A new opinion from the Fifth Circuit shows multiple mishaps in connection with a bankruptcy-related auction. However, its most important holding has to do with authenticating evidence. The bottom line is that a trial court decision limiting a defaulting bidder's damages based on a webpage found on the Wayback Machine was reversed. Weinhoffer v. Davie Shoring, Inc., Case No. 20-30568 (5th Cir. 1/20/22). You can find the opinion here.
What Happened
David Weinhoffer was liquidating trustee for Offshore Specialty Fabricators, LLC. He contracted with Henderson Auctions to conduct an online auction. Henderson advertised the auction on its website. However, when bidders clicked on the auction link, they were taken to Proxibid, a third-party website where they could view the terms of the auction and place bids. One of the terms listed on Proxibid was that defaulting bidders would only be liable for 20% of the amount of their bid. Davie Shoring, Inc. did not go through Proxibid. Instead, it called up Henderson and placed the bid by phone. Davie Shoring bid $177,500 for a piece of equipment but decided not to go through with the purchase because it would be too difficult to remove the module from storage.
The liquidating trustee sued Davie Shoring to recover the amount of the bid. Davie Shoring insisted that it was only liable for 20% of the amount of its bid. Davie Shoring's principal testified that he read and relied upon the 20% limitation prior to bidding. The company sought to authenticate the evidence through two forms of evidence. First, it introduced a printout from the Proxibid website. The printout was authenticated by Henderson's office manager. The office manager testified that Henderson did not have a copy of the auction terms because the auction was no longer up on its website. Instead, she obtained them from Proxibid when Henderson was subpoenaed. Davie Shoring also introduced a copy of the Proxibid terms and conditions obtained from the Wayback Machine, an online digital archival of web pages.
The liquidating trustee objected to the internet evidence as irrelevant, unauthenticated and hearsay. The district judge allowed the evidence in. The district court found that Henderson's office manager had properly authenticated the printout as a custodian of records. The district court also found that it could take judicial notice of the contents of the Wayback Machine because it was a source whose accuracy could not reasonably be questioned under Fed.R.Evid. 201.
Based on the terms and conditions, the district court limited the liquidating trustee's recovery to $35,500 plus costs. The liquidating trustee appealed.
The Ruling
The Fifth Circuit reversed and remanded. It found that Henderson's office manager could only testify as a custodian of records as to its own records. The exhibit came from Proxibid's records, not Henderson's. As a result, Henderson's custodian of records could not authenticate it. "Although a witness need not be a document’s author to authenticate it for purposes of Rule 901, we have observed that a witness attempting to authenticate online content as evidence was unlikely to have the requisite direct knowledge where that content was created and maintained by a third party." Opinion, pp. 4-5. Because Henderson's custodian of records could not authenticate the document, it also could not take the document out of the hearsay rule by authenticating it as a business record. Thus, the printout was doubly inadmissible.
The Court also found that it was error to take judicial notice of the Wayback Machine. There is apparently a body of case law dealing with the Wayback Machine. An opinion from the Federal Circuit found that it could not take judicial notice of a page on the Wayback Machine because the district court had not been asked to take judicial notice. This led several district courts to conclude that they could take judicial notice. Other district courts disagreed, noting that the Wayback Machine itself disclaims any guarantees of accuracy. In another federal circuit decision, a witness properly authenticated a page from the Wayback Machine to show that certain content was publicly known in the context of a patent dispute.
The Fifth Circuit found that the Wayback Machine was not so reliable that pages from its archive could not be self-authenticated.
Here, there was no testimony to authenticate the archived webpage. Our sister circuits’ decisions that the Wayback Machine is not self-authenticating are persuasive in the context of judicial notice. In sum, the district court erred in taking judicial notice of the terms because a private internet archive falls short of being a source whose accuracy cannot reasonably be questioned as required by Rule 201.
Opinion, p. 8. The Fifth Circuit reversed the decision and remanded for further proceedings consistent with the opinion. Presumably, the further proceedings will not include another chance for the defendant to authenticate the evidence.
Lessons to Be Learned
The first important question about this case is one that is not answered by the opinion. Did the trustee know that the company he hired to conduct the auction had out-sourced the auction to a third-party whose terms and conditions contained a damage limitation? There are two possibilities here. One is that the trustee had no idea that this limitation existed and was shocked when the bidder tried to limit his liability. The other is that the trustee knew all along and was willing to let his attorneys take an opportunistic position hoping that the other side couldn't get the evidenced authenticated. However, if the trustee knew about the limitation, the bidder could simply have gotten the evidence from the trustee. The fact that it had to go to other sources strongly suggests that the trustee was not aware of this limitation and didn't agree to it.
This suggests that trustees conducting online auctions should do their due diligence to know the mechanics of how the auction will be conducted and whether a third-party will be posting the terms and conditions of the sale. Had the bidder properly authenticated the terms and conditions, the small judgment would have been upheld. Henderson was the authorized agent of the trustee and Proxibid was the authorized agent of Henderson. Therefore, the trustee could have been held to the admissions of its agent once removed.
The second lesson is that just because something is on the internet does not make it admissible. If I write on my Facebook page that Leif Clark was in Norway on a certain date, that post could be used as a party admission against me (although I have no idea why anyone would care). However, it could not be introduced into evidence against Leif since that would be hearsay. Instead, you would have to go to find Leif's own posting about his latest trip to Norway and then authenticate it. That could be done by asking Leif if that was his post or by having a witness from Facebook testify that the posting accurately reflected a statement posted from Leif Clark's Facebook account.
For those wanting to authenticate pages from the Wayback Machine, the Fifth Circuit helpfully points out that
The Wayback Machine’s “Using The Wayback Machine” webpage instructs users on how to request affidavits to authenticate Wayback Machine pages as “certified records for use in legal proceedings.” See Internet Archive, Using the Wayback Machine, http://help.archive.org/hc/en-us/articles/360004651732-Using-The-Wayback-Machine (last visited January 20, 2022).
Opinion, n. 22.
The final lesson is that this opinion illustrates why counsel should get stipulations on the admissibility of evidence prior to trial so that you know in advance which exhibits may be problematic.
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