Evidence From BK Persp

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THE 2005 CONSUMER BANKRUPTCY CONFERENCE

GALVESTON, TEXAS

JUNE 30 - JULY 1, 2005

AVOIDING EVIDENTIARY PITFALLS IN

BANKRUPTCY LITIGATION

BANKRUPTCY EVIDENCE MANUAL

by

BARRY RUSSELLChief Judge

United States Bankruptcy CourtCentral District of California

255 E. Temple Street Los

Angeles, California 90012

Reprinted with permission fromRussell Bankruptcy Evidence Manual

200S EditionWEST GROUPSt Paul, Minn.

Reproduction prohibited


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AVOIDING EVIDENTIARY PITFALLS IN

BANKRUPTCY LITIGATION

BARRY RUSSELL

Chief JudgeUnited State Bankruptcy CourtCentral District of California

THE 2005 CONSUMER BANKRUPTCY CONFERENCE

GALVESTON, TEXAS

JUNE 30 - JULY 1, 2005

Contents: Page1. ARTICLE I - GENERAL PROVISIONS 12. ARTICLE II - JUDICIAL NOTICE 223. ARTICLE III - PRESUMPTIONS IN CIVIL ACTIONS AND PROCEEDINGS 634. FRE 612 - WRITING USED TO REFRESH MEMORY 765. FRE 615 - EXCLUSION OF WITNESSES 816. ARTICLE VII - OPINIONS AND EXPERT TESTIMONY 917. FRE 801 - HEARSAY 1478. FRE 803 - BUSINESS RECORDS EXCEPTION TO HEARSAY RULE 158


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ARTICLE I

GENERALPROVISIONS


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ARTICLE I

GENERAL PROVISIONS

Table of Sections

RULE 101. SCOPE

Sec.

101.1 Scope of Rules.

RULE 102. PURPOSE AND CONSTRUCTION

102.1 Purpose and Construction.

RULE 103. RULINGS ON EVIDENCE

103.1Rulings on EvidenceOverview.

103.2Error in AdmittingObjection, Presentation and Waiver.103.3 Error in AdmittingTime of Objecting; Motion to Strike; Curative Instructions.103.4Error in AdmittingWaiver of Right to Object; "Opening Door".103.5Error in AdmittingDepositions.103.6Error in AdmittingNonjury Trials.103.7Error in ExcludingOffer of Proof.103.8Hearing of JuryMotions in Limine.103.9Plain ErrorSubstantial Right.

RULE 104. PRELIMINARY QUESTIONS

104.1Preliminary Questions of AdmissibilityWeight and Credibility.104.2Relevancy Conditioned on FactConnecting up.104.3Hearing in Presence of Jury.

RULE 105. LIMITED ADMISSIBILITY

105.1 Limited Admissibility.

RULE 106. REMAINDER OF OR RELATED WRITINGS OR RECORDEDSTATEMENTS


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106.1 Remainder of or Related Writings and Recorded Statements Employed at Time ofIntroduction.

106.2 Remainder of Oral Statements, Writing or Recorded Statement Employed on NextExamination.

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Westlaw Electronic Research

See Westlaw Electronic Research Guide preceding the Summary of Contents.

RULE 101

SCOPE

These rules govern proceedings in the courts of the United States and before United States

bankruptcy judges and United States magistrate judges, to the extent and with the exceptions stated inRule 1101.

101.1 Scope of Rules

Rule 101 follows the pattern set by Rule 1 of each of the Federal Rules of Civil Procedure,Federal Rules of Criminal Procedure, and Federal Rules of Appellate Procedure in making abroadgeneral statement as to the scope of the Federal Rules of Evidence. The rules govern proceedingsbefore bankruptcy judges. The rule also refers to Rule 1101 where the exceptions to coverage arespecified in detail. Rule 1101 (b) provides in pertinent part: "Proceedings generally. These rules apply ...to proceedings and cases under title 11, United States Code."

Bankruptcy Rule 9017 provides: "The Federal Rules of Evidence and Rules 43,44 and 44.1Fed.R.Civ.P. apply in cases under the Code."

