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United States v. Pacific Gas & Electric Co.

United States District Court, N.D. California

July 6, 2016

UNITED STATES OF AMERICA, Plaintiff,
v.
PACIFIC GAS AND ELECTRIC COMPANY, Defendant.

          FIRST ORDER REGARDING DEFENDANT'S OBJECTIONS TO MANEGOLD EXHIBITS

          THELTON E. HENDERSON United States District Judge

         Yesterday, July 5, 2016, Defendant Pacific Gas and Electric Company ("PG&E") lodged objections to 43 of the 96 exhibits that the Government intends to introduce through Government witness William Manegold. Dkt. No. 717 ("Objs."). The Government filed a written opposition to these objections just before midnight yesterday evening, only hours before Mr. Manegold was set to begin testifying. Dkt. No. 718 ("Opp'n"). As Mr. Manegold is presently testifying, the Court will issue piecemeal orders on PG&E's objections, so that the Government may question Mr. Manegold in as uninterrupted a manner as possible.

         The Court now addresses PG&E's global objections to the Manegold exhibits and PG&E's first eight exhibit-specific objections.

         GLOBAL OBJECTIONS

         PG&E makes several global objections to the Manegold exhibits, which the Court will address before making admissibility determinations as to each exhibit. With respect to the rulings on PG&E's exhibit-specific objections, the Court directs the reader to PG&E's Objections themselves for a listing of each objection by exhibit.

         i. Mr. Manegold may sometimes lay the foundation for a hearsay exception even if he did not author or receive the document requiring the exception.

         PG&E objects to 14 of the Manegold exhibits on the basis that the exhibit lacks foundation because "Manegold [is] not on the email, " "not on the document, " "not on [the] spreadsheets, " or "not on [the] letter."[1] The Court will address these objections on a case-by-case basis, but notes that PG&E is incorrect to suggest that the Government may never use Mr. Manegold to lay the foundation for a hearsay exception simply because he did not author or receive the document requiring the exception.

         In the context of PG&E emails, the clearest avenue for the Government to establish that an email is not barred by the rule against hearsay is for the Government to establish that the email is a nonhearsay statement of a party opponent under Federal Rule of Evidence ("Rule") 801(d)(2). Even if Mr. Manegold is not on an email, it is likely that as a long-time employee of PG&E, he will be able to lay the foundation for the application of this Rule. For example, the Government argues for Exhibit 273 (an email) that it "expects Manegold to testify that [the email's author] was a PG&E employee at the time, and that [Manegold] recognizes the budget discussion in the email as being within the scope of [the author's] employment." Opp'n at 3. Provided Mr. Manegold actually so testifies, this would be sufficient testimony to establish that the email in Exhibit 273 is a nonhearsay statement under Rule 801(d)(2), [2] and the same may be true for other PG&E email-exhibits that do not list Manegold as either the sender or a recipient.

         In the context of PG&E data responses, spreadsheets, or other documents, for which no author is indicated, it is similarly likely that Mr. Manegold will possess the knowledge to establish either that the document is a nonhearsay statement under Rule 801(d)(2) or that the document meets a hearsay exception under Rule 803. For example, the Government argues for Exhibit 283 (a chart detailing PG&E's 2008 budgeting metrics and concerns) that it "expects Manegold to testify that he recognizes this form of document as one created by PG&E's budget team in the scope of employment (and thus a nonhearsay statement of party opponent), as well as a business record of PG&E, created and maintained in the ordinary course of business. His performance appraisals from the time show that he was involved in the PG&E budget process for integrity management, the program that is the subject of the second line in this chart." Opp'n at 3. Provided Mr. Manegold actually so testifies, this would be sufficient to establish that the chart is either a nonhearsay statement under Rule 801(d)(2) or a business record under Rule 803(6), and the same may be true for other PG&E document-exhibits that do not list Manegold as an author.

         ii. Financial evidence, post-accident evidence, and general relevance or prejudice objections will be handled on a case-by-case basis.

         PG&E also makes global objections to "Financial Evidence Not Tied to the Government's Allegations, " "Post-Accident Evidence, " and "General Relevance/Prejudice." Objs. at 1-2. As PG&E concedes, however, it is more appropriate for the Court to "individually consider each of [the] documents" as they pertain to these global objections. Id. at 2. The Court does so below, and in the order(s) that follow.

         Nevertheless, PG&E's global objection to "Financial Evidence Not Tied to the Government's Allegations, " which is rooted in the Courts Order on PG&E's Motion in Limine Number Four, Dkt. No. 460 ("MIL Order") at 17-19, provides an occasion for the Court to offer a global clarification on that Order. There, the Court held "that evidence that PG&E's profit motives drove its compliance (or noncompliance) with the charged regulations is not substantially outweighed by the risk of unfair prejudice, as such would be direct evidence of the required mental state for the regulatory counts." MIL Order at 19. But the Court noted that "[t]hough this may be true in the abstract, it does not mean all evidence regarding PG&E's financial condition would survive a Rule 403 balancing." Id. As an example, the Court noted that the one figure offered by the Government would not survive such a balancing: "the fact that ‘PG&E reported its income for the second quarter of 2010 as $333 million, ' is a presentation of wealth unnecessary to any argument that PG&E's profit motives drove regulatory violations . . . ." Id. (citation omitted). However, this holding was in response to the Government's introduction of that figure only as evidence of PG&E's wealth. See Dkt. No. 277 as 12 ("But PG&E is not poor; a month before the San Bruno explosion, PG&E reported its income for the second quarter of 2010 as $333 million."). The Court did not mean to suggest, and did not hold, that the Government may never reference a PG&E financial figure in making its case that PG&E knowingly and willfully violated the Pipeline Safety Act regulations. The Court was merely noting that such figures are only relevant to the extent that they are offered to prove the required mental state for the regulatory counts. The parties should heed this clarification as they continue to confer on any objections moving forward.

         GOVERNMENT'S EXHIBIT 192

         This exhibit includes an email and attached summary report regarding the 2005 Performance Incentive Plan ("PIP") for PG&E's CGT Group.

         This exhibit is admissible, provided the Government lays the proper foundation for the email being a nonhearsay statement of a party opponent under Rule 801(d)(2) (which, as discussed above, the Court believes it should be able to do through Mr. Manegold). The email and attachment are not the sort of financial evidence prohibited by the Court's order on PG&E's Motion in Limine Number Four, MIL Order at 17-19, because the evidence is probative of PG&E's mental state on the charged crimes and not excludable under Rule 403. Specifically, the email and attachment demonstrate that "earnings from operations" and "expense budget management, " among many other laudable targets, are factors in employees' PIP bonuses, and also demonstrate the weight of these factors in calculating those bonuses. This information is relevant to the Government's theory that "PG&E's profit motives drove its compliance (or noncompliance) with the charged regulations, " id. ...


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