Court filing

Exhibit 12 — Arbitration Order Denying Motion to Admit Congressional Report - OTO Analytics, LLC (Womply) v. Benworth Capital Partners LLC

No. 4:24-cv-03975-AMO · Doc. 41-14 · Docket on CourtListener

Summary

Exhibit 12, filed August 20, 2024 as Document 41-14 in Oto Analytics, LLC (Womply) v. Benworth Capital Partners LLC, No. 4:24-cv-03975-AMO. The exhibit is Order No. 6 in JAMS Arbitration Case Reference No. 1210038203, ruling on Benworth's motion to admit the December 2022 staff report of the U.S. House of Representatives' Select Subcommittee on the Coronavirus Crisis. The arbitrator finds the report's contents are hearsay and hearsay within hearsay, and rejects admission under Rule 803(8) of the Federal Rules of Evidence and California Evidence Code section 1280 for lack of trustworthiness. The order cites the absence of hearings and the report's reliance on statements by Benworth and Fountainhead, both in arbitration with Womply. It denies the motion and is dated May 2, 2023 over the name of Arbitrator Alexander L. Brainerd.

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Case 4:24-cv-03975-AMO Document 41-14 Filed 08/20/24 Page 1 of 8

EXHIBIT 12
DocuSign Envelope ID: C9844285-C322-4845-A2DF-FA1A5A931738
Case 4:24-cv-03975-AMO Document 41-14 Filed 08/20/24 Page 2 of 8

JAMS ARBITRATION CASE REFERENCE NO. 1210038203

Oto Analytics, Inc. dba Womply,
Claimant(s),

and

Benworth Capital Partners, LLC,
Respondent(s).

______________________________________________

Benworth's Order Re: Motion to Admit Congressional Staff Report.

Order No. 6

Introduction

Throughout these arbitral proceedings, Respondent/Counter-Claimant, Benworth Capital Partners

LLC ("Benworth"), has sought to admit the December 2022 staff report of the U.S. House of

Representatives' Select Subcommittee on the Coronavirus Crisis entitled: "We Are Not The Fraud Police":

How Fintechs Facilitated Fraud In The Paycheck Protection Program (the "Congressional Report" or the

"Report"). According to Benworth, "a number of findings in the Congressional Report go directly to factual

issues at the heart of this arbitration, including the efforts of Claimant/Counter-Respondent, Oto Analytics,

Inc. d/b/a Womply ("Womply") to evade Small Business Administration ("SBA") rules and regulations

governing the Paycheck Protection Program ("PPP") and the parties' agreements." (Benworth Letter Br.,

3/27/23, p.l.) Womply has continually objected to the introduction of the Congressional Report on hearsay

grounds, and to date, each time that Benworth has attempted to admit the Congressional Report, the

Arbitrator has sustained Womply's objections, often noting that the Congressional Report is "rank hearsay."

Based on Benworth's continuing requests to introduce the Congressional Report, the Arbitrator

granted Benworth leave to file a formal motion to have the Congressional Report admitted into evidence.

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Benworth submitted its Motion, via letter brief, on March 27, 2023. Benworth attached the Congressional

Report to this submission.

Womply submitted its Opposition to Benworth's Motion on April 7, 2023, and on April 14, 2023,

Benworth submitted its Reply.

Based upon the submissions of the parties, and after careful review and analysis of the legal

precedent cited in those papers, the following order is issued on Benworth's Motion

Discussion

Benworth cites two grounds for the admission of the Congressional Report. First, Benworth seeks to

admit the Report for non-hearsay purposes, that is, according to Benworth, to provide the necessary context

for the reasons underlying the SBA's suspension ofWomply and the investigation it is currently

undertaking. Second, Benworth seeks to admit the factual findings contained in the Congressional Report

since, according to Benworth, those findings are admissible under the public records exception to the rule

against the admission of hearsay. The Arbitrator shall address each of these contentions below.

Admission of the Report for the non-hearsay purpose of "context"

According to Benworth, the Congressional Report is admissible to provide the factual foundation for

the basis of the SBA's suspension ofWomply and its investigation into Womply's compliance with SBA

Loan Program Requirements. The fact that the Congressional Report was the impetus for the SBA's

suspension and investigation has already been established in the record, however. (See, e.g., JX 374

[December 8, 2022 letter from SBA to Mr. Scammell citing Congressional Report and its "references to

Womply" as grounds for SBA's actions].) Admission of the Congressional Report is therefore not necessary

to provide any further context for the SBA investigation or any other fact or event. The fact of the Report is

in the record.