A number of the Bankruptcy Rules contain matters of an evidentiary nature including: Rule2001, evidence of debtor retained in possession; Rule 3 001 (f), proof of claim constitutes prima facieevidence of the amount and validity of a claim; and Rule 5007(c), sound recording of courtproceedings constitutes the record of the proceedings.

It is important to note that assertions of counsel do not constitute probative evidence. In reSmith, 170B.R. Ill (Bkrtcy.N.D.Ohio 1994).

Examples

1. Motion for summary judgment must be supported by evidence that would be admissible at trial.

Chapter 7 debtor brought an adversary proceeding to determine the validity and extent of acreditor's purchase money security interest in the debtor's property and, to the extent the claim wasfound to be unsecured, to avoid the creditor's asserted lien. Creditor filed a summary judgmentmotion, and the debtor cross-moved for summary judgment. The bankruptcy court denied thecreditor's motion and granted summary judgment in favor of the debtor. Creditor appealed.

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The bankruptcy court denied the creditor's motion because it was not supported by evidencethat would be admitted at trial.

As stated by the Tenth Circuit BAP, the creditor argued as follows:

Beneficial argues that the unauthenticated documents were sufficient "evidence" in

support of its motion for summary judgment because: (1) Rule 903 of the Federal Rules ofEvidence provides that the testimony of a subscribing witness is not necessary to authenticate awriting; and (2) the documents are admissible evidence as business records.

209 B.R. at 997.

Held: Affirmed. In holding that the creditor's arguments were incorrect, the BAP concluded:

Rule 903 provides that "[t]he testimony of a subscribing witness is not necessary toauthenticate a writing unless required by the laws of the jurisdiction whose laws govern thevalidity of the writing." Fed.R.Evid. 903. This Rule, which applies to authentication by asubscribing witness, or "a person who at the request or with the consent of the maker placeshis [or her] name on the document for the purpose of making thereby an implied or expressed

statement that the document was then known by him [or her] to have been executed by thepurported maker[,]" does not obviate the need to authenticate a document at all. BarryRussell,Bankruptcy Evidence Manual, 903.1 (West 1996-97 ed.). Indeed, Rule 901 makesauthentication a condition precedent to admissibility that can be "satisfied by evidencesufficient to support a finding that the matter in question is what its proponent claims."Fed.R.Evid. 901 (a); see Citibank South Dakota v. Dougherty (In re Dougherty), 84 B.R. 653,655 (9th Cir.BAP 1988) ("The essential question for authentication purposes is whether areasonable jury could conclude that the evidence is what its proponent claims it is.").

Beneficial's argument that the documents attached to its briefs are admissible asbusiness records is totally unavailing. No foundation was provided to the Bankruptcy Courtto establish that the documents were the business records of anyone. Moreover, even if suchfoundation had been laid, business records are not self-authenticating. See Fed.R.Evid. 902.

In re Harris, 209 B.R. 990, 997 (10th Cir.BAP 1997).

See also In re Morris, 260 F.3d 654 (6th Cir.2001) (Upon motion for summary judgment, trialcourt does not have duty to search the entire record to establish that it is bereft of any genuine issue ofmaterial fact; rather, nonmoving party has affirmative obligation to direct court's attention to thosespecific portions of record upon which it seeks to rely to create genuine issue of material fact).

See also In re Guccione, 268 B.R. 10 (Bkrtcy.E.D.N.Y.2001) (Where creditors sought toinvoke the collateral estoppel effect of a prepetition National Association of Securities Dealers(NASD) arbitration judgment against chapter 7 debtor in a subsequent nondischargeabilityproceeding, but failed to direct the bankruptcy court's attention to relevant portions of thevoluminous NASD record, the court refused to engage in a mining expedition, in which it would berequired to extract isolated nuggets of testimony of witnesses and findings by the arbitration panelwhich would then create creditors' case for them).

See also In re All American Petroleum Corp., 259 B.R. 6 (Bkrtcy.E.D.N.Y.2001) (Unswornletter as to chapter 7 debtor's solvency at time of alleged fraudulent transfers was of no probativevalue and could not be considered by court when ruling on trustee's motion for summary judgment

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on fraudulent transfer claims).

