California Law Review
Volume 54 | Issue 2
Article 26
May 1966
The Evidence Ruling at Pretrial in the Federal
Courts
Steven M. Kipperman
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Recommended Citation
Steven M. Kipperman, The Evidence Ruling at Pretrial in the Federal Courts, 54 Cal. L. Rev. 1016 (1966).
Available at: http://scholarship.law.berkeley.edu/californialawreview/vol54/iss2/26
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Comments
THE EVIDENCE RULING AT PRETRIAL IN THE
FEDERAL COURTS
Rule 16 of the Federal Rules of Civil Procedure,1 adopted in 1938,
made the pretrial conference available to federal district courts.2 The
pretrial conference was originally introduced in the United States to clear
congested court dockets;' a primary purpose of the pretrial procedures
created by Federal Rule 16 remains pruning away unnecessary proof and
1 This
rule provides:
In any action, the court may in its discretion direct the attorneys for the
parties to appear before it for a conference to consider
(1) The simplification of the issues;
(2) The necessity or desirability of amendments to the pleadings;
(3) The possibility of obtaining admissions of fact and of documents which
will avoid unnecessary proof;
(4) .The limitation of the number of expert witnesses;
(5) The advisability of a preliminary reference of issues to a master for findings to be used as evidence when the trial is to be by jury;
(6) Such other matters as may aid in the disposition of the action.
The court shall make an order which recites the action taken at the conference,
the amendments allowed to the pleadings, and the agreements made by the parties
as to any of the matters considered, and which limits the issues for trial to those
not disposed of by admissions or agreements of counsel; and such order when entered
controls the subsequent course of the action, unless modified at the trial to prevent
manifest injustice. The court in its discretion may establish by rule a pretrial calendar
on which actions may be placed for consideration as above provided and may either
confine the calendar to jury actions or to nonjury actions or extend it to all actions.
2 In the quarter century since its inauguration pretrial has gained wide acceptance
among federal judges as a worthwhile procedural innovation. See, e.g., 3 MooIE, FEERAL
PRACricn § 16.06 (2nd ed. 1964); Kaplan, Remarks, 29 F.R.D. 462 (1962).
The pretrial conference has also been adopted in some form by forty four states. RosENBERG, THE PRETarL CoNFrENcE AND ErFacrrv JusTicE 210 (1964). While this Comment is
not directly concerned with pretrial procedure in the states, many states have pretrial rules
with provisions similar to those of Federal Rule 16. Id. at 210-15. Some states have a pretrial
rule virtually identical with Federal Rule 16. See IhsTrnmu
or JODIcAL AsmnasSTRAT0io,
FEDERAL RorwEs or CIVum PROCEDnm-I
mACT
ON STATE, PRoCEDmmR 1 (1962); Clark, Two
Decades of the Federal Civil Rules, 58 CoLurm. L. REV. 435 n.2 (1958). What is said here
about federal pretrial, therefore, may well be applicable to pretrial in a substantial number
of the states.
3 HoLrzorF, N.w FEDERAL PaocarnmR Am =m CouRns 53-55 (1940); Lousell, Discovery
and PretrialUnder the Minnesota Rules, 36 Mnm. L. Ray. 633, 661-62 (1952). Contrary to
the belief of pretrial's early supporters, recent empirical studies indicate that pretrial may
not effectively conserve judicial time. RosaunxRo, op. cit. supra note 2, at 45-53; Comment,
California Pretrial in Action, 49 CArr. L. Rav. 909, 918-20 (1961). Pretrial has perhaps
been more successful in improving the quality of trial and eliminating surprise from the
adversary process. ROSEwBERG, op. cit. supra note 2, at 28; Loulsell, Book Review, 53 CALaO.
L. REV. 911-13 (1965).
1016
1966]
PRETRIAL EVIDENCE RULINGS
1017
specious issues to promote swift resolution of litigation at trial.4 A heretofore little used device which may well further this expediting purpose
of pretrial is the pretrial evidence ruling. An evidence ruling at pretrial
may save the court time and the litigant expense. The present uncertain
status and undefined nature of such a ruling, however, blunt its potential;
the pretrial evidence ruling may today increase, rather than lessen, the
cost in time and money of a case, or simply become food for appeal.5 To
clarify the status and define the proper scope of the pretrial evidence
ruling, the legitimacy, utility, feasibility, effect, and procedural pitfalls of
this ruling must be examined. Defects exist in the present law governing
pretrial evidence rulings; an amendment to Federal Rule 16 will most
effectively remedy these defects.
LEGITIMACY
Federal Rule 16 delimits the action a pretrial judge may take; if the
pretrial evidence ruling is a legitimate act, it must be within the jurisdiction conferred on the pretrial judge by that rule.6 Few cases directly consider the legitimacy of pretrial evidence rulings. An analysis of analogous
pretrial rulings and of the limits of the pretrial judge's authority in general is therefore necessary.
Principally, Federal Rule 16 empowers the pretrial judge to direct
the parties to appear before him to consider the simplification of the issues,
admissions of facts and documents, and the possibility of limiting the
number of expert witnesses. In addition Rule 16 has a catch-all clause:
subsection six provides that the pretrial judge may consider "such
4
E.g., Padovani v. Bruchhausen, 293 F.2d 546, 548 (2d Cir. 1961) (opinion by Clark, J.) ;
Meadow Gold Products v. Wright, 278 F.2d 867 (D.C. Cir. 1960); Rosden v. Leuthold, 274
F.2d 747, 750 (D.C. Cir. 1960); Judicial Conference Committee on Pretrial Procedure,
Handbook for Effective PretrialProcedure,37 F.R.D. 257, 270-72 (1965) ; Kincaid, A Judge's
Handbook of PretrialProcedure, 17 F.R.D. 439, 440-42 (1955); Yankwich, Crystallization
of Issues by Pretrial:A Judge's View, 58 CoLum. L. Ray. 470 (1958). Other important purposes of pretrial include the promotion of settlement, 6 NIcHoIs, Da FuNrAK, WimEraus,
M/oona, CLrx, PooRE & NoRRis, CycLoPEDTA or FEDERAL PaocEooRa § 19.18, at 297-98
(3d ed. 1951); Nms, PREnumIL 62-68 (1950); ROSENBERG, op. cit. supra note 2, at 8-10, and
elimination of the "sporting element" from the adversary system, Clark v. Pennsylvania R.R.,
328 F.2d 591, 594 (2d Cir. 1964).
5 See, e.g., LeRqy v. Sabena Belgian World Airlines, 344 F.2d 266, 274 (2d Cir.), cert.
denied, 382 U.S. 878 (1965), where the defendant unsuccessfully attempted to use pretrial
issuance of an evidence ruling as a basis for appealing an adverse judgement at both the
circuit court and the U.S. Supreme Court levels. See 34 U.SL. WEEK 3074 (1965).
Procedural rules promulgated by the Supreme Court under 28 U.S.C. § 2072 and
accepted by Congress have the force and effect of law, and supersede any inconsistent local
federal district court rules or practices. For a pretrial technique to be legitimate, therefore,
it must fall within the ambit of authority Federal Rule 16 confers on the pretrial judge.
See 1B MooRE, FEDERAL PRAcncE § .501(2) (2d ed. 1964).
CALIFORNIA LAW REVIEW
1018
[Vol. 54: 1016
other matters as may aid in the disposition of the action."' The specific
grants of authority in subsections one through five are cast in noncoercive
terms; they seek to promote party agreement on facts and issues, not
force such agreement.8 Reflecting this philosophy of pretrial, courts often
say that pretrial is not to take the place of trial9 or that the judge at pretrial is not to decide controverted fact. 10
Since pretrial's inception, however, pretrial judges have acted coercively without appellate objection on questions of law." The pretrial
judge, like any federal district court judge, has the power to dispose of
those motions or questions which the federal rules authorize for beforetrial disposition. Hence he may rule on motions properly made under
Federal Rule 12,12 concerning inter alia, dismissal for lack of jurisdiction
7 FED. R. Civ. P. 16, supra note 1. The state pretrial rules, except for Oklahoma's, have
ROSENBERG, op. ct. supra note 2, at 212. Much of this Comment
is inapplicable to pretrial in California state courts because the California catch-all clause,
CAL. SUPER. CT. RULE 212(b), severely restricts the other matters a judge may consider
at pretrial by requiring that both parties consent to such consideration for it to be
similar catch-all provisions.
legitimate. See Kroninger, Pretrial Conferences, in CONTINUING
CALIPoRNIA CIVIL PROCEDURE BFxoRE TRmL
748 (1957).
EDUCATION OF THE BAR,
s The most noted advocates of pretrial emphasize the noncoercive character of that
procedure. See, e.g., Clark, Summary and Conclusion to an Understanding Use of Pretrial,
29 F.R.D. 454, 455-56 (1962); Kincaid, supra note 4, at 442; Louisell, Discovery and
Pretrial Under the Minnesota Rules, 36 MnN. L. REv. 633, 664 (1952). Judge Clark expressed this view of the nature of pretrial when he said in Padovani v. Bruchhausen, 293
F.2d 546 (2d Cir. 1961): "Nothing in the rule affords a basis for clubbing the parties into
admissions they do not willingly make." Id. at 548. Accord, Buffington v. Wood, 351 F.2d
292, 298 (3d Cir. 1965). But see Berger v. Brannan, 172 F.2d 241, 243 (10th Cir.), cert.
denied, 337 U.S. 941 (1949). The history of the adoption and formulation of Federal Rule
16 also suggests that the power of the judge at pretrial was not meant to be coercive: an
early version of the rule provided specifically that the pretrial judge was to have the power
to order issues over which he finds no real dispute exists between the parties excluded
from trial, whether the parties agree to this exclusion or not.
COURT ADVISORY
Commar.
ON
RULES or
CIVIL PROCEDURE,
UNITED STATES S-UPREIM
PREiMINARY
DRAFT
Or TInE
RULES, Rule 23 (1936); 1 BARRON & HOLTzOrp, FEDERAL PRACTICE & PROCEDURE
950 (1950). No such provision is in present Federal Rule 16.
9 E.g., Lynn v. Smith, 281 F.2d 501, 506-07 (3d Cir. 1960) (pretrial judge's order of
summary judgment on basis of witness's oral statement at pretrial held error); Clay v.
Callaway, 177 F.2d 741, 743 (5th Cir.), modified, 178 F.2d 758 (1949) ; Berger v. Brannan,
172 F.2d 241, 243 (10th Cir.), cert. denied, 337 U.S. 941 (1949).
10
E.g., Lynn v. Smith supra note 9, at 506; Reines Distributors, Inc. v. Admiral Corp.,
241 F. Supp. 814, 815 (S.D.N.Y. 1964); Nims, op. cit. supra note 4, at 131. The states
generally agree. E.g., Connell v. State Highway Comm., 192 Kan. 371, 375, 388 P.2d 637, 641
(1964); Buffington v. Continental Cas. Co., 69 N.M. 365, 370, 367 P.2d 539, 542 (1961).
113 MooRE, FEDERAL PRACTICE § 16.16, at 1121-22 (2d ed. 1964); Delehant, The Pretrial Conference in PracticalEmployment, 28 NE. L. Rr.v. 1, 23, 25 (1948). Louisell, supra
note 8, at 662-63; Note, 72 YALE L.J. 383, 386-90 (1962).
12
FED. R. CIV. P. 12: E.g., Becker v. Buder, 81 F. Supp. 369 (E.D. Mo. 1948); Lane
v. Brown, 63 F. Supp. 684 (E.D. Mich. 1945).
FEDERAL
19661
PRETRIAL EVIDENCE RULINGS
1019
and failure to state a claim for relief, or under Federal Rule 56,13 concerning partial or total summary judgment. Also in this category of
determinative action validly taken at pretrial falls the decision on consolidation or separation of causes of action and issues authorized by
Federal Rule 42 and on a party's motion for a jury trial authorized by
Federal Rule 3831 The power to make sufh rulings and decisions is given
the federal district court judge by the specific rules authorizing and setting up procedures for their before-trial determination; the catch-all
clause of Rule 16 simply empowers the federal judge to exercise at pretrial the authority given him by such other federal rules. 5
Regardless of the authority conferred by other federal rules, questions of law may be decided at pretrial-if the parties consent to such decision; by their consent the parties waive any right they might have had to
consideration of the question at a different stage of the proceedings or
under a different procedure.' 6
Some pretrial judges have found in Federal Rule 16 an independent
source of power to make coercive determinations of questions of law.'
13 FED. R. Civ. P. 56: E.g., Syracuse Broadcasting Corp. v. Newhouse, 271 F.2d 910, 914
(2d Cir. 1959) (pretrial judge may decide motion for summary judgment under Federal
Rule 56); Klein v. Belle Alkali Co., 229 F.2d 658, 662 (4th Cir. 1956) (pretrial judge may
indicate that a motion for summary judgment under Federal Rule 56 should be filed);
Berger v. Brannan, 172 F.2d 241 (10th Cir. 1949), cert. denied, 337 U.S. 941 (1949) (judge at
pretrial may decide Federal Rule 56 motion for summary judgment).
On decision of both Federal Rule 12 and Federal Rule 56 motions at pretrial, see Nims,
op. cit. supra note 4, at 131-32, 154, 165; Kincaid, supra note 4, at 442. Many of the local
rules of federal district courts reflect the belief that pending motions under other federal
rules may be determined at pretrial. E.g., D. ALAsX:A R. 9(K) (2) ; E.D. & W.D. ARxANsAs R.
9(h)(4); S.D. CAL. R. 9(i)(3); D. NVAnA R. 11(J)(3); W.D. PA. R. 5 (II) (F). See also
Suggested Local Rules for Pretrial,Rule A(IV), 37 F.R.D. 285 (1965); Steckler, Motions
Prior to Trial, 29 F.R.D. 299, 305-07, 311 (1962).
14 FED. R. Civ. P. 38, 42. Caplen v. Sturge, 35 F.R.D. 176, 177 (E.D. Pa. 1964)
(dictum); Fairchild Stratos Corp. v. General Elec. Co., 31 F.R.D. 301 (S.D.N.Y. 1962)
(separate trials decision made at pretrial) ; Schram v. Kolowich, 2 F.R.D. 343 (E.D. Mlich.
1942) (jury trial decision made at pretrial) ; Judicial Conference Study Group on Protracted
Litigation, Handbook of Recommended Procedures for the Trial of Protracted Cases, 25
F.R.D. 351, 403 (1960).
15 Louisell, supra note 8, at 663-64.
16 See Furguson v. Hurford, 132 Colo. 507, 519-20, 290 P.2d 229, 236 (1955) (the
Colorado pretrial rule is patterned after the federal rule); 3 MooRE, FEDERAL PRACriCE
§ 16.16, at 1122 (2d ed. 1964) (parties may stipulate to matters which may be handled
by court order). Party consent may confer jurisdiction only to the extent the matter is
within the scope of things properly heard at pretrial; for example, the pretrial judge may
not decide controverted fact, Reines Distributors, Inc. v. Admiral Corp., 241 F. Supp. 814,
815 (S.D.N.Y. 1964), or make decisions on the basis of oral statements, Lynn v. Smith, 281
F.2d 501, 507 (3d Cir. 1960).
1 See Nims, op. cit. supra note 4, at 131; Belknap, Criticisms of the Steckler Outline,
23 F.R.D. 397, 401 (1959); Louisell, supra note 8, at 663. See generally Annot., 22 A.L.R.2d
599, 609-10 (1952). A pretrial judge, of course, is never competent to decide a question of
controverted fact. See note 10 supra.
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CALIFORNIA LAW REVIEW
[Vol. 54: 1016
Under this theory on their own motion, or on motion of a party first
noticed to the opponent at the pretrial conference, pretrial judges have
ordered summary judgment," ruled on the legal sufficiency of claims and
defenses, 19 and entered pretrial orders defining the issues to which the
parties (or one party) refused formal assent.2 0 Courts and legal writers
rely on Federal Rule 16 in geheral and subsection six in particular to
justify such exercise of power by the pretrial judge.2 This power to take
determinative action on questions of law independent of the motion
procedures set up in the other federal rules is usually qualified by the
condition that the party against whom the action is taken must not have
18 See, e.g., Holcomb v. Aetna Life Ins. Co., 255 F.2d 577, 580 (10th Cir.), cert. denied,
358 U.S. 879 (1958); Brinn v. Bull Insular Lines, Inc., 28 F.R.D. 578 (E.D.Pa. 1961)
(partial summary judgment, in effect, as to issue of liability); Newman v. Granger, 141
F. Supp. 37, 39 (W.D.Pa. 1956), aff'd mem., 239 F.2d 384 (3d Cir. 1957); N3ins, op. cit.
supra note 4, at 131; Louisell, supra note 8, at 663; Annot., 22 A.L.R.2d 599, 609 (1952).
This is far different from the situation where the pretrial judge orders summary judgment
by ruling on a properly brought Federal Rule 56 motion. See note 13 supra.
Some cases assert that summary judgment or partial summary judgment may only
be determined through a properly brought Federal Rule 56 motion. Wirtz v. Young Elec.
Sign Co., 315 F.2d 326, 327 (10th Cir. 1963) (Federal Rule 56 procedures preferred);
Syracuse Broadcasting Corp. v. Newhouse, 271 F.2d 910 (2d Cir. 1959) (Federal Rule 16
is not a grant of power independent of the other federal rules).
The states are also split, some permitting summary judgment sua sponte, e.g., Roberts
v. Braynon, 90 So. 2d 623, 626 (Fla. 1956) ; Reliable Furniture Co. v. Fidelity & Guar. Ins.
Underwriters, Inc., 16 Utah 2d 211, 216-17, 398 P.2d 685, 688 (1965), some states undecided,
e.g., Buffington v. Continental Cas. Co., 69 N.M. 365, 370-74, 367 P.2d 539, 542-43 (1961),
and other states prohibiting it, see, e.g., CAL. SuiaRa. CT. RmIx
212(b) (by implication).
Moore seems to agree with those denying that the pretrial judge through Federal Rule
16 has the power to order summary judgment sua sponte: "It should be noted the Rule 16
confers no special power of dismissal not otherwise contained in the rules." 3 MooPa, FEDE LA
PRACricE § 16.04 (Supp. 1965).
19 American Mach. and Metals, Inc. v. De Bothezat Impeller Co., 82 F. Supp. 956, 58
(S.D.N.Y.), appeal dismissed, 173 F.2d 890 (2d Cir. 1949). But see Clay v. Callaway, 178
F.2d 758 (5th Cir.), modifying 177 F.2d 741 (1949) (better to delay ruling on plaintiff's
right to specific performance as a remedy until trial); Phillipp v. United States Cas. Co.,
127 F. Supp. 37 (D. Colo. 1954) (questions of law should not be decided at pretrial);
Steckler, supra note 13, at 306 (decision on legal sufficiency of defenses should be had only
after2 0raised by motion).
Life Music, Inc. v. Broadcast Music Co., 31 F.RJ). 3 (S.D.N.Y. 1962), approved, Life
Music, Inc. v. Edelstein, 309 F.2. 242 (2d Cir. 1962) (per curiam); Brinn v. Bull Insular
Lines, Inc., 28 F.R.D. 578, 579 (E.D. Pa. 1961). But see Padovani v. Bruchhausen, 293 F.2d
546 (2d Cir. 1961), supra note 8. While the Edelstein per curiam decision, which approved
Broadcast Music, and the Padovani case are both decided by the Second Circuit, philosophically they are in conflict. In Padovani the court said the pretrial judge should not
"club" the parties into admissions they do not wish to make. See note 8 supra. In Edelstein
the court approved coercive action by the pretrial judge.
21
E.g., Daniels v. Beryllium Corp., 211 F. Supp. 452, 456 (E.D. Pa. 1962) (Federal
Rule 16 in general); Life Music, Inc. v. Broadcast Music, supra note 20, at 6 (Federal Rule
16 in general); Life Music, Inc. v. Edelstein, supra note 20 (subsection six relied on);
Delehant, supra note 11.
19661
PRETRIAL EVIDENCE RULINGS
been so taken by surprise that he was unable adequately to defend him22
self against the action.
A pretrial judge, therefore, may assert jurisdiction to decide a question of law on three different grounds: First, the parties may by consent
submit the question for decision; second, the legal question may be authorized by the federal rules for before-trial determination and pending
by motion at the time of trial if motion is required; third, Federal Rule
16 may be considered as authorizing determination of questions of law
independent of the authority conferred and the procedures created by the
other federal rules.
The above three grounds, then, are available to legitimize the decision
of evidence questions at pretrial. Unless the parties consent to the decision
of an evidence question at pretrial, that decision must be justified through
the two remaining grounds. The federal rules do not authorize the determination of evidence questions prior to trial. While a before-trial motion
to suppress evidence is not unknown at common law in civil cases, such
motions concern only highly prejudicial evidence.2 The second or "pending-motion" basis for making pretrial decisions on questions of law
justifies decision at pretrial only of this narrow class of admissibility of
evidence questions. Pretrial decision of most evidentiary questions which
may arise at pretrial may only be legitimized under the third or "independent-power" justification for pretrial decision of questions of law. In
order for a pretrial judge to take coercive action on a question of evidence,
a question normally decided by the trial judge during the course of trial,2"
Federal Rule 16 must be viewed as an independent source of authority
to make decisions which a judge could not otherwise make before trial.
