Schmutz v. Bolles, 88SC602

• Decision Date: 29 October 1990
• Docket Number: No. 88SC602,88SC602
• Citation: 800 P.2d 1307
• Parties: Prod.Liab.Rep. (CCH) P 12,650 Peter SCHMUTZ, Petitioner, v. Gene BOLLES, M.D.; Boulder Community Hospital; and Codman & Shurtleff, Inc., Respondents.
• Court: Colorado Supreme Court

Page 1307

800 P.2d 1307

Prod.Liab.Rep. (CCH) P 12,650

Peter SCHMUTZ, Petitioner, v. Gene BOLLES, M.D.; Boulder Community Hospital; and Codman & Shurtleff, Inc., Respondents.

No. 88SC602.

Supreme Court of Colorado En Banc.

Oct. 29, 1990.

Rehearings Denied Dec. 10, 1990.

Holland & Hart, Brooke Jackson, Marcy G. Glenn, Denver, for petitioner.

Johnson & Mahoney, P.C., Collie E. Norman, Denver, for respondent Gene Bolles, M.D.

Cooper & Kelley, P.C., Paul D. Cooper, Thomas B. Kelley, John R. Mann, Denver, for respondent Boulder Community Hosp.

Hall & Evans, Kathleen G. Lanterman, Thomas N. Alfrey, Denver, for respondent Codman & Shurtleff, Inc.

Justice LOHR delivered the Opinion of the Court.

This case involves medical malpractice and product liability claims arising out of a craniotomy performed to remove a subdural hematoma. ¹ During the procedure the plaintiff bled extensively and suffered a stroke. He then filed an action against the surgeon, the hospital and the manufacturer of the drill that was used during the procedure. The jury returned a verdict for the defendants, the trial court entered judgment accordingly, and the Colorado Court of Appeals affirmed that judgment in an unpublished opinion. Schmutz v. Bolles, No. 86CA0720 (Colo.App. Oct. 13, 1988). We granted certiorari to determine whether the trial court properly disallowed the use of incident reports kept by the defendant drill manufacturer for any purpose other than notice to the manufacturer and whether the trial court's instruction regarding product misuse was appropriate. We reverse the court of appeals' judgment and return the case with instructions that it be remanded for a new trial.

I.

On February 4, 1983, Dr. Gene Bolles performed a craniotomy at Boulder Community Hospital to remove blood that had accumulated next to Peter Schmutz's brain. A surgical drill, a Smith perforator manufactured by Codman & Shurtleff, Inc. (Codman), was used during the procedure to bore a hole in Schmutz's skull. During the procedure, the drill accidentally plunged ² through Schmutz's dura, the outer protective membrane covering the brain, and came in contact with his brain. The Codman drill used in this procedure is designed so that the drill bit will automatically stop rotating when it ceases to encounter firm resistance. This design feature causes the bit to stop turning as soon as it has drilled through the skull and before it perforates the dura. During the Schmutz operation, however, the drill apparently did not stop turning, and instead it plunged through the dura and came into contact with his brain. The effect of this accidental plunging was disputed at trial. A neurosurgeon called by Schmutz as an expert witness expressed the opinion that the drill bit went into Schmutz's brain and that branches of an artery wrapped around the bit and were torn off at a location away from the bit, causing extensive bleeding. Dr. Bolles testified that the drill merely bruised the brain and did not penetrate it. Defense experts expressed opinions that the drill plunge could not have caused the extensive bleeding at the location where it was encountered. They testified that the bleeding was probably caused by the spontaneous rupture of a pre-existing vascular malformation in Schmutz's brain or the removal of the hematoma itself. Whatever its cause, the unexpected bleeding that occurred during the procedure resulted in a stroke that left Schmutz partially paralyzed and with diminished vision. ³

Schmutz filed an action in Boulder County District Court against Dr. Bolles, Boulder Community Hospital and Codman. Schmutz sued Bolles for negligence in the use of the Smith perforator during the operation. He sought relief against the hospital for negligence in failing to clean the Smith perforator properly. He asserted claims against Codman based on negligence and strict liability theories. Schmutz averred that Codman negligently manufactured or designed the Smith perforator or the warnings or instructions related to it, and that the instrument was defective and unreasonably dangerous. Schmutz also sought exemplary damages against Codman. ⁴ At trial, all of the defendants contended that the drill malfunction did not cause the bleeding in Schmutz's brain. Codman also argued that the drill malfunction was caused by the hospital's inadequate cleaning of the drill.