See also In re Aarismaa, 233 B.R. 233 (N.D.N.Y.1999) (Attorney's affirmation which is notbased on personal knowledge of relevant facts is to be accorded no weight by court in ruling onmotion for summary judgment.).

See also In re Kennedy Inn Associates, 221 B.R. 704 (Bkrtcy.S.D.N.Y.1998) (Affidavitsubmitted by party's attorney as to party's subjective understanding in entering into settlementagreement was not made on personal knowledge, and could not be considered by the bankruptcycourt in opposition to summary judgment motion.)

2. Statements in brief and closing argument are not evidence.

Chapter 7 debtor's former husband brought adversary proceeding, to except from discharge,debtor's alleged debt to him for child support that he had paid post-divorce based on debtor's allegedintentional misrepresentation during divorce proceedings of her fidelity during the marriage. Thebankruptcy court entered judgment in favor of ex-husband under "false pretenses" dischargeabilityexception, and awarded compensatory and punitive damages. Debtor appealed.

The court stated the issue as follows:

Finally, the Debtor argues that her briefs and her closing argument at trial weresubstantive evidence that controverted Florence's testimony. While the Debtor appears toacknowledge that neither briefs nor closing argument is normally valid evidence, sheapparently urges this Court to construe it as evidence because, although she is a licensedattorney, prior to trying the dischargeability action pro se, she never had practiced law as alitigator.

293 B.R. at 512-13.

Held: Affirmed. In holding that argument was not evidence the court concluded:

This we cannot do. Counsel's statements in a brief or during a trial are not evidence.See Exeter Bancorporation, Inc. v. Kemper Sec. Group, Inc., 58 F.3d 1306, 1312 n. 5 (8thCir. 1995) (quoting United States v. Fetlow, 21 F.3d 243, 248 (8th Cir.1994), for theproposition that " '[Statements of counsel are not evidence' and do not create issues offact."); see also In re Nielsen, 211 B.R. 19, 22 n. 3 (8th Cir. BAP 1997) (stating thatstatements of counsel are not evidence unless "expressly stipulated as admissible evidence").While courts will give some leeway to a pro se litigant, they cannot take unsubstantiatedstatements as factual evidence. In the absence of any evidence that Florence's testimony wascontroverted, or that his credibility was at issue, the successor judge did not abuse hisdiscretion by declining to recall Florence.

In re Lang, 293 B.R. 501, 513 (10th Cir.BAP 2003).

3. Although statements of counsel are not evidence, they may be judicial admissions.

It is, of course, fundamental that the statements of counsel are not evidence. BarryRussell, Bankruptcy Evidence Manual, 1995-96, 101.1 at 174. Counsel's unequivocalstatements may, nevertheless, be given the effect of judicial admissions. Glick v. WhiteMotor Company, 458 F.2d 1287, 1291 (3d Cir. 1972); In re Sanglier, 124 B.R. 511, 513 n.

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3 (Bankr.E.D.Mich.1991); In re Eagson Corp., 37 B.R. 471,481 n. 35 (Bankr.E.D.Pa.1984);2 McCormick on Evidence 257, at 147 & n. 2 (John W. Strong ed., 4th ed. 1992). In thisinstance, counsel's description of the events leading up to the filing of the case made to theCourt will be treated as judicial admissions.

In re Stephenson, 205 B.R. 52, 54, n. 2 (Bkrtcy.E.D.Pa.1997).

4. Court erred when it confirmed chapter 13 plan without debtor presenting any evidence.

Creditor objected to the confirmation of debtor's proposed chapter 13 plan, on the theory thatthe debtor was not a wage earner with sufficiently regular income to qualify for a chapter 13 relief,and that the debtor's plan was neither feasible nor proposed in good faith. The bankruptcy courtentered an order confirming the plan, and the creditor appealed.

The district court stated that the creditor's main contention as follows:

The appellant's prime contention on this appeal is that the bankruptcy judge placedthe burden on proof on the appellant rather than the debtor. This error, it is alleged, mandatesaction by this court because the debtor was not required to, and in fact did not, come forward

with any evidence to show her qualification for relief pursuant to Chapter 13, much lessevidence in support of confirmation of the Plan. Accordingly, the appellant contends that, atleast, this court should remand and matter for proper findings.