Those cases in which binding pretrial evidence rulings are made treat
Federal Rule 16 as such a source of power.2 5
22 Clay v. Callaway, 178 F.2d 758 (5th Cir.), modifying 177 F.2d 741 (1949) ; Newman
v. Granger, 141 F. Supp. 37 (W.D. Pa. 1956), aff'd mem., 239 F.2d 384 (3d Cir. 1957). The
states agree. E.g., Murphy v. Kelly, 28 N.J. Super. 266, 100 A.2d 558 (1953); Buffington v.
Continental Cas. Co., 69 N.M. 365, 370-74, 367 P.2d 539, 542-43 (1961); Reliable Furniture
Co. v. Fidelity & Guar. Ins. Underwriters, Inc., 16 Utah 2d 211, 216-17, 398 P.2d 685, 688
(1965); see Shafroth, PretrialTechniques of Federal Judges, 3 Wyo. L.J. 185, 195-96 (1949).
Concern over depriving the opponent of his right to argue effectively for his cause is
the primary reason some courts refuse to permit sua sponte determinations of summary
judgment or the legal sufficiency of defenses by the pretrial judge. Wirtz v. Young Elec.
Sign Co., 315 F.2d 326, 327 (10th Cir. 1963) ; see note 18 supra.
2
3See note 37 infra.
24
See note 29 infra.
25 See, e.g., Parmelee Transp. Co. v. Keeshin, 3 FED. RULES SERv. 2d 16.261, at 257-58
(NJD. Ill. 1960); Hertz v. Graham, 23 F.R.D. 17, 19 (S.D.N.Y. 1958); Carlock v. Southeastern Greyhound Lines, Inc., 8 FED. RuLFS SEav. 16.261, at 348 (E.D. Tenn. 1944); Penn
v. Automobile Ins. Co., 27 F. Supp. 337 (D. Ore. 1939).
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CALIFORNIA LAW REVIEW
[Vol. 54: 1016
II
NORMAL PRETRIAL
AND TRADITIONAL EVIDENCE RULINGS
The normal function of the pretrial judge in regard to evidence is to
have prepared a list of all documents and exhibits a party intends to offer
as evidence and to seek agreement by the opposing party that the documents and exhibits be admitted at trial without objection, at least, to
their authenticity." Many of the local court rules for federal district
courts also provide that the party opponent must list in the pretrial order
his objections to the admissibility of the documents and exhibits listed;"
one such rule asserts that he waives any unlisted objections to exhibits
and may not raise them at trial. 28 Ordinarily the pretrial judge does not
take the further step of ruling on the listed objections, on objections to
possible testimonial evidence, or on other evidence questions, such as
questions of judicial notice or burden of proof.
Traditionally rulings on the admissibility of evidence have been the
preserve of the trial judge.29 An opponent of evidence could object to
evidence only at the moment the proponent offered to introduce it; even
the beginning of trial itself was in the view of most courts too soon to
raise such an objection. ° The ruling of the court on the admissibility of
26 See Nims, op. cit. supra note 4, at 121-22; Gourley, Effective PretrialMust Be the
Beginning of Trial, 28 F.R.D. 165, 168-69 (1962); Hooper, Judicial Preparationfor Pretrial
Conferences, 29 F.R.D. 315, 317 (1962); Judicial Conference Comm. on Pretrial Procedure,
Suggested Local Court Rules, Rule 4(a)-(d), 37 F.R.D. 285 (1965); McAllister, Pretrial
Practicein the Southern District of New York, 12 F.R.D. 373, 376 (1952); Scurlock, Actual
PretrialExperience, 29 F.R.D. 323, 328 (1962).
27
E.g., D. ALAsxA R. 9(K)(9); S.D. CAL. R. 9(j)(VII)(A); D. Coro. R. 12(b)(8);
D. DEx.. R. 11(D) (f); S.D.N.Y. CAL. R. 13(b) (1) (g). See Leach v. Chesapeake & Ohio Ry.,
35 F.R.D. 9 (W.D. Mich. 1964) (local court rule requires all documents to be used at trial
to be listed at pretrial on pain of exclusion from trial of all unlisted documents).
28
S.D.N.Y. CAL. R. 13 (b) (1) (g).
29 See Lavender v. Kurn, 327 U.S. 645, 654 (1946) (rulings on admissibility of evidence
must normally be left to the trial judge's discretion); Chandler v. Von Roeder, 65 U.S.
(24 How.) 224, 226 (1860) (trial judge has duty to decide all questions of the competency
of evidence which arise during trial); Bradstreet v. Thomas, 37 U.S. (12 Pet.) 174, 176
(1838) (trial judge must determine admissibility of evidence independently of prior determinations of admissibility of same evidence in other cases) ; Central Nebraska Pub. Power
& Irr. Dist. v. Harrison, 127 F.2d 588 (8th Cir. 1942) (admissibility of evidence is within
trial court's discretion); Price v. Johnston, 125 F.2d 806, 811 (9th Cir.), cert. denied, 316
U.S. 677 (1942) (duty of trial judge to rule on admissibility). The states also hold this view.
See, e.g., State v. Flett, 234 Ore. 124, 129, 380 P.2d 634, 637 (1963) (criminal case);
Bradford v. Birmingham Elec. Co., 227 Ala. 285, 287, 149 So. 729, 730 (1933).
30 See Graham v. Squier, 132 F.2d 681, 684-85 (9th Cir.), cert. denied, 318 U.S. 777
(1942); Fidelity & Cas. Co. v. Frank, 227 F. Supp. 948, 949 (D. Conn. 1964); 1 Wi- MoRE,
EVIDENCE § 18, at 323 (3d ed. 1940); Annot., 94 A.L.R.2d 1087, 1090 (1964). For the
states, see, e.g., Burdick v. York Oil Co., 364 S.W.2d 766 (Tex. Civ. App. 1963) (in linine
motion to exclude evidence approved) ; Gist v. French, 136 Cal. App. 2d 247, 272, 288 P.2d
1003, 1019 (1955), overruled on another point, Deshotel v. Atchison, T. & S.F. R. Co., 50
PRETRIAL EVIDENCE RULINGS
19661
1023
evidence followed this objection." The most cogent reasons advanced to
support the idea that the course of trial is the proper time for evidence
objections and rulings are: (1) The admission or exclusion of evidence
often turns on the circumstances of the trial and should, therefore, be left
to the discretion of the trial judge," and (2) the court should not spend
time on evidence questions until error in fact has been threatened by
inadmissible evidence being offered for admission at trial. 3
Traditional judicial procedure does offer, however, examples of priorto-trial methods for seeking the exclusion of evidence. In criminal cases
the motion to suppress or the suit in equity to suppress evidence may
both be brought before trial begins.34 The primary purpose of these procedural devices for challenging evidence is not to test the evidence itself,
but rather to act as a means of police control by denying use of evidence
improperly obtained.3 r
The preliminary-before the actual offer of evidence-motion to suppress evidence in the criminal case has not been limited to challenging the
legality of the means by which evidence is obtained; it also has been used
successfully to exclude from trial evidence highly prejudicial to the deCal.
2d 664, 328 P.2d 449 (1958); People v. Lindsey, 90 Cal. App. 2d 558, 567, 203 P.2d 572,
577 (1949) (precise ground for objection must be given at time of offer).
31
United States v. Carter, 311 F.2d 934, 945 (6th Cir.), cert. denied, 373 U.S. 915
(1963); Wimo, A STUDENT'S TE=X OO oT E LAW or EvmENCE 420 (1935).
The admissibility of evidence is put in question at trial, then, only after the proponent
has offered it and the opponent objected on some ground. If evidence is offered and not
objected to it becomes evidence in the case regardless of any technical inadmissibility; the
trier of fact may consider it for whatever probative worth it has. Diaz v. United States,
223 U.S. 442, 450 (1912); Patrick v. Graham, 132 U.S. 627, 629 (1890); Koshorek v.
Pennsylvania R.R., 318 F.2d 364, 371 (3d Cir. 1963); County of Todd, Minn. v. Loegering,
297 F.2d 470 (Sth Cir. 1961); Hayden v. Chalfant Press, Inc., 281 F.2d 543, 548 (9th Cir.
1960); cf. Noonan v. Caledonia Mining Co., 121 U.S. 393, 400 (1886); Johnston v. Reily,
160 F.2d 249, 250 (D.C. Cir. 1947); see Ladd, Objections, Motions and Foundation Testi-
mony, 43 CoRNELL. L.Q. 543, 544 (1958).
32 See, e.g., LeRoy v. Sabena Belgian World Airlines, 344 F.2d 266, 274 (2d Cir.), cert.
denied, 382 U.S. 878 (1965); Fidelity & Cas. Co. v. Frank, 227 F. Supp. 948, 949 (D. Conn.
1964).
33
E.g., State v. Flett, 234 Ore. 124, 129, 380 P.2d 634, 637 (1963). Another reason cited
by one court, at once more frivolous and more chivalrous than those indicated above, is that
the court should not presume that counsel will offer incompetent evidence before he actually
does so. Bradford v. Birmingham Elec. Co., 227 Ala. 285, 287, 149 So. 729, 730 (1933).
34
FFn. R. CRim. P. 41e; Rodgers v. United States, 158 F. Supp. 670, 678-84 (S.D. Cal.
1958), aff'd, 267 F.2d 79 (9th Cir. 1959) (Rule 41e held to be proper prior-to-trial remedy
in federal court to suppress evidence obtained in violation of the 4th Amendment, rather than
the traditional suit in equity to suppress illegally obtained evidence) ; cf. In Re Fried, 161
F.2d 453 (2d Cir. 1947). The distinction between the motion to suppress and the suit in
equity to suppress evidence is that the former is available after indictment but before trial,
while the latter is available before indictment (except for Rule 41e evidence, for which a 41e
motion is the only before-trial remedy). Rodgers v. United States, supra at 675-76, 681-82.
35 See In Re Fried, 161 F.2d 453, 458 (2d Cir. 1947) ; Note, 44 CA aF. L. REv. 164 (1956).
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[Vol. 54: 1016
fendant.8 6 A before-trial motion to suppress for this purpose has even
invaded the civil field, being used to exclude from trial evidence highly
prejudicial to the movant.37 The question raised by the motion to exclude
in such cases is a true evidence question, for what a judge hearing such a
motion before trial determines is the relevancy of the evidence the movant
wishes to exclude."8
Another traditional before-trial method of seeking the exclusion of
evidence in civil cases is the prior-to-trial motion to suppress a deposition.3 9 The scope of such motions, however, is strictly limited: They
typically may concern only defects of a formal character, such as errors in
filing, signing, transcribing, and may not usually be used to assert more
40
substantive evidence objections, such as relevancy and competency.
They offer, therefore, little guidance to either the district court judge or
the attorney concerning the proper use and scope of pretrial rulings on
substantive evidence questions.
While ruling on a pretrial motion to exclude evidence at least has
some procedural analogues and precedents, no precedent exists for a
motion at pretrial to have evidence declared admissible. Such a motion is
unknown even at the trial itself. The normal procedure by which a ruling
is obtained on an admissibility question is by the opponent's objection to
offered evidence, not by a proponent's motion to admit evidence.4 ' Traditional procedure also offers no examples of before-trial motions seeking
the resolution of judicial notice or burden of proof questions.
III
PRETRIAL EVIDENCE RULINGS
Twelve cases involving evidence decisions at pretrial have been reported 42 since pretrial began in federal district courts. Nine rulings origi36 E.g., Scarborough v. State, 171 Tex. Crim. 83, 344 S.W.2d 886 (1961) ; State v. Smith,
189 Wash. 422, 65 P.2d 1075 (1937).
37
E.g., Sacramento & San Joaquin Drainage Dist. v. Reed, 215 Cal. App. 2d 60, 66-68,
29 Cal. Rptr. 847, 851-53, modified, 217 Cal. App. 2d 611, 31 Cal. Rptr. 754 (1963). See
Annot., 94 A.L.R.2d 1087 (1964), which discusses the emergence of a before-trial "motion
to exclude"
prejudicial evidence in both criminal and civil law.
38
Prejudicial effect alone is not a ground for excluding evidence; it is only one factor
to be weighed against the probative value of evidence to determine the relevancy of that evidence. McCoRmucx, Evmance § 152 (1954); Ladd, Common Mistakes in the Technique of
Trial, 22 IowA L. REv. 609, 619 (1937). For a discussion of relevancy decisions at pretrial,
see notes 93-103 infra and accompanying text.
39 FED. R. Civ. P. 32(d). The law prior to the adoption of the Federal Rules contained
a similar motion to suppress a deposition. York Co. v. Central R.R., 70 U.S. (3 Wall.) 107
(1865).
40
Ibid.
41 See notes 29-31 supra.
42 LeRoy v. Sabena Belgian World Airlines, 344 F.2d 266, 274 (2d Cir.), cert. denied,
19661
PRETRIAL EVIDENCE RULINGS
1025
nated by motion of one party,43 one by consent of both parties,44 and one
apparently on the court's own initiative.45 In one case the procedural
origin of the ruling is unclear. 46 These reported pretrial evidence decisions
primarily involve questions of relevancy and hearsay.47 Of the six relevancy decisions, only two involved questions of highly prejudicial evidence (and therefore questions for which the before-trial motion to exclude may have been available) .4 The eight hearsay rulings concern
prior reported testimony, 49 depositions taken for prior cases,50 prior judg382 U.S. 878 (1965); Independent Iron Works, Inc. v. United States Steel Corp., 322 F.2d
656 (9th Cir.), cert. denied, 375 U.S. 922 (1963); Syracuse Broadcasting Corp. v. Newhouse,
295 F.2d 269, 276 (2d Cir. 1961); Aley v. Great Ati. & Pac. Tea Co., 211 F. Supp. 500 (W.D.
Mo. 1962); Parmelee Transp. Co. v. Keeshin, 3 FED. Rrmz SRV. 2d 16.261, Case 1 (N.D.
Ill. 1960); Hertz v. Graham, 23 F.RD. 17 (S.D.N.Y. 1958); Rivera v. American Export
Lines, 13 F.R.D. 27 (S.D.N.Y. 1952); Volk v. Paramount Pictures, Inc., 91 F. Supp. 902
(D. Minn 1950); United States v. Certain Tracts of Land, 57 F. Supp. 739 (S.D. Cal. 1944);
Carlock v. Southeastern Greyhound Lines, Inc., 8 FED. RuLrs SEav. 16.261 (EI). Tenn.
1944); Ulrich v. Ethyl Gasoline Corp., 2 F.R.D. 357 (WIM. Ky. 1942); Penn v. Automobile
Ins. Co., 27 F. Supp. 337 (D. Ore. 1939). These are all the reported evidence rulings made at
pretrial discovered by the writer; how many pretrial evidence rulings are either buried in
the cases or unreported is conjectural. Because of the substantive law nature of the parol
evidence rule, one case involving such a ruling is omitted from the above collection of cases,
see Scurlock, Actual PretrialExperience, 29 F.R.D. 323 (1962).
43 See LeRoy v. Sabena Belgian World Airlines, supra note 42; Independent Iron Works,
Inc. v. United States Steel Corp., supra note 42; Aley v. Great AUt. & Pac. Tea Co., supra
note 42; Parmelee Transp. Co. v. Keeshin, supra note 42; Hertz v. Graham, supra note 42;
Rivera v. American Export Lines, supra note 42; Volk v. Paramount Pictures, Inc., supra
note 42; Carlock v. Southeastern Greyhound Lines Inc., supra note 42; Penn v. Automobile
Ins. Co., supra note 42.
44 See Ulrich v. Ethyl Gasoline Corp., 2 F.R.D. 357 (W.D. Ky. 1942).
45 See Syracuse Broadcasting Corp. v. Newhouse, 295 F.2d 269, 276 (2d Cir. 1961).
46 See United States v. Certain Tracts of Land, 57 F. Supp. 739 (S.D. Cal. 1944).
47 See cases cited in notes 48-53 infra. One reported case involved the admission of evidence as required by settled judicial rule in the federal courts (comparative sales evidence
admissible in condemnation cases). United States v. Certain Tracts of Land, supra note 46
at 740. No reported cases of pretrial decision of burden of proof or judicial notice questions
were found.
48 Independent Iron Works, Inc. v. United States Steel Corp., 322 F.2d 656, 669 (9th
Cir.), cert. denied, 375 U.S. 922 (1963); Syracuse Broadcasting Corp. v. Newhouse, 295 F.2d
269, 276 (2d Cir. 1961); Aley v. Great At. & Pac. Tea Co., 211 F. Supp. 500 (WD. Mo.
1961); Parmelee Transp. Co. v. Keeshin, 3 FED. RuLas SEav. 2d 16.261, Case 1 (N.D. Ill.
1960); Carlock v. Southeastern Greyhound Lines, Inc., 8 FED. RuLES SEav. 16.261 (ED.
Tenn. 1944); Ulrich v. Ethyl Gasoline Corp., 2 F.RD. 357, 360 (WMD. Ky. 1942). The two
cases involving highly prejudicial evidence are the Carlock case and the Aley case.
49 Hertz v. Graham, 23 F.RD. 17 (S.D.N.Y. 1958); Penn v. Automobile Ins. Co., 27 F.
Supp. 337 (D. Ore. 1939).
0 Hertz v. Graham, supra note 49; Rivera v. American Export Lines, 13 F.R.D. 27
(S.D.N.Y. 1952). Some cases involved rulings on more than one type of evidence question.
E.g., Hertz v. Graham, supra note 49; Independent Iron Works, Inc. v. United States Steel
Corp., 322 F.2d 656, 669, 671 (9th Cir.), cert. denied, 375 U.S. 922 (1963).
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ments involving a present party, 51 business records, 52 and official documents.5 3 The hearsay decisions involve only the admissibility at trial of
documents. The admissibility of documents is also the sole concern of
some pretrial relevancy decisions;5 4 others, however, concern the admissibility of both documentary and potential testimonial evidence at trial. 5
While some pretrial judges have not hesitated to tackle difficult and
important evidentiary questions when asked by a party to do so, several
of the decisions made indicate the judge's uncertainty as to the efficacy
and proper scope of a pretrial evidence ruling and his hesitancy to supplant the trial judge in this area. One indication of this hesitation and
uncertainty is the paucity of reported pretrial evidence rulings; pretrial
judges apparently do not often use this technique. Another indication is
the terms in which some of the pretrial evidence decisions are cast; several of them are more like advisory opinions than binding rulings." In
Aley v. Great Ati. & Pac. Tea Co.,5" a false arrest case, the pretrial judge
asserted that his remarks on the admissibility of evidence that defendant's employee had previously seen plaintiff shoplift were for the purpose of enabling "counsel better to prepare for trial""8 and were not to be
considered as binding on the trial judge. Decisions in such terms are surprising in light of the settled rule, grounded in Article III of the U.S.
Constitution, that federal courts do not issue advisory opinions. 9 They
are perhaps best explained as reflecting the competing desires of the pre-
trial judge on the one hand to end litigation at pretrial by indicating to a
party that he has little chance of getting crucial evidence admitted or
51 Ulrich v. Ethyl Gasoline Corp., 2 F.R.D. 357, 359 (W.D.Ky. 1942) (this case also
involved a ruling on relevancy, see note 48 supra) ; Volk v. Paramount Pictures, Inc., 91 F.
Supp. 902 (D. Minn. 1950). Both cases involve the use under 15 U.S.C. § 16 in a later civil
trial of judgments in prior antitrust suits brought by the United States against one of the
participants in the later civil trial as prima facie evidence of antitrust violations by that
participant.
52LeRoy v. Sabena Belgian World Airlines, 344 F.2d 266 (2d Cir.), cert. denied, 382
U.S. 878 (1965).
53 Independent Iron Works, Inc. v. United States Steel Corp., 322 F.2d 656, 671 (9th
Cir.), cert. denied, 375 U.S. 922 (1963).
54
E.g., Parmelee Transp. Co. v. Keeshin, 3 FED. R-JLEs SEav. 2d 16.261, Case 1, at 254
(N.D. Ill. 1960).
55
E.g., Ulrich v. Ethyl Gasoline Corp., 2 F.R.D. 357, 360 (W.D.Ky. 1942).
56 E.g., Aley v. Great Atl. & Pac. Tea Co., 211 F. Supp. 500, 501 (W.D. Mo. 1962).
Cf. Fidelity & Cas. Co. v. Frank, 227 F. Supp. 948, 949 (D. Conn. 1964).
57 211 F. Supp. 500 (W.D. Mo. 1962).
58 Id. at 501. The court did not deny the power of a pretrial judge to issue a binding
evidence ruling, however, as it contemplated another pretrial hearing to consider whether
such a binding ruling should be made. Id. at 503.
59 Local 8-6, Oil Workers Int'l, AFL-CIO v. Missouri, 361 U.S. 363, 367 (1960) ; Oklahoma City v. Dulick, 318 F.2d 830, 831 (10th Cir. 1963); Pauling v. Eastland, 288 F.2d 126,
128 (D.C. Cir.), cert. denied, 364 U.S. 900 (1960).
19661
PRETRIAL EVIDENCE RULINGS
1027
excluded, and on the other to refrain from interfering with the trial
judge's control of the case if it comes before him.
Also indicative of this hesitancy and uncertainty are decisions made as
binding rulings but strictly limited in scope. In Parmelee Transp. Co. v.
