Category: Trial Practice

Finance Company’s Affidavit In Summary Judgment Motion Fails Business Records Test – IL ND

In NRRM, LLC v. Mepco Finance Corp., 2013 WL 4537391 (N.D.Ill. 2013), the Northern District of Illinois denied a finance company’s summary judgment motion in a breach of contract suit against an automobile  warranty provider. 

The finance company plaintiff sued the car warranty provider (warrantor) for breach of contract, claiming it failed to reimburse the plaintiff for various warranty claim losses.

The finance company moved for summary judgment on its breach of contract claim and supported its motion with its business analyst’s declaration.

Disposition: Motion for summary judgment denied.  

Reasoning:

To prove breach of contract under Illinois law, a plaintiff must show (1) the existence of a valid contract, (2) substantial performance by the plaintiff, (3) breach by the defendant and (4) resultant damages.  

The business analyst stated in his declaration that the defendant owed over $5M in reimbursement payments.  He declared he was familiar with plaintiff’s business practices and that his damage calculation was based on a review of the company’s business records.  *3-4.

Federal Rule of Evidence 803(6) – The Business Records Exception

The Court ruled that the plaintiff’s declaration and its underlying business records were inadmissible hearsay.

The business records exception to the hearsay rule- codified in FRE 803(6) –  is based on the theory that business records are generally trustworthy and their risk of fabrication low.  The party offering business records in support of its claim must lay a foundation for the records and establish their reliability. 

To establish business record foundation at summary judgment, the record’s proponent must supply an affidavit (or declaration) signed by someone qualified to introduce the record at trial (i.e. a records custodian).  

FRE 803(6) allows into evidence a  “record of an act, event, condition, opinion or diagnosis if”: (1) the record was made at or near the time by someone with knowledge (or from information transmitted by someone with knowledge); (2) the record was kept in the course of regularly conducted activity of a business, (3) making the record was a regular practice of that activity; and (4) all these conditions are shown by the testimony of a custodian or other qualified witness, or by certification that complies with FRE 902(11), (12).  (*4-5)

While the plaintiff’s analyst did parrot the the business records rule elements in his declaration, this wasn’t enough.

He didn’t establish that the records were made at or near the time of the event by someone with knowledge of the event or that making the record was the finance company’s regular practice.  

And since the declaration and business records constituted plaintiffs’ only evidence on the breach and damages elements of its contract claim, the Court denied plaintiff’s summary judgment motion.   *5-6.

Notes: It’s an understatement to say that getting key documents into evidence during a breach of contract trial is critical.  Trial success or defeat often hinges on whether a litigant successfully gets business records into evidence over a hearsay or foundation objection.  Same goes for summary judgment practice; especially in Federal court. 

 

 

 

 

Construction Manager Who ‘Controls’ Site Can Be Liable For Subcontractor Employee’s Injury

Calloway v. Bovis Lend Lease, Inc., 2013 WL 4428894 (1st Dist. 2013) examines a construction manager’s negligence liability to a subcontractor’s employee where the construction manager entrusts work to the subcontractor but still exercises some control over its work.

Facts: A father and son were piping installers for a subcontractor on a construction project managed by the defendant.  They sustained fatal (father) and permanent (son) injuries when a trench wall collapsed. The father’s estate sued the defendant for wrongful death and the son sued for negligence.

Held: The First District upheld the jury verdict of over $8M for the son and just over $1M for the Estate (after a 49% damages reduction for contributory negligence) against the defendant.

Reasoning:

Affirming the jury verdict, the court held that the defendant construction manager entrusted the underground piping work to the subcontractor (the father and son’s employer).  However, it also exercised a sufficient amount of supervisory control over the subcontractor and was responsible for overall project safety.  These rules were integral to the court’s decision:

– one who employs an independent contractor is not liable for the independent contractor’s acts or omissions;

– If the employer retains control over the operative detail of the contractor’s work, the employer is liable under agency law principles (i.e. respondeat superior);

– if the employer retains only supervisory control – such as power to direct timing of the work or to forbid the work from being done in a potentially harmful way – the employer can be liable unless he exercises that control with reasonable care to prevent injury to others;

– when a contractor entrusts part of work to a subcontractor but superintends the entire job through a foreman, the entrusting contractor can be liable if  he (1) fails to prevent the subcontractor from jeopardizing the safety of others; (2) knows or should know that the subcontractor is engaging in unreasonable dangerous activity; and (3) has the opportunity to prevent the dangerous activity by exercising his retained power of control;

– a principal contractor’s right to order work stopped or started, to inspect its progress or receive reports, or make recommendations is not enough – standing alone – to confer liability on the principal contractor;

– the key inquiry in determining whether a contractor owes a duty of care under negligence rules turns on whether the contractor retains control or the right to supervise the contractor.

¶¶ 47-50; Restatement (Second) of Torts, Section 414

The court found that defendant entrusted the underground piping work to plaintiffs’ employer and did more than just administrative work on the job.  The contract documents gave defendant the authority to act as the owner’s agent and afforded it wide latitude in bidding and choosing contractors on the project.  ¶¶ 60-63.

