Sunday, March 27, 2011

FYI: Penn Sup Ct Allows Evidentiary and Other Rulings Against Debt Collector to Stand

In a case involving collection on a credit card debt, the Superior Court of Pennsylvania allowed the trial court's evidentiary and other rulings against the plaintiff to stand, including: (1) the trial court's refusal to allow the admission of certain of the plaintiff's business records to stand;  (2) the trial court's finding that the plaintiff had failed to prove the existence of a contract, and thus failed on its breach of contract claim; and (3) the lower court's refusal to award sanctions for defendant's failure to appear at trial despite having received a Notice to Attend from plaintiff.

A copy of the opinion is available online at:

Plaintiff Commonwealth Financial Systems ("CFS") filed suit against defendant Ms. Smith in 2004 for breach of contract and quantum meruit on an alleged credit card debt seeking $5, 435.93 plus interest at 23.99%, and attorney fees at a 20% rate plus costs.  When the case proceeded to arbitration the arbitrators entered an award in Smith's favor despite her failure to appear. 

On appeal from the arbitration award, CFS attempted to introduce evidence at trial that Citibank had issued Smith a revolving credit line, which she had used for thirteen years, that Smith had defaulted on her payments to Citibank in 2002, and that CFS was the current owner of the debt.

The Superior Court noted that CFS attempted to introduce at trial:  billing statements from 2002 stating that Smith owed a balance on her card in excess of $2,000; "an unsigned, standard form copy of a 1996 "Citibank Card Agreement," which was issued seven years after Smith opened the account; and bills of sale establishing a chain of ownership of the alleged debt in question from Citibank eventually to CFS.

The Court first addressed CFS' argument that the above documents should have been admitted to establish their breach of contract claim.  The Court noted that the question of "whether computerized files of an original creditor are admissible as the business records of a successor debt buyer appears to be one of first impression in this Commonwealth." 

Despite this fact, the Court found that the standard of review concerning admission of evidence was "quite clear" and decisions on such are "within the sound discretion of the trial court and will not be overturned absent an abuse of discretion or misapplication of law."  Based on this standard, the Court held they were "constrained to affirm the trail court's decision." 

Noting that Pennsylvania Rule of Evidence 803(6) "requires the proponent of documentary evidence to establish circumstantial trustworthiness", the Court found no abuse of discretion in the lower court's finding that "the sources of information, method, and time of preparation" were not sufficient to allow admission of CFS' exhibits. 

For example, CFS produced as a witness "the vice-president responsible for overseeing CFS' portfolio collection division", who testified that "CFS' sole business is debt purchasing and collection."  The Court noted that the witness had not been considered "a qualified witness" as he did not know whether the Citibank Card Agreement was applicable to defendant's account, or whether "industry standards had actually been followed in the preparation" of the pertinent records "because, simply put, he was never in a position to know."

Stating that the lower court "[a]s the finder of fact". .  . was in the best position to determine the trustworthiness of CFS' documentary evidence" the Court further noted that this judgment was also borne out by the outdated and occasionally inaccurate evidence CFS produced.  Therefore, despite the existence of a "nationwide trend" or "clear federal precedent" allowing the introduction of business records that include documents produced by third parties, the Court "declined CFS' invitation" to follow this rule of incorporation of documents.

The Court then addressed CFS' contention that the lower court had erred in its ruling that CFS had not established the existence of a contract.  The Court distinguished the instant case from another ruling in which it had found that the failure of a creditor to produce a cardholder agreement and other documentation was fatal to their breach of contract claim.  Nevertheless, because the lower court did not err in excluding CFS' evidence, "CFS did not establish its right to a judgment based on the claims set forth in the complaint."

Lastly, the Court disagreed with CFS' contention that the lower court erred by not imposing sanctions on the defendant for failure to appear at trial.  The Court conceded that despite the lower court's finding otherwise, CFS had not waived this issue by failure to formally object to the court's denial of its Motion for Sanctions, as it was clear from the record that CFS was so objecting.  However, the Court concurred with the lower court's finding that CFS' Notice to Attend was not timely, as they had known for nearly a week the date of trial, but had delayed several days in sending the Notice to defense counsel or "soliciting an order of court." 

Furthermore, the Court found that CFS' efforts to blame defense counsel for not preparing the defendant for trial were "disingenuous," as "his trial strategy was not to call her." 

Thus, the Pennsylvania Superior Court upheld the lower court's judgment.

Ralph T. Wutscher
Kahrl Wutscher LLP
The Loop Center Building
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Chicago, Illinois  60602
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