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Cobra Capital, LLC v. Pomp's Services

February 23, 2010


The opinion of the court was delivered by: Milton I. Shadur Senior United States District Judge


Cobra Capital LLC and Forest Park National Bank & Trust Co. (collectively "Cobra," treated after this sentence as a singular noun) have brought this diversity action against Pomp's Services, Inc. and Frank Pomprowitz (individually "Pomprowitz") (those two defendants are collectively termed "Pomp's," also treated for convenience as a singular noun), suing for breach of contract after Pomp's had defaulted on an Equipment Lease Agreement ("Agreement") with Cobra. Pomp's has not only answered the Complaint but has also counterclaimed against Cobra, alleging violations of the Illinois Uniform Commercial Code ("Code," 810 ILCS 5/1-101 to 5/13-103)*fn1 plus conversion and fraud.

Pomp's has now moved for partial summary judgment--that is, a summary judgment as to liability--against Cobra under Fed. R. Civ. P. ("Rule") 56.*fn2 For the reasons stated here, the motion is denied.

Summary Judgment Standard

Every Rule 56 movant bears the burden of establishing the absence of any genuine material (that is, outcome-determinative) factual dispute (Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986)). For that purpose courts consider evidentiary records in the light most favorable to nonmovants and draw all reasonable inferences in their favor (Lesch v. Crown Cork & Seal Co., 282 F.3d 467, 471 (7th Cir. 2002)). But to avoid summary judgment a non-movant "must produce more than a scintilla of evidence to support his position" that a genuine issue of disputed fact exists (Pugh v. City of Attica, 259 F.3d 619, 625 (7th Cir. 2001)) and "must set forth specific facts that demonstrate a genuine issue of triable fact" (id.). Ultimately summary judgment is warranted only if a reasonable jury could not return a verdict for the non-movant (Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).


Sometime in late 2005, Pomp's submitted an application to Insurelease LLC ("Insurelease"), an equipment finance broker, seeking financing for the purchase of a 2005 model wood grinder (P. St. ¶13). Insurelease approached Cobra on December 1, 2005, asking if it would be interested in providing terms for such a transaction (id. ¶15). Cobra responded that it was familiar with the equipment and agreed to propose terms, which it then did (C. Supp. St. Ex. B). Those terms included a monthly payment of 2.7% of the equipment's purchase price over 48 months (id.). Steve Kochensparger ("Kochensparger"), a part owner and sales director at Insurelease and the individual negotiating with Cobra, testified that to him those terms were consistent with an equipment lease with a $1 purchase option at the end of the lease (P. Supp. St. Ex. 38). Kochensparger and Pomp's believed throughout the negotiations that the terms included such a $1 purchase option (see id.).*fn3

After receiving the proposed terms from Cobra, Insurelease presented them to Pomp's and continued to negotiate the deal (see P. St. ¶15). First it arranged with Cobra to reduce the security deposit on the deal from 10% to 5% (C. Supp. St. Ex. B). Later it proposed an alternative term to Cobra: structuring the lease with a 20% residual, which would allow Cobra to take the depreciation expense and lower Pomp's monthly payment (id.).*fn4

Cobra declined to do so. Finally, Insurelease asked Cobra if it would provide the same terms for the financing of a less expensive 2001 model wood grinder and stated that, if so, Pomp's would agree to the deal. Cobra agreed to move forward (P. St. ¶¶16-18).

On January 6, 2006 Pomp's forwarded a check for $3,000 to Cobra, across the face of which was written "Commitment Fee" (id. ¶20). Pomp's has submitted uncontroverted evidence that it also sent along a signed Insurelease document titled "Conditional Lease Approval" that described the terms of the deal and included the $1 purchase option (id. ¶19).

Cobra, upon receipt of those two items, emailed Insurelease and stated that it would not accept the Insurelease document (C. Supp. St. Ex. A). Instead, Cobra stated, Pomp's needed to complete and send a Cobra application (id.). Cobra also clarified that the check sent was an application fee rather than a Commitment fee (id.). Cobra then sent a copy of the Agreement (P. St. Ex. 18) directly to Pomp's "[i]n order to notify [Pomp's] of Cobra Capital's primary terms and conditions" (C. St. Ex. A).

Cobra's cover letter asked Pomp's to sign and complete the Agreement as well as a few ancillary documents (P. St. Ex. 15). It also expressly referred to the $3,000 check as an "application fee" (id.).

Before the Agreement was executed, Pomp's found another grinder, a 2004 model, and again asked Cobra to adjust the terms and conditions of the Agreement accordingly (P. St. ¶¶25-31). Cobra agreed to do so, and Pomp's signed the amended Agreement on February 10, 2006 (id.). Cobra signed on February 13 (id. Ex. 23).*fn5

After the Agreement was signed, Pomp's authorized Cobra to remit a check to the grinder's seller (id. ¶37). Pomp's also arranged to pick up the grinder and transport it to its place of business, applied for a title and license plate, extended the warranty coverage on the grinder and applied for a Wisconsin Title identifying Cobra as a secured lender (id. ¶¶39-42). Cobra filed a UCC-1 financing statement in Wisconsin identifying itself as a secured party (id. ¶¶43-46).*fn6 Pomp's remitted further funds to Cobra for fees incurred in processing the UCC search and titling. Pomp's was issued a Wisconsin Certificate of Title naming Pomp's as the owner of the grinder and Cobra as the lien holder (id. ¶46).

Pomp's made all payments on the grinder until December 2007 (id. ¶¶47-48). On June 25, 2008 Cobra sent Pomp's a notice of acceleration and default (id. ¶51). Cobra then repossessed the grinder and sold it at auction for $113,580 (id. ¶¶57, 67-69).*fn7

Cobra's suit requests damages for (1) the remaining payments due under the Agreement as well as (2) the estimated residual value of the grinder, less the proceeds from the sale ...

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