Seventh Circuit Finds 'Floating' Forum Selection Clauses Valid

In the fall of 2003, Norvergence, Inc. ('Norvergence') was a seemingly fast-growing, highly profitable telecommunications company. Norvergence contracted with thousands of small- to mid-size businesses throughout the United States, entering into Equipment Rental Agreements ('ERAs') for the lease of telecommunications equipment that was deemed to be proprietary, cutting-edge, and to be used in conjunction with telecom services that Norvergence would provide. After entering into an ERA, Norvergence would sell the payment rights under the ERA to a third-party leasing company. Norvergence retained all service obligations under the ERAs, and the ERAs provided that the lessees' payments under the leases to any subsequent assignee were unconditional. Additionally, the ERAs were fully integrated contracts, providing that there were no side agreements outside of the ERAs, that oral promises not contained in the ERAs cannot be enforced, and that the ERAs can only be modified by written agreement. Lease finance companies could not get enough of the ERAs into their portfolios, and lined up to take assignments of them from Norvergence. It was not until Norvergence collapsed into bankruptcy that these companies realized that they had the makings of a vendor financing fiasco on their hands. As lessee after lessee stopped making their payments under the ERAs when Norvergence became unable to provide them the promised telecommunications services, lease finance companies found themselves holding portfolios with astronomical delinquency rates and the prospect of protracted litigation to protect their investment.