restricted BRA’s questioning of Cajun’s
plaining the history of the type of material used corporate representative, Todd Grigsby. BRA
for the electrode connecting bars. Any design explains that, during pretrial discovery, it no-
change described there that occurred before ticed the deposition of Cajun on a variety of
the 2001 fire is therefore not even problematic.
The document then relates several instances of
failure of this productSSfailures that did not 11
We do not analyze individually the other ex-
engender any fires or present any safety issues. cluded exhibits, but we trust that our discussion of
the exhibits that are mentioned offers sufficient
Thus, this description of product failures guidance on remand.
cannot be considered a post-accident investi-
gation, because there was no accident 12
We disagree with the defendants’ contention
(producing “harm or injury”) to investigate. that BRA’s failure to call two additional witnesses
Rather, this merely shows a concern to im- after its last offer of proof was rejected (on the last
prove a poorly-performing product, not to day of its case-in-chief) precludes it from seeking
remedy a safety hazard. The document next a remand. Most of the rule 404(b) and 407 exclu-
discusses two fires, but they are not even BRA sions were reiterated and made at the offer-of-proof
fires, so the only basis for exclusion of that conference on the last day of BRA’s case-in-chief.
Therefore, there is no indication that the district
material would be the rule 404(b) ruling,
court would have changed its views as to the great
majority of these documents, especially given the
conviction with which it embraced the rule 404(b)
arguments throughout the trial.
12
topics pursuant to Federal Rule of Civil Pro- sought by [the party noticing the deposition]
cedure 30(b)(6), and neither Ionics nor Cajun and to prepare those persons in order that they
objected. Cajun designated Grigby to testify can answer fully, completely, unevasively, the
on all topics on Cajun’s behalf, and BRA de- questions posed . . . as to the relevant subject
posed him. matters.’”14 “[T]he duty to present and pre-
pare a Rule 30(b)(6) designee goes beyond
At trial, BRA called Grigsby. It had previ- matters personally known to that designee or
ously designated excerpts from his testimony to matters in which that designee was person-
to be presented if he did not appear to testify; ally involved.”15 The deponent must prepare
he did, however, appear. According to BRA, the designee to the extent matters are reason-
after a few questions, counsel for Cajun, joined ably available, whether from documents, past
by counsel for Ionics, objected to further ex- employees, or other sources.16
amination of Grigsby on the ground that he
lacked personal knowledge. “Obviously it is not literally possible to take
the deposition of a corporation; instead, . . .
The district court ruled that BRA could eli- the information sought must be obtained from
cit testimony from Grigsby if it was offered natural persons who can speak for the corpor-
with respect to Cajun alone and did not refer- ation.”17 Thus, a rule 30(b)(6) designee does
ence Ionics; that Grigsby’s testimony was in- not give his personal opinions, but presents the
admissible as to Ionics pursuant to Federal corporation’s “position” on the topic. Taylor,
Rule of Evidence 602; and that Grigsby’s tes- 166 F.R.D. at 361. When a corporation pro-
timony would be unduly prejudicial to Ionics duces an employee pursuant to a rule 30(b)(6)
because it would constitute hearsay as to notice, it represents that the employee has the
Ionics and because Grigsby lacked personal authority to speak on behalf of the corporation
knowledge. BRA was prohibited from asking
any questions that would address whether any
14
component supplied by Ionics was defective Bank of New York v. Meridien BIAO Bank
and from asking Grigsby about the warranty Tanzania Ltd., 171 F.R.D. 135, 151 (S.D.N.Y.
notice given by BRA to Cajun. 1997) (citations omitted) (emphasis added); see al-
so Gucci Am., Inc. v. Costco Cos. Inc., 2000 WL
60209, at *3 (S.D.N.Y. Jan. 24, 2000); SEC v.
Rule 30(b)(6) is designed “to avoid the pos-
Morelli, 143 F.R.D. 42, 45 (S.D.N.Y. 1992);
sibility that several officers and managing
FDIC v. Butcher, 116 F.R.D. 196 (E.D. Tenn.
agents might be deposed in turn, with each dis- 1986); Mitsui & Co. (U.S.A.), Inc. v. P.R. Water
claiming personal knowledge of facts that are Res. Auth., 93 F.R.D. 62, 67 (D.P.R. 1981)).
clearly known to persons within the organiza-
tion and thus to the organization itself.”13 15
United States v. Taylor, 166 F.R.D. 356, 361
Therefore, the deponent “‘must make a con- (M.D.N.C. 1996) (citations omitted).
scientious good-faith endeavor to designate
16
the persons having knowledge of the matters Id. (citations omitted)); see also Dravo Corp.
v. Liberty Mut. Ins. Co., 164 F.R.D. 70, 75 (D.