Keeskin,60 the ruling was limited to the documents specifically objected
to by the defendant as irrelevant, the judge declaring that the ruling did
not prevent plaintiff from seeking at trial to introduce testimony proving
the same facts."' In the Parmelee case the pretrial judge even differentiated the effect of his decision that certain documents were inadmissible
from his decision that some documents were admissible; the former was,
and the latter was not, to be binding on the trial judge." Not all pretrial
evidence decisions, of course, are cast in the soft terms of advice; nor are
they all limited in effect.63 That some decisions are cast in such terms,
however, indicates that even while using this device pretrial judges have
qualms about it.
Legal commentators have done little to resolve the unease of the pretrial judge; the paucity of reported pretrial evidence rulings is matched
by a paucity of comment on this potentially revolutionary technique.6 4
Most writers discussing the pretrial judge's evidentiary function do so
only in terms of his seeking the admission of documents and exhibits by
party agreement and of his listing in the pretrial order the evidentiary
objections which a party refuses to relinquish. 65 While most commentators
who consider the question approve of the pretrial judge ruling on some
of these listed objections,6 6 none do so in terms clear enough to ease the
doubts of the pretrial judge over the use of this technique. The following
60 3 FED. R.Es
SERv. 2d 16.261, Case 1 (N.D. Il.
1960).
61id. at 254. This limitation was made even though the documents the court ruled
inadmissible were for the most part declared inadmissible because they were irrelevant
or immaterial. How testimony at trial concerning the same facts as these documents could
be ruled
relevant or material consistent with the pretrial decision is not clear.
62
Ibid.
03 See, e.g., Independent Iron Works, Inc. v. United States Steel Corp., 322 F.2d 656,
671 (9th Cir.), cert. denied, 375 U.S. 922 (1963) ; Carlock v. Southeastern Greyhound Lines,
Inc., 8 FED. RuLas SERv. 16.261 (E.D. Tenn. 1944).
64 Moore states simply that the pretrial judge may rule on the admissibility of evidence.
3 Moo E, FEDERAL PRAcr cE § 16.16 (2d ed. 1964); McCormick says only that pretrial may
be an appropriate place to seek a "tentative ruling" on certain evidence questions.
McConxicx, EvIDENCE § 152, at 320 n.29 (1954); see the authorities cited in note 65,
infIra. Barron and Holtzoff indicate some unease over the propriety of an evidence ruling at
pretrial. 1 BAR-Rolx & HOLTZOrr, FEDERAL PRACTICE & PRocEDuRE § 473, at 966 n.48 (1950).
65 See Carter, Judicial Control of the Case, 23 F.R.D. 406, 411 (1959); McAllister,
Pretrial Experience in the Southern District of New York, 12 F.R.D. 373, 376 (1952);
Scurlock, supra note 42, at 328; Smith, Pretrial Conference, 29 F.R.D. 348, 354 (1962).
66
Nimrs, PRET IAL 121-22 (1950); Hooper, supra note 26, at 317; Kincaid, A Judge's
Handbook of Pretrial, 17 F.R.D. 437, 447-48 (1955); Scurlock, supra note 42, at 326 (on
parol evidence question).
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(Vol. 54: 1016
discussion endeavors to ease these doubts by assessing the utility and
feasibility of the pretrial evidence ruling, and by indicating the limitations
which should be placed on it to maximize its usefulness to the court and
to the litigant.
IV
UTILITY OF THE PRETRIAL EVIDENCE RULING
To assess properly the value of the pretrial evidence ruling one must
judge it from the different, often conflicting, viewpoints of the attorney
and the judge. The former wants to help his client as much as he legally
and practically may; the latter seeks the efficient administration of justice.
From the attorney's standpoint the pretrial evidence ruling is a new procedural device by which he may achieve tactical advantages over his
adversary; the nature of these advantages varies as his status changes
from proponent to opponent of evidence. If the proponent, he may for
the first time take the initiative in securing a judicial determination of
the admissibility of his evidence; the initiative in obtaining the evidence
ruling does not lie, as it does at trial, solely with the opponent of evidence.
Tactically this is of immense importance to the party whose case hinges
on evidence of doubtful admissibility; now he need not wait until trial
for the opponent's objection to his introduction of the evidence, but may
seek by a request for a ruling a determination of the evidentiary question
at pretrial.67 The proponent of evidence may thus save himself anxiety
over the admissibility of crucial evidence at trial. He also avoids having
to disrupt a jury trial, perhaps at a psychologically important moment,
for the determination of a knotty admissibility question. The expense of
putting essential facts in a better evidentiary form may be averted
entirely, or else at least borne with the knowledge that it was unavoidable. Expense would also be avoided by determining questions of
judicial notice at pretrial,6 9 for proof of a fact assured judicial notice
67 Of the nine pretrial evidence decisions sought by one party only, the following five
were initiated by the proponent of evidence. See Brief for Appellee-appellant, p.22, LeRoy
v. Sabena Belgian World Airlines, 344 F.2d 266 (2d Cir.), cert. denied, 382 U.S. 878 (1965);
Hertz v. Graham, 23 F.R.D. 17 (S.D.N.Y. 1958); Rivera v. American Export Lines, 13
F.R.D. 27 (S.D.N.Y. 1952); Volk v. Paramount Pictures, Inc., 91 F. Supp. 902 (D.
Minn. 1950); Penn v. Automobile Ins. Co., 27 F. Supp. 337 (D. Ore. 1939).
68
Unavoidable, because one must assume that the pretrial judge's decision was correct
and, therefore, would have been made in any case at trial.
69 Moore asserts that the question of judicial notice may be determined at pretrial.
1 MooRE, FEDERAL PRAC CE § 0.316(1) n.4 (2d ed. 19&4); 3 id. § 16.16, at 1122 n.9. The
only authority cited for this position is a weak one, however, for it concerns only a party's
stipulation at pretrial that the law of a particular state could be judicially noticed, not a
ruling by the pretrial judge that such law should be noticed by the trial judge. Wells Fargo
Bank v. Titus, 41 F. Supp. 171, 174 (S.D. Texas 1941). As Moore intimates, however, there is
no good reason for preventing the pretrial judge from deciding the question of judicial notice.
19661
PRETRIAL EVIDENCE RULINGS
1029
would not have to be offered at trial at all. If the ruling goes against
the proponent, and the evidence is crucial to his case and not available
in an acceptable form, he may seek settlement or, if he is the plaintiff,
simply end the litigation; by so doing he at least saves his client further
expense. The deadening effect of an adverse evidence ruling on the possibility of obtaining a favorable settlement before trial is perhaps the
major drawback of the pretrial evidence ruling from the proponent's point
of view; it should prevent his ill-considered use of the pretrial evidence
ruling technique.
On the other hand if an attorney wants to exclude evidence his adversary intends to offer, the pretrial evidence ruling is a useful device
for securing its exclusion. At trial, particularly at a jury trial, the opponent of evidence often hesitates to object to the introduction of evidence
of doubtful admissibility unless it affects his case seriously because he
fears he will alienate the jurymen by appearing to prevent them from
knowing all the facts,7" or that he may offend the judge by appearing to
obstruct the trial through seemingly trivial interruptions.71 If the opponent may assert his objections, or some of them, at pretrial, this important braking effect on the number of objections to evidence the opponent
will in practice make is removed. 7' Furthermore, by excluding evidence
before trial tho opponent avoids any prejudicial effect his adversary's
allusions to or partial introduction of inadmissible evidence may cause;
he avoids, in other words, the farce of having the jury told to ignore
evidence his adversary has effectively put before it. As with the proponent,
winning a pretrial evidence ruling strengthens the opponent's settlement
hand, while losing a ruling on important evidence may destroy it. A loss,
again, at least allows the opponent-plaintiff to avoid further litigation expense for his client by ending prosecution of the action.
To say that the pretrial evidence ruling is a useful tactical device for
the attorney, however, is not necessarily to say that it is also a useful
device for securing efficient judicial administration. Judged by the latter
criterion the pretrial evidence ruling is at present more of a mixed blessing. Judges making pretrial evidence rulings typically assert that the
70
MCCORMUCH, EvoamNC § 52, at 121 (1954); LAxE, How To Wnq LAW S=rs
B-roRE Juaxas 42 (1954); Armstrong, Objections to Evidence in Jury Trials, 23 TEmx.
L. R v. 943, 945-47 (1955); Gourley, Effective Pretrial Must Be the Beginning of Trial,
28 F.R.D. 165, 171 (1962); Ladd, supra note 31, at 544.
71 Ladd, Common Mistakes in the Technique of Trial, 22 IowA L. Rav. 609, 619 (1937).
72 This would be untrue only where the trial is to be a nonjury trial and the pretrial
judge is the same as the trial judge. In most of the larger federal districts the pretrial judge
and the trial judge are not the same individual. Some federal district courts follow local
procedural practices which insure that the judge at pretrial will not be the judge at trial.
See Koshorek v. Pennsylvania R.R., 318 F.2d 364, 371 n.17 (3d Cir. 1963).
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CALIFORNIA LAW REVIEW
ruling will expedite trial and reduce litigants' costs,7 3 two of the acknowledged purposes of pretrial conference procedures. 74 This often appears
to be in fact what is accomplished. In Penn v. Automobile Ins. Co.75 the
pretrial judge's ruling made prior reported testimony of a witness admissible at a later trial between the same parties, thus saving the defendant the cost of bringing in the witness from out of state. In LeRoy v.
Sabena Belgian World Airlines,7 a copy of an in-flight recorded conversation between the defendant's airplane crew and the staff of an Italian
control tower made by the Italian Civil Aviation Ministry was ruled admissible at pretrial over an objection to the copy's authenticity and a
hearsay objection. The plaintiff saved by this ruling the cost of getting
the copy certified as accurate by the Italian government and the cost of
deposing the Italian tower operator.
Pretrial evidence rulings also seem to save judicial time (and therefore
expense), because trial will flow more smoothly absent time consuming
disputes over the admissibility of evidence77 or over whether a fact is
sufficiently notorious to justify taking judicial notice of it. Legal writers
approving the pretrial evidence ruling do so primarily in the belief that
such rulings promote the swift resolution of the case by reducing interruptions during trial and by preventing the introduction of evidence
extraneous to the issues being litigated. 78 A factor seldom mentioned in
discussions of the reduction of court time and litigant expense which the
pretrial evidence ruling may effect is the impetus such rulings may give
to out of court settlement; judicial time is obviously conserved by such
before-trial resolution of the case.
Though allegedly saving the court's time and the parties' money, the
pretrial evidence ruling today may increase, rather than decrease, the
total amount of judicial time which must be spent to resolve a given
action. In the first place, evidence of doubtful competence or relevance
73 See, e.g., Hertz v. Graham, 23 F.R.D. 17, 19 (S.D.N.Y.
74 See note 4 supra and accompanying text.
1958).
75 27 F. Supp. 337 (D. Ore. 1939).
70 344 F.2d 266 (2d Cir.), cert. denied, 383 U.S. 878 (1965). In Carlock v. Southeastern
Greyhound Lines, Inc., 8 FED. RuLES SF.Rv. 16.261, at 348 (ED. Tenn. 1944), the judge notes
that by deciding the admissibility of evidence that plaintiff seeks to exclude "the issues may
be narrowed,... the trial shortened by eliminating witnesses, and expenses reduced incident
to witness costs." The evidence plaintiff sought to exclude in Carlock was highly prejudicial
(evidence of plaintiffs' immoral conduct).
77 See, e.g., Independent Iron Works, Inc. v. United States Steel Corp., 322 F.2d 656,
669-72 (9th Cir.), cert. denied, 375 U.S. 922 (1963); Hertz v. Graham, 23 F.R.D. 17, 19
(S.D.N.Y. 1958); Aley v. Great Ati. & Pac. Tea Co., 211 F. Supp. 500, 501 (W.D. Mo.
1962).
78 Gourley, supra note 70; Scurlock, supra note 42 (lengthy conferences between judge
and attorneys and time consuming objections at trial prevented).
19661
PRETRIAL EVIDENCE RULINGS
might not actually be introduced at trial, though during before-trial stages
of the litigation its proponents contemplated its introduction.79 Or the
opponent might fail to object to the introduction of the technically inadmissible evidence out of ignorance or as a matter of sound trial tactics."0
A pretrial evidence ruling in such cases, simply because no evidence ruling
would have been necessary had the evidence question been left for trial,
would unnecessarily increase the total pretrial-trial judicial time spent
on the case.
Furthermore the availability of pretrial as a forum in which to make
objections to evidence may induce the opponent of evidence to assert
many more objections to the admission of evidence during the combined
pretrial-trial period than he would have asserted at trial alone. Removal
of the inhibiting factor of fear of alienating jury or judge will result in a
multiplication of objections to evidence. 8 Justice, of course, may be
served by thus expanding the practical ability of a litigant to exclude
evidence; one's view on this is necessarily determined by one's estimate
of the utility of the Anglo-American law of evidence.82 Whether or not
the pretrial ruling on admissibility leads to a more just result, obviously
it need not lead to a swifter result. Since deciding whether or not to rule on
an evidence question at pretrial is totally within the discretion of the pretrial judge, and not, as with the trial judge, an unavoidable duty, the
pretrial judge may control a party's tendency to proliferate his evidence
objections by simply refusing to rule.
The utility of the pretrial evidence ruling as a conservator of judicial
time is most severely challenged by the limited nature of its effect on the
trial judge. Some pretrial evidence rulings limit by their own terms
their ultimate effect on the trial judge.8" Pretrial evidence rulings not cast
in limited terms, however, do not necessarily have a binding effect on
the trial judge. Under present law the trial judge has the power to review
79 Illustrative is the objection of the plaintiff in Parmelee Transp. Co. v. Keeshin, 3
FED. RuL-Ls SERV. 2d 16.261, Case 1, at 257 (N.D. Ill. 1960) that the judge in ruling on the
admissibility of documents not yet offered in evidence was engaging in an act of clairvoyance.
80 Straub v. Reading Co., 220 F.2d 177, 181-82 (3d Cir. 1955) ; FDICxE, PLANNING AND
TRYXNG CASES 362 (1952); lox, LAWYER'S CONCISE GUIDE To TRiAL PRocEDuRE 71 (1965);
Armstrong, supra note 70, at 944-47; Ladd, supra note 31, at 543, 544-45.
81 Armstrong, supra note 70, at 944. Ladd, supra note 71, 611-14.
82 The utility of Anglo-American evidence law remains a matter of hot dispute among
legal commentators. See WicmORE, A STuDENT's TExTBoo orx
or
LAw op EVIDENCE viiviii (1935); Dow, A New Approach to Admissibility of Prior Statement of a Witness, 41
NEB. L. REV. 598, 599 (1962); Marshall, Evidence, Psychology and the Trial: Some Challenges to the Law, 63 CoLum. L. REv. 197, 199-200 (1963). Compare Taylor v. Crain, 224
F.2d 237, 239 (3d Cir. 1955), with Taylor v. Crain, 224 F.2d 237, 240 (3d Cir. 1955) (dissenting opinion) (validity of the dead man rule discussed). See generally 1 WiGmoRE, EviDENCE § 8c, at 259-63, 287-88 (3d ed. 1940).
83 See notes 56-62 supra.
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[Vol. 54: 1016
and reverse the pretrial judge's evidence ruling."4 The party losing on an
evidence question at pretrial is thus free to offer his evidence, assert his
objection, make his claim for judicial notice again at trial. The trial judge
may and in practice usually will accept the pretrial ruling as finally dispositive of the question decided, but he need not consider himself legally
bound to accept that ruling.8 5 Under present law, then, the pretrial evidence ruling may simply result in the same evidence question being
separately considered by two different judges of the same court; the
potential for waste of judicial time is evident.
The belief that the pretrial evidence ruling is useful in lessening
parties' costs is less open to attack. A party's expenses may rise because
of the nonbinding effect of the pretrial evidence ruling: He may be forced
to argue the same evidence question twice. If he loses the second time
around as a proponent of evidence he will have to incur the expense of
getting his evidence in better evidentiary form. On the other hand, the
latter expense would have been incurred anyway had the pretrial ruling
not been sought.86 And the rise in a party's expenses because of multiple
argumentation is probably insignificant.
V
FEASIBILITY OF THE PRETRIAL EVIDENCE RULING
To assess the value of the pretrial evidence ruling one must look
beyond factors of judicial time and parties' expenses and examine the
ability of a judge to make a correct evidence ruling at the pretrial stage.
The doubt of judges and commentators over the ability of a pretrial judge
to make proper evidence rulings arises from a belief that the other evidence introduced and the circumstances of the trial bear heavily on
some questions of evidence admissibility.87 As the court said in LeRoy v.
Sabena Belgian World Airlines, "the efficacy of such rulings necessarily
is limited by the first judge's inability to foresee the circumstances of the
trial which may be relevant to admissibility."8 8 As far as it goes this
argument against the feasibility of making evidence rulings at pretrial is
See notes 112-147 infra and accompanying text.
85 Ibid. LeRoy v. Sabena Belgian World Airlines, 344 F.2d 266, 274 (2d Cir.), cert.
denied, 382 U.S. 878 (1965), intimates this, but the court does not reach the issue in its
decision.
86 Assuming, as one must, that the pretrial decision is correct, and therefore would also
have been made had it been left for the trial judge.
87 See United States v. Moore, 150 U.S. 57, 60 (1893) ; Beaty Shopping Center, Inc. v.
Mfonarch Ins. Co., 315 F.2d 467, 470 (4th Cir. 1963); Hawkins v. Missouri Pac. R.R., 188
F.2d 348, 351-52 (8th Cir. 1951) ; Golden Reward Mining Co. v. Boston Mining Co., 97 Fed.
413, 416 (8th Cir. 1899); UNIFoRm Ru .s or Ev-mDNcE, Rule 45 (1953).
88344 F.2d 266, 274 (2d Cir.), cert. denied, 382 U.S. 878 (1965); cf. Fidelity & Cas. Co.
v. Frank, 227 F. Supp. 948 (D. Conn. 1964).
84
19663
PRETRIAL EVIDENCE RULINGS
1033
irrefutable: If an evidence question involves matters which only will be
known at the trial, the ruling on that question clearly'should be reserved
for decision at trial. Not all evidence questions, however, involve factors
known only at trial; pretrial decision of such questions is not subject to
the objection put forward in the LeRoy case. Neither judges nor legal
writers have attempted to distinguish which types of evidence questions
may be decided at pretrial and which should not be so decided. Were such
a distinction made, perhaps some of the qualms of judges over the pretrial evidence ruling would be resolved.
A. A Proposed Division Among Evidence Questions
Certain evidentiary questions are inherently beyond the reach of the
pretrial judge because they arise only at trial. All problems concerning
the form of questions to or answers of a witness are exemplary of this
category. 9 Other evidence questions are clearly beyond the jurisdiction
of the pretrial judge to determine. All evidence questions requiring the
determination of controverted fact (for example, whether a document is
genuine, or a witness competent where the parties disagree on the underlying facts pertaining to the making of the document, the nature of the
witness) are within this group. 0 This exclusion cuts heavily across any
other classifications of evidence questions that one makes in trying to
segregate those questions amenable to pretrial resolution from those that
are not; regardless of any such segregation, if controverted fact is involved the pretrial judge is powerless to rule.
The great bulk of evidence law concerns admissibility. The law of the
admissibility of evidence consists of two distinctly different inquiries:
(1) Is the evidence offered probative of a material proposition in the case
(the problem of relevancy), and (2) does a rule exist which demands that
relevant evidence be excluded from consideration by the trier of fact (the
problem of competency)." This natural division of the problem of
89 If the attorney's questions and the witness's answers are in deposition form, the pretrial judge could rule on such questions; the pretrial judge is prohibited only from hearing oral
evidence at pretrial, Lynn v. Smith, 281 F.2d 501 (3d Cir. 1960), not from ruling on the form
of testimonial evidence before him in writing. The opportunity for such rulings, however,
would arise only rarely, for the normal rule is that objections to the form of questions and
answers in a deposition are waived if not asserted at the time the deposition was taken.
FED. R. Crv. P. 32(c) (2).
90
Pritchett v. Etheridge, 172 F.2d 822, 826 (5th Cir. 1949) (genuinely controverted fact
may not be determined at pretrial).
OlMcCoimcz, EvDENcE § 53, at 125, §§ 151-52 (1954); see, e.g., Sears v. Southern
Pac. Co., 313 F.2d 498, 504 (9th Cir. 1963); Hadley v. Baltimore & 0. Ry., 120 F.2d 993,
995 (3d Cir. 1941). In this Comment "competency" of evidence always refers to nonrelevancy
admissibility questions. There is much confusion among both judges and commentators over
the precise meaning of "relevancy," "competency," and "admissibility." Compare McConmxr, EviD~cE § 53, at 125 (1954), with WixOoRE, A STUDENT'S TEaxToox OF THE LAW
or EviDENc 36-37 (1935).
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CALIFORNIA LAW REVIEW
[Vol. 54: 1016
admissibility should be taken also as the dividing line between those
admissibility questions resolvable at pretrial and those that are not.
Questions of competency may be decided at pretrial; questions of relevancy normally should not be.9 2
Relevancy questions are not simply questions of logic, of whether
evidence X tends to prove material proposition y.93 While some relevancy
questions are of this clear cut logical type, most involve the judge in
weighing the probative value of evidence against any undesirable side
effects introduction of the evidence might cause. 4 Prominent among
undesirable effects of evidence pertinent to the relevancy decision are
surprise to the opponent, 95 waste of the court's time by cumulative proof
of a point already well established,96 possible prejudice the evidence might
arouse in the jury against the opponent,"' and possible confusion the
evidence may induce in the minds of the jury by introducing complex or
misleading side issues."' When the judge finds the evidence's undesirable
effects outweigh its probative value, it is excluded as irrelevant.
