Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

IFC Credit Corp. v. United Business & Industrial Federal Credit Union

December 11, 2006

IFC CREDIT CORP., PLAINTIFF,
v.
UNITED BUSINESS & INDUSTRIAL FEDERAL CREDIT UNION, DEFENDANT.



The opinion of the court was delivered by: Matthew F. Kennelly, District Judge

MEMORANDUM OPINION AND ORDER

IFC Credit Corporation (IFC) sued United Business & Industrial Federal Credit Union (UBI) for breach of contract and fraud relating to an equipment lease between UBI and NorVergence, Inc., which NorVergence assigned to IFC. A jury found for UBI on both claims.

IFC has moved for judgment as a matter of law on its breach of contract claim and for a new trial on both claims. It has also moved to supplement the record in certain respects relating to purported objections to jury instructions. For the reasons stated below, the Court grants IFC's motion to supplement the record but denies its motions for judgment as a matter of law and for a new trial.

Background

UBI is a credit union based in Connecticut. In 2003, UBI negotiated with NorVergence to obtain telecommunications services and equipment. UBI's chief information officer Michael Knurek, who testified at trial, stated that he handled the discussions with NorVergence. Knurek testified that he obtained a GED and attended one year of college and had worked with computers ever since. He also stated that he has a learning disability that he "seem[s] to overcome."

Knurek stated that NorVergence promised to provide UBI "no-risk" Internet access, telephone service, and cellular phones, at a significant savings compared to UBI's then-current services. On December 12, 2003, Knurek signed five contracts in which UBI agreed to a sixth month lease for five "Matrix boxes," equipment that NorVergence represented enabled it to supply low-cost telecommunications services. Pl. Exs. 1, 14, 23, 33, 44. Each of the leases contained a waiver of defenses provision and a so-called "hell or high water" provision making the obligation to pay unconditional despite equipment failure or other problems. These provisions, reproduced in their approximate actual size from the back of the leases, read as follows (the documents offered in evidence were far blurrier than what appears below):

YOUR DUTY TO MAKE THE RENTAL PAYMENTS IS UNCONDITIONAL DESPITE EQUIPMENT FAILURE, DAMAGE, LOSS OR ANY OTHER PROBLEM. RENTER IS RENTING THE EQUIPMENT "AS IS", WITHOUT ANY WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE IN CONNECTION WITH THIS AGREEMENT. If the Equipment does not work as represented by the manufacturer or supplier, or if the manufacturer or supplier or any other person fails to provide service or maintenance, or if the Equipment is unsatisfactory for any reason, you will make any such claims solely against the manufacturer of supplier or other person and will make no claim against us.

YOU UNDERSTAND THAT ANY ASSIGNEE IS A SEPARATE AND INDEPENDENT COMPANY FROM RENTOR / MANUFACTURER AND THAT NEITHER WE NOR ANY OTHER PERSON IS THE ASSIGNEE'S AGENT. YOU AGREE THAT NO REPRESENTATION, GUARANTEE OR WARRANTY BY THE RENTOR OR ANY OTHER PERSON IS BINDING ON ANY ASSIGNEE, AND NO BREACH BY RENTOR OR ANY OTHER PERSON WILL EXCUSE YOUR OBLIGATIONS TO ANY ASSIGNEE.

See, e.g., Pl. Ex. 1.

Knurek testified that the NorVergence representative "shov[ed] a lot of papers at me" and that he understood he was signing an "application for telecommunications services." He stated that he had a hard time reading the terms of the leases because the print was so small and that when he pointed this out, the NorVergence representative assured him that the documents were "standard lease agreements." Knurek stated that he had never heard of a waiver of defense clause or a hell or high water clause, nor did the NorVergence representative tell him the leases contained such provisions. Knurek testified that he understood that UBI could terminate the leases if the equipment did not work. Knurek testified that had he known he was giving up any rights he might have against NorVergence, he would not have signed the leases. Knurek stated that he was unaware that NorVergence had already entered into an agreement to assign the leases to IFC.

