LN in the Minority on Settlement for NorVergence Lessees

Leasing News believes settlement is the best and less costly avenue to take for both sides in the NorVergence leasing “dispute.” We have published two editorials on our position. It appears to be in the minority. Other trade publications, and associations, have taken a hard line.

The Monitor, who has a web site, www.monitordaily.com, and also a monthly magazine and newspaper, reportedly the largest printed circulation in the industry, in their February edition, 2005, includes a legal viewpoint by Stan Goldberg and Steven Karlin of the New York law firm of Platzer, Swergold, Karlin, Levine, Goldberg & Jaslow,LLP, well respected in the industry and representing "numerous companies in the equipment leasing industry.

Here is the conclusion of the article “NorVergence Calamity: Challenging “Hell or High Water” and the Enforcement of Assigned Leases:”

“In an attempt to avoid class certification issues, at least one law firm has apparently obtained hundreds — if not thousands — of individual plaintiffs as clients and brought mass lawsuits on behalf of hundreds of individually, named plaintiffs against each individual leasing company. While avoiding the class certification quandary, these individual mass actions may eventually be severed by the courts into hundreds of separate actions by individual plaintiff-lessees, thus placing them in the same posture as the single pre-emptive suits previously described.

“Finally, the NorVergence bankruptcy has brought forth numerous actions by the attorneys general of several states. These are probably the actions of greatest concern to the leasing industry. This is not because the AGs have better facts or claims under the law; they don't. But the AGs are not constrained by litigation budgets and, often, are motivated by an internal agenda to champion the rights of the "consumer" against perceived offending business or financial institutions. (1) Thus, the AGs appear to be seeking not only relief under the NorVergence leases but to effect a fundamental change in the way leasing companies operate in the future.

“The AGs are, in essence, seeking to change laws governing lease financing, not through elected representatives of the state legislatures, but by the threat of costly and protracted — even if unwarranted and legally unsupported — litigation.

“Conclusion “As each day passes, there are practical and procedural developments emanating from the various pending legal actions, each of which has an impact, profound or subtle, on the broad challenge to the leasing industry posed by NorVergence. The NorVergence situation remains dynamic and fluid, and the leasing industry is advised to follow all developments carefully as the ultimate impact of NorVergence has not yet been determined. It is imperative that the leasing industry protect and defend the basic principles that it has thrived under, including "hell or high water" provisions and the safeguard of waiver of defenses remaining enforceable by assignees.

•  “The equipment leasing industry accurately and steadfastly maintains that the rental agreements are not “consumer” leases since the Matrix Boxes are clearly intended for business usage and since, among other factors, the form rental agreement states clearly on its face that the lessee agrees that the equipment “...will not be used for personal, family or household purposes.” Nonetheless, the AGs and private plaintiffs contend otherwise.”