Defendants also seek to exclude the SEC's factual findings and conclusions and any references thereto by plaintiffs' expert and fact witnesses, as hearsay pursuant to 802. Plaintiffs are correct, however, that the SEC's factual findings are admissible under Rule 803(8)(C), the "Public records and reports" hearsay exception. Rule 803(8)(C) provides, in pertinent part, for the admission of "Records, reports, statements, or data compilations, in any form, of public offices or agencies, setting forth . . . (C) in civil actions and proceedings and against the Government in criminal cases, factual findings resulting from an investigation made pursuant to authority granted by law, unless the sources of information or other circumstances indicate lack of trustworthiness. " This "factual findings" exception permits the admission of statements of an agency in the form of opinions and conclusions. Beech Aircraft Corp. v. Rainey, 488 U.S. 153, 170, 175, 102 L. Ed. 2d 445, 109 S. Ct. 439 (1988)("We hold . . . portions of investigatory reports otherwise admissible under Rule 803(8)(C) are not inadmissible merely because they state a conclusion or opinion.").
Defendants vigorously contend the factual findings and conclusions of the SEC are untrustworthy and inadmissible for a number of reasons, including the lack of formal hearings and opportunity of these parties to cross-examine the witnesses to the SEC proceedings and otherwise fully participate therein, and the fact they were issued as an integral part of the Releases announcing the settlement of the SEC administrative proceedings. This Court deems the trustworthiness issue foreclosed by the detailed opinion of the Court of Appeals for the Third Circuit in Japanese Electronics which thoroughly reviewed the complex evidentiary rulings of then District Judge Becker who had excluded certain agencies' findings pursuant to Rule 803(8)(C) as untrustworthy. Judge Becker's untrustworthy determination was based on a host of factors, including the lack of an evidentiary hearing and the opportunity to cross-examine adverse witnesses and present argument to the agencies.
In reversing the district court for abuse of discretion, the Court of Appeals stated "Neither singly nor collectively do these reasons overcome the presumption of reliability." 723 F.2d at 268. Although an agency's mere notice of "probable cause" to conduct an investigation is not an adequate "finding" to qualify for the 803(8)(C) exception, id. at 266, the "indice of reliability for the government [final] investigative report is the fact that it was prepared pursuant to a duty imposed by law." Id. at 268.
"Public reports are presumed admissible in the first instance and the party opposing their introduction bears the burden of coming forward with enough "negative factors" to persuade a court that a report should not be admitted." Nautilus, 85 F.3d at 113, citing Beech Aircraft, 488 U.S. at 167. Defendants have not met their burden in this case.
Moreover, the fact that an agency or the parties before it provide by rule or stipulation that the factual findings are not binding and disclaim their viability in other proceedings does not control their admissibility in federal civil proceedings, wherein the admissibility of evidence is governed by the Federal Rules of Evidence unless overridden by the constitution, an act of Congress, or Supreme Court rule. Nautilus, 85 F.3d at 112. Accordingly, the SEC's factual findings, including its opinions and conclusions, are admissible under Rule 803(8)(C).
For the foregoing reasons the defendants' motions in limine will be granted in part and denied in part. An appropriate Order will be entered.
ORDER OF COURT
AND NOW, this 30th day of September, 1996, for the reasons set forth in the accompanying opinion, it is HEREBY ORDERED AS FOLLOWS:
1. Chambers Defendant's Motion in Limine Concerning SEC Settlements (Document No. 95) is GRANTED IN PART AND DENIED IN PART;
2. Grant Thornton Defendants' Motion in Limine to Exclude References to SEC Consent Decree and Enforcement Release Issued as a Result of Settlements and for Other Relief (Document No. 93) is GRANTED IN PART AND DENIED IN PART;
3. All evidence, references or testimony concerning the Consent and Final Judgment at Civil Action No. 95-0693 and the SEC Enforcement Releases and the fact of compromise and settlement of those administrative proceedings, including any statements and conduct made during the course of compromise negotiations, shall be excluded pursuant to Fed.R.Evid. 408, except as provided in Paragraph 4, and will not be considered by the Court for summary judgment or other purposes; such materials and matters need not be stricken from the plaintiffs' pleadings and other documents filed with the Court, but no reference may be made to them in any fashion, directly or indirectly, written or oral, at trial;
4. The factual findings of the SEC set forth in the various Enforcement Releases, including its conclusions and opinions, are admissible pursuant to Fed.R.Evid. 803(8)(C), and will be considered by the Court for purposes of the summary judgment motions, and at trial, subject to the conditions set forth in paragraph 5;
5. At trial, neither the parties, counsel, nor their respective witnesses shall refer in any fashion, directly or indirectly, written or oral, to said factual findings, and shall not attempt to adduce testimony thereon, until the admissibility of the evidence is raised at side bar outside of the presence of the jury, at which the Court will entertain and resolve any objections made pursuant to Fed.R.Evid. 403, Exclusion of Relevant Evidence on Grounds of Prejudice, Confusion, or Waste of Time.
Plaintiffs' counsel shall serve all parties with a copy of this order forthwith.
Donald J. Lee
United States District Judge