On January 9, 2004, the Matrix boxes were installed at UBI's offices. The boxes did not work properly. The installer nonetheless asked Knurek to sign delivery and acceptance certificates. Knurek refused to do so. The installer called NorVergence's installation coordinator, who then spoke with Knurek. Knurek advised that the equipment was not in working order. The NorVergence representative told Knurek that signing the certificates indicated only that the equipment had been installed, and that if Knurek did not sign, the installer would have to remove the equipment, which would delay the process and jeopardize the low price NorVergence had guaranteed. The representative assured Knurek that the service would begin within sixty days and that signing the certificates was just "standard procedure."

Relying on what the NorVergence representative stated, Knurek signed the certificates, which stated:

The undersigned certifies that it has received and accepted all the Equipment described in the Equipment Rental Agreement between NorVergence, Inc. (Rentor) and the undersigned United Business & Industrial Federal Credit Union (Renter) dated 12/12/03. The Equipment conforms with our requirements. There are no side agreements or cancellation clauses given outside the Equipment Rental Agreement.

I have reviewed and I understand all of the terms and conditions of the Equipment Rental Agreement. I AGREE THAT THE RENTAL PAYMENT UNDER THE EQUIPMENT RENTAL AGREEMENT WILL BEGIN 60 DAYS FROM THE DATE OF THIS DELIVERY AND ACCEPTANCE CERTIFICATE AND SHALL CONTINUE THEREAFTER FOR THE FULL LENGTH OF THE STATED INITIAL TERM OF THE EQUIPMENT RENTAL AGREEMENT AND IN ACCORDANCE WITH ITS TERMS AND CONDITIONS. I was not induced to sign this by any assurances of Rentor or anyone else. I have had a reasonable opportunity to inspect the goods.

Pl. Ex. 2 (emphasis in original).

On January 12, 2004, NorVergence assigned the leases to IFC, which leases equipment and purchases existing leases. Beginning in March 2004, Robert Wolfeil of IFC began calling Knurek regarding the rental payments for the Matrix boxes. Knurek told Wolfeil that the equipment was defective and then called NorVergence, which agreed to pay UBI's bills. On June 30, 2004, however, NorVergence was forced into involuntary bankruptcy and stopped paying UBI's rental payments. Wolfeil again contacted Knurek and asked UBI to make its payments, but UBI refused because the equipment still did not work.

IFC sued UBI for breach of contract, claiming that it was owed $113,098.20 in payments on the leases, and for fraud, claiming that UBI had defrauded IFC in signing the delivery and acceptance certificates for the equipment. Prior to trial, the Court denied IFC's motion to strike UBI's jury demand, a matter to which the Court will return shortly.

At trial, the jury was given instructions regarding IFC's claims to which both sides had agreed, as the Court will discuss below. The jury was told, first, that IFC had to prove that UBI had failed to perform its obligations under the leases. It was next explained that UBI had raised three defenses but that IFC disputed UBI's entitlement to raise two of them. The first defense, which according to the instructions the parties agreed UBI was entitled to argue, required UBI to prove that "it signed the contracts as a result of fraud that induced UBI to sign the contracts without knowledge of, or a reasonable opportunity to learn of, the character or essential terms of the contracts." Tr. 463-64 (Aug. 4, 2006). In this decision, the Court will refer to this defense as UBI's fraud in factum defense. The jury instructions provided a list of factors the jury could consider in determining whether UBI had proved this defense. Tr. 464 (Aug. 4, 2006).

The agreed instructions advised the jury that IFC disputed UBI's right to argue its two remaining defenses. The jury was told that IFC was entitled to enforce a provision of the leases barring UBI from asserting these defenses against IFC, unless UBI proved that IFC had not acquired the leases for value, had not acquired them in good faith, or acquired them with notice of UBI's fraud in factum defense. The instructions then advised what UBI had to prove to prevail on these defenses if it persuaded the jury that it was entitled to assert them against IFC. One of the defenses was a "fraud in the inducement" defense. Tr. 467-68 (Aug. 4, 2006).

With the agreement of both sides, the jury was given a special verdict form that had particularized questions corresponding to each of the issues the jury might be called upon to decide. The jury found that IFC proved that UBI breached the contracts by failing to pay, but that UBI proved that "it signed the contracts as a result of fraud that induced it to sign the contracts without knowledge of, or a reasonable opportunity to learn of, the character or essential terms of the contracts." Tr. 476 (Aug. 4, 2006); Verdict Form.

Discussion

1. Motion to Supplement ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.