190 B.R. at 741.

Held: Remanded.

In holding that the bankruptcy court erred when it confirmed the chapter 13 plan without thedebtor presenting evidence, the district court concluded:

It is well-settled that the debtor has the burden of proving entitlement to relief underChapter 13, and the burden of proving that the requirements of 11 U.S.C. 1325 has been

met. In re Lessman, 159 B.R. 135, 137 (Bkrtcy.S.D.N.Y.1993); see, generally, Tillman v.Lombard, 156 B.R. 156 (E.D.Va.1993). In this case, the record is devoid of any evidenceshowing entitlement to relief under Chapter 13, or that the requirements of 11 U.S.C. 1325have been met. In fact, in the transcript from the confirmation hearing, the bankruptcy judge,understandably frustrated by the dilatory tactics of the parties, refused to permit the attorneysfor either side to adjourn for even one half hour to gather evidence together for presentment atthe hearing.

National School Bus, Inc. v. Carignan, 190 B.R. 739, 741 (N.D.N.Y.1996).

5. Counsel's affidavit insufficient to authenticate summary judgment exhibits.

Creditor brought a complaint pursuant to 523(a)(9) and moved for summary judgment. Thecourt stated that:

In its motion for summary judgment, attempted to authenticate all of these items byuse of an affidavit filed by plaintiffs counsel. At a hearing on plaintiffs motion for summaryjudgment, defendant objected to use of these items of purported evidence because of the lack ofproper authentication. Fed.R.Civ.P. 56(e) requires that:

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Supporting and opposing affidavits shall be made on personal knowledge,shall set forth such facts as would be admissible in evidence, and shall showaffirmatively that the affiant is competent to testify to the matters stated therein.

193 B.R. at 837.

Held: Exhibits excluded.

hi excluding certain exhibits, the court concluded:

Nothing in plaintiffs moving papers demonstrate that plaintiffs counsel has thepersonal knowledge and competency to testify in this adversary proceeding as required byRule 56(d). As a result, in ruling upon plaintiffs motion for summary judgment, the court hasnot considered item A-U except to the extent, as described infra, that some of the items wereresubmitted by the plaintiff.

In re Howard, 193 B.R. 835, 837 (Bkrtcy.S.D.Ohio 1996).

See also in re Masterwear Corp., 229 B.R. 301 (Bkrtcy.S.D.N.Y. 1999) (Affidavit of financial

institution's counsel, that second temporary administrative freeze which the institution had placed ondebtors' account was the result of administrative error, was not based on personal knowledgepossessed by counsel, but was mere hearsay account of what counsel had apparently been told byinstitution's executive vice president; accordingly, affidavit was a nullity, which court could notconsider in ruling on the institution's motion for summary judgment on debtors' motion to hold theinstitution in contempt for allegedly violating bankruptcy court's financing order in placing thisfreeze on their account.)

6. Unsupported assertions and conclusory statements in affidavit disregarded by court.

On a motion for summary judgment, unsupported assertions and conclusory statements inaffidavits must be disregarded by the court.

"Supporting and opposing affidavits submitted pursuant to Rule 56(c) must be 'made onpersonal knowledge.' There must be an affirmative showing of personal knowledge of the specificfacts. Otherwise the affidavit is not sufficient. Antonio v. Barnes, 464 F.2d 584,585 (4th Cir. 1972).Unsupported assertions and conclusory statements must be disregarded by the Court. In re Kaltz, 100B.R. 871, 872 (Bankr.E.D.Mich.1989); Bsharah v. Eltra Corp., 394 F.2d 502, 503 (6th Cir.1968)."Matter of New Center Hosp., 187 B.R. 560, 570 (E.D.Mich. 1995).

See also In re Buri, 240 B.R. 416 (Bkrtcy.D.Kan.1999) (In ruling on chapter 7 trustee'smotion for summary judgment on his request to sell property together with non-debtor spouse'sinterest therein, bankruptcy court could not consider conclusory statement in trustee's affidavit, that itwould be impracticable to partition property, where trustee's affidavit did not state that it was made onpersonal knowledge and did not show affirmatively that trustee was competent to testify to thematters stated therein.).

