Signature Financial LLC v. Neighbors Global Holdings, LLC et al

Filing 40

OPINION AND ORDER. For the reasons stated above, the Court hereby grants plaintiff's motion for summary judgment finding Neighbors Global and Lufkin jointly and severally liable on Count I in the amount of $264,224; Neighbors Global and Luf kin liable on Count II; Neighbors Global and Lufkin liable on Count III; Neighbors Global and Greeley jointly and severally liable on Count IV in the amount of $258,546; Neighbors Global and Greeley liable on Count V; Neighbors Global and Greele y liable on Count VI; Neighbors Global and West Warwick jointly and severally liable on Count VII in the amount of $258,546; Neighbors Global and West Warwick liable on Count VIII; Neighbors Global and West Warwick liable on Count IX; Neighbors Global and Lubbock jointly and severally liable on Count X in the amount of $258,546; Neighbors Global and Lubbock liable on Count XI; Neighbors Global and Lubbock liable on Count XII; Neighbors Health, Legacy Holdings, and Bellaire jointly and severally liable on Count XIII in the amount of $215,891; Neighbors Health, Legacy Holdings, and Bellaire liable on Count XIV; and Neighbors Health, Legacy Holdings, and Bellaire liable on Count XV. The Court further awards plaintiff its costs a nd fees in connection with Counts III, VI, IX, XII, and XV, and permits peaceable repossession of the lease equipment pursuant to Counts II, V, VIII, XI, and XIV. Plaintiff is directed to submit to the Court by May 14, 2018 a proposed Final Judgment and a specification of its recoverable fees and costs through May 11, 2018, accompanied by appropriate "break-downs" for same. Defendants, by no later than May 21, 2018, may file any objections to the amounts of fees and costs and/or to the form of the Final Judgment. The Clerk is instructed to close docket entry number 31. re: 31 MOTION for Summary Judgment filed by Signature Financial LLC. (Signed by Judge Jed S. Rakoff on 5/8/2018) (rjm)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

-------------------------------------x
SIGNATURE FINANCIAL LLC,
17 Civ. 6089
Plaintiff,
OPINION AND ORDER
-

v -

NEIGHBORS GLOBAL HOLDINGS, LLC, NEC
LUFKIN EMERGENCY CENTER, LP, NEC
GREELEY EMERGENCY CENTER, LP, NEC
WEST WARWICK EMERGENCY CENTER, LP,
NEC LUBBOCK EMERGENCY CENTER, LP,
NEIGHBORS LEGACY HOLDINGS, INC.
f/k/a NEIGHBORS HEALTH SYSTEM, INC.,
NEIGHBORS HEALTH, LLC f /k/a
NEIGHBORS HEALTH SYSTEM, LLC, and
NEC BELLAIRE EMERGENCY CENTER, LP,
Defendants.

-------------------------------------x
JED S. RAKOFF, U.S.D.J.
Before the Court in the above-captioned case is the motion
for

summary

judgment

of

plaintiff

31.

Signature seeks the amounts due and

("Signature") . See Dkt.

owing under five equipment leases,
and

reimbursement

of

costs

and

Signature

Financial

LLC

possession of the equipment,

fees.

See

Plaintiff

Signature

Financial LLC's Memorandum of Law in Support of its Motion for
Summary

Judgment

("Pl.

Mem. "),

Dkt.

31-43.

Defendants

oppose,

arguing that there are genuine issues of material fact regarding
(1) whether plaintiff has the authority to enforce the leases at
issue,
of

(2) whether plaintiff has established all of the elements

breach

of

contract,

(3)

whether

1

defendants'

affirmative

defenses could prevail at

trial;

and

( 4)

the amount of damages

plaintiff is entitled to recover if the leases are enforceable.
See

Defendants'

Memorandum

of

Law

in

Opposition

to

Signature

Financial LLC's Motion for Summary Judgment and Memorandum of Law
in Support

("Def. Opp.") at 1-4, Dkt. 32.

For the reasons set forth below, the Court grants Signature's
motion in full.
The pertinent facts,

either undisputed, or, where disputed,

taken most favorably to defendants, are as follows:
Signature is a New York limited liability company, the sole
member

of

which

is

a

New

York

resident.

See

Local

Rule

Statement of Undisputed Material Facts ("Pl. 56.1 St.")

~

56. 1

1, Dkt.

