Venue Losses by Lessors

According to ELTnews, the Equipment Leasing Association has filed an amicus curiae brief in support of Preferred Capital's appeal of an adverse ruling on forum selection provisions in its NorVergence case.

(This file plus the previous “white paper” is available only to members, and Leasing News has not received permission to print them. ELA appears to continue to “champion” what are known as “hell and high water” leasing contracts. Of course, it is their role to champion their members. They have gone to extra lengths and should be commended for their vigorous efforts. editor)

Last week the Federal Court in Illinois echoed other court rulings in various states regarding the “vague” venue provision in the “Equipment Rental Contracts” generated by NorVergence and used by most whom they “discounted” or who funded their invoice.

The ruling states:

"The purported forum selection clause does not designate a specific state to which the parties will litigate any issues one the lease is assigned and confers upon the lessor the right to assign to any creditor in any state. Defendants have no way of knowing, at the time the lease was executed, what state in the union they would be required to litigate. As such, Defendants cannot be found to have consented to jurisdiction in Illinois. The cases cited by Plaintiff all contain clauses which designate a specific forum at the time of execution of the agreement."

According to a well-known attorney who would like to appear anonymous in his opinion, “Although a ruling in a federal court in Illinois could be considered ‘persuasive' authority on a state court in Illinois, it would not be binding authority or precedent. Even among judges of the same federal district court in Illinois, one judge's ruling would not bind another. In addition, I believe IFC has brought its cases in state court and I assume the successful case at issue was "removed" to federal court. That being said, I believe the dismissal is still positive news.

“While defendant's in non-IFC cases in other states could certainly cite to the Illinois district court case, such a citation would be only persuasive authority and not binding authority.”

What has happened is the “venue” statutes have been challenged, and in most instances, it means the lessor has had to sue the lessee in the county when the lessee is located. This means more expense, and in some situations, the difficulty of that state's laws such as Texas or Massachusetts. It also may mean for instance, a Chicago lawyer has to make his case to a jury in a small county located in Alabama, where at best he would be considered a “carpetbagger.”

It does appear several of the lessors have decided to make a cash flow business decision: that it is “cash flow” wise better to fight than come up with $500,000 or a $1 million to pay off a bank line—while they may need to do so in the interim, the loan is made with the concept the “winnings” would pay it off.

They may find defendants who would prefer to settle than also pay for the court costs and attorney fees, plus in some courts, they may be able to prove their position, so from a business decision viewpoint, they have decided to bring matters to court to decide.

So to take two years with a cost of $10,000 per month with the hopes of settling some, winning some, is a better cash flow decision than forgiving 85% as GE agreed recently agreed to do for 660 small businesses in 12 states, according to a preliminary settlement approved by Judge Jonathan N. Harris in Hackensack, New Jersey.

Leasing News has made it very plain, such as in a recent editorial, we favor settlement to this matter rather than letting it fester in court where both sides will be losers.

http://www.leasingnews.org/Conscious-Top%20Stories/Novergence_67.htm