The Ninth Circuit Court of Appeals tackled a matter of first impression in Transbay v. Chevron when it found that a party’s willful ignorance of the contents of a document can possibly lead to an admission of the truth of the contents. Anyone who’s planning to whip out the “I knew nothin’” defense will have to reassess her strategy.

Every litigator loves hearsay – and its infamous loopholes. It looks like the Ninth Circuit has finally spoken and closed another loop on the “ostrich defense.”

Transbay had leased property from Chevron to run a gasoline station in San Francisco. In 2008, Chevron notified Tsachres of its intent to sell the property. The sale had to conform to the Petroleum Marketing Practices Act (PMPA). Chevron opted to make a “bona fide offer” to sell pursuant to the PMPA, which was measured by an “objectively reasonable” standard that must “approach fair market value.” Ellis v. Mobil Oil.

Chevron commissioned Deloitte, which returned a number of $2.386 million for the property’s “highest and best use”; and $1.5 million if the property continued to be used as a going concern. With these numbers, Chevron offered to sell the property to Transbay for $2.386 as a branded Chevron station; $2.375 million for no branding.

“Possession Plus”

The panel rejected the lower district’s finding that the independent appraisal of the property that valued it at much higher than both commissioned values was not hearsay, and should have been included in the body of evidence at the lower court level under FRE 801(d)(2)(b).

Specifically, under the “possession plus” test first articulated in United States v. Ospina (possession or documents and reliance on information), a party essentially adopts as true the contents of a document when his actions objectively manifest an intent to rely on the truth of its contents, even if he never looked at the statements within.

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