31-42; Local Rule 56.1 Response to Statement of Undisputed Material

Facts and Statement of Genuine
56. 1

st . II)

~

Issues of Material Facts

("Def.

1, Dkt . 3 2 -1.

Defendants

Neighbors

Global

("Neighbors

LLC

Holdings,

Global"), NEC Lufkin Emergency Center, LP ("Lufkin"), NEC Greeley
Emergency
Center,

Center,

LP

("Lubbock"),

("West
NEC

LP

("Greeley"),

Warwick"),
Bellaire

LLC

West

Lubbock

Emergency

Neighbors Legacy Holdings, Inc.
Health,

NEC

NEC

Warwick

Emergency

Emergency Center,

Center,

LP

LP

("Bellaire"),

("Legacy Holdings"), and Neighbors

("Neighbors Health")

(collectively,

"Neighbors")

are

either organized pursuant to the laws of the State of Texas or, in
the case of Neighbors Global, the State of Delaware. Id.
2

~~

2-9.

On or about September 14, 2015, Neighbors Health, as Lessee,
and

non-party All

Points

Solution

Inc.

d/b/a

3i

International

("3i"), as Lessor, entered into a Master Equipment Lease Agreement
numbered 41261960
or about May 1,
960,

and

Id.

9[ 16.

Thereafter,

Health,
3i,

numbered 41343964

as

Legacy
Lessor,

Holdings,
entered

and

into

Bellaire

as

Lessor,

(the "Bellaire Schedule").

entered into a

numbered 41395501
terms

Co-

Schedule

Id. 9[ 18.

Master Equipment

as Lessee,

and

Lease Agreement

("Master Lease 501"). Id. 9[ 11. Pursuant to the

of Master Lease

were made:

as

Equipment

On or about July 15, 2016, Neighbors Global,
3i,

on

2016 and pursuant to the terms of Master Lease

Neighbors

Lessees,

("Master Lease 960")

on or about

501,

the

following

September 1,

additional

2016,

agreements

Neighbors Global and

Lufkin, as Co-Lessees, and 3i, as Lessor, entered into an Equipment
Schedule numbered 414134 30
about

September 15,

Lessees,

and 3i,

numbered

4142163 9

September
Lessees,

15,

Lessees,

("Greeley

2016,

and 3i,

September

Neighbors Global

as Lessor,

as

numbered 41421644
about

2016,

("Lufkin Schedule") ,

and 3i,

numbered 41421656

as

2016,

and Greeley,

on or
as Co-

Schedule") ,

or

Global

id.

9[

13;

and West

on

Warwick,

entered into an Equipment

Neighbors

Lessor,

12;

Schedule

("West Warwick Schedule"),

15,

<JI

entered into an Equipment

Neighbors
Lessor,

id.

Global

id.

<JI

entered into an Equipment

3

as

Co-

Schedule

14; and on or

and Lubbock,

("Lubbock Schedule"), id. 9[ 15.

about

as CoSchedule

Thereafter,
Agreement

and

Commercial

pursuant

to

the

Assignment

of

Leases

Finance,

Inc.

Assignment Agreement"),

1

terms

of

a

Master

between

( "EverBank")

(the

Purchase

3i

and

EverBank

"3i

to

EverBank

3i physically delivered to EverBank the

original Master Leases and Schedules listed above (the "Leases") .
See id.

<J[<j[

19,

21.

Subsequently,

on or about October 13,

2016,

pursuant to a Master Assignment Agreement dated May 23, 2012 (the
"EverBank to Signature Assignment Agreement"), id.

<JI

22, EverBank

assigned the Lufkin, Greeley, West Warwick, and Lubbock leases to
Signature and executed a further Assignment and Specification of
Assigned Interest dated October 13, 2016,
July 7,

2016,

Agreement,

id.