Neb. 1995); Buycks-Roberson v. Citibank Fed.
Sav. Bank, 162 F.R.D. 338, 343 (N.D. Ill. 1995).
13
8A CHARLES A. WRIGHT, ARTHUR R. MIL-
17
LER & RICHARD L. MARCUS, FEDERAL PRACTICE 8A WRIGHT, MILLER & MARCUS, supra,
AND PROCEDURE § 2103, at 33 (2d ed. 1994). § 2103, at 36–37.
13
with respect to the areas within the notice of that plainly identified a witness as having per-
deposition. This extends not only to facts, but sonal knowledge of the subject of the deposi-
also to subjective beliefs and opinions.18 If it tion but did not furnish those documents or
becomes obvious that the deposition represen- designate the witness until after it had desig-
tative designated by the corporation is defi- nated two other witnesses with no personal
cient, the corporation is obligated to provide a knowledge. Id.
substitute.19
Although there is no rule requiring that the
We agree with BRA that Cajun violated corporate designee testify “vicariously” at trial,
rule 30(b)(6) by failing to prepare Grisby with as distinguished from at the rule 30(b)(6) de-
respect to issues that although not within his position, if the corporation makes the witness
personal knowledge, were within the corporate available at trial he should not be able to refuse
knowledge of the organization, such as wheth- to testify to matters as to which he testified at
er BRA had presented a warranty claim to the deposition on grounds that he had only
Cajun. At the very least, Cajun could have corporate knowledge of the issues, not person-
designated another witness with personal or al knowledge. This conclusion rests on the
corporate knowledge of the questions asked. consideration that though Federal Rule of Civil
Procedure 32(a)(2) “permits a party to intro-
If the designated “agent is not knowledge- duce the deposition of an adversary as part of
able about relevant facts, and the principal has his substantive proof regardless of the adver-
failed to designate an available, knowledge- sary’s availability to testify at trial,” Coughlin
able, and readily identifiable witness, then the v. Capitol Cement Co., 571 F.2d 290, 308 (5th
appearance is, for all practical purposes, no Cir. 1978),20 district courts are reluctant to al-
appearance at all.” Resolution Trust, 985 F.2d low the reading into evidence of the rule
at 197. In Resolution Trust we affirmed sanc- 30(b)(6) deposition if the witness is available
tions against a party that possessed documents to testify at trial, and such exclusion is usually
deemed harmless error.21 Thus, if a rule
30(b)(6) witness is made available at trial, he
18 should be allowed to testify as to matters with-
Lapenna v. Upjohn Co., 110 F.R.D. 15, 25
in corporate knowledge to which he testified in
(E.D. Pa. 1986) (citing 4 J. MOORE, J. LUCAS & G.
GROTHEER , M OORE ’S F EDERAL P RACTICE deposition.
¶ 26.56[3], at 142-43 (2d ed. 1984)); see also Res-
olution Trust Corp. v. S. Union, 985 F.2d 196, Also, because, under the rule 30(b)(6)
197 (5th Cir. 1993)) (“When a corporation or as-
sociation designates a person to testify on its be-
20
half, the corporation appears vicariously through Rule 32(a)(2) provides, in relevant part, that
that agent.”). the “deposition of . . . a person designated under
Rule 30(b)(6) . . . to testify on behalf of a public or
19
Marker v. Union Fid. Life Ins. Co., 125 private corporation, . . . which is a party may be
F.R.D. 121, 126 (M.D.N.C. 1989) (noting that used by an adverse party for any purpose.”
even where defendant in good faith thought de-
21
ponent would satisfy the deposition notice, it had a See, e.g, Jackson v. Chevron Chem. Co., 679
duty to substitute another person once the defi- F.2d 463, 466 (5th Cir. 1982) (noting that the de-
ciency of its designation became apparent during position contained no information that the witness’s
the course of the deposition). “live testimony could not supply”).
