Federal Evidence Review

FRE 803(22), and the facts essential for the criminal judgment could be admitted in the civil case; the trial court took steps to mitigate the potential for unfair prejudice under FRE 403, in U.S. ex rel. Miller v. Bill Harbert Intern. Const., Inc., 608 F.3d 871 (D.C. Cir. June 22, 2010) (per curiam) (Nos. 08-5390, 08-5393, 08-5391, 08-5394, 08-5392)

FRE 803(22) permits the evidence of a final criminal felony judgment to be admitted as an exception to the rule excluding hearsay. The D.C. Circuit recently considered the admission of a company guilty plea to a Sherman Act antitrust violation in a subsequent civil False Claim Act trial. In doing so, the circuit reviewed claims of inadmissible hearsay and unfair prejudice.

The case originally commenced as a civil False Claims Act qui tam action when a company vice president alleged a bid-rigging conspiracy on three sewer system contracts in Egypt which were funded by the U.S. Agency for International Development. The government originally moved to seal the civil qui tam action pending a criminal investigation. The government convicted five U.S. corporations and individuals during the criminal investigation. One of the companies, Bilhar International Establishment (BIE), entered a guilty plea to violating the Sherman Act based on the bid-rigging conspiracy. Specifically, the guilty plea and a Fed. R. Crim. P. 11 memorandum admitted “BIE and others rigged bids by ‘submitting bids on USAID funded Contracts 20A, 29 and 07’ and ‘making payments to co-conspirators who agreed to not compete for USAID funded contracts 20A and 08 pursuant to the bid-rigging conspiracy.’” Bill Harbert Intern. Const., Inc., 608 F.3d at 891.

The civil action, which was eventually unsealed, proceeded after the government adopted the claims and added others under the False Claims Act. At trial, the court admitted the BIE company guilty plea and memorandum against all of the defendants. Portions of the memorandum which referred to others were redacted. The trial court concluded that the factual admissions in the plea and memorandum were relevant, but the government would “still bear the burden of establishing a link between the ‘others’ who BIE allegedly conspired with, and specific defendants in this case.” Bill Harbert Intern. Const., Inc., 608 F.3d at 891 (quoting trial court ruling). The government was permitted to refer to the plea in its opening statement and to read the memorandum to the jury during its case in chief. The jury concluded that the government suffered approximately $34 million in damages. The trial court trebled the damages under the False Claims Act. One issue on appeal claimed the trial court erred in admitting the company’s antitrust plea conviction.

The D.C. Circuit affirmed the admission of the BIE guilty plea, including the Rule 11 memorandum. The evidence of the prior criminal antitrust conviction was not inadmissible hearsay where the requirements of FRE 803(22) were met. First, the circuit noted that in the civil case, under the rule “BIE’s guilty plea may be admitted under Rule 803(22) against all the defendants as long as the plea was admitted ‘to prove any fact essential to sustain the judgment.’” Bill Harbert Intern. Const., Inc., 608 F.3d at 892 (quoting FRE 803(22)). The bar against using the prior conviction under the terms of the rule in a criminal case did not apply. See FRE 803(22) (noting “[e]vidence of a final judgment” is not admissible “when offered by the Government in a criminal prosecution for purposes other than impeachment”). The circuit rejected the defense claim that the plea was used to prove a legal conclusion of the company’s guilt and not to establish any facts. In particular, the Rule 11 memorandum established the facts “that BIE and others submitted bids and made payments as part of a bid-rigging conspiracy involving Contracts 20A, 29, and 07,” which were “essential to sustain the legal conclusion of BIE’s guilt under Section 1 of the Sherman Act, and therefore fell within the scope of the rule.” The trial court redacted other facts which “were not essential to that conclusion—such as specific references to the defendants.” Bill Harbert Intern. Const., Inc., _ F.3d at _.

The D.C. Circuit also concluded that the admission of the guilty plea was not unfairly prejudicial under FRE 403. The circuit was “extremely wary of secondguessing” the trial court’s FRE 403 balancing. Bill Harbert Intern. Const., Inc., 608 F.3d at 892 (quoting United States v. Law, 528 F.3d 888, 898 (D.C. Cir. 2008) (other citation omitted). The circuit recognized some risk of prejudice. In particular, “BIE’s guilty plea did carry with it the potential to cause prejudice or confuse the jury — it might have presumed that the ‘co-conspirators’ referred to in the plea were the other defendants in the case.” However, the trial court mitigated the risk any unfair prejudice by redacting any names other than the company’s name from the plea documents and twice instructed the jury that “[t]he fact that BIE pleaded guilty may not in any respect be considered against any other defendants, nor may any inference be drawn against them by reason of BIE’s plea of guilty.” Bill Harbert Intern. Const., Inc., 608 F.3d at 893. Under these circumstances, there was no abuse of discretion in admitting the company’s conviction evidence.

The Bill Harbert Intern. Const. case shows how a prior criminal conviction may be admitted in a civil case. Hearsay objections are resolved by application of FRE 803(22). The facts essential for the criminal judgment could be admitted in the civil case. The trial court can take steps to mitigate the possibility of unfair prejudice.