A pretrial judge cannot make a proper balancing-type relevancy
decision because so many of the pertinent factors are determinable only
at trial. To know the probative worth of evidence, a judge must know
not only its logical tendency to prove the proposition it is offered to prove,
but also the importance of this proposition to the proponent's case and the
other evidence the proponent has introduced, or offers to introduce, to
prove it." The pretrial judge can not properly estimate probative worth
92 The distinction suggested here may not be necessary in the protracted or "big" case
(for example, most antitrust cases). See note 101 infra.
93 James, Relevancy, Probability and the Law, 29 CALrj. L. REv. 689, 690 (1941); see
United States v. 88 Cases, More or Less, Containing Bireley's Orange Beverage, 187 F.2d 967,
975 (3d Cir.), cert. denied, 342 U.S. 861 (1951); United States v. Krulewitch, 145 F.2d 76,
80 (2d Cir.), rev'd on other grounds, 336 U.S. 440 (1949).
94 See United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 229-31 (1940); United
States v. Spaeth, 152 F. Supp. 216, 221 (ND. Ohio 1957), aff'd, 254 F.2d 924 (6th Cir.),
cert. denied, 358 U.S. 831 (1958); UNzioR= RULES Or EviDENCE, Rule 45 (1953); James,
supra note 93, at 701.
95 E.g., Gonzales v. United Fruit Co., 193 F.2d 479, 481 (2d Cir. 1951); United States
v. Krulewitch, 145 F.2d 76, 80 (2d Cir.), rev'd on other grounds, 336 U.S. 440 (1949);
Brigham Young Univ. v. Lillywhite, 118 F.2d 836 (10th Cir.), cert. denied, 314 U.S. 638
(1941).
96E.g., United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 229-31 (1940); Reeves
v. Bennet, 145 Mass. 23, 28, 11 N.E. 944 (1887) (opinion by Holmes, J.).
97
E.g., Sears v. Southern Pac. Co., 313 F.2d 498, 504 (9th Cir. 1963) ; United States v.
Kennedy, 291 F.2d 457, 459 (2d Cir. 1961); United States v. 88 Cases, More or Less, containing Bireley's Orange Beverage, 187 F.2d 967, 975 (3d Cir.), cert. denied, 342 U.S. 861
(1951).
98
B.g., Golden Reward Mining Co. v. Boston Mining Co., 97 Fed. 413, 416 (8th Cir.
1899); Burch v. Reading Co., 140 F. Supp. 136, 147 (E.D. Pa. 1956), aff'd, 240 F.2d 574
(3d Cir. 1957), cert. denied, 353 U.S. 965 (1957); James, supra note 93, at 701.
99 McCoRincK, EVIDENCE § 152, at 319-20; see Moore v. United States, 150 U.S. 57, 60
(1893).
1966]
PRETRIAL EVIDENCE RULINGS
1035
because he can only know what a party intends to offer in evidence, not
what he actually does offer, nor what he successfully introduces. Furthermore, for the pretrial judge even to approach a knowledgeable decision the
proponent would have to summarize the other evidence, documentary or
testimonial, which he at the time intends to offer on the point the
questioned evidence seeks to prove or which is necessary for an understanding of the importance of that point in his case. 100 Much court time
and litigant effort would be expended to sketch at pretrial a picture easily
and more accurately drawn at trial as evidence is actually introduced, a
picture which must be drawn even if the sketch be made. 01'
The undesirable effects of evidence are also often only apparent at
trial. To know evidence offered is cumulative, as to estimate its probative
worth, the judge must know the other evidence introduced on that point;
the pretrial judge can know only what the proponent might introduce.
Whether evidence will tend to confuse or mislead a jury is best determined by a trial judge who has the jury before him and who knows precisely at what point in the presentation of evidence the questioned evidence is offered. Surprise of the opponent at trial would not arise as a
factor in a pretrial relevancy decision simply because the parties are not
at trial." 2 The potential prejudicial effect of evidence may perhaps be
100 See
the comment following UmFoRm R-uL~s oF EvmECE, Rule 45 (1953), which
stresses the importance of acquaintance with the day-by-day course of the trial to the making
of the relevancy decision. See also Parmelee Transp. Co. v. Keeshin, 3 FED. RunLs SERV. 2d
16.261, Case 1, at 254 (NZl. E1. 1960), where the pretrial judge had to go through a painstaking analysis of summaries of the many documents in the case in order to make his relevancy decision.
101 This argument may not be applicable to the protracted or "big" case, such as the
typical antitrust case, e.g., Independent Iron Works, Inc. v. United States Steel Corp., 322
F.2d 656 (9th Cir.), cert. denied, 375 U.S. 922 (1963). In such cases the emerging procedure
is to have several pretrial conferences over many months, the case slowly being shaped for
trial; pretrial conferences and trial tend to form one undifferentiated process. In these cases
the pretrial judge may well become sufficiently acquainted with the parties' evidence to make
relevancy decisions as suitably as the trial judge. McAllister, The Big Case, ProceduralProblems, 64 HARv. L. REv. 27, 33 (1950). The Ninth Circuit in Independent Iron Works,
supra at 669, seems to approve of the practice of pretrial evidence rulings on relevancy
in the "big" case; it at least did not voice any objections to them. The Second Circuit, on
the other hand, seems to disapprove of making relevancy decisions at pretrial even in a "big"
case. See Syracuse Broadcasting Corp. v. Newhouse, 295 F.2d 269, 276 (2d Cir. 1961).
McAllister also has reservations about making substantive evidence rulings at pretrial in the
"big" case. McAllister, supra at 33-34. It is interesting to note that many commentators
suggest that the pretrial judge for the protracted case also be the trial judge, thus having
total control over all aspects of the case from beginning to end; such a system inherently
avoids the "double consideration" problem (discussed notes 112-47 infra) of the trial judge
reconsidering an evidence question already decided by the pretrial judge. See McAllister,
supra at 52.
10 2 McCormick suggests that at least the pretrial conference could be used to eliminate
from the relevancy determination the factor of surprise of opponent at trial over evidence;
if the opponent were notified at pretrial that certain evidence was to be introduced at trial,
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CALIFORNIA LAW REVIEW
[Vol. 54: 1016
assessed as easily by the pretrial judge as by the trial judge; an exception
to the exclusion of relevancy decisions from pretrial might be made for
evidence alleged to be so highly prejudicial that a before-trial motion to
exclude would be proper. If such a before-trial decision must be made,
the pretrial judge, rather than the trial judge, may as well be the one
to engage in the wasteful process of attempting to weigh outside the trial
context probative worth against prejudicial effect. Because probative
worth and most undesirable effects are better determined at trial, however, the before-trial determination of relevancy should not be expanded
through the device of pretrial evidence rulings to encompass more than
evidence overwhelmingly prejudicial on its face."0 3
Aside from the question of relevancy, the operation of the rules of
exclusion of evidence does not usually depend on trial context or other
evidence introduced on the same point. At issue in these "competency"
determinations is only whether evidence by its nature-not its effectfalls within or without an excluded class of evidence.'0 4 This is not to
say that such determinations are simple; the hearsay question, typical of
this type exclusionary rule, for example, is among the most complex and
torturous questions a judge may confront during a case. Decision at pretrial of such time consuming and interrupting questions is all the more
beneficial because of their difficult nature," 5 for the rush of trial may
lead the trial judge into error by forcing him to make a quick decision.
Since these determinations usually involve the application of settled rules
of exclusion and not a balancing of factors better known to the trial judge,
the pretrial judge is as capable as the trial judge to make them. 10 To a
certain extent competency rulings at pretrial are limited to exhibits and
he could not claim to be so surprised at trial as to be unable to meet that evidence. McCoR?rcK, EvmEN CE § 152, at 320 n.29 (1954).
l03 But see note 101 supra.
104 Exemplary of these exclusionary rules are the hearsay rule and its many exceptions,
the best evidence rule, and the dead man rule. See McCop2&cx, EVIDENCE § 53, at 125 (1954).
105 Gourley, supra note 70, at 171.
106 If a competency question does involve factors better known to the trial judge, of
course, decision of that question at pretrial would be as inappropriate as decision at pretrial
of the typical relevancy question. Except for such imponderable factors as the "feel" for the
case a judge develops as the trial progresses which may influence (query, properly?) the
trial judge's competency decision when the question is a close one, competency questions do
not typically involve factors which will be known only at trial. Those rare competency questions which may involve such factors are virtually limited to cases where evidence inadmissible for one purpose is later found at trial to be admissible for another purpose-for example, evidence excluded as hearsay, later found to be admissible for impeachment purposes
or for a nonhearsay purpose (to prove state of mind) which is only found to be relevant as
the trial progresses. Since, technically, distinctly separate competency determinations are
involved at the different stages in such cases, one might argue that the trial developments
requiring admissibility of evidence previously ruled inadmissible do not so much affect the
PRETRIAL EVIDENCE RULINGS
19661
1037
documentary evidence-including testimony in deposition form-simply
because oral evidence may not be taken at pretrial.0 7 However, some
questions relating to oral evidence, such as the qualifications of an expert
witness, the competency of a witness to testify, or the existence of a
privilege prohibiting certain testimony should be as resolvable at pretrial
as competency questions relating to documents.
Other important questions of evidence include whether a fact should
be judicially noticed and whether facts uncontroverted by both parties
are sufficient to raise a presumption and thus shift the burden of going
forward or the burden of persuasion. These evidence questions, like the
usual competency type admissibility question, do not normally depend
on factors best known at trial. The pretrial judge is in as good a position
as the trial judge to make these decisions, for he need look only to the law
and the nature of the fact to be noticed to decide a judicial notice question,10 8 and only to the law, the specific facts said to raise the presumption,
and the public policies sought to be effectuated through the presumption
in question to decide a presumption problem.' 09
The basic distinction dividing types of evidence questions for pretrial
purposes, then, should be the distinction between the relevancy and the
normal competency-admissibility questions: whether decision of the question requires knowledge of matters the pretrial judge cannot know so well
as the trial judge. There is little indication that the courts presently make
such a distinction. One indication that pretrial judges may be making such
a distinction unconsciously, however, is that pretrial judges making a
relevancy decision cast their opinions more often in nonbinding or limited
terms than do pretrial judges making competency decisions." 0 Some apvalidity of the competency decision made at pretrial as involve a new competency determination altogether.
0
Lynn v. Smith, 281 F.2d 501, 506-07 (3d Cir. 1960).
108 See, e.g., Ohio Bell Tel. Co. v. Public Util. Comm'n of Ohio, 301 U.S. 292, 300-02
(1937); Dean v. Southern Ry., 327 F.2d 757, 761 (6th Cir. 1964) (judge-made rule determines
whether particular evidence is subject to judicial notice); Bias v. Talabera, 318 F.2d 617, 619
(9th Cir. 1963) (statute determines whether fact is proper subject for judicial notice);
WIGmoRE, A STUDENT's TETBOOK ON Tm LAW oF Ev-DEccE 479-80 (1935).
109 See McCoaacx, EVmENcE §§ 306-07, at 636, 639 (1954); Comment, The California
Evidence Code: Presumptions, 53 CAlls. L. Rxv. 1439, 1447 (1965) (presumptions said to
rest on mixture of probability, convenience, and social policy).
110 Compare Parmelee Transp. Co. v. Keeshin, 3 FED. RuLEs Sav. 2d 16.261, Case 1, at
254 (N.D. 111. 1960) (relevancy decision binding only in so far as documents were excluded) ;
Aley v. Great AtI. & Pac. Tea Co., 211 F. Supp. 500, 501 (W.D. Mo. 1962). (advisory opinion
only on relevancy of evidence), with United States v. Certain Tracts of Land, 57 F. Supp.
739, 744 (S.D. Cal. 1944) (unlimited ruling on a question of admissibility of comparable
sales evidence under settled judicial rule for condemnation cases) ; LeRoy v. Sabena Belgian
World Airlines, 344 F.2d 266, 274 (2d Cir.), cert. denied, 382 U.S. 878 (1965) (unlimited
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CALIFORNIA LAW REVIEW
[Vol. 54: 1016
pellate opinions assert that relevancy decisions are better left for trial,"'
but no case specifically recognizes the proposed distinction. By limiting
the pretrial evidence ruling to questions on which pretrial determinative
action is feasible, the pretrial judge might be more inclined to cast his
decision in binding terms.
VI
EFFECT ON THE TRIAL JUDGE
above," 2
As noted
the present utility of the pretrial evidence ruling is
diminished because the trial judge may overrule the pretrial judge's decision, thus leaving the door open for double decision of the same evidence
question at the same court level. Under present law a pretrial evidence
ruling will not have the effect of a final determination until the trial judge
accepts it as binding. This situation is particularly serious because as a
novel technique the pretrial evidence ruling is likely to be viewed with
some suspicion and hostility by the trial judge.
Two different rules may govern the effect of a pretrial evidence ruling
on the trial judge under present law: the law of the case doctrine and
the modification of the pretrial order rule. These doctrines, based on
dissimilar policy considerations and having different ultimate effects, both
come in strict and liberal versions, some circuits adopting one version,
some the other. The final effect of a given pretrial order is therefore
highly uncertain. Under no version of either doctrine, however, is the
trial judge absolutely precluded from reconsidering the precise evidence
question decided at pretrial.
A. The Law of the Case
The law of the case doctrine states that a judge should not review a
ruling on a question of law made by a prior judge of the same court in
the same case." 3 At one time the law of the case doctrine was considered
ruling as to admissibility of evidence under the business records exception to the hearsay
rule). But see Fidelity & Cas. Co. v. Frank, 227 F. Supp. 948, 949 (D. Conn. 1964) (advisory
opinion as to admissibility of evidence under the business records hearsay exception); Independent Iron Works, Inc. v. United States Steel Corp., 322 F.2d 656, 669 (9th Cir.), cert.
denied, 375 U.S. 922 (1963) (unlimited ruling as to relevancy of evidence).
Ill Padovani v. Bruchhausen, 293 F.2d 546, 549-50 (2d Cir. 1961), suggests that while
a pretrial judge may exclude witnesses on grounds of irrelevancy, he should only do so under
exceptional circumstances. Syracuse Broadcasting Corp. v. Newhouse, 295 F.2d 269, 276 (2d
Cir. 1961) indicates that a relevancy decision is better left for trial than decided at pretrial.
112 See notes 83-85 supra and accompanying text.
11 Lummus, The Law of the Case in Massachusetts, 9 B.U.L. REV. 225, 232 (1929);
Note, 31 U. CrNc. L. REv. 109, 113 (1962). The law of the case doctrine may also be used
to refer to the binding effect on retrial in a lower court of an appellate court decision in the
case. Comment, 5 STAN. L. REv. 751 (1953). It is not so used here.
19661
PRETRIAL EVIDENCE RULINGS
1039
a mandatory rule of law" 4 similar to res judicata; as late as 1925 the
Second Circuit asserted that the second judge lacked all power to reconsider or alter a prior judge's ruling in the same case." 5 Today, however,
federal courts universally view the law of the case doctrine as it applies
to judges of coordinate jurisdiction as a wise rule of practice, but not a
mandatory rule of law." 6 The second judge is to a large extent free to
review and, if he thinks it erroneous, to overrule the prior judge's decision, 1 7 at least under one version of the modern doctrine."' The nonbinding effect of the prior judge's rulings on the later judge has been held
to apply to evidence rulings" 9 just as to rulings on other legal questions.
The primary policy served by this doctrine is the prevention of judicial shopping by litigants; the power of a second judge in the same case
to rule contrary to a prior judge encourages litigants to make an attempt
before each judge to secure a favorable ruling on the same legal question. 2
The law of the case doctrine also serves to prevent what some courts
consider the unsightly picture of one district court judge reviewing the
decision of a brother district court judge. 2 ' The argument most often
14 Cole Silver Mining Co. v. Virginia & Gold Hill Water Co., 6 Fed. Cas. 72, 74 (No.
2990) (C.C. Nev. 1871); Presidio Mining Co. v. Overton, 261 Fed. 933, 939 (9th Cir. 1919),
aff'd, 270 Fed. 388 (1921), cert. denied, 256 U.S. 694 (1921); Commercial Union of America,
Inc. v. Anglo-South American Bank, Ltd., 10 F.2d 937, 938 (2d Cir. 1925), overruled, Dictograph Prods. Co. v. Sonotone Corp., 230 F.2d 131 (2d Cir.), rehearing denied, 231 F.2d 867,
cert. denied, 352 U.S. 883 (1956); United States v. Steinberg, 100 F.2d 124, 125 (2d Cir.),
inodified, 100 F.2d 405 (1938) (mandatory law of the case begins to erode away in the
Second Circuit with this case). The law of the case had a similar history in the states. See
generally, Annot., 132 A.L.R. 14 (1941).
115 Commercial Union of America, Inc. v. Anglo-South American Bank, Ltd., supra
note 114.
11O Hoffman v. Blaski, 363 U.S. 335, 340, n.9 (1960) (dictum); United States v. United
States Smelting, Ref. & Mining Co., 339 U.S. 186, 198 (1950) ; LeRoy v. Sabena Belgian World
Airlines, 344 F.2d 266, 274 (2d Cir.) (dictum), cert. denied, 382 U.S. 878 (1965); Castner v.
First Nat'l Bank of Anchorage, 278 F.2d 376, 380 (9th Cir. 1960) ; United States v. Wheeler,
256 F.2d 745, 747 (3d Cir.), cert. denied, 358 U.S. 873 (1958); TCF Film Corp. v. Gourley,
240 F.2d 711, 713 (3d Cir. 1957); Dictograph Prods. Co. v. Sonotone Corp., 230 F.2d 131,
134-35 (2d Cir.), rehearing denied, 231 F.2d 867, cert. denied, 352 U.S. 883 (1956).
117 Castner v. First Natl Bank of Anchorage, supra note 116.
118 See note 124 infra.
".9 Salem Trust Co. v. Federal Nat'l Bank, 78 F.2d 407, 408 (1st Cir. 1935) (evidence
ruled admissible by judge who took over the case after the first had died). The two judges
here, it should be noted, were not in the pretrial-trial relationship.
120 United States v. Wheeler, 256 F.2d 745, 748 (3d Cir.), cert. denied, 358 U.S. 873
(1958); Note, 31 U. Cmc. L. REv. 109, 113 (1962); Maniey, "Law of the Case" as a Pitfall,
34 CoRNE= L.Q. 397 (1949).
121
Presidio Mining Co. v. Overton, 261 Fed. 933, 939 (9th Cir. 1919), aff'd, 270 Fed.
388 (1921), cert. denied, 256 U.S. 694 (1921); United States v. Wheeler, supra note 120, at
746-47. Thus it is often still said today that the judge should defer to the prior judge's ruling
out of feelings of judicial respect and comity. LeRoy v. Sabena Belgian World Airlines, 344
F.2d 266, 274 (2d Cir.), cert. denied, 382 U.S. 878 (1965). But see Dictograph Prods. Co. v.
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CALIFORNIA LAW REVIEW
[Vol. 54: 1016
advanced to support the "rule of practice but not of law" position of today's federal courts on the law of the case doctrine is that if error occurs
at the trial level the trial court judge should be able to correct it, thus
preventing appeal, regardless of whether the judge correcting it or some
other district court judge committed the error. 2 2
While all federal courts, following the United States Supreme Court's
decision in United States v. United States Smelting, Refining & Mining
Co.,"2' 3 agree that the law of the case doctrine is only a rule.of practice,
the circuits differ as to when the second judge is justified in departing
from the rule. Some circuits assert that a judge may reverse a prior judge's
ruling whenever he believes it to be wrong. 24 The Ninth Circuit even
intimates that the second judge is honor bound to review a prior judge's
ruling in the case on which he now sits if he is at all doubtful about its
soundness.' 25 The Third Circuit expresses another view: The second judge
may review the prior's ruling only if the first judge is dead or otherwise
unavailable, and therefore unable to reconsider his own ruling. 20 Only
such exceptional circumstances justify a second judge even entertaining
a motion which will require him to decide again a question already decided
by a judge of the same court. 27 The second judge's opinion of the soundness of the first judge's ruling is not relevant in this circuit's view to the
question of whether the second judge may review the first's ruling. 28
Under the law of the case doctrine, therefore, a pretrial evidence ruling
is more likely to be accepted as final by the trial judge in the Third
Circuit' 29 than in the First, Second, and Ninth Circuits, though in no
federal court would such a ruling be mandatorily binding.
Sonotone Corp., 230 F.2d 131, 135 (2d Cir.), rehearing denied, 231 F.2d 867, cert. denied,
352 U.S. 883 (1956), which gives this argument short shrift.
122See, e.g., Lummus, supra note 113, at 233-34; Note, 31 U. CiNc. L. REV. 109, 116
(1962).
123 339 U.S. 186, 198 (1950).
124 Castner v. First Nat'l Bank of Anchorage, 278 F.2d 376, 380 (9th Cir. 1960) ; Dictograph Prods. Co. v. Sonotone Corp., 230 F.2d 131, 135 (2d Cir.), rehearing denied, 231 F.2d
867, cert. denied, 352 U.S. 883 (1956); Salem Trust Co. v. Federal Nat'l Bank, 78 F.2d 407,
408 (1st Cir. 1935). The majority of federal circuits adhere to this view.
125 Castner v. First Nat'l Bank of Anchorage, supra note 124.
126 United States v. Wheeler, 256 F.2d 745, 747 (3d Cir.), cert. denied, 358 U.S. 873
(1958); TCF Film Corp. v. Gourley, 240 F.2d 711, 713 (3d Cir. 1957).
