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American Express vs. Dalbis: A Case Study on Evidentiary Challenges in Debt Litigation

This blog reflects on a significant, prior New York City ruling denying American Express Bank's request for a default judgment against a credit card holder due to insufficient evidence. 

Three findings were made in American Express Bank, FSB v. Dalbis, 2011 NY Slip Op 50366(U) (Civ Ct, Richmond County 2011):

  1. Failure to Authenticate Electronic Records: The court found that American Express Bank did not meet the requirements for authenticating electronic records as per NY State Technology Law § 306 and CPLR § 4539, lacking necessary attachments and affirmations from individuals with personal knowledge of the records' integrity.

  2. Lack of Proof of Agreement Delivery: The judge noted that American Express failed to demonstrate that they had attempted to deliver the credit card agreement to the defendant, casting doubt on the enforceability of the alleged debt agreement.

  3. Inadequate Evidence of Debt Ownership and Account Activity: The court criticized the plaintiff for not providing sufficient evidence to prove the history of the defendant’s account, the terms of the agreement, or any consumer-generated activity that would establish the use of the card, leading to the denial of the default judgment request.

The 2024 Perspective: Evidentiary Principles Still Apply

More than a decade later, the American Express Bank, FSB v Dalbis case remains a pivotal reference for understanding the challenges in proving debt ownership and the necessity for meticulous documentation in debt collection lawsuits.

Evidentiary Failures Highlighted

Inadequate Affirmation

The court identified that the affirmation provided by Amex's counsel failed to meet the standards set by NY State Technology Law § 306 and CPLR § 4539. Notably, the electronic records reviewed were not attached, and the affirmation lacked a declaration from someone with personal knowledge of the records' maintenance to prevent tampering or degradation.

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Missing Agreement Delivery Proof

Amex did not demonstrate attempts to deliver the credit agreement to the defendant. The agreement presented was dated too closely to the first billing statement, suggesting it was not the original agreement under which the account was opened.

Lack of Account Activity Evidence

The plaintiff's account statements did not show any consumer-generated activity, such as purchases, that would establish the use of the card. All provided billing statements predated the contract, further questioning the validity of the claimed debt.

Custodian of Records Affidavit Issues

The affidavit submitted was based merely on "access to the records" without asserting personal knowledge of how these records were maintained, failing to comply with relevant legal standards.

Amendment and Notification Procedures

An amendment to the cardholder agreement was provided without accompanying evidence of how cardholders were notified of new terms, lacking an affidavit from someone knowledgeable about the notification process.

Compliance and Calculation Questions

The court also found non-compliance with CPLR § 4544 regarding contracts in small print and noted the inability to discern the debt's composition between purchases and interest from the documents submitted.

The Court's Conclusion

Judge Straniere emphasized that while credit card debts should be paid, enforcing such obligations through the court mandates adherence to evidence rules and legal precedents. The decision critiqued the credit card industry's documentation practices, suggesting that perceived judicial bias towards consumers stems from the industry's evidentiary shortcomings.

—Our Previous 2011 blog about this case—

Today we bring you a new decision from New York City's Richmond County Civil Court in which the court denied a motion by American Express Bank seeking a default judgment against an alleged credit card debtor. The March 14, 2011 decision, written by Hon. Philip S. Straniere, set out a lengthy list of Amex's failures of proof.

The court first addressed the Affirmation submitted by Amex's counsel. The court noted the affirmation did not meet the requirements of NY State Technology Law § 306 (an electronic record may be admitted into evidence as long is its admission complies with CPLR § 4539) and CPLR § 4539 (reproduction of evidence must be authenticated by testimony/affidavit that includes a statement of the manner or method by which tampering or degradation of reproduction was prevented).

Additionally, the court said, counsel’s affirmation did not attach the electronic records he reviewed, and the affirmation was not made by someone with personal knowledge that the records are maintained in such a way that such degradation did not take place.

Next, the court stated, the plaintiff made no showing or even an allegation that the plaintiff ever attempted to deliver a copy of the agreement to the defendant. Further, as to the agreement attached to the complaint, the only date on it was one month before the date of the first monthly billing statement provided by the plaintiff, making it unlikely that this was the agreement in effect when the account was opened.

The account statements offered by plaintiff showed no purchases or other consumer generated activities which established use of the card. In addition to not showing any activity by the consumer, all billing statements submitted by plaintiff pre-dated the date on the contract.

The plaintiff failed to establish by someone with personal knowledge of the history of the defendant’s account when the agreement went into effect, when the terms were allegedly communicated to the defendant and when any of the alleged charges were incurred.

As to the Custodian of the Records Affidavit submitted by Amex, it was based only on “access to the records of the defendant;” the custodian did not state that he had personal knowledge as to how the records are gathered and maintained. This Affidavit also was not in compliance with Technology Law § 306 and CPLR § 4539.

An amendment of the alleged original cardholder agreement was also submitted by the plaintiff; it was not accompanied by an affidavit made by someone with personal knowledge of the procedures used by the plaintiff to notify cardholders of the new terms and conditions, when and how this new agreement was transmitted to defendant, and what procedures are used by the plaintiff to notify the cardholder of the new policy. The affidavit also did not indicate that the affiant had any personal knowledge as to the specifics of this particular account. The court also noted that the amendment was dated after the commencement of the litigation.

Neither the agreement nor the amendment complied with CPLR § 4544, which governs contracts in small print. Plaintiff has the obligation to make sure its contracts comply, and has the burden of proof, and thus must allege it in its application for default judgment.

Based on the documents submitted, the court said, there was no way for the court to determine how much of the amount claimed due was the result of purchases made by the defendant and to what extent the debt resulted from the interest being assessed.

Additionally, the Affidavit of Fact was styled as an Affirmation, which only attorneys can make. The Affidavit of Fact claimed personal knowledge, yet gave no explanation as to how the plaintiff's records were maintained, the method used to input information into the computer, the relationship between the computer records and the generation of monthly statements, how the computer system kept track of the original cardholder agreements and amendments, and how/when they were conveyed to the cardholder. There also was nothing to link these records to the defendant. Also, there was nothing in the affidavit to indicate when the account was opened, when charges were incurred, when the last payment was made, when changes to agreement were mailed, when changes went onto effect and how the total claimed due was calculated.

The court also noted a number of defects as to the form of several of the documents submitted which would render them inadmissible under the CPLR and court administrative rules.

Judge Straniere concluded his opinion with the following:

"This court beleives that people who make purchases using their credit cards should pay for them. However, when they do not pay the debt, and plaintiffs use the court system to enforce the obligation, the rules of evidence and legal precedents existing will then govern the transaction. If this is creating the impression that courts are "pro-consumer," the credit card industry need only look in the mirror to see the real reason for this seeming intense judicial scrutiny."

The case is called American Express Bank, FSB v Dalbis, 2011 NY Slip OP 50366 (U)

and you can find it here.

- Sheril Stanford

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