<JI

23. On or about

pursuant to the EverBank to Signature Assignment

EverBank assigned the Bellaire Schedule to Signature

and executed a specific Assignment and Specification of Assigned

1

Defendants object to the admissibility of this document arguing
that "it has not been authenticated and admission would be improper
under Fed. R. Evict. 1002 and the exceptions of Fed. R. Evict. 1004
have not been met." Def. 56.1 St. <JI 19. But it is plain that this
document is admissible under Rule 1004. William Wellford, a Fed.
R. Civ. P. 30 (b) (6) designee of EverBank, testified that the policy
of EverBank is to image documents and thereafter to destroy the
originals. See Deposition of William Wellford dated February 27,
2018 at 26-27, Dkt. 36-1 (testifying that EverBank has a staff of
three people who, in the ordinary course of business, image all
documents and destroy the hard copies typically within five
business days) . He identified the signature on the Master
Assignment Agreement as belonging to an EverBank employee and
testified that the original had been destroyed in the ordinary
course. Id. at 27-29 (testifying that an EverBank employee signed
the Master Purchase Agreement and that the original Agreement had
been destroyed in the ordinary course).
4

Interest dated July 7, 2017. Id. ! 24. Signature paid EverBank in
full

for the Leases,

dollars,

id.

!

25,

an amount exceeding one million

see Affidavit of David McGowan

~!

16,

on

the

("McGowan Aff.")

28, Dkt. 31-23.
In

early

2017,

Leases, Pl. 56.1 St.
court,

alleging,

Neighbors
~

stopped making

payments

26, and filed suit against 3i in Texas state

inter

al ia,

fraud

and

breach

of

contract

in

connection with the Leases at issue in this case as well as 26
other

3i

leases

assigned

to

other

financial

institutions,

see

Affidavit of Thomas Gruenert ("Gruenert Aff.") ! 13, Dkt. 33; First
Amended Petition and Application for Temporary Restraining Order,
Temporary Injunction and Permanent Injunction,

Dkt.

14-1. While

the parties dispute the reasons for defendants' non-payment,
Reply Affirmation of Robert M. Tils ! ! 28-29,

see

Dkt. 36 (asserting

that the real reason defendants stopped paying was that Neighbors
ran out of money);
23,

2018

("Gruenert

Deposition of Thomas Gruenert dated February
Dep.")

at

7-8,

·Dkt.

36-2

(testifying

that

Neighbors is engaged in 16 or so other lawsuits, including several
for non-payment of real estate leases);

id. at 20-21

(testifying

that Neighbors'

is currently being run by a Chief Restructuring

Officer at

request

the

of Neighbors'

creditors) ;

id.

at

35-3 6

(testifying that Neighbors failed to open centers that were fully
built out because Neighbors "ran out of cash"),

they agree that

all of the physical IT equipment covered by the Signature Leases
5

was delivered to Neighbors,

see Pl.

56 .1 St.

<JI

27; 2 that the IT

equipment covered by the Leases is vital to Neighbors' operations,
id.

<JI

29; and that the emergency room centers associated with each

lease opened on time,

id.

28. They also agree that Neighbors'

<JI

Chief Financial Officer John Decker signed Delivery and Acceptance
Certificates for each of the Leases, id.
of

the

lease

equipment

was

delivered

<JI

30, attesting that all

as

promised,

and

that

Signature relied on these documents when taking assignment of the
Leases from EverBank, id.

<JI

32.3

2

As discussed further below, defendants contest that the Bellaire
location received equipment. See Def. 56.1 St. <JI 27. According to
defendants, the location on the Bellaire Schedule "was closed at
this time so there was no reason to buy or lease any equipment."
Id. But the evidence cited by defendants - an excerpt from the
deposition transcript of their General Counsel, Thomas Gruenert does not support this assertion. Rather the testimony shows, even
in the light most favorable to defendants, that the equipment at
the old Bellaire location was moved to the new location, Gruenert
Dep. at 84:18-19, Dkt. 34-6 ("the equipment was relocated"), and
that, at a later date, 3i and Neighbors executed a further lease,
not at issue in this case, which lease may have included equipment
or services already paid for by Neighbors pursuant to the lease
here. Gruenert never states that the Bellaire location in the
Bellaire Schedule was closed at the time of the lease or that no
equipment was ever received by Neighbors from 3i.
3
In a scatter-shot approach,
defendants submit two dozen
paragraphs regarding factual issues they claim remain to be tried,
see Def. 56.1 St. <JI<JI 34-57, many relating to their affirmative
defenses, see, e.g., id. <JI 48 ("Fact Issue To Be Tried (No. 15):
Whether
any
of
the
five
(5)
Signature
Agreements
are
unconscionable"). But in violation of Local Rule 56.1, defendants
do not include any citations to the record. Moreover, none of these
paragraphs asserts any factual statements that plaintiff might
contest or admit. Accordingly, defendants' af fi rmati ve defenses
lack any evidentiary support. While defendants improperly seek to
cure these defects by providing evidentiary citations in their

6

After Signature commenced the instant action for non-payment
of rent in New York state court, Neighbors removed the action to
this Court on August 11, 2017, see Notice of Removal, Dkt. 1, and
on September 6, Neighbors moved to dismiss Signature's complaint
for

lack

of personal

pursuant to 28 U.S.C.

jurisdiction
§

in New York

and also moved

1404 to transfer venue to the Southern

District of Texas, Dkt. 12, but the Court denied both motions, see
Order dated October 29, 2017, Dkt. 24; Opinion dated December 19,
2017,

Dkt.

