Reid v. Climatemp, Inc. (In re 3RC Mechanical & Contracting Services, LLC)

502 B.R. 548
CourtUnited States Bankruptcy Court, N.D. Illinois
DecidedNovember 26, 2013
DocketBankruptcy No. 10-bk-34781; Adversary No. 10-ap-2680
StatusPublished
Cited by3 cases

This text of 502 B.R. 548 (Reid v. Climatemp, Inc. (In re 3RC Mechanical & Contracting Services, LLC)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Reid v. Climatemp, Inc. (In re 3RC Mechanical & Contracting Services, LLC), 502 B.R. 548 (Ill. 2013).

Opinion

MEMORANDUM OPINION ON TRUSTEE’S MOTION TO STRIKE

JACK B. SCHMETTERER, Bankruptcy Judge.

3RC Mechanical & Contracting Services (“3RC”) filed a petition for relief under chapter 7 of the Bankruptcy Code on August 3, 2010. N. Neville Reid, the Chapter 7 Trustee, (“the Trustee”) filed this adversary proceeding against Climatemp, Inc. (“Climatemp”) seeking damages for breach of contract and unjust enrichment based on work purportedly performed under two subcontracts. Climatemp filed an answer and affirmative defenses. Climatemp also filed a motion for summary judgment, attaching several affidavits, including one by Fred Adamitus (“Adamitus Affidavit”), which included thirty-five exhibits. The Trustee has moved to to strike portions of exhibits to the Amended Affidavit of Fred Adamitus (“Motion to Strike”) contending that sixteen of those exhibits constitute inadmissible hearsay which cannot be considered in support of the motion for summary judgment. The motion for summary judgment is still pending, awaiting final briefing. For reasons stated below, Trustee’s Motion to Strike is denied.

Background

The following background facts are according to the Adamitus Affidavit, which at this point has not been challenged as to its asserted facts. The Trustee did not submit any evidence or dispute any facts for purposes of his motion. Thus, for purposes of deciding this motion, the following facts can be treated as undisputed.

Climatemp was a subcontractor to F.H. Paschen, S.N. Nielsen & Assoc, LLC (“FHP”), the general contractor, for a project named the Kelly Curie Gage Park High School (“the Project”). Fred Adami-tus was the project manager for the Project. In October, 2008, 3RC and Clima-temp entered into a sub-sub-contract where 3RC was to provide heating and cooling equipment and services. In March, 2010, 3RC experienced trouble performing its obligations under the contract, which resulted in FHP hiring T.V.S. Mechanical Inc. (“TVS”) to complete 3RC obligations. FHP charged the cost of hiring TVS against Climatemp’s contract price. On June 22, 3RC stopped work entirely, and informed Climatemp that it was going out of business. Climatemp hired Quality Control Systems (“QCS”) and several other subcontractors to finish 3RC’s work.

Then came 3RC’s bankruptcy, this adversary, Climatemp’s motion for summary judgment, and Trustee’s Motion to Strike. Other undisputed facts appear in the Discussion below.

Discussion

Jurisdiction

Jurisdiction lies over this motion under 28 U.S.C. § 1334. It is referred here by Internal Procedure 15(a) of the District Court for the Northern District of Illinois. This matter is a trustee’s adversary complaint seeking damages for breach of con[551]*551tract under state law, and is therefore not a core proceeding, but is related to a case under title 11. “A bankruptcy judge may hear a proceeding that is not a core proceeding but that is otherwise related to a case under title 11.” 28 U.S.C. § 157(c)(1). § 157(c)(1) further provides that the “any final order or judgment shall be entered by the district judge,” implying that interim orders may be entered by a bankruptcy judge under authority to “hear” the proceeding. Both parties have consented to entry of final judgment by a bankruptcy judge under 28 U.S.C. § 157(c)(2).

Rule 803(6) Business Records

The Trustee contends that invoices from third parties in sixteen of the thirty-five exhibits attached to the Affidavit of Fred Adamitus are inadmissible hearsay even though they were received and retained in the business records of Climatemp because they are hearsay within hearsay. Further, the Trustee argues that any reference in the Affidavit to statements made by third parties should also be stricken.

Evidence offered to support or deny a motion for summary judgment must be admissible at trial. Tindle v. Pulte Home Corp., 607 F.3d 494, 496 (7th Cir.2010). Thus, “copies of documents cannot simply be slapped on the back of a party’s statement of facts or its response with an assertion in the body that the copies are ‘true and correct.’ An affidavit must be supplied, one that lays the necessary foundation for the documents’ admission.” Maxwell v. Penn Media. (In re marchFirst, Inc.), 01-bk-24742 03-ap-1141, 2010 WL 4027723 (Bankr.N.D.Ill. Oct. 14, 2010) (Goldgar, J.).

As the Seventh Circuit has repeatedly held, “statements made by third parties in an otherwise admissible business record cannot properly be admitted for their truth unless they can be shown independently to fall within a recognized hearsay exception.” United States v. Christ, 513 F.3d 762, 769 (7th Cir.2008) (citing Woods v. City of Chicago, 234 F.3d 979, 986 (7th Cir.2000)). This is because “courts may not permit the introduction of hearsay contained within hearsay unless each layer is properly admitted under an exception” to hearsay. United States v. Borrasi, 639 F.3d 774, 780 (7th Cir.2011). While the foundation witness does not need to have personal knowledge of the underlying facts, the witness does need to “have knowledge of the procedures under which the records were created.” Christ at 770 (internal quotation omitted). Here, Adamitus does not aver in his affidavit that he is familiar with the recordkeeping practices of any third party company. Thus, he is has not laid a foundation to introduce the third party invoices as business records.

Climatemp argues, citing authority from other circuits, that documents created by third parties can qualify as the business’s own business records when they are integrated into the business’s records, and the business relies on those records in day-today operations. See, e.g., Brawner v. Allstate Indem. Co., 591 F.3d 984, 987 (8th Cir.2010); United States v. Adefehinti, 510 F.3d 319, 326 (D.C.Cir.2007); Air Land Forwarders, Inc. v. United States, 172 F.3d 1338, 1342-44 (Fed.Cir.1999). A District Judge in the Northern District of Illinois has adopted this view in two opinions. Malcor Issues & Rights, Ltd. v. Tellabs, Inc., 735 F.Supp.2d 856, 867 n. 2 (N.D.Ill.2010); BP Amoco Chem. Co. v. Flint Hills Res., LLC, 697 F.Supp.2d 1001, 1021 (N.D.Ill.2010) (St. Eve, J., using identical language in both opinions). Whatever the merits of this position, the Seventh Circuit Court of Appeals precedent cited earlier is unequivocal. Third party invoices must be independently supported by knowledgeable persons.

[552]*552Under Illinois law, a bill that has been paid is prima facie evidence of amount and the reasonableness of the payment. Saunders v. Wilson,

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502 B.R. 548, Counsel Stack Legal Research, https://law.counselstack.com/opinion/reid-v-climatemp-inc-in-re-3rc-mechanical-contracting-services-llc-ilnb-2013.