The court cited as support for its findings the evidence that defendant was in charge of overall project safety and even produced safety videos and published safety protocols.  Several witnesses also testified that defendant had day-to-day control over the project and actively monitored its progress.  ¶¶ 68-75.

Witness Discovery Deposition Admitted Into Evidence As A Party Admission

The court affirmed the trial court’s allowing defendant’s former employee’s discovery deposition to be read to the jury.  Rule 212(a)(5) allows a discovery deposition to be used at trial where the deponent isn’t a retained expert, his evidence deposition hasn’t been taken and he can’t testify due to death or infirmity.  SCR 212(a)(5).

The First District found that Rule 212(a)(5) didn’t apply since the deponent wasn’t dead or sick. He was just out of the country.  However, under Rule 212(a)(2) and (3), the discovery deposition was properly read to the jury as a party admission.  These sections specifically allow discovery depositions to come into evidence as party admissions.  A statement is not hearsay if (1) it’s a statement offered against a party; (2) is a statement by the party’s agent (3) concerning a matter within the scope of the agency and (4) is made during the existence of the relationship.  ¶ 88.

The court found that the deposition met all of the rule’s requirements for a party admission and was properly read to the jury.  ¶ 89.

Conclusion: Calloway discusses an entire gamut of important and recurring substantive, procedural and evidentiary topics including compensable damages, contributory negligence, the Dead Mans’ Act, the hearsay rule and exceptions, proper discovery sanctions and the importance of jury instructions.  The case is especially instructive on the entrustment rule – derived from Section 414 of the Restatement (Second) of Torts.  Calloway makes clear that regardless what the contract documents say, if a construction manager retains a sufficient level of supervisory or “superintending” control over a project, it can be subject to negligence liability to third parties if it fails to exercise reasonable care.

 

 

 

 

Illinois Business Records: Getting Them In at Trial

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I’ve learned from painful experience to always have evidentiary foundation and authenticity considerations at the forefront of my trial preparation plan. 

I’ve also found that having a working knowledge of Illinois Supreme Court Rule 236 (SCR 236), as well as Federal and Illinois Evidence Rules 803(6) and 902(11) (hearsay exception and self-authentication rules for business records, respectively) is essential to preparing for and proving my client’s breach of contract case at trial.

Bank of America v. Land, 2013 IL App (5th) 120283 serves as a good case law illustration of the business records rule.  

The plaintiff bank sued to foreclose a mortgage and later moved for summary judgment.  The bank supported its summary judgment motion with a bank officer’s affidavit who testified that she reviewed the bank’s books and records of the mortgage holders, reviewed the borrowers’ payment history and certified a payment history attached to the affidavit. Land, ¶ 5. 

The trial court granted the bank’s motion awarding it money damages of over $100,000 and a judgment of foreclosure.  Land, ¶ 6.  Defendant appealed.

Result: Trial Court affirmed.  The bank’s supporting affidavit meets the requirements of SCR 236.

Reasoning:  The defendant’s chief argument on appeal was that the bank officer’s supporting affidavit was inadmissible hearsay since the underlying mortgage didn’t originate with the plaintiff and because the affidavit relied on a third party’s (another mortgage company) loan records. 

The Court rejected the argument and held that the affidavit met the requirements of SCR 236, which codifies the hearsay exception for business records (a link to the Rule’s text follows this post).

– SCR 236 provides that any record of a monetary transaction is admissible as evidence of that transaction if the record is made in the regular course of business and the business’s regular practice was to make a record of a transaction at or near the time of the transaction;

– The rationale for the rule is that business records exist to aid in the proper transaction of business and so records are “useless for that purpose unless accurate.” 

– Lack of personal knowledge by the maker may affect the evidence’s weight, but not its admissibility;

A third party’s records can also be admitted where that third party is authorized to generate the record on behalf of the offering party.

¶ 13.

Applying these rules, the Court found that plaintiff satisfied SCR 236 requirements where the affiant/bank officer testified

(i) that she was familiar with the bank’s business records creation and maintenance practices,

(ii) that the records pertaining to the defendants were made at or near the time of the occurrences giving rise to the records,

(iii) were made by individuals with personal knowledge of the information contained in the business record, and

(iv) the records were kept in the regular course of the bank’s business.  ¶ 13.

Take-aways: Illinois litigants now have a slew of evidence rules – SCR 236, IRE 803(6), IRE 902(11) – at their disposal that streamline the process of getting business records into evidence at trial and eliminate many of the logistical and hearsay headaches that trial practice formerly entailed.  

The case underscores the importance of knowing the rules for business record admissions at trial and on summary judgment.  A key holding of Land is that the business records relied on can be those of a third party; as long as the witness can testify to her familiarity with the records and can establish that the third party records were integral to the witness’s business.  This obviously obviates the need to subpoena a third party to testify concerning the third-party records.