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Layups Are Limited to Basketball Courts, Not Supreme Court

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When thinking about proving the bigger picture of liability on a motion for summary judgment, an experienced attorney knows that it is vital not to lose track of technical prerequisites to what is, after all, the request for ultimate relief without trial.  Even when a summary judgment motion is unopposed concerning what may feel like a relatively rudimentary breach of contract claim, attorneys should not become complacent regarding the rules of evidence, or they might find themselves in the unenviable position of losing the unopposed motion, as in the recent case of Advance Servicing Inc. v. ATD LLC, in the Supreme Court of Kings County.

In Advance Servicing, the plaintiff is in the business of providing merchant cash advances in exchange for an interest in the defendant’s future receivables.  This sort of relationship is how many businesses get start-up money in exchange for future sales, and both the contractual provisions of merchant cash advance agreements – and the litigations where a merchant attempts to redirect the revenue interest away from the purchaser – are fairly routine.  Here, the Plaintiff has brought its claims against two businesses and a guarantor.

As pointed out by the Advance Servicing Court though, even if unopposed, a party seeking summary judgment must still prove that they are entitled to the relief sought – the courts do not rubber stamp such motions.  Indeed, if there is any doubt, the courts will deny the motion.  Critically, as noted by the Advance Servicing Court, citing precedent, the evidence presented as proof of a claim must be in admissible form in accordance with the rules of evidence.

Of course, seeking summary judgment on a breach of contract claim, plaintiff must prove the existence of a contract, plaintiff’s performance, the defendant’s breach, and damages.  In analyzing these submissions, the Advance Servicing Court found that the Plaintiff had failed on both proving the contract pertained to the parties at bar and to Plaintiff’s performance.

For the proof of contract, the Plaintiff had relied on the affidavit of a managing member of the Plaintiff to lay a foundation for the admissibility of the submitted contract, proof of payment of the purchase price, and the Defendant’s payment history.  Such documents as these however, as per the rules of evidence, must conform to the mandates of the “business record” exception to prohibitions against hearsay to be considered admissible. 

Here, the Plaintiff’s supporting affidavit failed to include, per CPLR 4518(a), the following statements:

  • that the contract, proof of payment, and payment history were made in the regular course of Plaintiff’s business.
  • that it is the regular course of Plaintiff’s business to make such records.  Statements such as “[i]t is the regular course of Plaintiff’s business to make its business records” are insufficiently general.
  • that the records were made at the time of the act or occurrence or within a reasonable time thereafter.  A statement regarding Plaintiff’s business records being made “at or about the time of the event or transaction recorded” is insufficiently general both as to the timing and impermissibly fails to refer to the specific documents.
  • that the records must be made by a person who has personal knowledge of the act or occurrence and is under a business duty to report it.  The Advance Servicing Court noted that this particular foundational element is important in the realm of financial transactions because often the entity keeping the business records is not the entity that ends up bringing suit, which was the case in Advance Servicing.

Further, the submitted payment history itself failed to identify the purchaser of the future receivables and or associate the transactions with the defendant businesses.  Without these, the existence of the Contract was not proven.

The Advance Servicing Plaintiff ran into the same fatal flaws regarding payment because the submitted documentary evidence did not identify Plaintiff as the entity making the payment and did not name the financial institution who conducted the money transfer.  Without someone with personal knowledge of plaintiff’s payment or the bank’s transfer of the payment, the element of establishing the Plaintiff’s performance fails.

It seems that the Court’s exact analysis might be also bolstered by the presence of significant internal inconsistencies along with the previously listed gaps significant details.  Indeed, while the action is against two business entities, only one of said businesses is even in the contract at bar.  Indeed, the Advance Servicing Court signals the necessity of a strict analysis of the business record exception requirements to avoid wrongful awards on deficient evidence. 

In conclusion, prudent attorneys should never dismiss evidence requirements as arcane superfluousness or “mere boilerplate”, — even when applications are unopposed.  In fact, a careful adherence to these requirements can identify problems with the evidence before those





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