Norcon v. Kotowski
971 P.2d 158 (1999)
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Rule of Law:
Business records are admissible under the hearsay exception when they are made in the regular course of business at or near the time of the event by someone with knowledge, and when the source of information and method of preparation indicate trustworthiness.
Facts:
- Mary Kotowski was hired by Norcon, Inc. to work on the Exxon Valdez oil spill cleanup, where a strict no-alcohol policy was in effect.
- On June 29, 1989, Kotowski's supervisor, Mike Posehn, made an unwelcome sexual advance by kissing her on the lips and squeezing her bottom.
- The next day, Posehn invited Kotowski to his room to discuss her work, gave her whiskey to drink, and invited her back for a party that evening to further discuss her employment.
- Kotowski reported the harassment and the upcoming party to an Exxon executive, Elmo Saveli, who provided her with a tape recorder and a written note granting her amnesty from being fired for gathering information about rule violations.
- Saveli furnished the tape recorder specifically to enable Kotowski to record conversations at the party to document alcohol and drug abuse.
- At the party, Posehn implied Kotowski's work assignment depended on her continuing to drink with him, and later, when she returned to his room, he was in his underwear and invited her to spend the night.
- Kotowski delivered the tapes and tape recorder to Saveli's secretary the same night, and Saveli acknowledged receiving and listening to parts of them.
- After Kotowski submitted the tapes, Norcon managers had her sign a statement admitting to insubordination under the false promise her job was safe, and were later seen laughing about it.
- Norcon then ordered Kotowski to Valdez, subjected her to a hostile, four-hour interrogation, causing her to fear for her safety and sleep in a car for two nights.
- Norcon officially terminated Kotowski, citing her for drinking alcohol, even though no one else who drank at Posehn's party, including managers, was terminated for that reason.
Procedural Posture:
- Mary Kotowski filed a complaint with her union, which declined to pursue her grievance.
- Kotowski filed a complaint in the superior court (trial court) against Norcon, Inc., Exxon, and Veco, Inc.
- At trial, Norcon objected to the admission of the tape recordings as hearsay, arguing they were not made in the regular course of business.
- The trial court admitted the tapes under the business records exception to the hearsay rule.
- Following trial, the jury found Norcon liable for sexual harassment, intentional infliction of emotional distress, and negligent infliction of emotional distress.
- The jury awarded Kotowski $10,344.40 in compensatory damages and $3,770,260.63 in punitive damages.
- The superior court entered a final judgment consistent with the jury's verdict.
- Norcon, as appellant, appealed the judgment to the Alaska Supreme Court, challenging among other issues the admission of the tape recordings.
- Kotowski, as appellee, filed a cross-appeal.
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Issue:
Whether the trial court properly admitted tape recordings and related testimony under the business records exception to the hearsay rule when the recordings were made by an employee at the direction of management to document workplace misconduct.
Opinions:
Majority - Matthews, Justice
The court held that the tape recordings were properly admitted under the business records exception to the hearsay rule. The recordings were made at the direction of Exxon management (Saveli) for the purpose of investigating and documenting violations of company policy regarding alcohol consumption and workplace misconduct. This falls within the regular course of business for a company managing a large-scale cleanup operation with strict safety and conduct policies. The recordings were made contemporaneously with the events they documented, by someone with personal knowledge (Kotowski herself was present and participating in the conversations). The court found that the circumstances surrounding the creation of the recordings—made at management's direction to investigate policy violations—indicated sufficient trustworthiness to satisfy the business records exception. The fact that the recordings were made for investigative purposes rather than routine record-keeping does not disqualify them from the exception, as investigating employee misconduct and policy violations is part of the regular business of managing a workforce. The court rejected Norcon's argument that the recordings were made in anticipation of litigation, finding instead that they were made for legitimate business purposes of enforcing workplace policies and ensuring compliance with safety rules.
Concurring - Eastaugh, Justice
While concurring in the result, Justice Eastaugh emphasized that the business records exception should be applied carefully when recordings are made in circumstances that might suggest they were created primarily for litigation. However, in this case, the evidence supported the conclusion that Saveli directed Kotowski to make the recordings as part of Exxon's legitimate business interest in enforcing its strict no-alcohol policy and investigating reports of sexual harassment. The contemporaneous nature of the recordings, combined with the fact that they documented actual events as they occurred rather than after-the-fact recollections, provided sufficient indicia of reliability. The concurrence noted that the recordings captured actual conversations and conduct, making them more reliable than typical hearsay statements that report what someone said or did at an earlier time.
Analysis:
This case illustrates the application of the business records exception to hearsay in the context of workplace investigations. The key issue was whether tape recordings made by an employee at management's direction could qualify as business records. The court's analysis focused on several critical factors: (1) whether making such recordings was part of the regular course of business; (2) whether they were made at or near the time of the events recorded; (3) whether they were made by someone with knowledge; and (4) whether the circumstances indicated trustworthiness. The court found that investigating policy violations and employee misconduct is a regular business activity for employers, particularly in high-stakes environments like the Exxon Valdez cleanup where safety and conduct policies were paramount. The recordings were made contemporaneously—they captured events as they happened—satisfying the timing requirement. Kotowski had personal knowledge because she was present at and participating in the recorded conversations. Finally, the court found sufficient trustworthiness because the recordings were made at management's direction for legitimate business purposes (enforcing the no-alcohol policy and investigating harassment), not merely to build a case for future litigation. This case demonstrates that the business records exception can extend beyond traditional written records to include audio recordings when they meet the foundational requirements of the exception.
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