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. 

 

 

 

 

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PaulP

Litigation attorney at Fisher Kanaris, P.C. representing businesses and individuals in all types of commercial disputes.