See also In re B & B Utilities, Inc., 208 B.R. 417, 424 (Bkrtcy.E.D.Tenn.1997) ("If anaffidavit does not include sufficient factual information to establish the personal knowledge of theaffiant, then a court cannot consider the affidavit in ruling on the summary judgment motion. ElDeeb v. University of Minnesota, 60 F.3d 423, 428-29 (8th Cir. 1995).")

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7. Affidavit verified "upon information and belief is insufficient for summary judgment.

A summary judgment affidavit verified "upon information and belief is insufficient and maynot be considered on summary judgment.

The summary judgment affidavit must be made on personal knowledge of the affiant, must

set forth facts that would be admissible in evidence, and must show affirmatively that the affiant iscompetent to testify to the matters stated therein. In re Bryson, 187 BR. 939 (Bkrtcy.ND.Ill. 1995).See also B.F. Goodrich v. Betkoski, 99 F.3d 505 (2d Cir. 1996), cert. denied524 U.S. 926,118 S.Ct.2318, 141 L.Ed.2d 694 (1998) ("When deciding a motion for summary judgment, only admissibleevidence may be considered. Tamarin v. Adam Caterers, Inc., 13 F.3d 51, 53 (2d Cir. 1993)"); In reDaedalean, Inc., 193 B.R. 204 (Bkrtcy.D.Md.1996) (Affidavit based on belief, not personalknowledge, was insufficient for summary judgment purposes, with respect to chapter 11 debtor'spreferential transfer claim.); In re Taylor & Associates, L.P., 191 B.R. 374 (Bkrtcy.E.D.Tenn. 1996); Inre Bilzerian, 188 B.R. 46, 48 (Bkrtcy.M.D.Fla.1995) (declaration of SEC's counsel listing ninedocuments and stating that "true and correct copies" of documents were attached to declaration asexhibits was insufficient to support grant of summary judgment for SEC, absent indication thatdeclarant had personal knowledge of matters contained in exhibits).

8. Statements of Counsel Are Not Evidence.

Chapter 7 debtors filed a motion requesting sanctions against a creditor barred as an allegedviolation of the automatic stay pursuant to 362(a)(6). Attached to the motions were a number ofdocuments. At the hearing on the motion, the debtor's attorney made statements concerning variousalleged actions by the creditor.

Held: Motion denied. In finding that the debtors failed to prove the creditor violated 362(a)(6), the court concluded:

[D]ebtors offered no admissible evidence that Green Tree committed any of the actsof which it had been accused. Although certain documents were attached to debtors' motion,they do not constitute evidence in and of themselves and may not be considered. Notestimony was offered concerning the exhibits. Indignant statements by debtors' counselaccusing Green Tree of various misdeeds are not admissible evidence that Green Treeviolated the automatic stay.

Haymaker v. Green Tree Consumer Discount Co., 166 B.R. 601, 607 (Bkrtcy.W.D.Pa.1994).

See also Exeter Bancorporation, Inc. v. Kemper Securities Group, Inc., 58 F.3d 1306,1312 n.5 (8th Cir.1995) (statements of counsel not evidence); In re Nielsen, 211 B.R. 19 (8th Cir.BAP1997) (neither statements of counsel nor exhibits to briefs are evidence unless expressly stipulated asadmissible evidence).

See also In re McClure, 234 B.R. 889, 890 (Bkrtcy.N.D.Tex.1999) (Assertions by counsel do

not constitute probative evidence. Thus, Mr. Dome's motion to vacate default judgment should bedenied for lack of evidence. FCC Nat'I Bank v. Roberts (In re Roberts), 193 B.R. 828, 831(Bankr.W.D.Mich.1996). See also Russell, Bankruptcy Evidence Manual, 1999 ed. at 232, et seq.). Inre Med-Atlantic Petroleum Corp., 233 B.R. 644, 662 (Bkrtcy.S.D.N.Y.I999) (Upon motion todismiss for insufficient service of process, conclusory statements by counsel that defendant wasproperly served are insufficient to overcome defendant's sworn affidavit that he was never servedwith process); In re Brandl, 179 B.R. 620, 627 (Bkrtcy.D.Minn.1995).

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Evidence From BK Persp