Friday, May 25, 2012

Unifund v. Youngman - Fourth Department's Significant Decision Will Stand in Debt Case

The Court of Appeals recently denied leave to review the Fourth Department's decision in Unifund CCR Partners v. Youngman, 89 A.D.3d 1377, 932 N.Y.S.2d 609 (4th Dep’t Nov. 10. 2011), lv. denied, 2012 N.Y. Slip Op. 72420.

In Unifund, the Fourth Department picked up where it left off in Palisades Collection, LLC v. Kedik, 67 A.D.3d 1329, 1331, 890 N.Y.S.2d 230, 231 (4th Dep’t 2009), holding debt buyers seeking to collect alleged debts strictly to the usual rules of evidence and procedure and rejecting motions for summary judgment that grossly fail to comply with those usual rules.

To paraphrase Jerry Jarzombek, the legendary Texas debt defense lawyer (he's lost something like six out of 4,000 cases or some such ridiculous number) (who I often paraphrase to this effect), the fact affidavit in the usual debt buyer case is essentially as though the plaintiff in a car accident case was to submit a witness affidavit that says "I wasn't there, and I didn't see the accident, but I did read about it, and that guy ran the red light."  Specifically, the debt buyer typically says: (1) although I have no assignment agreement that mentions this account, I do have these documents on Citibank letterhead with this account number on them, and how would I have those if I didn't own the account; (2) I can attest to the fact that these records came from Citibank and ended up in our records; (3) I've never worked for Citibank and know nothing about its records (I wasn't there and didn't see the accident), but these are records that Citibank created in the ordinary course of business at or about the time of the events recorded and maintained and reproduced in a reliable manner (that guy ran the red light).

In Kedik, the debt buyer actually did a bit better than the above, submitting a spreadsheet purportedly listing the assigned account, but its affiant failed adequately to explain where the spreadsheet came from and so failed to show that the spreadsheet was admissible under the business records exception to the hearsay rule.  Unifund takes the logical step of applying the principles of evidence that Kedik applied to proof of assignment to all the putative evidence submitted with such a motion for summary judgment, in particular, account statements.  An employee of Unifund does not have personal knowedge of Chase's records, so cannot authenticate them.  Only someone from Chase could authenticate them.

Even more significantly, the Fourth Department ordered that the defendant's cross-motion for summary judgment be granted and the complaint dismissed.  A debt buyer at least in the Fourth Department will face loss of its case if it makes a motion for summary judgment that inadequately proves standing or inadequately authenticates creditor records.

Lower courts in many places hesitate to treat debt collection suits as real lawsuits to which the usual rules of evidence and procedure apply.  There is often an assumption that the defendant owes the plaintiff money unless a defense of some kind can be marshaled.  See John Skiba's blog post, Are Judges Biased Against Consumers?  One hopes that Unifund helps change the culture in this respect.

The next step for the Fourth Department should be to address original creditors' evidentiary failings.  With routine use of robo-signers original creditors' records affidavits are no more compliant with personal-knowledge requirements than debt buyers', and never make the required threshold showings required under the business records exception in more than utterly conclusory, and thus inadequate, terms.  

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