Burden of Proof: The ‘Shop Book’ Rule

By David Paul Horowitz and Katryna L. Kristoferson | NYSBA Journal Winter 2025

With the holiday season upon us, and shopping both online and in stores in full swing at the time of writing this issue’s column, it seemed the right time to discuss an evidentiary rule originally referred to as the “Shop Book” Rule (and sometimes as the “Regular Entries” Rule). In our last column we opined that perhaps the most important rule in the CPLR is Rule 2104, “Stipulations.” While reasonable minds might differ about which rule is most important, there is general agreement among CPLR geeks about rules that place in the top 10, and we turn to another one of those finishers, CPLR 4518, “Business Records” (f/k/a the “Shop Book” Rule).

The opening sentence of CPLR 4518 provides the foundation necessary to admit a business record into evidence:

(a) Generally. Any writing or record, whether in the form of an entry in a book or otherwise, made as a memorandum or record of any act, transaction, occurrence or event, shall be admissible in evidence in proof of that act, transaction, occurrence or event, if the judge finds that it was made in the regular course of any business and that it was the regular course of such business to make it, at the time of the act, transaction, occurrence or event, or within a reasonable time thereafter.

Providing a proper foundation has been established, CPLR 4518 permits the introduction into evidence of myriad documents used every day in motions and trials which are, on their face, hearsay. Without the rule, the rapids counsel would have to navigate in order to admit those records into evidence would be difficult at best, impossible at worst, and would significantly increase the legal work necessary to establish that proof, along with the concomitant cost. It is a critical tool in the litigator’s tool box.

Origins and Evolution of the Rule

The Court of Appeals in Smith v. Rentz [1] recites the origins of the rule:

The “shop book” rule was first introduced in New York through the Dutch colonial courts. It permitted merchants to exhibit their books of account when it was shown that the books were regularly kept and that there had been several dealings between the parties involved in the suit. These books of account were admitted as evidence of the charges contained in them when it was proven that the books were regularly kept. When the English gained control of New York, there was an even greater need for the rule, for English common law at that time did not permit parties to testify on their own behalf.

Having satisfied the History Channel contingent, fast forward to the 21st century where, in 2010, the Court of Appeals in People v. Ortega, [2] explained the business records exception to the hearsay rule this way:

Under the business records exception to the hearsay rule, ‘‘[a]ny writing or record . . . made as a memorandum or record of any act, transaction, occurrence or event, shall be admissible in evidence in proof of that act, transaction, occurrence or event, if the judge finds that it was made in the regular course of any business and that it was the regular course of such business to make it, at the time of the act, transaction, occurrence or event, or within a reasonable time thereafter’’ (citation omitted).

People v. Ortega restates the three necessary elements required to be satisfied by the rule:

1) Was the writing or record made in the regular course of any business?

2) Was it the regular course of such business to make such memorandum or record?

3) Was the memorandum or record made at the time of the transaction, occurrence or event or within a reasonable time thereafter?

However, there is one more component engrafted onto the rule in 1930 by the Court of Appeals in Johnson v. Lutz.[3] Johnson v. Lutz, involving an entry in a police report, added a fourth element for the admissibility of a statement by third party contained in a business record, to wit, that the person providing the information has a business duty to impart the information. The fourth element was required because:

In view of the history of section 374-a [CPLR 4518’s predecessor] and the purpose for which it was enacted, it is apparent that it was never intended to apply to a situation like that in the case at bar. The memorandum in question was not made in the regular course of any business, profession, occupation or calling. The policeman who made it was not present at the time of the accident. The memorandum was made from hearsay statements of third persons who happened to be present at the scene of the accident when he arrived. It does not appear whether they saw the accident and stated to him what they knew, or stated what some other persons had told them.

In addition to the three statutory elements, it is necessary to affirmatively answer the fourth question required by Johnson v. Lutz:

4) Was the person furnishing the information under a duty to report the information?

The Court of Appeals in People v. Patterson [4] explained the fourth element this way:

More than 85 years ago, in Johnson v. Lutz (citation omitted), this Court imposed an additional requirement for admissibility that is not set forth in the statute – specifically, that “[u]nless some other hearsay exception is available . . . , admission may only be granted where it is demonstrated that the informant has personal knowledge of the act, event or condition and he [or she] is under a business duty to report it to the entrant” (citations omitted).

