Rearden LLC v. The Walt Disney Company

Background

Rearden LLC and MOVA LLC, together referred to as “Rearden,” sought to affirmatively designate witness testimony from the SHST trial for the jury. The parties disputed whether that testimony could be admitted under Federal Rule of Evidence 804(b)(1).

Rule 804(b)(1) creates an exception to the hearsay rule for former testimony given at a trial, hearing, or lawful deposition when the witness is unavailable and the testimony is offered against a party—or, in a civil case, that party’s predecessor in interest—that had an opportunity and similar motive to develop the testimony through examination.

Parties’ Positions

Rearden argued that a party qualifies as a predecessor in interest when it had a similar motive and opportunity to develop testimony about the same material facts. Disney argued that predecessor-in-interest status requires legal privity between the prior party and the current party.

The opinion states that the Ninth Circuit had not expressly resolved the issue and that district courts were divided. The court found the reasoning of Edwards v. Techtronic Industries North America, Inc. more persuasive than the approach Rearden proposed.

Court’s Analysis

The court reasoned that Rearden’s interpretation would make former testimony admissible against any party that had a similar motive and opportunity to develop the testimony in the earlier proceeding. In the court’s view, that interpretation would effectively remove the separate “predecessor in interest” requirement from Rule 804(b)(1) and conflict with the rule’s text and legislative history.

The court relied on the advisory committee’s explanation that it is generally unfair to hold a party responsible for how another party handled a witness in an earlier proceeding. The exception, the court explained, applies when the earlier party was the current party’s predecessor in interest and had a similar motive and opportunity to examine the witness. The court concluded that “predecessor in interest” means something more like legal privity.

Ruling

The court noted that the parties did not dispute that legal privity did not exist between SHST/VGH and Disney. Because that requirement was not satisfied, Rearden could not use Rule 804(b)(1) to admit the testimony. The court ruled that Rearden’s SHST trial testimony designations were inadmissible hearsay and outside the scope of the rule. The order states: “IT IS SO ORDERED.”