“All Knowledge Is Inferential” – Bankruptcy Court Rules that “To the Best of My Knowledge” Does Not Suggest that a Declarant Does Not Have Personal Knowledge

Contributed by Doron P. Kenter.

“Either you karate do ‘yes’ or karate do ‘no.’  You karate do ‘guess so’ — [you get squished] just like grape.” – Mr. Miyagi, The Karate Kid

Attorneys often take common expressions for granted, but a recent decision in the United States Bankruptcy Court for the Southern District of Indiana reminds us to pay close attention to how to express the foundation for the facts asserted in supporting affidavits and declarations.
In Fredin Bros., Inc. v. Bankers Bank (In re Eastern Livestock Co.), Peoples Bank sought a determination that it was entitled to certain funds paid into the court by Fredin Brothers, Inc.  The dispute arose from a transaction in which Eastern Livestock bought 192 steers from Kansas farmers who were, in turn, financed by Peoples Bank.  To pay for the cattle, Eastern wrote a check to the farmers and Peoples Bank, which check was subsequently dishonored.  Meanwhile, Eastern had sold the steers to a third party, which sold the steers to Fredin Brothers, which then sold the cattle down the supply chain to other purchasers.  Fredin Brothers, which had not yet paid for the cattle, then filed an interpleader action so as to avoid having to pay twice for the same cattle.
Once the interpleader suit was removed and transferred to the Indiana bankruptcy court, Peoples Bank filed a motion for summary judgment seeking a determination that it was entitled to the funds paid into the court by Fredin Brothers in connection with the interpleader action.  Along with its motion for summary judgment, Peoples Bank included a sworn and notarized verification from its president (which was, pursuant to for 28 U.S.C. § 1746, akin to a stand-alone affidavit or declaration).  That sworn statement included a qualifier that the facts alleged in the motion were “true and correct to the best of my knowledge.”  In opposing the bank’s motion, the chapter 11 trustee for Eastern Livestock argued (among other things), that the presence of this caveat demonstrated that the bank’s president would not be qualified to testify to these facts or to introduce the supporting materials at trial and that the motion must be denied because it failed to satisfy the requirement, pursuant to Rule 56 of the Federal Rules of Civil Procedure, that any sworn declaration or affidavit (or, in this case, verified complaint) must demonstrate that the declarant is competent to testify to the matters stated therein.
In support of its argument that the bank president’s verified statement should be disregarded, the Eastern Livestock trustee relied on the Seventh Circuit Court of Appeals’ decision in Price v. Rochford, in which the circuit court held that a litigant’s verification “based upon his own personal knowledge or upon his information and belief” did not suffice to show that the affiant could testify to the matters stated in his sworn statement.  Similarly, the trustee contended that “to the best of my knowledge” was too great a qualifier on the sworn testimony.
Though the bankruptcy court ultimately denied the bank’s motion for summary judgment on other grounds, it rejected the trustee’s argument that “to the best of my knowledge” invalidated the sworn statement from the bank’s president.  The court noted that it was not a “subjunctive escape clause” like the language at issue in Price, and the qualifier did not suggest that the statement was based on secondhand information.  The court, citing Visser v. Packer Eng’g Assocs., wisely noted that “all knowledge is inferential” and that the apparent caveat in the sworn statement was accordingly “of no moment.”  Even though “upon information and belief or upon personal knowledge” would not run afoul of Bankruptcy Rule 7056, “to the best of my knowledge” was considered adequate evidence of competency to testify to the facts set forth in the sworn statement.
It is easy to ignore the jargon that so often crops up in legal writing, but attorneys and putative witnesses would be well-advised to consider their words wisely.  Though it can be tempting to include caveats to protect ourselves and our witnesses from making false statements under oath, Eastern Livestock reminds us that these hedges have real meaning, and should be considered carefully.
And that’s no bull.