127 United States v. Wheeler, supra note 126.
28
' Id. at 748. The second's opinion of the first's decision is relevant, of course, to
whether or not the second may overrule if he is in a position to review.
129 This version goes the farthest in making the first ruling binding because the pretrial
judge is typically available before trial to reconsider his own ruling, thus precluding review
by the trial judge.
19661
PRETRIAL EVIDENCE RULINGS
1041
B. Modification of the Pretrial Order
The pretrial evidence ruling, like any other action taken at pretrial,
is reported to the trial judge as a part of the pretrial order.' A pretrial
order may be modified before or at trial only "to prevent manifest injustice."'' Two policy considerations dictate restriction of the power to
modify the pretrial order: (1) the need to force counsel to take pretrial
seriously, thus insuring their sound preparation for it,' 32 and (2) the
need to force counsel to disclose fully the basic propositions they will
put forward at trial, thus removing the "sporting element" from trial. 3'
Based on different policy considerations than those underlying the
law of the case doctrine, the modification doctrine's criteria for altering
the pretrial order also differ from the criteria of the law of the case doctrine for overruling the prior judge. The "to prevent manifest injustice"
test is too general to be anything but obscure. Some of the factors courts
consider in applying this test, however, may be identified. 4 One such
factor concerns the effect on the party seeking modification of a refusal
to modify; for modification to be possible at all, a party must show that
failing to modify would have a prejudicial effect on his case.' 5 The major
determinants in the "to prevent manifest injustice" test, however, have
little to do with the substantive effect of the modification sought on the
seeker's case; rather, they concern the effects which will result from the
137
unmodification. 3 6 Surprise to the opponent is such a determinant;
after
and
pretrial
at
of
diligence
a
lack
for
movant
the
justly rewarding
is another.3 Such factors indicating that to modify the order would cause
an injustice often control whether a judge finds modification necessary to
prevent injustice."3 9
130 FED. R. Civ. P. 16, supra note 1.
'1
Ibid.
Case v. Abrams, 352 F.2d 193, 195 (10th Cir. 1965); Christenson, The PretrialOrder,
29 F.R.D. 362, 371 (1962).
133 Clark v. Pennsylvania R.R., 328 F.2d 591, 594 (2d Cir.), cert. denied, 377 U.S. 1006
132
(1964).
134 Nnxs, Paammx. 162 (1950); Christenson, supra note 132, at 372-76; Note, Federal
PretrialPractice,a Study of Modification and Sanctions, 51 Gno. L.J. 309, 323 (1963).
135 Case v. Abrams, 352 F.2d 193, 195 (10th Cir. 1965) (modification denied, partly because no good cause shown for modification); Maryland Cas. Co. v. Rickenbacker, 146 F.2d
751, 753 (4th Cir. 1944). Similarly, no appeal lies from a modification of the pretrial order
absent a prejudicial effect on the opponent because of modification. Scott v. Spanjer Bros.,
Inc., 298 F.2d 928, 931 (2d Cir. 1962).
136 Note, supra note 134, at 323-24.
137 Scott v. Spanjer Bros., Inc., 298 F.2d 928, 931 (2d Cir. 1962).
13
8 McCarthy v. Lerner Stores Corp., 9 F.R.D. 31 (D.D.C. 1949) ; Nims, op. cit. supra
note 134, at 162.
139 Note, supra note 134, at 323.
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Like the law of the case doctrine, the modification doctrine comes in
strict and liberal versions. Some courts will allow modification only in
"exceptional circumstances"; 140 others follow a liberal policy akin to
that of Federal Rule 15 governing amendments to the pleadings, allowing modification whenever the opponent is not unduly surprised or if the
court can compensate for his surprise through a continuance. 14' The
factors courts consider relevant to the manifest injustice test are the same
for both versions of the modification doctrine; only the practical effect of
42
the two differs.1
Courts have developed the modification doctrine largely in reference
to the parties' stipulation of agreed facts and statement of issues in controversy; in reference, in other words, to the consensual parts of the
pretrial order. But evidence rulings and the like are coercive in nature,
not consensual; when a party approves the pretrial order proposed by the
judge all his approval means in so far as the determinative actions of the
judge are concerned is that he admits the action took place, not that he
approves of or consents to it. Federal Rule 16, however, affords no basis
for distinguishing between the consensual and coercive parts of the pretrial order for modification purposes; there is only one test of modification
given and that applies to the entire pretrial order. Under the present
140 See Marble v. Batten & Co., 9 FED. RuiYLs SERV. 2d 16.33, Case 1 (D.D.C. 1964);
McCarthy v. Lerner Stores Corp., 9 F.R.D. 31 (D.D.C. 1949); accord, Kline v. S. M. Flickinger Co., 314 F.2d 464, 467 (3d Cir. 1963); Payne v. S.S. Nabob, 302 F.2d 803 (3d Cir.
1962) ; Associated Beverages Co. v. P. Ballantine & Sons, 287 F.2d 261 (5th Cir. 1961) ; First
Fed. Say. & Loan Ass'n of Bremerton v. United States, 295 F.2d 481 (9th Cir. 1961). But see
Globe Indem. Co. v. Capitol Ins. & Sur. Co., 352 F.2d 236, 239 (9th Cir. 1965) (seems to
indicate that the Ninth Circuit is beginning to move toward the less strict version of the
modification doctrine).
141 See Clark v. Pennsylvania R.R., 328 F.2d 591 (2d Cir.), cert. denied, 377 U.S. 1006
(1964); Bucky v. Sebo, 208 F.2d 304, 305 (2d Cir. 1953) (Rule 16 should be interpreted in
light of Rule 15b to avoid strict modification doctrine) ; accord, Case v. Abrams, 352 F.2d 193,
195 (10th Cir. 1965) (no modification allowed unless good cause shown, but strict modification doctrine should be eschewed); United States v. Sommers, 351 F.2d 354 (10th Cir. 1964)
(court stretches pretrial order to avoid having to apply modification doctrine at all) ; Century Ref. Co. v. Hall, 316 F.2d 15, 20 (10th Cir. 1964) (pretrial order should be liberally
construed but strictly applied); Smith Contracting Corp. v. Trojan Constr. Co., 192 F.2d
234 (10th Cir. 1951) (rigid modification doctrine should be avoided); see Rosden v.
Leuthold, 274 F.2d 747 (D.C. Cir. 1960); Maryland Cas. Co. v. Rickenbacker, 146 F.2d 751
(4th Cir. 1944).
142 The problem of amendment of the pleadings to conform to proof in cases where such
amendment will also require a modification of the pretrial order best illustrates the difference in attitude toward modification between the strict and liberal versions of the modification
doctrine. Compare Bucky v. Sebo, 208 F.2d 304, 305 (2d Cir. 1953), where the court said
Federal Rule 16 should be interpreted in light of Federal Rule 15b in order to liberalize
the modification doctrine, with Kline v. S. M. Flickinger Co., 314 F.2d 464, 467 (3d Cir.
1963), where the court said that Federal Rule 15b should be interpreted in light of Federal
Rule 16 in order to make amendments to conform to proof difficult to obtain.
19661
PRETRIAL EVIDENCE RULINGS
1043
wording of Federal Rule 16 the modification doctrine, therefore, is applicable to determinative actions, like evidence rulings, taken at pretrial.
While there is little recorded judicial opinion on this point, at least one
court believes to the contrary; it applies law of the case doctrine, not the
modification doctrine, to a trial judge's reversal of the pretrial judge's
1 43
decision to consolidate issues for trial.
C. Discretionof the Trial Judge
The problem with the law of the case and the modification doctrines is
that under both the trial judge has discretion to reverse or accept the
pretrial ruling; error may be assigned under either doctrine only for an
abuse of that discretion. 4 The range of discretion allowed by each doctrine differs, however. Under the majority version of law of the case, 45
whether the second judge abuses discretion in overruling the prior judge's
decision is determined by whether or not the first judge's decision was
erroneous. This places little restraint on the second judge's power to overrule the first; he would not overrule to begin with unless he believed that
judge mistaken. Attacking the trial judge's decision to overrule the pretrial judge as an abuse of discretion becomes virtually impossible under
this version.
The minority, Third Circuit version of the law of the case offers a
better tool for controlling the trial judge's exercise of discretion: It relates
the propriety of overruling the prior judge to the ascertainable criteria
of availability of the prior judge rather than only to the subjective criteria
of the second judge's view of the law. Because the second judge ought not
overrule if the prior is available, his power to overrule is much more
restricted than under the majority version of law of the case.146
'43 First Nat'l Bank in Greenwich v. National Airlines, Inc., 288 F.2d 621, 623 (2d Cir.),
cert. denied, 368 U.S. 859 (1961). Confusion over which doctrine applies is indicated by the
majority and dissenting opinions in LeRoy v. Sabena Belgian World Airlines, 344 F.2d 266
(2d Cir.), cert. denied, 382 U.S. 878 (1965). The majority apparently believes the law of the
case doctrine applies to pretrial evidence rulings (or other rulings by the pretrial judge), id.
at 274; the dissenting judge thinks the modification doctrine applies to such rulings, id. at
279.
144 McKey v. Fairbairn, 345 F.2d 739, 742 (D.C. Cir. 1965) ("justifiably large discretion" of trial judge to either allow or deny modification indicated) ; Scott v. Spanjer Bros.,
Inc., 298 F.2d 928, 931 (2d Cir. 1962) (modification of pretrial order held not an abuse of
discretion). Castner v. First Nat'l Bank of Anchorage, 278 F.2d 376, 380 (9th Cir. 1960)
(with law of case doctrine, question is one of "proper exercise of judicial discretion" where
one judge has overruled another judge of the same court).
145The version which allows the second judge to overrule the prior if he believes the
prior judge's ruling is erroneous. See note 124 supra and accompanying text.
146 See text at notes 126-28 supra for further discussion of the minority version of the
law of the case doctrine. When the prior judge is unavailable, the test under the minority
version becomes the same as the majority version test, that is, whether or not the second
believes the first judge's ruling to be erroneous. See text at note 128 supra.
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The modification doctrine also offers stricter control than the majority
version of the law of the case over a judge's discretionary power to alter
an evidence ruling contained in the pretrial order, since most factors relevant to the validity of the decision to modify, such as prejudice, surprise,
and diligence, are ascertainable by an appellate court. Certain objective
facts must be present, or absent, before modification is justified. Under
the strict version of the modification doctrine it is of course more difficult
to show sufficient prejudice, diligence, or lack of surprise to the opponent
to justify modification than it is under the liberal version. The factor of
undue surprise to the opponent of modification would almost always be
present in the case of the pretrial evidence ruling: The winner at pretrial
would not obtain proof for facts slated for judicial notice, find a better
form for evidence ruled admissible, be able to meet evidence excluded,
so a reversal of the pretrial ruling would usually prejudice his case.
Because the trial judge considers the surprise to the winner at pretrial,
and not merely the soundness of the pretrial ruling, the modification
doctrine1 4 7 provides a more equitable basis than the law of the case doctrine for the decision at trial of whether or not the pretrial evidence ruling
should be altered. That doctrine, however, still leaves open the door to
discreet judicial shopping and double consideration of the same evidence
question.
D. Solutions to the Problem of Effect on the Trial Judge
From the standpoint of efficient judicial administration, then, neither
the law of the case nor the modification doctrine appropriately governs
the pretrial evidence ruling. For that device to be most useful it should
be mandatorily binding on the trial judge. It is difficult to see how a litigant is more prejudiced by an erroneous evidence ruling at pretrial than
he is by an erroneous evidence ruling at trial; under present law the latter
may not be reviewed before final appeal, so why should the former?""
147
See text following note 130 supra for further discussion of the modification doctrine.
For the purposes of pretrial evidence rulings, the harsh version of the modification doctrine
would be better than the liberal if the modification doctrine is to be applied to such rulings,
for it would combine the equitable criteria of the modification doctrine with a resistance to
allowing modification.
148 Before-trial rulings on evidence questions are not normally reviewable except on
appeal from final judgment in trial court. 6 MooRE, FEDERAL PRACtiCE § 54.16, at 146 (2d
ed. 1965); 3 MooRx, FDERA. PRAcrica § 16.21, at 1134 (2d ed. 1965). In those extraordinary
cases in which an interlocutory decree is final disposition of the case for all practical purposes,
however, a federal appellate court may grant immediate review by way of writ of mandate,
Padovani v. Bruchbausen, 293 F.2d 546 (2d Cir. 1961) (pretrial order precluding use of
evidence crucial to plaintiff's case as a punishment held immediately reviewable) ; Comment,
Mandamus Proceedings in the Federal Courts of Appeals: A Compromise with Finality, 52
CATi. L. REv. 1036, 1045, 1048 (1964).
19661
PRETRIAL EVIDENCE RULINGS
1045
The circumstance that another judicial mind on the same court will consider the case is insufficient reason for allowing such review of the pretrial
evidence ruling; for normally it would be no more than fortuitous that
the correct decision would be that of the trial judge rather than that of
the pretrial judge. 49 In reality, then, allowing reversal at trial may as
often as not result in a wrong decision, thus causing reversal on appeal,
the very thing allowing reversal at trial purports to avoid. No good reason
exists, therefore, for not making the pretrial evidence ruling mandatorily
binding, and in that way avoiding the twin evils of judicial shopping and
double consideration which lessen the utility of that device.
It is too late in the day to return the law of the case doctrine to the
status of a rule of law. A possible solution to the power of the trial judge
to overrule the pretrial's ruling would be for the circuit courts generally
to adopt the Third Circuit's version of the law of the case 5 ° as the standard for review by the trial judge of pretrial evidence rulings. While not
absolutely prohibiting review by the trial judge, the enabling circumstances would occur so infrequently that in practice this standard would
tend to preclude review at trial of the pretrial ruling. 5 '
The modification doctrine,'52 in either version, is not by itself the
proper tool for controlling review at trial of pretrial evidence rulings. 5 '
In part, Federal Rule 16 creates the problem; that rule is presently being
used by courts to justify taking coercive action at pretrial,' but the tests
of modifiability prescribed in it were designed with a consensual pretrial
order in mind.'5 5 An amendment to Federal Rule 16 prescribing a new
test of modifiability for the coercive action taken by the pretrial judge
on evidence questions would be the best solution to the problem. Such an
amendment might be worded as follows:
Federal Rule 16:
(7) rulings at pretrial on evidence questions properly raised at pretrial are final, and may be altered at trial only if the party seeking
reversal (1) offers new facts not known at pretrial justifying
reversal and (2) reversal is required to prevent manifest injustice.
This amendment would cover those evidence questions'5 " for which pre140 United States v. Wheeler, 256 F.2d 745, 748 (3d Cir.), cert. denied, 358 U.S. 873
(1958).
150 See text at note 126 supra for a discussion of the Third Circuit's minority version of
the law of the case doctrine.
151 See text at note 129 supra.
152 See notes 130-42 supra and accompanying text for discussion of the modification
doctrine.
153 See notes 112, 149 supra and accompanying text.
15 4
See note 17 supra and accompanying text.
155 See text following note 142 supra.
156 Perhaps this amendment should cover all coercive action-for example, partial sum-
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[Vol. 54: 1016
trial resolution is feasible;' 57 the relevancy type evidence question would
not be covered, because it inherently involves factors which may only be
known at trial. 5 8 The proposed amendment has the virtue of combining
a strict approach to review with the equitable criteria'5 9 of the modification doctrine for allowing reversal when review is justified. Also, by confining itself strictly to evidence rulings at pretrial the amendment avoids
wholesale disruption of the present effect of the law of the case doctrine
on other legal questions decided before trial and of the modification doctrine on other aspects of the pretrial order. The amendment is a rifle, not
a shotgun.
Of the two solutions suggested here, adoption of the proposed amendment would be preferable to adoption of the Third Circuit's version of
law of the case, because the amendment would immediately provide a
uniform rule for all circuits to follow as well as bring dramatically to the
attention of attorneys the new potentialities of pretrial.
VII
PROCEDURAL
CONSIDERATIONS
While the pretrial evidence ruling possesses great potential, seeking
coercive action on evidence questions at pretrial is today fraught with
procedural pitfalls which may trap the unwary litigant. How should a
party desiring an evidence ruling at pretrial go about securing one? What
should a party who loses on an evidence ruling at pretrial do to preserve
his objection to the ruling for appeal purposes? The infrequent use of
the pretrial evidence ruling, the nature of the pretrial conference, and the
uncertainty concerning the binding effect of the pretrial ruling on the
trial judge make answers to these questions important.
The proper method of securing a pretrial evidence ruling, aside from
submission of the question by both parties, is to notice a request for such
a ruling in the pretrial statement made in preparation for pretrial by the
parties under most local rules of federal district courts. 10 This insures
that both the judge and the adversary are informed of the proposed action.
The judge may prepare himself for the ruling on evidence at pretrial;
the adversary cannot claim surprise at meeting an evidence question at
pretrial. If the motion for a ruling is made directly at the pretrial confermary judgment, definition of the issues without party consent-taken by a pretrial judge.
This question, however, is beyond the scope of this Comment.
157 See text at notes 89-92, 106 supra.
158 See text at note 99 supra. But see note 101 supra.
159 See note 147 supra and accompanying text.
160 E.g., S.D. CAL. R. 9(d) ; see Brief for Appellee-Appellant, pp. 22-23, LeRoy v. Sabena
Belgian World Airlines, 344 F.2d 266 (2d Cir.), cert. denied, 382 U.S. 878 (1965).
19661
PRETRIAL EVIDENCE RULINGS
1047
ence, without prior notice to the opponent, the judge, upon request, should
postpone consideration of the evidence question until the opponent can
prepare -himself to meet it.
A party receiving an adverse evidence ruling at pretrial must take
steps to insure its preservation for appeal. His job is more complicated
than at trial. At trial a continuous record is kept, while at pretrial this
is not the typical procedure.' 1 When an evidence question is to be considered at pretrial both parties may request that a continuous record of
the conference be made if the local district court rules1 62 allow such a
record. Since neither party at this stage knows who shall lose, it is in the
interest of both that some record be kept. The problem of recordation
is crucial. To preserve for appeal a ruling excluding evidence the proponent must show that he made an offer of proof; 163 and to preserve any
erroneous ruling for appeal, the losing party must be able to show that
he clearly pointed out the error to the judge.' 64 Such information should
be attached to, or incorporated in, the pretrial order if no record of the
pretrial conference is kept; this would be the most economical way to
solve the problem.'6 5
Failure at present to follow such procedures may not result in loss of
the alleged error for appeal. An appellate court could reasonably hold that
in view of the novelty of the pretrial evidence ruling lack of compliance
161 The necessity of a record for the preservation of error for appeal purposes is pointed
PRocEnuRx 69-70 (1965).
out in Jox, LAWYER'S CoNcIsE GUIDE To T Lai
The court in Independent Iron Works, Inc. v. United States Steel Corp., 322 F.2d 656
(9th Cir.), cert. denied, 375 U.S. 922 (1963), recognized the necessity of a transcript or other
record of the pretrial conference when the pretrial judge is making evidence rulings. See id.
at 671. The court, for example, decries counsel's failure to make an adequate offer of proof
at either pretrial or trial concerning evidence which was ruled inadmissible. Id. at 673 n.22,
674 n.23. The only way a pretrial offer could be available to the circuit court for appeal purposes would be through a record of some sort being kept at pretrial. Such a record need not
be a full transcript of the whole conference. See note 165 infra. The cost of preparing a transcript, or other record, of the pretrial conference may be taxed to the losing party on appeal.
Independent Iron Works, Inc. v. United States Steel Corp., supra at 677-78.
62
1 SjXN.Y. CAL. R. 14(a)(3), (4).
163 FED. R. CIv. P. 43(c) ; UzmoR.i RuLEs or EVIDENCE, Rule 5 (1953); 1 WIGmORE,
EVIDENCE § 17 (3d ed. 1940)*; Ladd, Common Mistakes in the Technique of Trial, 22 IowA
L.R av. 609, 619-20 (1937).
' 64 McCoaIIx, EvmEwcE § 52, at 121 (1954); UNirroa R-LES or EVIDENCE, Rule 4
(1953); Gibbs, PrejudicialError:Admission and Exclusion of Evidence in the FederalCourts,
3 V=ii. L. REv. 48, 51 (1957); Ladd, supra note 163.
165 Such a procedure would in effect revive the practice of excepting to adverse evidence
rulings in federal courts (in the pretrial situation only, of course), a practice Federal Rule 46
abolishes. The abolition of the exception practice, however, is predicated on counsel making
clear in the record the basis of his objection to the court's ruling. FED. R. Cirv. P. 46; McCorotlCX, EvmENcE § 52, at 121 (1954). If no continuous transcript is kept at pretrial,
adopting a procedure which would convey the necessary information to the appellate court
should be unobjectionable.
1048
CALIFORNIA LAW REVIEW
[Vol. 54: 1016
with offer and exception requirements should be overlooked because the
parties did not have a chance to include this information in the record.' 0
As the pretrial evidence ruling becomes a better known and more frequently used technique, this excuse will lose its force. Even today, however, an attorney should be in a better position on appeal if he points out
the error to the judge making it, or indicates the importance to his case
of excluded testimonial evidence.
