Why interoffice emails that discuss potential product issues are a long term land mine for businesses
While not strictly a product
liability action but a Song Beverly Warranty action available to vehicle buyers
in CA, Bowser v Ford Motor Co. (May
2022) exemplifies the problems with “bad” internal company emails being created
as well as long threads which loop different people in and out of the thread
and even loop in parties outside the corporate entity. Needless to say email is
very dangerous when not used properly and our office counsels clients all the
time on best practices for ensuring that internal emails do not end up becoming
an damning exhibit in a case against them or even another company. These days
very often employees want to text, chat or email a free flowing “discussion”
which really should be conducted on the phone or conference call. Failing to
heed that one simple rule creates lots of headaches down the road that cannot
be “undone”. Keeping outside legal counsel active in the thread discussion of
the “issue” goes a long way to defeating claims of admissibility. But there are
also limits to that practice as well which is the subject of another posting.
Using social media of course is even worse than email and this article only
address internal company emails (not communications outside the company). We
are also not delving into the courts discussion of the depositions used against
Ford that were taken in another action as that is another long analysis for
another post (and most entities do not run into that situation as often as the
email problem). The decision (Bowser v
Ford Motor Co.; decision issued May 2022) is a great read however it is 83
pages long. It is available here.
I quote liberally from the
decision below but of course I have only taken out the essential parts of the
ruling at issue here and tried to ensure clarity and continuity in the relevant
portions of the decision.
The purchase price of the
2006 Ford truck in question was $43,084.68. Mr. Bowser (the plaintiff) reviewed
literature at the dealership that said “the Ford Super Duty [was] the best in
class, having the best performance, highest quality.”
Over Ford’s objections, the
Bowsers introduced a number of internal Ford emails and presentations. These
showed that Ford was aware that certain parts of the 6.0L engine, including
fuel injectors, turbochargers, and EGR valves, were failing at excessive rates,
and that Ford was struggling to find the root cause of some of these failures.
Some of the emails said that this information should be kept secret.
The Bowsers sued Ford,
asserting causes of action under the Song-Beverly Consumer Warranty Act (Civ.
Code, § 1790 et seq. [Song-Beverly or Song-Beverly Act]) and for common-law
fraud. Ford conceded liability under the Song-Beverly Act. A jury found for the
Bowsers on all causes of action. It awarded compensatory damages ($42,310.17
under the Song-Beverly Act; $43,084.68 for fraud), $84,620.34 as a statutory
penalty under the Song-Beverly Act, and $253,861.02 in punitive damages. The
Bowsers elected to recover compensatory damages under the Song-Beverly Act
rather than for fraud. The trial court awarded them $836,528.12 in attorney
fees plus $94,264.99 in costs.
Ford appealed. It contended
that the trial court erred by admitting the internal Ford documents, because
they were inadmissible hearsay.
The Bowsers introduced a
number of internal Ford emails and presentations (I am only highlighting a few
for the purposes of showing the efforts to keep them secret):
In one email in the chain,
dated May 29, 2002 (note how hold this
email is), Freese noted that the turbocharger of a test vehicle had failed.
There were “[n]ew concerns” about “loose injectors.” He requested a “[r]oot [c]ause [d]efinition,” a “[c]ontainment [p]lan,”
and a “[c]orrective action plan.”
Exhibit 42 was an email
chain dated November 2002 sent by Steven Henderson. Henderson’s title was Power Train Purchasing
Manager. He said, “[W]e’re in the middle of 6.0L launch, and . . . things are not going well. J1 was delayed a full week for
[Navistar] to work on the issues, but they are not fully resolved yet.”
Exhibit 47 was an email
chain including a September 2004 email sent by Frank Ligon. Ligon’s title was
Director of the Customer Service Division. He said Ford was “putting together a
comprehensive strategy to bring all 6.0 up to standard.” “We are seeing a new group of concerns that
range from chaffing [sic] of various wire harnesses causing drivability
concerns, sensors that are failing at a high rate and turbo concerns.” “At this
point we do not have a definitive repair action . . . to properly address the
concern universe.” “Bottom line is we
are not ‘out of the woods’ on this 6.0 and in fact may experience repeat
symptoms once certain repairs are performed . . . .” The email was marked “privileged and confidential.” It added, “This is
very confidential!!!” “I strongly urge that this information NOT be shared at
this time until the ‘official’ action is announced.”
Exhibit 198 was a PowerPoint-style presentation dated February
2006. No author was indicated. It was entitled, “ITEC and Large Diesel Strategy
Review.” It was labeled, “Ford secret
draft.”
Exhibit 64 was an email
chain dated February 2006 sent by Koszewnik. It said, “FYI only. Don’t forward or reference.”
The court addressed the
hearsay objections to the emails (those above and many others) as follows:
There is a hearsay exception
for a statement by the opposing party: “Evidence of a statement is not made
inadmissible by the hearsay rule when offered against the declarant in an
action to which he is a party . . . .” (Evid. Code, § 1220.) A corporation,
however, can speak only through its officers and agents (employees included in
“agent”). Accordingly, statements assertedly made by a corporation are not
usually analyzed as party admissions under Evidence Code section 1220, but
rather as authorized admissions under Evidence Code section 1222.
The court held “an assertion
made by an agent in the course and scope of the agent’s employment, when
offered against the principal by a party-opponent, no matter to whom the
assertion was addressed.” California
cases also hold that a statement by one employee to another was an authorized
admission of the employer. It need only be shown that the agent’s statement
“concerned a matter within the scope of the declarant’s employment and was made
before that relationship was terminated.”
“Whatever is said by an
agent . . . , either in the making of a contract for his principal, or at the
time, and accompanying the performance
of any act, within the scope of his authority, . . . of the particular
contract or transaction in which he is then engaged, is, in legal effect, said
by his principal, and admissible as evidence . .” Also when based on evidence
of the declarant’s duties and responsibilities, it can apply to lower-ranking
agents.
“In general, the
determination requires an examination of the nature of the employee’s usual and
customary authority, the nature of the statement in relation to that authority,
and the particular relevance or purpose of the statement. A statement is
“admissible as an authorized admission only where a proper foundation has been
laid as to the declarant’s authorization to speak on behalf of the party
against whom the statement is offered.”
The once concession made to
Ford, (which did not really help them) was “The declarations of an [alleged]
agent (employee) are not admissible to prove the fact of his agency or the
extent of his power as such agent. [Citations.]”. “Hearsay statements in the
documents themselves cannot be used to prove that they were authorized
admissions.” For example, the fact that Koszewnik’s email signature described
him as “Director, North American Diesel” cannot be used to prove that he actually
was Ford’s Director of North American Diesel.
So clearly 20 year old
emails in this case were a problem for Ford. The other problem is that email
tends to exist on servers outside of your control and has backup and retention
policies that don’t align with your company’s own policy. So think twice before
sending that email to someone else in the company. Should you pick up the phone
first rather then later on write a “better” less inflammatory open ended no
resolution email?