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Supplementing its argument regarding context, Benworth also contends that the Congressional

Report's findings are admissible under Federal Rule of Evidence, Rule 801(d)(2)(A) and California

Evidence Code section 1200, since the Report's findings are based on communications that Womply and its

officers, attorneys, and other representatives had with the Select Subcommittee. The problem with

Benworth's position is twofold. First, these communications within the Report are not only hearsay in that

they reflect communications by individuals to members of the Committee who then chose which selected

excerpts of those communications they would include within the Report, they are also hearsay within

hearsay since they reflect communications by individuals to other individuals that were then submitted to

and reviewed by members of the Committee who then chose which excerpts of those communications they

would include within the Report. Neither hearsay nor hearsay within hearsay is admissible in these arbitral

proceedings.

Second, while it is true that, under Rule 801(d)(2)(A) and California Evidence Code section 1220, a

party's own statement, if offered against that party, is not considered hearsay, Benworth is not now, nor has

it ever, sought to introduce into evidence the documents underlying the Congressional Report, nor has it

sought to introduce Womply's officers, attorneys, or other representatives own statements to the

Congressional Select Subcommittee. Instead, Benworth is seeking to introduce the Report, which contains

the Select Subcommittee's staff's selected excerpts, descriptions, and characterizations of the underlying

documents and officers', attorneys', or other representatives' purported statements. Benworth has cited no

statute or court decision that demonstrates that these excerpts found within the Report are the equivalent of

the individuals' own statements. They do not, therefore, constitute a Rule 801(d)(2)(A) or section 1200's

party admission.

Finally, Benworth contends that the Congressional Report is admissible to explain Womply's state of

mind and to challenge any inconsistent statements made by Mr. Scammell during his testimony at the

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hearing. Copious evidence ofWomply's state of mind has already been introduced in this arbitration, and

Benworth has had ample opportunity to challenge Mr. Scammell's purportedly inconsistent statements. In

addition, the hearsay statements in the Report are not a reliable or appropriate source to explain Womply's

state of mind or to challenge inconsistent statements. These are therefore not grounds for admitting the

Congressional Report.

Admission of the Report under the Public Records Exception to the hearsay rule

Rule 803(8) of the Federal Rules of Evidence-the public records exception to the hearsay rule -

permits an admission of" [a] record or statement of a public office if: (A) it sets out ... factual findings from

a legally authorized investigation; and (b) the opponent does not show that the source of information or

other circumstances indicate a lack of trustworthiness." (Fed. R. Evid. 803(8).) Factual conclusions within

the "record" are also permitted so long as they are "based on a factual investigation and satifly] the Rule's

trustworthiness requirements." (Beech Aircraft Corp. v. Rainey (1988) 488 U.S. 153, 170.) "Thus, a trial

judge has the discretion, and indeed the obligation, to exclude an entire report or portions thereof - whether

narrow 'factual' statements or broader [factual] 'conclusions' -that she determines to be untrustworthy."

(Id. at 167.) 1

Trustworthiness is evaluated based on: (1) the timeliness of the investigation; (2) the investigator's

skill or experience; (3) whether a hearing was held; and (4) possible bias when reports are prepared with a

view to possible litigation. (Id., n.11.) The party opposing the introduction of a public record bears the

burden of coming forward with enough negative factors to persuade a court that a report should not be

admitted. (Sullivan v. Dollar Tree Stores, Inc. (9th Cir. 2010) 623 F.3d 770, 778.) Here, Womply has met its

burden.

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Even if the Report was not inadmissible on hearsay grounds, Benworth has never directed the Arbitrator to any specific
"findings" within the Report that it seeks to admit, instead merely discussing "fmdings" in general, which is wholly unhelpful to
the Arbitrator's considerations.

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First, the Select Subcommittee did not hold any hearings in connection with the Congressional

Report. This weighs in favor ofWomply's burden.

Second, the Congressional Report relies heavily upon statements by Benworth and Fountainhead,

both of which were in active arbitration with Womply. Benworth and Fountainhead thus had a financial

interest in making statements to Select Subcommittee staffers attacking Womply in the hopes that they could

use the results of those statements to advance their arbitration interests. The motivations of the individuals

providing information to the Select Subcommittee staffers, coupled with the fact that the Arbitrator has not

been presented with any information about those staffers, particularly with regard to their skill or expertise

in assessing credibility and weighing potentially biased motivations and evidence, also tips the balance in

favor of Womply meeting its burden. (See Anderson v. City ofNew York (S.D.N.Y. 1987) 657 F. Supp. 1571,

1579 [excluding Congressional report as hearsay for lack of trustworthiness because Committee members

may not have had "any special expertise in evaluating witnesses, especially regarding their credibility or

accuracy of recall" and because witnesses "were self-interested."].)