Since today the pretrial evidence ruling is not mandatorily binding on
the trial judge, to preserve the ruling for appeal one should at trial again
object to evidence ruled admissible at pretrial, or offer again evidence
excluded at pretrial. There are simply too many authorities and cases
outstanding which assert that objections not made at trial on the introduction of evidence are waived, 1 67 or that failure to seek correction of error
166 See Gibbs, supra note 164.
167 See note 31 supra. In Independent Iron Works, Inc. v. United States Steel Corp.,
322 F.2d 656, 675 (9th Cir.), cert. denied, 375 U.S. 922 (1963), the court held that although
the pretrial judge erred in ruling the entire deposition of plaintiff's witness inadmissible as
irrelevant, the error was not appealable, in part because the plaintiff at trial had failed to try
to introduce the portions of the deposition the court of appeals now ruled were admissible.
The procedures governing the appeal of one of the few traditional devices analogous to
the pretrial evidence ruling, the motion before trial to suppress illegally obtained evidence,
may shed some light on this problem. The failure to object again at trial to evidence after
denial of a motion to suppress has been held to constitute waiver of any objection to the
evidence for appeal purposes. Lawn v. United States, 355 U.S. 339, 350-55 (1958). The facts
of Lawn, however, amounted to conscious waiver (attorney stated he bad no objection to
introduction of evidence he had tried to exclude by a motion to suppress); and the court
noted: "It is quite true generally that the overruling of a pretrial motion to suppress the use
at the trial of particular evidence preserves the point and renders it unnecessary again to
object when such evidence is offered at the trial." Id. at 353. In Page v. United States, 282
F.2d 807 (8th Cir. 1960), the court held that the denial of defendant's before-trial motion
to suppress illegally obtained evidence preserved the error for appeal without the need for
counsel to object again at trial. Id. at 813. But see id. at 813 (opinion of Sanborn, J.) ; Cogen
v. United States, 278 U.S. 221, 224 (1929) (if motion to suppress is denied, normal procedure
is to object again to the evidence when offered at trial) ; cf. Gouled v. United States, 255 U.S.
298, 312-13 (1921) (trial judge has duty to consider admissibility of evidence which appears
to have been unconstitutionally obtained even if motion to suppress has previously been
denied). If one has unsucessfully sought to exclude illegally obtained evidence by a beforetrial motion to suppress, therefore, it is safer to object again at trial as the evidence is offered,
even though in most cases the denial of the prior motion will preserve the point for appeal.
For the trial itself, of course, the general rule is that an objection to the same evidence
once made need not continuously be asserted each time the infected evidence is introduced;
the law does not require the doing of a futile act. Keen v. Overseas Tankship Corp., 194 F.2d
515, 519 (2d Cir.), cert. denied, 343 U.S. 966 (1952). This rule was formulated, however, in
light of the context of the continuous trial, governed by one judicial mind, not the pretrialtrial context in which two judges consider the same case. Since under present law the trial
judge can overrule the pretrial judge's evidence ruling, reasserting an objection made and lost
at pretrial cannot be said to be engaging in a futile act (just as objecting again at trial to
unconstitutionally obtained evidence is not a futile act. Gouled v. United States, supra). The
logic of the Keen case does not, in other words, apply to the case of an evidence ruling made
at pretrial, as the court in Independent Iron Works, Inc. v. United States Steel Corp., supra
19661
PRETRIAL EVIDENCE RULINGS
1047
ence, without prior notice to the opponent, the judge, upon request, should
postpone consideration of the evidence question until the opponent can
prepare 'himself to meet it.
A party receiving an adverse evidence ruling at pretrial must take
steps to insure its preservation for appeal. His job is more complicated
than at trial. At trial a continuous record is kept, while at pretrial this
is not the typical procedure.", When an evidence question is to be considered at pretrial both parties may request that a continuous record of
the conference be made if the local district court rules"62 allow such a
record. Since neither party at this stage knows who shall lose, it is in the
interest of both that some record be kept. The problem of recordation
is crucial. To preserve for appeal a ruling excluding evidence the proponent must show that he made an offer of proof; 6 3 and to preserve any
erroneous ruling for appeal, the losing party must be able to show that
he clearly pointed out the error to the judge.'6 4 Such information should
be attached to, or incorporated in, the pretrial order if no record of the
pretrial conference is kept; this would be the most economical way to
solve the problem.' 65
Failure at present to follow such procedures may not result in loss of
the alleged error for appeal. An appellate court could reasonably hold that
in view of the novelty of the pretrial evidence ruling lack of compliance
161 The necessity of a record for the preservation of error for appeal purposes is pointed
out in Jox, LAwYER's
CONCISE GUIDE TO TRiAi PROCEDuE 69-70 (1965).
The court in Independent Iron Works, Inc. v. United States Steel Corp., 322 F.2d 656
(9th Cir.), cert. denied, 375 U.S. 922 (1963), recognized the necessity of a transcript or other
record of the pretrial conference when the pretrial judge is making evidence rulings. See id.
at 671. The court, for example, decries counsel's failure to make an adequate offer of proof
at either pretrial or trial concerning evidence which was ruled inadmissible. Id. at 673 n.22,
674 n.23. The only way a pretrial offer could be available to the circuit court for appeal purposes would be through a record of some sort being kept at pretrial. Such a record need not
be a full transcript of the whole conference. See note 165 infra. The cost of preparing a transcript, or other record, of the pretrial conference may be taxed to the losing party on appeal.
Independent Iron Works, Inc. v. United States Steel Corp., supra at 677-78.
162 S.D.N.Y. CAL. R. 14(a) (3), (4).
16 3 FED. R. Civ. P. 43(c); UNivoa
RULEs oF EVIDENCE, Rule 5 (1953); 1 WIGMORE,
§ 17 (3d ed. 1940)°; Ladd, Common Mistakes in the Technique of Trial, 22 IowA
L. REv. 609, 619-20 (1937).
64
1 Mc:CoPI
cx, EVIDENCE § 52, at 121 (1954); Umuo.u Rurrs ox EVIDENCE, Rule 4
(1953); Gibbs, PrejudicialError: Admission and Exclusion of Evidence in the FederalCourts,
3 V=rn. L. REv. 48, 51 (1957); Ladd, supra note 163.
.65 Such a procedure would in effect revive the practice of excepting to adverse evidence
rulings in federal courts (in the pretrial situation only, of course), a practice Federal Rule 46
abolishes. The abolition of the exception practice, however, is predicated on counsel making
clear in the record the basis of his objection to the court's ruling. FED. R. Civ. P. 46; McCoxhiacic, EvIDENE § 52, at 121 (1954). If no continuous transcript is kept at pretrial,
adopting a procedure which would convey the necessary information to the appellate court
should be unobjectionable.
EvDENocE
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CALIFORNIA LAW REVIEW
[Vol. 54: 1016
with offer and exception requirements should be overlooked because the
parties did not have a chance to include this information in the record.' 0
As the pretrial evidence ruling becomes a better known and more frequently used technique, this excuse will lose its force. Even today, however, an attorney should be in a better position on appeal if he points out
the error to the judge making it, or indicates the importance to his case
of excluded testimonial evidence.
Since today the pretrial evidence ruling is not mandatorily binding on
the trial judge, to preserve the ruling for appeal one should at trial again
object to evidence ruled admissible at pretrial, or offer again evidence
excluded at pretrial. There are simply too many authorities and cases
outstanding which assert that objections not made at trial on the introduction of evidence are waived,""' or that failure to seek correction of error
166 See Gibbs, supra note 164.
167
See note 31 supra. In Independent Iron Works, Inc. v. United States Steel Corp.,
322 F.2d 656, 675 (9th Cir.), cert. denied, 375 U.S. 922 (1963), the court held that although
the pretrial judge erred in ruling the entire deposition of plaintiff's witness inadmissible as
irrelevant, the error was not appealable, in part because the plaintiff at trial bad failed to try
to introduce the portions of the deposition the court of appeals now ruled were admissible.
The procedures governing the appeal of one of the few traditional devices analogous to
the pretrial evidence ruling, the motion before trial to suppress illegally obtained evidence,
may shed some light on this problem. The failure to object again at trial to evidence after
denial of a motion to suppress has been held to constitute waiver of any objection to the
evidence for appeal purposes. Lawn v. United States, 355 U.S. 339, 350-55 (1958). The facts
of Lawn, however, amounted to conscious waiver (attorney stated he bad no objection to
introduction of evidence he had tried to exclude by a motion to suppress); and the court
noted: "It is quite true generally that the overruling of a pretrial motion to suppress the use
at the trial of particular evidence preserves the point and renders it unnecessary again to
object when such evidence is offered at the trial" Id. at 353. In Page v. United States, 282
F.2d 807 (8th Cir. 1960), the court held that the denial of defendant's before-trial motion
to suppress illegally obtained evidence preserved the error for appeal without the need for
counsel to object again at trial. Id. at 813. But see id. at 813 (opinion of Sanborn, J.); Cogen
v. United States, 278 U.S. 221, 224 (1929) (if motion to suppress is denied, normal procedure
is to object again to the evidence when offered at trial) ; cf. Gouled v. United States, 255 U.S.
298, 312-13 (1921) (trial judge has duty to consider admissibility of evidence which appears
to have been unconstitutionally obtained even if motion to suppress has previously been
denied). If one has unsucessfully sought to exclude illegally obtained evidence by a beforetrial motion to suppress, therefore, it is safer to object again at trial as the evidence is offered,
even though in most cases the denial of the prior motion will preserve the point for appeal.
For the trial itself, of course, the general rule is that an objection to the same evidence
once made need not continuously he asserted each time the infected evidence is introduced;
the law does not require the doing of a futile act. Keen v. Overseas Tankship Corp., 194 F.2d
515, 519 (2d Cir.), cert. denied, 343 U.S. 966 (1952). This rule was formulated, however, in
light of the context of the continuous trial, governed by one judicial mind, not the pretrialtrial context in which two judges consider the same case. Since under present law the trial
judge can overrule the pretrial judge's evidence ruling, reasserting an objection made and lost
at pretrial cannot be said to be engaging in a futile act (just as objecting again at trial to
unconstitutionally obtained evidence is not a futile act. Gouled v. United States, supra). The
logic of the Keen case does not, in other words, apply to the case of an evidence ruling made
at pretrial, as the court in Independent Iron Works, Inc. v. United States Steel Corp., supra
ACCUMULATED EARNINGS TAX
1051
of proof of the reasonableness of the accumulation and the purpose of
avoiding shareholder taxes.
I
1939 CODE
The 1954 Code provisions are best understood in light of the sections
of the Internal Revenue Code of 1939 that they supplanted. Section 102
of the 1939 Code imposed a penalty tax on corporations accumulating
earnings and profits to avoid shareholder income taxes.4 If earnings or
profits were accumulated beyond the reasonable needs of the business, the
proscribed purpose was presumed unless the taxpayer proved the contrary by a clear preponderance of the eiridence. If the purpose was found,
the entire net income, as defined by section 102(d) (2), was taxed.' The
burden of proof as to whether an accumulation was beyond the reasonable
needs of the business rested with the taxpayer. 7 What constituted a reasonable need was left unclear.8
By 1954 Congress and the commentators were quite dissatisfied with
the administration of the 1939 Code's penalty tax provisions.9 Opposition
THE
RuThe accumulated earnings tax imposed by section 531 shall apply to every corporation (other than those described in subsection (b) [(1) section 542 personal holding
companies, (2) section 552 foreign personal holding companies, and (3) subchapter F corporations]) formed or availed of for the purpose of avoiding the income tax with respect
to its shareholders or the shareholders of any other corporation, by permitting earnings and
profits to accumulate instead of being divided or distributed."
Subchapter S corporations, IRC §§ 1371-77, are also exempted, their shareholders being
taxed even when earnings are accumulated for no tax avoidance purpose, IRC 1373.
Note that the language of section 532(a) is broad enough to include the avoidance of
tax for the benefit of corporate shareholders, but the Regulations, Treas. Reg. §§ 1.532-1
(a) (1) (B), 1.532-1(a) (2) (1959), refer to the "individual income tax" (Emphasis added.)
and neither the cases nor this Comment make any reference to the alternative interpretation.
The Code refers to corporations "formed or availed of" for the proscribed purpose.
This Comment deals only with the second class of taxpayers.
4 IxT. REv. CODE Or 1939, § 102 (a).
56 INT. REV. CODE OF 1939, § 102 (c).
INT. Rv. CoD or 1939, §§ 102(a), (d) (2). The pre-1954 penalty provisions, note 2
supra, taxed all of the accumulation even when only some or none was unreasonable, provided the interdicted purpose was found. See, e.g., Helvering v. Chicago Stock Yards Co.,
318 U.S. 693 (1943); World Publishing Co. v. United States, 169 F.2d 186 (10th Cir. 1948),
affirmning 72 F. Supp. 886 (N.D. Okla. 1947), cert. denied, 335 U.S. 911 (1949); Whitney
Chain & Mfg. Co., 3 T.C. 1109 (1944), aff'd per curiam, 149 F.2d 936 (2d Cir. 1945); Trico
Prods. Corp., 46 B.T.A. 346 (1942), aff'd, 137 F.2d 424 (2d Cir.), cert. denied, 320
U.S. 799 (1943); United Business Corp. of America, 19 B.T.A. 809 (1930), af'd, 62 F.2d
754 (2d Cir.), cert. denied, 290 U.S. 635 (1933); Semagraph Co., 3 CCH Tax Ct. Mem.
812 (1944), aff'd, 152 F.2d 62 (4th Cir. 1945).
7TAx CT. R. PRAc. 32: "Burden of proof. The burden of proof shall be upon the petitioner, except as otherwise provided by statute . . . "
8
Compare Treas. Reg. 19.102-3 (1939), with Treas. Reg. § 1.537 (1959). See also note
26 infra and accompanying text.
0 As evidenced by the House, Senate, and Conference reports, note 2 supra, and, e.g.,
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CALIFORNIA LAW REVIEW
[Vol. 54: 1050
to section 102 proceeded on various grounds and precipitated significant
changes in the 1954 Code. Opponents of section 102 argued: First, placing the burden on proof as to reasonableness on the taxpayer was bad
because the government, having such an advantage, might either be overzealous in enforcing section 102 or use the tax as a threat to induce settlements on other issues; ° second, the small, usually closely held,11 corporation needed protection from indiscriminate use of the tax; 12 third, the
concept of a reasonable need was too narrowly construed and a finding of
an unreasonable accumulation giving rise to the presumption of the proscribed purpose was too difficult to overcome. Plans for the future somehow had to be included in the concept of legitimate accumulation.
II
THE
1954
CHANGES
Concrete results of the preceding criticism are attested to by the 1954
provisions. Substantial changes"3 were made in the accumulated earnings
tax. Section 531 of the 1954 Code establishes the tax and specifies the
rates.' 4 Section 532 describes the corporations covered and states the
violation for which the tax is imposed. 5 Section 533 provides that if the
Commissioner can show that an accumulation was unreasonable, that
showing gives rise to a presumption that the accumulation was motivated
by the forbidden purpose of tax avoidance. 16 The taxpayer may overcome
Bolan, Section 102: A Persistent Menace to Closely Held Corporations, 27 ST. JoiN'S L.
REv. 1 (1952).
10 H.R. REP. 1337, at 52. These considerations led to the adoption of section 534 in the
1954 Code.
11 Most of the assessments for improper accumulation of surplus are against the closely
held corporation. See Bolan, supra note 8. Indeed, the House of Representatives proposed
in 1954 to exempt the large, widely held corporation. H.R. REP. 1337, at A172.
12 See SHocxEy, SwEENty
& BADY, TAXATION AND Busnuss PLANNING 393 (1963). See
also HALL 31-33, summarizing criticism of and support for section 102 of the 1939 Code
obtained through questionnaires distributed and discussions conducted by the Tax Institute.
Conclusions of studies conducted by the Tax Institute, the Brookings Institution, and the
Joint Committee on the Economic Report are set out id. at 187-88.
13 See generally SHocxEy, op. cit. supra note 12, at 391-92; Barker, Penalty Tax on
CorporationsImproperly Accumulating Surplus, 35 TAXES 949 (1957).
14 See note 3 supra.
15 bid. Sections 531 and 532 replace section 102(a) of the 1939 Code.
1' IRC § 533: "EvmnxcE oF PuwosE To Avom Izco~m TAx. (a) UNREASONABLE
AcculnLAoN DKETErsnATiv or PuaPosa.-For purposes of section 532, the fact that the
earnings and profits of a corporation are permitted to accumulate beyond the reasonable
needs of the business shall be determinative of the purpose to avoid the income tax with
respect to shareholders, unless the corporation by the preponderance of the evidence shall
prove to the contrary .... "
Section 533 replaces sections 102(b) and 102(c) of the 1939 Code with the minor change
mentioned in the text.
19663
ACCUMULATED EARNINGS TAX
1053
this presumption by proof that he did not have the proscribed purpose
in mind. While the 1939 Code required him to prove the absence of the
purpose by a "clear preponderance" of the evidence, the 1954 Code requires only a "preponderance." Section 534 provides that the burden of
proof as to the reasonableness of the accumulation may be shifted to the
Commissioner under certain circumstances' 7 and represents a fundamental change in response to criticism of the 1939 Code. Section 535
provides a credit for reasonably accumulated income and a minimum
credit to help small corporations-both radical changes. Section 53718
broadened the definition of a reasonable accumulation to make provision
for reasonably anticipated needs of the business.
III
REASONABLE ACCUMULATIONS
The issue of reasonableness of an accumulation is important for two
reasons: (1) Section 533 attaches a presumption of the existence of the
purpose of shareholder tax avoidance to an affirmative finding of an unreasonable accumulation, and (2) section 535(c)(1)(A)' 9 provides that
no tax shall be levied upon any part of the accumulation affirmatively
found to be reasonable.
A. What Constitutes a Reasonable Accumulation?
Section 537 was intended to broaden the meaning of reasonable need
and to do away with the so-called "immediacy test" which had been employed by the courts in interpreting the provisions of the 1939 Code.2"
That criterion had effectively limited the concept of "reasonable needs"
to fairly short-term business projects.2 '
17IRC § 534 ("Burden of Proof"). The provisions may be briefly summarized as
follows: If the proceeding in the tax court involves a deficiency notice based on an allegation
that earnings were unreasonably accumulated, the burden of proving the unreasonableness
shall be on the Commissioner if (1) he has not sent the § 534(b) notice in advance of the
deficiency notice or (2) if the taxpayer returns a sufficient 534(c) statement.
18 IRC § 537: "REASONABLE NEEus or THE Busnass. For purposes of this part, the
term 'reasonable needs of the business' includes the reasonably anticipated needs of the
business."
19
Internal Revenue Code of 1954, § 535 does not refer to an affirmative finding, but
that is the conclusion to be drawn from the cases. See cases cited note 67 infra.
20 INTAEwRAL IEvEs
CODE OF 1939, § 102(c).
21H.R. REP. 1337, at 53. The House Committee expressly rejected the "immediacy
test" as well as the seventy percent-distribution-of-earnings-as-dividends measure as a rule
of thumb. But see, with respect to the seventy percent test, Latchis Theatres of Keene, Inc.
v. Commissioner, 286 F.2d 237 (1st Cir. 1961) (distribution of more than seventy per cent
is not conclusive of reasonableness).
Another test of reasonableness permitted cash in the amount of one year's operating
expenses to be maintained. Youngs Rubber Corp. v. Commissioner, 331 F.2d 12 (2d Cir.
1964) circumscribes and perhaps abolishes this' standard.
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[Vol. 54: 1050
Whether an unreasonable accumulation has occurred is a question of
fact to be determined in each case.22 The standard applied is that of the
"prudent businessman. '23 Congress did not intend to second-guess corporate management by substituting the Commissioner's judgment for that of
a board of directors.24 The taxpayer's intent is to be determined as of the
time of the decision to accumulate.2 5
Reasonable grounds for accumulations, as promulgated by the Commissioner,21 include the necessary appurtenances to conducting the particular enterprise,2 7 for example, plant expansion, maintenance of working
capital for expenses and inventories, retention of funds for bona fide redemptions of indebtedness," and investments related to the taxpayer's
business. 2 9 Looked upon with particular disfavor are retentions of earnings and profits and their subsequent transfer to shareholders or their
friends in the form of loans. 30 This danger is especially prevalent in the
closely held corporation. The alleged borrowers may not intend to repay
the "loan," and a loan to an outsider may have no relation to the business.
Unreasonable, too, is the retention of earnings for protection against unrealistic hazards.
The purpose of the accumulated earnings tax is to prevent a corporation from unreasonably holding disbursable assets for the purpose of
avoiding the income tax with respect to its shareholders. 1 The liquid
funds held should provide a relevant measure of whether the corporation is not distributing all that it should. But which assets are considered
disbursable and how should they be measured? One author has concluded,
after extensive statistical analyses of the cases, that "the critical factor in
vulnerability under the [accumulated earnings tax] section appears to be
22
Treas. Reg. § 1.537-2(a) (1959).
Reg. § 1.537-1(a) (1959).
E.g., R. Gsell & Co. v. Commissioner, 294 F.2d 321, 326 (2d Cir. 1961): The Commissioner "may not . . .look over the shoulder of the corporate manager and assess a
penalty any time the Commissioner believes that a corporation has not been generous...
25
E.g., Harry A. Koch Co. v. Vinal, 228 F. Supp. 782, 786 (D. Neb. 1964); Treas.
Reg. § 1.537-1(b) (2) (1959).
26
Treas. Reg. §§ 1.537-2(b), (c)(1959).