At the conclusion of the trial, the jury returned a verdict for all of the defendants, and the trial court entered judgment accordingly. The court of appeals affirmed. Schmutz now argues that the trial court erred in limiting the use of Codman's reports of other drill malfunction incidents to the issue of notice to Codman. ⁵ If the reports were to be admitted to prove causation, all of the defendants would be affected. ⁶ Codman would be further affected by admission of the reports to show that the drill was defective. Schmutz also contends that the trial court erred in giving a product misuse instruction to the jury. This allegation of error involves Schmutz's product liability claim against Codman only. We will address Schmutz's contentions in turn.

II.

A.

During discovery, Schmutz obtained from Codman approximately two hundred reports concerning malfunctions of the same model drill that occurred between 1977 and 1986. ⁷ Each incident report consists of one or more documents, including a "Codman Product Complaint Report," and often including a "Patient Related Incident Report," internal Codman memoranda and correspondence. The Product Complaint Report and Patient Related Incident Report are both printed Codman forms. A Codman representative fills out the form based on information provided by a doctor, hospital employee or Codman field representative who has spoken with hospital personnel. The attached memoranda often include reports by Codman investigators who, after examining a returned drill, express an opinion about the cause of the malfunction. In many cases, the reports attribute the malfunction to the hospital's failure to assemble or clean the drill properly.

Schmutz sought admission of these reports, contending that they were relevant for at least three purposes: (1) to demonstrate that Codman had notice of the malfunctions of the drill and of the potential misuse of the drill by failing to clean, lubricate and assemble it properly between uses; (2) to support Schmutz's theory of causation; and (3) to show that the drill was a defective product. The trial court admitted all but one of the reports, but only for the purpose of demonstrating notice. ⁸ The court rejected the use of the reports for the other proffered purposes, concluding that for such uses the reports were inadmissible hearsay. The trial court excluded one report completely, concluding that the risk of prejudice resulting from its admission would outweigh any value it might have in establishing notice. See CRE 403.

B.

Evidence is hearsay if it is "a statement other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted." CRE 801(c). The incident reports were not hearsay when used to establish notice because they were not admitted to establish the truth of the statements in the reports. The trial court, therefore, correctly admitted the reports to show that Codman knew of the reported malfunctions and the improper cleaning and assembly to which Codman had attributed those malfunctions.

Use of the reports to establish causation or product defect, however, would entail admitting the reports as evidence of the truth of the statements contained in them. The trial court excluded the reports for all purposes other than notice to Codman, noting that they typically contained information from persons other than those who wrote the reports and therefore were hearsay.

Hearsay is inadmissible unless it falls within a statutory exception or one of the exceptions found in rule 803 of the Colorado Rules of Evidence. Schmutz argues that these incident reports should have been admitted under the business records exception of CRE 803(6) or under the residual exception of CRE 803(24). We conclude that the incident reports may be admissible as business records under CRE 803(6) and that the reports must be considered individually to determine whether they qualify for admission under that rule.

CRE 803(6) provides in pertinent part:

The following are not excluded by the hearsay rule, even though the declarant is available as a witness:

....

(6) A memorandum report, record, or data compilation, in any form, of acts, events, conditions, opinions, or diagnosis, made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course of a regularly conducted business activity, and if it was the regular practice of that business activity to make the memorandum, report, record, or data compilation, all as shown by the testimony of the custodian or other qualified witness, unless the source of information or the method or circumstances of preparation indicate lack of trustworthiness. [ ⁹]

Underlying the business records exception is the belief that records kept in the ordinary course of business and relied upon by a business necessarily have sufficient guarantees of trustworthiness. Palmer v. A.H. Robins Co., Inc., 684 P.2d 187, 200 (Colo.1984) (applying common law predecessor to CRE 803(6)).

There are five requirements for a business record to be admissible under CRE 803(6): (1) the document must have been made "at or near" the time of the matters recorded in it; (2) the document must have been prepared by, or from information transmitted by, a person "with knowledge" of the matters recorded; (3) the person or persons who prepared the document must have done so as part of a "regularly conducted business activity"; (4) it must have been the "regular practice" of that business activity to make such documents; and (5) the document must have...