14
framework, Grisby acts as the agent for the sable on that ground under rule 704(b), be-
corporation, he should be able to present Ca- cause the rule is by definition applicable only
jun’s subjective beliefs as to whether the prod- to criminal cases.
ucts were in breach of warranty, as long as
those beliefs are based on the collective Rather, under rule 704(a), testimony “in the
knowledge of Cajun personnel. Cajun argues form of an opinion or inference otherwise ad-
that Grisby had no personal knowledge of this missible is not objectionable because it em-
matter under rule 602 and that rule 701 pro- braces an ultimate issue to be decided by the
hibits lay witnesses from testifying as to issues trier of fact.” Opinions phrased in terms of in-
that are not within their personal perception. adequately explored legal criteria would be in-
But Grisby does not testify as to his personal admissible. Advisory Committee’s Note to
knowledge or perceptions; as explained in Res- Rule 704. The Advisory Committee explained
olution Trust, he testifies “vicariously,” for the that the question “Did T have capacity to
corporation, as to its knowledge and percep- make a will?” would be excluded, but the
tions. question “Did T have sufficient mental capac-
ity to know the nature and extent of his prop-
Accordingly, if a certain fact is within the erty and the natural objects of his bounty and
collective knowledge or subjective belief of to formulate a rational scheme of distribu-
Cajun, Grisby should be prepared on the issue tion?” would be allowed.22
by Cajun, and allowed to testify as to it, even
if it is not within his direct personal knowl- We agree with Cajun, however, that Grisby
edge, provided the testimony is otherwise per- could not offer any testimony at trial as to
missible lay testimony. Thus, if it was within whether Ionics had made any misrepresenta-
the corporate knowledge of Cajun that BRA tions about its equipment to BRA, to the ex-
sent Cajun a warranty claim, Grisby should be tent that information was hearsay not falling
allowed to testify as to it even if he did not within one of the authorized exceptions. But
have direct knowledge of it. Grisby could testify, for instance, as to what
Ionics had told Cajun employees that it had
Similarly, Grisby should have been allowed represented to BRA, because that would be an
to testify as to whether Cajun’s work deviated admission of a party opponent.
from the requirements of the contract, because
that type of information should be within the We agree with Ionics that the record shows
corporate knowledge of the organization. In that the district court did allow adequate ques-
advance of the deposition, Cajun had a duty to tioning concerning the parties’ contracts. But,
prepare Grisby on that issue and to impart to given that we are remanding, we address Ca-
him the information obtained from individuals jun’s claim that Grisby could not offer his
with personal knowledge within the organiza- opinions as the meaning of contractual lan-
tion. Of course, in testifying as to matters
within Cajun’s corporate knowledge or sub-
jective beliefs, Grisby cannot make comments 22
See also Torres v. County of Oakland, 758
that would otherwise require expert qualifica-
F.2d 147, 150 (6th Cir. 1985) (“The problem with
tions. To the extent that this question embrac-
testimony containing a legal conclusion is in con-
es an ultimate issue to be decided by the trier veying the witness’ unexpressed, and perhaps er-
of fact, that testimony would not be inadmis- roneous, legal standards to the jury.”)
15
guage, for the reason that issues of contract in- The judgment is VACATED, and this mat-
terpretation are for the court only. Where a ter is REMANDED for a new trial and other
designated corporate representative is asked to appropriate proceedings.
restate or read parts of a contract as a back-
ground or foundation for the question whether
the corporation performed under the contract,
such testimony is permissible, because it does
not interpret the contract, but relates to the
corporation’s performance under the contract
(i.e. whether a breach occurred), which is an
ultimate issue for the jury and to which a wit-
ness can testify under rule 704(a), provided he
does not phrase his opinion in inadequately
explored legal terms.23
V.
Ionics contends nonetheless that the judg-
ment based on the verdict should be affirmed
because the statute of limitations expired on
BRA’s warranty claims. The district court had
denied summary judgment for Ionics on this
issue based on a factual dispute about the date
of the delivery of the goods, and sent the issue
to the jury, which never reached the issue
because it found that Ionics did not breach any
warranty. Given the disputed factual issue, we
cannot affirm the verdict on the limitations
ground.
We also reject Cajun’s claim that the ver-
dict should be affirmed as to it. The district
court’s holding that Cajun would be vicari-
ously liable for Ionics’s warranty breaches is
supported bythe contractual language at issue.
23
Given that the combined rule 404(b) and rule
407 errors are not harmless and require a remand,
we need not decide whether the errors with respect
to Grisby’s testimony are harmless. And because
we remand, we do not discuss BRA’s additional
claim that the district court erroneously excluded
evidence relating to Ionics’s failure to disclose cer-
tain information.
16