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What's New in the Law

By Robert W. Ihne
August 26, 2009

Ability to Collect Rentals under Article 2A Finance Leases or Leases With 'Hell or High Water' and/or Waiver of Defenses Provisions

De Lage Landen Financial Services, Inc. v. Viewpoint Computer Animation, Inc., 2009 WL 678635 (U.S.Dist.Ct. E.D.Pa. March 11, 2009) and 2009 WL 902365 (U.S.Dist.Ct. E.D.Pa. April 1, 2009). These two cases (the latter of which does not involve the lessor/plaintiff directly) illustrate issues that can arise when a lessor becomes part of a program involving not only the leasing of equipment, but also the provision of services by third parties. Notwithstanding a rental agreement that clearly disclaimed responsibility on the part of the lessor for the performance of services related to the equipment being leased, the court refused to decide many of the legal issues facing the lessor without further factual investigation regarding the lessor's role in the program and the possible connection of other program documents (to which the lessor was not a party) to the rental agreement. The customer had signed the rental agreement as part of a program devised by the service provider (with help from the equipment manufacturer) to enable the customer to achieve promised substantial savings on its telephone and Internet costs. When the service provider became insolvent and stopped providing those services, the customer stopped making payments on the rental agreement, claiming that it had a right to do so under its agreement with the service provider and claiming that the lessor was part of a conspiracy to commit fraud on it and other similarly situated customers. Indicating, among other things, that it could not determine yet what law to apply (the rental agreement was to be governed by Pennsylvania law while the customer's agreement with the service provider was to be governed by Texas law), the court states, “' this [c]ourt cannot conclude at this stage without discovery whether the [a]greements should be construed together and therefore which law should apply.”

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