27 See also HALT. 19-21.
28 See Herwitz, Stock Redemptions and the Accumulated Earnings Tax, 74 HARV. L.
23
Treas.
24
Rav. 866 (1961); Comment, Taxation-Federal Income Tax-Corporate Accumulations,
Stock Dividends and the "Preferred Stock Bail-Out," and Taxability of the Corporation
Upon the Distribution of "Inventory Assets" Under the Internal Revenue Code of 1954, 53
MIcH. L. REV. 725 (1955).
29 The scope or nature of a particular enterprise may cause considerable difficulty. See
Treas. Reg. § 1.537-3 (1959).
30
81
Treas. Reg. § 1.537-2(c) (1959).
IRC § 532 and the reasons given in HALL.
1966]
ACCUMULATED EARNINGS TAX
1055
the liquidity ratio"' --the ratio of liquid assets to total assets. But the
courts, in determining the quantity of distributable assets on hand, have
erred at times by equating a retained earnings or accumulated surplus or
accumulated taxable income account with distributable assets, an obvious
fallacy."5 Perhaps this difficulty is understandable considering the emphasis placed on capital or net worth accounts by the accumulated earnings tax provisions.3 4 These accounts measure net assets of all kinds, not
only disbursable assets. To say that they are relevant because dividends
may be in the form of "nuts and bolts," that is, may be other than cash,
begs the question; namely, must "net assets" be disbursed? The answer
seems clear-the Code simply does not require liquidation of the busi35
ness.
Financial ratios, 36 such as the ratio of liquid assets to total assets, may
be indicators of whether a taxpayer is unreasonably accumulating earnings and profits, especially when the taxpayer's ratios are compared with
similar businesses. But ratios in and of themselves are neither always
conclusive nor even necessarily controlling.3" A tax may be imposed where
ratios are low3 8 and, conversely, no tax may be imposed where ratios are
high.39
32
HATL 137. Hall discounts the importance of the accountant's everyday "current ratio"
(current assets to current liabilities) as becoming too volatile as current liabilities approach
zero. He offers interesting statistical analyses of. the pre-1952 cases to support his conclusions.
His "liquid assets" are the accountant's "quick assets," that is, cash, accounts receivable,
and marketable securities.
33 Electric Refrigerator Corp. v. Commissioner, 336 F.2d 339, 344 (2d Cir. 1964): "The
Tax Court's assumption that a retained earnings account (regardless of nomenclature) invariably represents a readily available source of liquid funds with which to satisfy existing
and anticipated corporate obligations and to pay dividends is unsound."
8
4IRC § 535; see, e.g., American Metal Prods. Corp. v. Commissioner, 287 F.2d 860
(8th Cir. 1961).
85 Sandy Estate Co., 43 T.C. 361, 377 (1964). Indeed, "to the extent the surplus has
been translated into plant expansion, increased receivables, enlarged inventories, or other
assets related to its business, the corporation may accumulate surplus with impunity."
Smoot Sand & Gravel Corp. v. Commissioner, 274 F.2d 495, 501 (4th Cir.), cert. denied,
362 U.S. 976 (1960).
85 The courts have looked at all sorts of ratios and especially the "current ratio." See,
e.g., Motor Fuel Carriers v. Commissioner, 322 F.2d 576 (5th Cir. 1963); American Metal
Prods. Corp. v. Commissioner, 287 F.2d 860 (8th Cir. 1961); Harry A. Koch Co. v. Vinal,
228 F. Supp. 782 (D. Neb. 1964) (going as far as revaluing securities in accordance with the
"cost-or-market-whichever-is-lower ' accounting convention). See also 7 MiRniNs, LAw or
FnDOMa Iiqco3 TAXATION ff 39.51 (1956).
37
Youngs Rubber Corp. v. Commissioner, 331 F.2d 12 (2d Cir. 1964).
38 Low ratios may be due to "window dressing," a term of art accountants use when
they mean "misrepresenting the accounts."
39 High ratios may be explained by unusual events, e.g., Vuono-Lione, Inc., 24 CCH Tax
Ct. Mem. 506 (1965) (many loans unexpectedly repaid in a short period), or business
needs, e.g., Fotocrafters, Inc., 19 CCH Tax Ct. Mem. 1401 (1960) (competitive business demanded funds for new equipment).
1056
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[Vol. 54: 1050
B. Who Has the Burden of Proof of Reasonableness?
To show a reasonable accumulation, the party carrying the burden of
proof must satisfy the court (1) that there was a reasonable or unreasonable accumulation and (2) how much of the accumulated taxable income
was reasonably or unreasonably retained.40 The burden is one of persuasion and not merely of going forward with the evidence. 4'
In 1954 Congress carved out a statutory exception42 within the rule
that in Tax Court proceedings the burden of proof rests with the taxpayer
unless a statute provides otherwise. 3 The Commissioner now has the
burden of proving the unreasonableness of the accumulation unless he
acts to shift the burden to the taxpayer before he sends the deficiency
notice.44 If the Commissioner sends the proper section 534(b) notification
that he intends to rely upon an allegation of unreasonable accumulation
to show a violation of section 532, the burden of proving the reasonableness of the accumulation shifts to the taxpayer. The taxpayer, in turn,
may attempt to shift the burden back to the Commissioner by filing a
proper section 534(c) statement. The taxpayer's statement must be
'(proper" in three respects: (1) It must be timely,4" (2) it must state adequate grounds for the accumulation,48 and (3) it must present facts sufficient to "show the basis thereof." -7 Should the taxpayer's statement suffer
from either (1) insufficient grounds or (2) sufficient grounds unsupported
by sufficient facts, it does not reshift the burden on those issues to the
Commissioner.4
40 H.R. REP. 2543, at 49.
41 R. Gsell & Co. v. Commissioner, 294 F.2d 321, 326 (2d Cir. 1961); Treas. Reg.
§ 1.33-1(b) (1959).
IRC § 534; see note 17 supra.
TAx CT. R. PRAc. 32 (burden of proof on taxpayer in absence of contrary statute).
There is no statute providing otherwise.
44
Reasonableness is an issue only when the Commissioner relies or attempts to rely on
the § 533 presumption to prove that the taxpayer was motivated by the interdicted purpose.
Cf. note 77 infra and text accompanying notes 77-78 infra.
45
Within sixty days after the Internal Revenue Service mails its § 534(b) notice or
within ninety days upon a showing of good cause for extension. Treas. Reg. § 1.534-2(d) (2)
(1959).
46
IRC § 534(c). For the most successful grounds, see Altman, CorporateAccumulation
of Earnings, 36 TAxEs 933, 939 (1958). See also, Treas. Reg. § 1.537-2 (1959) ("Grounds
for accumulation of earnings and profits"); notes 26-29 supra and accompanying text.
47 IRC § 534(c) ; Treas. Reg. § 1.534-2(d) (1) (1959). Interestingly enough, as originally
proposed, § 534(c) read as follows: "facts sufficient to appraise the Secretary or his delegate
of the basis thereof." H.R. 8300, 83d Cong., 2d Sess. (1954). The Senate Finance Committee
changed the wording to the present form, presumably indicating that the statement need
present something less than what would be needed to appraise the Secretary or his delegate
of the facts. S. REP. 1622, at 71.
48IRC § 534(a)(2), (c); Treas. Reg. § 1.534-2(a)(2) (1959). The burden shifts only
on those grounds and facts adequately presented in the statement. E.g., Youngs Rubber
42
43
1966]
ACCUMULATED EARNINGS TAX
1057
If the Commissioner fails to send the advance notice, he must then
carry the burden under section 534(a) (1) on all facts tending to show
unreasonableness. If he does give the advance section 534(b) notice, the
burden is reshifted to the Commissioner only as to those grounds and
facts adequately presented in the taxpayer's section 534(c) statement
and only if the issue is essential.40
After the taxpayer has filed a section 534(c) statement, the Commissioner may, to avoid the reshifting of the burden, file an answer denying the sufficiency of the statement. Taxpayers' subsequent motions to the
Tax Court5 ° requesting the court to rule on whether the burden of proof
on the question of reasonableness has shifted or to strike the denial have
met with varied results. The court has often refused to resolve the issue of
who has the burden of proof on reasonableness.5 1 Reasons given for not
ruling on the motions have been unsatisfactory.5 2 First, the court has said
that since the judge who presides at the trial may not be the same judge
who hears the motion, the motion judge should not bind the trial judge. 3
Why the allocation of the burden of proof of reasonableness should be
singled out when trial judges are bound on other matters5 4 is not clear.
Second, the court has said that the taxpayer's statement may be a sham. 5
But if the Commissioner thinks the statement is a sham, he may object
on that ground himself. Third, the court has stated that to rule it would
have to determine whether the grounds and facts were sufficient to justify
the accumulation and that determination is the very issue for the trier of
facts.50 Section 534 requires no such factual determination before the
burden shifts back to the Commissioner. All that is required is a finding
that the assertions in the statement, if true, would lead to an affirmative
finding for the petitioner on the question of reasonableness. The test,
Corp. v. Commissioner, 331 F.2d 12 (2d Cir. 1964); Factories Inv. Corp. v. Commissioner,
328 F.2d 781 (2d Cir. 1964); R. Gsell & Co. v. Commissioner, 294 F.2d 321 (2d Cir. 1961) ;
Bremerton Sun Publishing Co., 44 T.C. 566, 582, 583 (1965); Sandy Estate Co., 43 T.C.
361 (1964). See also note 46 supra and accompanying text.
4
OPelton Steel Casting Co., 28 T.C. 153 (1957), aff'd, 251 F.2d 278 (7th Cir.), cert.
denied, 356 U.S. 958 (1958).
G0 When the Commissioner levies a jeopardy assessment, the burden is on the taxpayer
and it may be shifted back to the Commissioner by petition to the tax court. IRC § 534(d).
51 See Barker, supra note 13, at 951-52.
52See ibid. See also Altman, supra note 46, at 937 (to the effect that such rulings
"agitate" the bar).
63 Barker, supra note 13, at 952.
5
4 See, e.g., United States v. United States Smelting, Ref. & Mfining Co., 339 U.S. 186,
198 (1950); FED. R. Civ. P. 16; Comment, The Evidence Ruling at Pretrialin the Federal
Courts, 54 CAtw. L. REV. 1016 (1966). Compare Dictograph Prods. Co. v. Sonotone Corp.,
230 F.2d 131 (2d Cir. 1956).
55 Barker, supra note 13, at 952.
SO Ibid.
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CALIFORNIA LAW REVIEW
[Vol. 54: 1050
then, of whether the burden reshifts to the Commissioner is analogous to
that applied to a motion under Rule 12 of the Federal Rules of Civil
Procedure to dismiss for failure to state a claim upon which relief can be
granted. The truth of the facts stated is irrelevant to the determination of
whether the burden of proof has shifted as it is in a ruling on a motion to
dismiss: The legal sufficiency of the pleading is the sole point at issue.
The majority of cases have held that it is not important to decide
whether the burden of proof as to the reasonableness of an accumulation
actually has shifted if the probative evidence, considering all of the facts
presented by both sides, fairly establishes the reasonableness or unreason-
ableness of the accumulation.17 That rule was specifically spurned, at least
in close cases, by the Second Circuit in R. Gsell & Co. v. Commissioner.s
Gsell involved a failure to declare dividends during a period in which
eccapital surplus" increased. The court reasoned that section 534 was
enacted 9 to prevent the Commissioner from alleging an unreasonable
accumulation and forcing the taxpayer to prove otherwise or face the
particularly difficult burden of proving that his purpose was not tax
avoidance. 60 If the court rules that the burden of proof on the issue of
reasonableness is on the Commissioner, the taxpayer need only bear the
burden of proving absence of the proscribed purpose. The court went on
to say that since the determination can be crucial, the Tax Court must
effectuate the congressional intent and rule on who has the burden.0 '
Undoubtedly the congressional intent 62 is better served by the Gsell case
than by the cases that have not considered the matter important. It is
significant that the appellate court cases holding that the issue is not
crucial have all involved the 1939 Code. Arguably the determination is
57
E.g., Barrow Mfg. Co. v. Commissioner, 294 F.2d 79 (5th Cir. 1961), affirming 19
CCH Tax Ct. Mem. 195 (1960), cert. denied, 369 U.S. 817 (1962) (holding also that failure
to rule on who had the burden was not reversible error); Raymond I. Smith, Inc. v. Commissioner, 292 F.2d 470 (9th Cir. 1961), affirming 33 T.C. 141 (1959) (no prejudice results
from improper determination of who has the burden); American Metal Prods. Corp. v.
Commissioner, 287 F.2d 860 (8th Cir. 1961); Smoot Sand & Gravel Corp. v. Commissioner,
274 F.2d 495 (4th Cir.), cert. denied, 362 U.S. 976 (1960); IA. Dress Co. v. Commissioner, 273 F.2d 543 (2d Cir. 1960) (dictum); James M. Pierce Corp., 38 T.C. 643, 653
(1962); F. E. Watkins Motor Co., 31 T.C. 288, 297 (1958); Breitfeller Sales, Inc., 28 T.C.
1164 (1957); Fotocrafters, Inc., 19 CCH Tax Ct. Mem. 1401 (1960); Penn Needle Art Co.,
17 CCH Tax Ct. Mem. 504 (1958).
58 294 F.2d 321, 325-26 (2d Cir. 1961).
59 Section 534(e) had made § 534 applicable to § 102 proceedings. See note 94 infra and
accompanying text. The retroactive application strengthens the reasoning of the Gsell case,
as it showed how important a policy Congress thought it to be.
60 294 F.2d at 325. Overcoming the presumption is not impossible. See, e.g., Bremerton
Sun Printing Co., 44 T.C. 566, 588, 590 (1965) (tax court found that conservative business
policy, not tax avoidance, motivated accumulation).
61 294 F.2d at 326.
62 S. REp. 1622, at 71.
19663
ACCUMULATED EARNINGS TAX
1059
more important under the 1954 Code than it was under the 1939 Code,
primarily because the credit now provided by section 535 completely
abates the tax for the portion of the accumulation found to be reasonable. 3 Previously, a finding of reasonable accumulation merely precluded
the statutory presumption of purpose from aiding the Commissioner. The
Gsell result is therefore preferable in cases where all provisions of the
1954 Code are operative, for the 1954 Code attaches greater consequences
to findings of reasonableness. 4
IV
THE ULTIMATE QUESTION-THE INTENT TO AVOID SHAREHOLDER TAXES
Reconsider the operative section imposing the accumulated earnings
tax-section 532.65 It declares that the tax is imposed when an accumulation is made for the purpose of avoiding shareholders' taxes. Just how
much purpose is required is not entirely clear. 6 Even within a single
opinion, a court may speak in inconsistent terms. The Young Motor Co.
6
3IRC § 535(c) (1) (A). While all the appellate cases involved the 1939 Code, ree note
57 supra and accompany text, two, Smith and Americal Metal, also involved the 1954
Code, albeit to a very small extent in dollar terms. But the courts, even in those cases,
definitely spoke in terms of the 1939 Code without mention of § 535 of the 1954 Code. At
last, however, a clear enunciation of the conclusion expressed in the text has been rendered
by the Tax Court. John P. Scripps Newspapers, 44 T.C. 453, 474 (1965); see note 83 infra.
See also Bremerton Sun Publishing Co., 44 T.C. 566, 580 (1965); Pelton Steel Casting Co.,
28 T.C. 153, 173 (1957), aff'd, 251 F.2d 278 (7th Cir.), cert. denied, 356 U.S. 958 (1958). The
Pelton court reviewed the cases prior to the 1954 Code (that is, prior to section 535(c) (1) (A))
and stated the rule that in cases brought under the 1939 Code, reasonableness made no difference if the proscribed purpose was found. Even this rule was somewhat circumscribed in
its practical effect when it was disapproved to the extent that it implied that the court could
ignore evidence of reasonableness as having no bearing on the issue of purpose should the
court reach that issue. Young Motor Co. v. Commissioner, 281 F.2d 488, 490-91 (1st Cir.
1960); see note 96 infra and accompanying text.
64 See note 83 infra. Of course the issue may not be important at all if neither party
raises the issue of who has the burden. Walter C. McMinn, Jr., 21 CCH Tax. Ct. Mem. 913(1962).
05 See note 3 supra.
66 The cases run the gamut from requiring a "complete absence" of purpose, in order
to avoid liability (Pelton Steel Casting Co., 28 T.C. 153, 174 (1957), aff'd, 251 F.2d 278
(7th Cir.), cert. denied, 356 U.S. 958 (1958); Whitney Chain & Mfg. Co., 3 T.C. 1109, 1120
(1944), aff'd per curiam, 149 F.2d 936 (2d Cir. 1945); Trico Prods. Corp., 46 B.T.A. 346,
374 (1942), aff'd, 137 F.2d 424 (2d Cir.), cert. denied, 320 U.S. 799 (1943); R. L. Blaffer &
Co., 37 B.T.A. 851, 856 (1938), aff'd, 103 F.2d 487 (5th Cir.), cert. denied, 308 U.S. 576
(1939)), through "one purpose" (Helvering v. Chicago Stock Yards Co., 318 U.S. 693, 699
(1943); Trico Prods. Corp., 46 B.T.A. 346, 374 (1942), aff'd, 137 F.2d 424 (2d Cir.), cert.
denied, 320 U.S. 799 (1943)), through an aiding or inducing purpose (Helvering v. Chicago
Stock Yards Co., 318 U.S. 693, 699 (1943); World Publishing Co. v. United States, 169
F.2d 186, 189 (10th Cir. 1948), affirming 72 F. Supp. 886 (N.D. Okla. 1947), cert. denied,
335 U.S. 911 (1949); Duke Labs., Inc. v. United States, 222 F. Supp. 400, 414 (D. Conn.
1963)), to "main" or "dominant" purpose (Young Motor Co. v. Commissioner, 281 F.2d
488 (1st Cir. 1960); Commissioner v. Young Motor Co., 316 F.2d 267 (1st Cir. 1963)).
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cases6" dealt with this issue. The Tax Court originally held that only one
purpose among other legitimate purposes need be found. 8 The court of
appeals for the First Circuit held that test to be entirely too favorable
to the government, pointing out that the statute (section 532) said "the"
purpose and not "a" purpose. 9 The court of appeals then enunciated a
"dominant purpose" test,70 which was ultimately applied by the Tax
Court.71 This test seems most consonant with the general rule that a subsidiary purpose of tax avoidance does not necessarily taint an otherwise
bona fide transaction. It seems even more appropriate when the general
legislative emphasis on reasonable uses of funds expressed in the 1954
Code72 is considered. Any test more favorable to the Commissioner, such
as the "one purpose" rule seems especially unwarranted if calculations
showing how much tax was saved to the shareholders 78 are considered as
evidence of purpose.
Section 532 explicitly makes the corporation's intent to avoid taxes on
its shareholders the ultimate issue. Reasonableness of the accumulation,
while important, is not controlling. The relation between reasonableness
and purpose is the topic of the remainder of this Comment.
A. The Relation Between the Ultimate Issue of Purpose and the
Reasonableness of the Accumulation
Under the 1939 Code, even if all but a small part of the accumulation
was reasonable, the entire amount was taxed.7 4 Theoretically, if the entire
accumulation was reasonable, and if the proscribed purpose was found,
the entire retention could be taxed, though no case presented those facts.
Section 535 of the 1954 Code provides a credit against the tax equal to
the amount of the retention that is reasonable. Even if the taxpayer was
motivated by the interdicted purpose, then, no tax would be imposed if
67Young Motor Co., 32 T.C. 1336 (1959), reversed and remanded, 281 F.2d 488 (1st
Cir. 1960); Young Motor Co., 21 CCH Tax Ct. Mem. 711 (1962), reversed and remanded,
316 F.2d 267 (1st Cir. 1963); Young Motor Co., 23 CCH Tax Ct. Mem. 113, affirmed,
339 F.2d 481 (1st Cir. 1964).
68 32 T.C. at 1345.
69 281 F.2d at 491.
70 Ibid.
7123 CCH Tax Ct. Mem. 113.
72
IRC §§ 533, 535(c) (1) (A), 537; Treas. Reg. §§ 1-535, 1-537 (1959).
7
3 Such facts, although evidence of purpose, must not be determinative. E.g., R. Gsell
& Co. v. Commissioner, 294 F.2d 321, 327 (2d Cir. 1961); Gus Blass Co., 9 T.C. 15, 39
(1947), appeal dismissed nolle prosse, 168 F.2d 833 (8th Cir. 1948); R. L. Blaffer & Co.,
.37 B.TA. 851, 856 (1938), aff'd, 103 F.2d 487 (5th Cir.), ceri. denied, 308 U.S. 576 (1939);
C. H. Spitzner & Sons, Inc., 37 B.T.A. 511 (1938); C. B. deMille Prods., Inc., 31 B.T.A.
1161, 1174 (1935), aff'd, 90 F.2d 12 (gth Cir.), cert. denied, 302 U.S. 713 (1937); see Treas.
Reg. § 1.533-1(a) (2) (1959).