Indeed, the Arbitrator knows nothing about the make-up of the Sub Committee and its staffers and how the

Select Sub Committee and its staffers were instructed to conduct its investigation. All he knows is that,

[i]n the course of the investigation, Select Subcommittee staff

reviewed more than 83,000 pages of internal documents and had multiple

briefings and conversations with former fintech employees and others with

knowledge of fintech activities.

The Select Subcommittee also was briefed by staff of the SBA and the SBA

OIG.

(Congressional Report, pp.16-1 7.) This is insufficient to instill any sense of trustworthiness in the Sub

Committee's skill and expertise on these matters.

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As the court explained in Barry v. Trustees ofInt 'l Ass 'n Full-Time Salaried Officers & Emps. Of

Outside Loe. Unions & Dist. Counsel's (Iron Workers) Pension Plan (D.D.C. 2006) 467 F.Supp.2d 91,

Congressional reports are not entitled to an additional presumption of trustworthiness or reliability simply

by virtue of having been produced by Congress. (Id. at 98.) Thus, whereas here, when presented with a

Congressional Report that "lacks the ordinary indicias of reliability, is not based on the personal knowledge

of the reporter, and contains the testimony of interested parties, not experts," the Arbitrator uses his

discretion and DENIES Benworth's request to admit the Congressional Report under the Public Records

Hearsay Exception. (See Anderson, supra, 657 F.Supp. at 1579-80.)

Benworth's reliance on California Evidence Code section 1280 fares no better. Section 1280 states

that a "writing made as a record of an act, condition, or event is not made inadmissible by the hearsay rule

when offered in any civil or criminal proceeding to prove the act, condition, or event if all of the following

applies: (a) The writing was made by and within the scope of duty of a public employee. (b) The writing

was made at or near the time of the act, condition, or event. (c) The sources of information and method and

time of preparation were such as to indicate its trustworthiness." (Cal.Evid.Code §1280.) Benworth

contends that it has satisfied all three prongs, and specifically with the regard to the third prong of

''trustworthiness," Benworth relies on Jazayeri v. Mao (2009) 174 Cal.App.4th 301 and People v. Orey

(2021) 63 Cal.App.5th 529 for the proposition that "the trustworthiness requirement is established [because

it has shown] that the written report is based upon the observations of public employees who have a duty to

observe the facts and report and record them correctly." (See Motion, p.9.) Jazayeri and Orey both involved

documents prepared by public employees based on their own personal observations, however. (See Jazayeri,

supra, 174 Cal.App.4th at 318 [reports not hearsay under public records exception because prepared after

authors' inspection of each chicken delivered]; Orey, supra, 63 Cal.App.5th at 551-52 [prison records not

hearsay under public records exception because records were made by public employees in official duty of

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recording statements during normal course of business].) Such is not the case here - the Select Sub

Committee staffers who prepared the Congressional Report did not observe any facts; they instead based the

Report on information provided by third parties. Jazayeri and Orey are therefore inapplicable to this

situation.

In its Reply, Benworth cites People v. ConAgra Grocery Prod. Co. (2017) 17 Cal. App.5th 51. This

case is inapposite, however, since it merely stands for the unremarkable and wholly distinguishable

proposition that reports relied upon by experts that were not prepared by the experts themselves are

admissible for the limited purpose of assisting the court in evaluating the expert's opinion. (Id. at 138.) The

Congressional Report is not being introduced for the purpose of evaluating an expert's opinion here.

ConAgra, therefore, does not apply herein.

In light of the above, the Arbitrator's conclusions with regard to the trustworthiness of the

Congressional Report remains the same, whether based on Federal or California law.

Conclusion

Based upon the above analysis, Benworth's motion to admit the Congressional Report is DENIED.

The existence of the report is in the record, but the content of the report is " rank hearsay" and does not fall

within any of the hearsay exceptions asserted by Benworth.

IT IS SO ORDERED.

May 2, 2023
_____________________________
Alexander L. Brainerd
Arbitrator

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