How the Rule Works and Doesn’t Work

A recent Kings County decision by Justice Aaron J. Maslow highlights the interplay between the four elements and illustrates omissions that rendered the purported business record inadmissible. CFG Merchant Solutions, LLC v. Complete Auto. Repair Serv., LLC [5] is a breach of contract action where the plaintiff moved for summary judgment, which the defendant opposed on the basis that, inter alia, certain records submitted as evidence in support of the motion were inadmissible because the foundation to admit them as business records was not established.

The plaintiff submitted several exhibits, including what purport to be the contract and proof of payment of the purchase price and a payment history. The plaintiff relied on the affidavit of James Elder, the director of risk management, to lay a foundation for the admissibility of the records submitted in support of the motion.

The first problem? “Mr. Elder repeatedly uses the phrase ‘ordinary course of business,’ but does not provide any further details as to how the records are maintained.” Addressing the first three elements of the business record rule, Justice Maslow quoted Rushmore Recoveries X, LLC v Skolnick. [6]

[R]epetitive statements that records were made in the regular course of business as if they were magic words, does not satisfy the business records exception to the hearsay rule. That phrase, standing alone, does not establish that the records upon which the Plain- tiff relies were made in the regular course of the Plain- tiff ’s business, that it was part of the regular course of the Plaintiff ’s business to make such records, or that the records were made at or about the time of the transactions recorded.

The second problem?

To be admissible in evidence, fourth, the records must be made by a person who has personal knowledge of the actor occurrence and is under a business duty to report it. This foundational element is important in the realm of financial transactions because often acts or occurrences are recorded by one person or company and then transmitted to or incorporated into another company’s records. It is the business record itself, not the foundational affidavit, that serves as proof of the matter asserted (citation omitted).

In this motion, the fourth foundational element to establish the business record exception was not met because the entries contained in the submitted payment history emanated from a different entity; they had to because these transactions were made by wiring money. However, nowhere in Plaintiff ’s papers is there reference to the records of this other entity and there is no affidavit by someone with personal knowledge at this other entity. The Court relies on its decision in Fenix Capital Funding LLC v Sunny Direct, LLC (81 Misc 3d 1243[A], 203 N.Y.S.3d 921, 2024 NY Slip Op 50131[U] [Sup Ct, Kings County 2024]). Each participant in the chain producing the record, from the initial declarant to the final entrant, must be acting within the course of regular business conduct or the declaration must meet the test of some other hearsay exception (citation omitted). Whoever at Plaintiff made the payment history record entries in its own records is unidentified in its papers (citation omitted). The submitted payment history contains coded data, “X08” [] which is not explained in the Elder affidavit []. Moreover, Mr. Elder stated that “R08” was used for April 8, 9, and 10, 2024 [], yet the code for April 10, 2024 is X08 []; this constitutes an inconsistency in the record evidence.

The Elder affidavit also included the following sentence: “As to Plaintiff ’s business records that consist of documents created by third parties, if any, Plaintiff relies on the accuracy of such records in conducting its business.” This one-sentence declaration with respect to records of third parties is totally insufficient to meet the business record exception to the hearsay rule. There are no details as to exactly which records submitted are from third parties, the originator of the third-party records, what the basis is for the accuracy of these records, and the circumstances under which they were made. “[T]he mere filing of papers received from other entities, even if they are retained in the regular course of business, is insufficient to qualify the documents as business records” (citation omitted).

Justice Maslow held that the records submitted in support of the motion were inadmissible and denied the motion.

Conclusion

David always tells lawyers that if someone woke them out of a sound sleep at 2:00 a.m., when asked they should be able to recite the required elements of the business records foundation. Having woken Katryna out of a sound sleep at 2:00 a.m., she can. Seriously, it’s that important.

So, thank you, CPLR 4518, for making our lives immeasurably easier. But smooth sailing in the business records world is not always easy, and our next column will address riptides and eddies that can capsize your efforts to admit business records into evidence.

Endnotes

131 N.Y. 169 (1892).
15 N.Y.3d 610 (2010).
253 N.Y. 124 (1930).
28 N.Y.3d 544, 550–551 (2016).
2024 N.Y. Slip Op 51512(U) (Sup. Ct., Kings Co. Nov. 8 2024).
15 Misc. 3d 1139(A) (Dist Ct., Nassau Co. 2007).

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