74 See note 6 supra.
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ACCUMULATED EARNINGS TAX
1061
the accumulation were found to be reasonable. The implication is that
Congress may not really care about the subjective intent of the taxpayer
at all. If so, that requirement might best be eliminated; if not, a new test
of intent may be appropriate. Presenty, intent is measured subjectively by
what actually existed in the mind of the taxpayer and goes only to
whether he intended to avoid taxes with the accumulation. Reasonableness is tested objectively by looking at the surrounding business circumstances. The problem is that if no affirmative finding of a reasonable
accumulation is made, and the intention to avoid shareholder taxes is
found, the penalty tax is imposed, even though, arguably, a reasonable
accumulation might have been found had the burden of proof on that
issue been otherwise. To prevent that anomalous result, a new interpretation of the intent requirement would require that the motivation to accumulate not be accompanied by the intent to make a reasonable accumulation.75 In that way, even in the absence of a finding of a reasonable
accumulation, the stricter standard of intent would protect the taxpayer if
the intent to accumulate reasonably were also present. On the other hand,
that interpretation would make it more difficult for the taxpayer to prevail
in those cases where the outcome turns solely on what his intent was, for
he must then show that his intent was not tax avoidance. However, since
he could show either no tax avoidance motivation or an intent to accumulate reasonably, he may be advantaged.
To prove that an accumulation was motivated by a tax avoidance purpose, the Commissioner may proceed in any of three ways: (1) He may
offer direct probative evidence of purpose; (2) he may, by failing to send
the section 534(b) notice, assume the burden of proof of reasonableness
and offer direct evidence of an unreasonable accumulation; 1 or (3) he
may rely upon an allegation of an unreasonable accumulation by sending
the section 534(b) notice in advance of the deficiency notice. Alternative
(1) is rarely used, since it is almost impossible for the Commissioner to
prove the state of mind of the corporation. For that reason, the statutory
presumption of section 533 is essential to effective enforcement of sections
531 and 532. 77 Alternatives (2) and (3) permit the Commissioner to fight
75BnTx=,
Fpzmn. INcoim TAXATION OF CoRpoRAMios AND SHAMEROLDES § 6.02
(1959).
7GIf the Commissioner proves an unreasonable accumulation, he derives the benefit of
the statutory presumption of § 533 (a) that the purpose of the accumulation was tax avoidance. Note 16 supra; see, e.g., IA. Dress Co., 32 T.C. 93, 99-100 (1959). But see Kirlin
Co., 23 CCH Tax Ct. Mem. 1580 (1964), in which a reasonable need was shown and the
presumption survived presumably because the court found that a reasonable accumulation
was already on hand to meet the need and that no further accumulation was necessary, and
Apollo Indus., Inc., 44 T.C. 1, 13, 14 (1965).
77 See HAL 186; 7 MERTENS, op. cit. supra note 36, at ff 39.28. In one recent case, the
Commissioner did not rely on the statutory presumption. Unistruct Corp. v. United States,
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an easier battle: It is easier to show unreasonableness measured by objective standards and lasting evidence than to show intent formed, perhaps for only an instant, in the minds of the directors or shareholders.
Should the Commissioner elect either alternative (2) or (3) and should
an affirmative finding of unreasonableness be made, the statutory presumption that the taxpayer has engaged in the proscribed course of conduct comes to the Commissioner's aid. The taxpayer must then show that
his purpose was not tax avoidance. In choosing between alternatives (2)
and (3), the Commissioner will usually be influenced by the assumed advantage in having the burden of proof of reasonableness shifted to the
taxpayer, a possibility under alternative (3), but not (2).11
The typical accumulated earnings tax case, then, may be viewed as a
two phase contest. The first phase customarily features a dispute over the
adequacy of the taxpayer's 534(c) statement and/or the reasonableness
of the accumulation. 0 If the Commissioner shows the accumulation was
unreasonable or if the taxpayer does not show that it was reasonable, the
second phase of the proceeding presents the ultimate question: whether
the unreasonable accumulation was motivated by the interdicted purpose. 0
Consider each possible combination of burdens and findings.,, First,
the taxpayer may have the section 534 burden on reasonableness. This
burden will lie with the taxpayer only when the Commissioner has sent
the section 534(b) notice and the taxpayer either (1) failed to return the
section 534(c) statement, or (2) the section 534(c) statement was defi65-1 U.S. Tax Cas. ff 9349 (E.D. Mich. March 4, 1964). The efficacy of this approach may
be subject to question under the 1954 Code, since § 535(c) (1) (A) should lead the case back
to the issue of reasonableness.
78 If the Comitissioner does not shift the burden, he is no worse off than if he had taken
alternative (2) except that he has revealed his strategy in -advance. It is not clear that the
taxpayer could discover that strategy on his own. Unistruct Corp. v. United States, supra
note 77.
79 This phase may be omitted where: (1) the issue is not raised, or (2) the Commissioner directly shows the purpose to be present.
80 This phase may be omitted where § 535(c) (1) (A) is applicable to provide a credit.
See note 83 infra.
81The logical possibilities may be summarized as follows: (1) The taxpayer may have
the burden of proof under § 534 and may carry it resulting in a finding of a reasonable accumulation and in no tax; (2) the taxpayer may have the burden of proof under § 534 and
fail to carry it resulting in the application of the statutory presumption that the proscribed
purpose motivated the accumulation; (3) the Commissioner may have the burden of proof
under § 534 and may carry it, resulting in the application of the statutory presumption that
the proscribed purpose motivated the accumulation; and (4) the Commissioner may have the
burden of proof under § 534 and fail to carry it. For the result in the last case, see notes
74-88 and accompanying text. Actually, a fifth possibility logically exists-that no one has
the § 534 burden on reasonableness. See note 64 supra.
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1063
cient.82 An affirmative finding that the accumulation was reasonable results if the taxpayer meets his burden. He then receives the credit provided by section 535(c) (1) (A) and avoids the second or purpose phase
of the case.8 3 If the taxpayer fails to carry the burden, an affirmative finding of an unreasonable accumulation results due to the then unrebutted
presumption of correctness that attaches to the Commissioner's determination.84 The section 533 presumption is then triggered and the taxpayer
must overcome the presumption by a preponderance of the evidence, with
the court already having found the accumulation unreasonable.
The second alternative is that the Commissioner may have the section
534 burden on reasonableness. This burden will lie with the Commissioner
when he does not send the section 534(b) notice or when the taxpayer
returns a sufficient section 534(c) statement. If the Commissioner carries
his burden, an affirmative finding of an unreasonable accumulation results
and the taxpayer is in the same position of having to overcome the
section 533 presumption as if he had assumed the burden on reasonableness and lost. If the Commissioner fails to meet his burden, apparently no
affirmative finding of reasonableness or unreasonableness results. This
result is certainly strange, for even when the proscribed purpose is subsequently found, must not the court reexamine the evidence to see if any
part of the accumulation is entitled to the credit for a reasonable accumulation? Perhaps the taxpayer should be able to ask for a finding on the
issue of reasonableness even if the Commissioner has the burden and
fails. No basis for an affirmative finding of unreasonableness exists since
section 534 shifts the burden to the Commissioner and consequently the
presumption of correctness that would otherwise attach to his determination85 does not attach. Therefore the section 533 presumption of purpose
does not come into play.
82
See notes 45-47 supra and accompanying text.
83 IRC § 535(c)(1)(A); John P. Scripps Newspapers, 44 T.C. 453, 474 (1965): "In
view of the credit provided for in section 535(c)(1), it is unnecessary for us to consider
whether or not petitioner was availed of for the proscribed purpose.... [E]ven if petitioner
were availed of for the proscribed purpose, it would still be entitled to a credit equal to the
amount of earnings and profits for the taxable years which has been retained for the reasonable needs of the business. In this case the credit would be equal to the full amount of the
retained earnings. Therefore, under section 535(a) the accumulated taxable income, on which
the section 531 tax is imposed, would be zero."
A narrower construction of § 535(c) might allow the credit only where the purpose of
the accumulation was to provide for reasonable business needs. See Bi==xxz, op. ct. supra
note 75.
84
See, e.g., Merritt v. Commissioner, 301 F.2d 484 (5th Cir. 1962); Arc Realty Co. v.
Commissioner, 295 F.2d 98 (8th Cir. 1961); Biltmore Homes, Inc. v. Commissioner, 288
F.2d 336 (4th Cir.), cert. denied, 368 U.S. 825 (1961).
85 Cases cited note 84 supra.
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Should the taxpayer believe that he has a good case with respect to
reasonableness but that he might be hard put to rebut an argument that
he was motivated by the purpose of tax avoidance, it might be advantageous for him voluntarily to assume the section 534 burden. This result
could be attained by not returning a section 534(c) statement. If the taxpayer proves that the accumulation is reasonable, he can receive the
section 535(c) credit and not have to rebut evidence of purpose." If,
however, he fails, the section 533 presumption must then be overcome and
the taxpayer may be in a worse position than had he not assumed the
burden with respect to reasonableness, assuming that in the latter case no
finding of reasonableness or unreasonableness would have been made.
If the case on both the tax avoidance purpose and reasonableness is
fairly close, the taxpayer should probably try to shift the burden of proof
of reasonableness to the Commissioner. If the Commissioner fails to carry
the burden, the issue of reasonableness probably becomes neutral. The
taxpayer is then better off than had he failed to carry the burden." On
the other hand, if the Commissioner's case is weak, the taxpayer can
either accept and carry his burden on reasonableness; or shift the burden
on reasonableness to the Commissioner and trust the Commissioner will
fail to carry it. The former alternative is preferable for the taxpayer, for
if he can show the accumulation is reasonable, he gets the section
535(c) (1) (A) credit. If the Commissioner's case is very strong, the taxpayer would probably fail if he had the burden on reasonableness and the
Commissioner would probably succeed in showing an unreasonable accumulation. In either case, the section 533 presumption is triggered.
Arguably, then, the taxpayer should assume the burden if he thinks he
will lose since he stands to gain if he can obtain a favorable finding with
respect to even a part of the accumulation, and he has nothing to lose.
To weigh these alternatives in a given case with mathematical precision is impossible. The important point is that the taxpayer should be
aware of his strategic alternatives, for it may be to his advantage to
assume the burden of proof of reasonableness if the case against him is
particularly strong or weak. The Commissioner, too, derives alternate
strategies from the combined effects of sections 533, 534, and 535. A weak
case, for example, might be better prosecuted by not sending a section
534(b) notice. Thus, the possibility of an affirmative finding of reasonableness might be precluded and the taxpayer would be forced to defend
on the issue of purpose.
8
6 Note 83 supra.
8T
The taxpayer may show a part, even a small part, of the accumulation to be reasonable, and be taxed on the remainder. IRC § 535(c) (1) (A); John P. Scripps Newspapers,
44 T.C. 453, 474 (1965).
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B. The Young Motor Co. Case
The burden of proof with respect to purpose is clearly governed by
statute in three of the four alternatives discussed. But what is the nature
of the proceeding when the Commissioner fails to carry his section 534
burden and no affirmative finding of a reasonable or unreasonable accumulation results? In the Young Motor Co. case,88 the First Circuit
considered the problem of who has the burden of proof with respect to
the purpose of the accumulation when no affirmative finding is made
regarding reasonableness. Young involved an automobile dealership in
which a husband and wife owned ninety-eight per cent of the stock and
the vice-president two per cent. For many years, General Motors had
demanded that the facilities be modernized. When no modernization plan
was commenced, the franchise was cancelled. While General Motors was
demanding improvements, concrete and steel were in short supply and
petitioner's retained earnings increased substantially from the time of
the first demands for improvements. During the years in question, no
officer salaries had been paid but unsecured loans had been made to the
president personally and to his solely owned unrelated enterprises. The
petitioner obtained another franchise from Ford, which required a large
working capital balance. The Commissioner informed the petitioner that
a deficiency notice would be sent and the taxpayer returned a proper
section 534(c) statement. The Commissioner, having the burden on the
issue, failed to show that the accumulation was unreasonable.8 9
The Tax Court said that since the Commissioner failed to show an
unreasonable accumulation, the reasonableness factor became "neutral.))90
The court held that the taxpayer had to prove the "ultimate question" of
whether the tax avoidance purpose was absent, 91 with no weight given to
the reasonableness or unreasonableness of the accumulation.
On appeal, the First Circuit declared that although the ultimate question was one of purpose and not of reasonable accumulation, actual needs
88 Young Motor Co., 32 T.C. 1336 (1959), reversed and remanded, 281 F.2d 488 (1st
Cir. 1960); Young Motor Co., 21 CCH Tax Ct. Mem. 711 (1962), reversed and remanded,
316 F.2d 267 (1st Cir. 1963); Young Motor Co., 23 CCH Tax Ct. Mem. 113, reversed
and remanded,339 F.2d 481 (1st Cir. 1964).
89 The opinion of the court is not clear as to exactly what did occur. The court did not
expressly say who had the burden of proof with respect to reasonableness. But all the opinions are clearly based on statements that the decisions are rendered as if the Commissioner
failed to carry a § 534 burden, and there is nothing to suggest that such was not the case.
See especially 32 T.C. 1336, 1343, 1344.
90 Id.at 1343.
91Id. at 1343-44. Many cases hold that the burden on the ultimate question of purpose
is on the taxpayer, e.g., Pelton Steel Casting Co., 28 T.C. 153 (1957), aff'd, 251 F.2d 278
(7th Cir.), cert. denied, 356 U.S. 988 (1958).
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may yet be the best evidence of purpose.92 The court said that the taxpayer had a reason for his accumulations and that the Tax Court was
wrong in holding that the burden was on the taxpayer on all matters
except reasonable needs. The reasonableness of the accumulation must be
considered even though the ultimate issue is purpose and even though no
finding of reasonableness or unreasonableness was made.
Both the Tax Court and the court of appeals discussed the Pelton
Steel Casting Co. case." In Pelton, the court of appeals for the Seventh
Circuit had relied on the 1955 amendment to section 5344 which made
that section applicable to cases tried under the 1939 Code after 1955.
The court reasoned that since Congress had changed the burden with
respect to reasonablenessin cases under the 1939 Code, it had consciously
decided to make no change in the well-established rule that the burden
with respect to purpose was with the taxpayer. 95
The Tax Court in the Young case cited Pelton and said that the issue
of purpose was separate from that of reasonableness. It is unclear whether
that conclusion, coupled with the Tax Court's statement that reasonableness had become "neutral," meant that once the issue of a reasonable
accumulation had been heard, no further evidence of reasonableness
would be admitted on the issue of purpose. But the court of appeals
thought that the Tax Court had so held and specifically disapproved the
Pelton decision to the extent that it lent support to such a rule."
The Tax Court, on remand of Young, claimed that all it had meant
was that the lack of an affirmative finding of an unreasonable accumulation resulted in denying to the Commissioner the statutory presumption
of purpose of section 533. When the court interpreted the appellate
court's opinion, it declared that the court of appeals had rejected the dual
burden of proof concept in cases where the burden with respect to reasonableness had shifted to the Commissioner.9 7 The Tax Court felt compelled
to say that if the burden on reasonableness shifted, so did the burden on
purpose.
To interpret the appellate decision as demanding such a result is
questionable, if not clearly erroneous, especially because an established
92 281 F.2d at 490-91.
9328 T.C. 153 (1957), aff'd, 251 F.2d 278 (7th Cir.), cert. denied, 356 U.S. 958 (1958).
94 69 Stat. 689 (1955).
95 28 T.C. at 180-82. See also IA. Dress Co. v. Commissioner, 273 F.2d 543 (2d Cir.
1960).
96 281 F.2d at 491 n.4.
97 The Tax Court said that the court of appeals meant that "once there has been a shift
to the Commissioner of the burden of proof with respect to the reasonableness of the accumulation, to regard the burden of proof with respect to the purpose of the accumulation as
likewise having shifted to him." 21 CCH Tax Ct. Mer. at 716.
19661
ACCUMULATED EARNINGS TAX
1067
Tax Court rule of practice" placed the burden on the taxpayer in such
cases. More important, however, nothing the court of appeals said about
the Pelton case should have led the Tax Court to conclude that the Commissioner had the burden of proof on the issue of purpose although even
the appellate court on the second appeal seemed to think that its original
criticism of Pelton may have misled the Tax Court.9 The second appeal
resulted in another remand. If there was any doubt before, this time the
court of appeals left none that it did not intend the burden of proving
purpose to lie with the government. All that was meant was that the
evidence of reasonableness of the accumulation must be considered in
determining purpose, even if no affirmative finding that the accumulation
was or was not reasonable was made.100
The Tax Court reheard the case. This time it concluded: (1) The
Commissioner had not shown an unreasonable accumulation; (2) the
taxpayer had the ultimate burden of proving by a preponderance of the
evidence that it had not been availed of for the proscribed purpose; and
(3) the taxpayer, considering all the evidence, had not sustained its
burden. The court of appeals affirmed. 10'
CONCLUSION
In all cases, then, the ultimate burden of showing the absence of the
proscribed purpose-tax avoidance-lies with the taxpayer. Usually this
burden will fall after a determination that the taxpayer has unreasonably
accumulated earnings. However, in the case where no finding has been
made as to the reasonableness of the accumulation, neither section 535 (c)
(1) (A) (credit for reasonable accumulation) nor section 533 (presumption of purpose when unreasonable accumulation shown) is applicable.
And although the taxpayer must show by a preponderance of the evidence
that his purpose was not tax avoidance, he may still introduce evidence
of reasonableness as the most persuasive evidence.
This result is consonant with the legislative attempt in 1954 to make
the accumulated earnings tax more equitable than it had been. The combined effect of sections 534 and 535(c)(1)(A) should not be underestimated. Hopefully, these provisions and the application of the rules of
the Young Motor Co. case will help eliminate the false dichotomy, seen
in the cases decided under the 1939 Code provisions, between reasonableus TAx Cr. R. PRAC. 32: "BuRoNw OF PROOF. The burden of proof shall be upon the petitioner, except as otherwise provided by statute .... " No such statute exists with respect to
the purpose of the accumulation.
99 316 F.2d at 270.
100 See American Metal Prods. Corp. v. Commissioner, 34 T.C. 89 (1960), aff'd, 287
F.2d 860 (8th Cir. 1961); F. E. Watkins Motor Co., 31 T.C. 288 (1958).
101339 F.2d 481.
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ness and purpose. The Young decision represents a practical and sensible
approach to what may be the most telling evidence of purpose. As long
as no finding has been made that the accumulation was unreasonable,
there appears to be every reason to take further evidence of the use for
which funds were accumulated as being pertinent to the question of
purpose.
As long as dividends are taxed to the recipient at potentially higher
rates than he might otherwise be able to pay by indulging in tax avoidance schemes," °2 the Commissioner will seek to defeat such plans with
penalty tax provisions. The accumulated earnings tax is one such provision, but to administer it fairly, two interests must be carefully balanced.
On the one hand there is the legitimate interest of the Commissioner in
curtailing tax avoidance. But on the other hand is the legitimate and vital
interest of business and the nation in stimulating reinvestment, even in
enterprises unrelated economically to the taxpayer's, in order to permit
and foster economic growth. The 1939 Code accumulation provisions had
a stiffing effect. The 1954 provisions made basic changes that helped
balance these interests.
The change in the burden of proof rules gives both parties alternatives
that permit better management of their presentations. Whether the Commissioner derives as much benefit as the taxpayer is doubtful. In strong
cases, the result should be the same no matter who sends what notice.
In weak cases, the Young opinions imply that the result will likewise
be the same. In close cases, where the allocation of the burden of proof
is important, the taxpayer is better off under the 1954 Code provisions.
If the Young result holds up, the taxpayer is helped by being able to
rely on objective evidence of reasonableness, and by being able to justify
an accumulation for any of a broad range of business purposes.
The section 535 credit for reasonable accumulations enhances the importance of the burden of proof changes because of the variety of findings
and alternatives possible. This Comment has stated the assumption that
if the Commissioner fails to carry his burden, no affirmative finding of
a reasonable accumulation is made. While that is the conclusion to be
drawn from the cases, this result is very curious, for even if the case
proceeds and the proscribed purpose is found, must not the court look
back to see if the taxpayer is entitled to any credit? Or may the entire
accumulation be taxed even though had the taxpayer assumed the burden
there would have possibly been no tax on some or all of the amount
retained? If the taxpayer can be taxed on the entire amount when it
might have been a reasonable accumulation all along, has the 1939 Code
effectively been changed?
102 See
note 1 supra and accompanying text.
19661
ACCUMULATED EARNINGS TAX
1069
Arguably Congress did not mean to make intent the sole determinant
that the tax should be imposed, for the credit provided by section 535
and the presumption of section 533 make the tax turn largely on reasonableness. °3 If this be so, perhaps the second phase of the proceedings
should be eliminated in order to force the court to make an apportioned
finding based on reasonableness. One could argue that Congress intended
that the taxpayer could receive the credit only if he assumed the burden
on reasonableness and forced the Tax Court to make a finding on this
issue during the first phase of the proceeding. Such a result, however,
places a great emphasis on the initial sparring over the exchange of the
requisite notices and the consequent allocation of the burden of proof of
reasonableness.
Relatively few cases brought solely under the 1954 Code's accumulated earnings tax provisions have reached the appellate courts, at least
on the issues dealt with in this Comment. If the Code is administered as
suggested above, an equitable balance should be attained among the
competing interests involved.
Steven M. Kipperman
10 3
The Young case seems to imply that no tax will result anyhow since the evidence that
could have gone to show reasonableness will also go to disprove purpose. Perhaps the decision actually helps emasculate any practical distinction between the different tests of reasonableness and purpose. A more recent case may suggest that the credit can actually be
granted no matter who has the burden. John P. Scripps Newspapers, 44 T.C. 453 (1965).
But the opinion is unclear because each party had the burden on some issues of reasonableness and the court did not say whether the credit was granted because the taxpayer carried
his burden or in spite of the fact that the Commissioner failed.