28.

Plaintiff then moved for summary judgment on all

fifteen counts of its complaint,
grounds,

defendants opposed on several

and the motion was fully briefed and argued.

See Def.

Opp. at 1-4. The Court now considers each of defendants' arguments
in turn:
I. Valid Assignment
As an initial matter, defendants challenge plaintiff's right
to enforce the Signature Leases, arguing that plaintiff has failed
to establish as a matter of law a valid assignment of the Leases
by 3i
contend

to

EverBank.
that

See

there

id.
are

at

13-14.

no

Specifically,

business

record

defendants
affidavits

authenticating the 3i to EverBank Assignment, that neither of the
signatories

have

authenticated

the

Assignment,

and

that

other

answering papers, this does not comply with Local Rule 5 6. 1.
Nevertheless, these citations will be discussed in connection with
defendants' arguments below.
7

witnesses have either not authenticated the Assignment or cannot
properly authenticate it. Id.
Not

only

discussed in

are

these

footnote

arguments

1,

supra,

unavailing

but

for

defendants

the

admit

original leases were delivered by 3i to EverBank,

reasons
that

see Def.

the
56.1

St. ! 21, and defendants continue to pay EverBank as Signature's
agent on nine leases not in dispute here, implicitly acknowledging
the

validity

challenge,

of

assignment

agreement

they

now

see Reply Affidavit of David McGowan

!! 3-5,

Aff.")

the

Dkt.

37.

Accordingly,

purport

to

("McGowan Reply

the Court

finds

that

the

Master Leases and the Equipment Schedules were assigned by 3i to
EverBank and, thereafter, by EverBank to Signature.
II. Breach of Contract
Defendants

argue

that

plaintiff

has

failed

to

establish

breach of contract as a matter of law. See Def. Opp. 15-17.
In

law,

order to establish breach of contract under New Jersey

Signature must

contract,

(2)

a

demonstrate

breach

damages.4 See RNC Sys.,

of

that

No.

09 Civ.

4534,

the

existence

contract,

Inc. v. Modern Tech.

Supp. 2d 436, 445 (D.N.J. 2012)
Kim,

(1)

and
Grp.,

of

(3)

a

valid

resulting

Inc.,

861 F.

(citing Ramada Worldwide, Inc. v.

2010 WL 2879611,

at *3

(D.N.J.

July 15,

4 The contracts in this case are governed by New Jersey law. See
Master Equipment Lease Agreement dated July 15, 2016 ("Lease") !
25, Dkt. 31-24; Master Equipment Lease Agreement dated September
14, 2015 ("Lease") ! 25, Dkt. 31-37.
8

2010)).

Signature also must show

performed

its

obligations

under

(4)
the

that it complied with and
contract.

See

Nat' l

Serv.,

Inc. v. Chesapeake Corp., 45 F. Supp. 2d 438,

1999).

Defendants argue that Signature has

448

Util.
(D.N.J.

failed to establish

three of these four elements:
A. Existence of a Valid Contract

First,

defendants

argue

that

plaintiff

has

failed

to

establish as a matter of law that the Signature Leases are valid
contracts because,

according to defendants,

there

is a

genuine

dispute of fact with respect to whether John Decker, the Neighbors
officer who signed the leases, had the authority to bind Neighbors.
See Def. Opp. at 15-16.5
According to defendants, Decker did not have the authority to
bind Neighbors because the Leases were not reviewed by "Neighbors'
legal department with the dollar figures attached and the equipment
pricing filled in/attached." Id. at 24. Additionally, defendants
argue,

the

Secretary's Certificates Relating to

Corporate

Resolutions,

contracts

on

behalf

conferring
of

authority

Neighbors,

"were

on

Incumbency and
Decker

never

to

sign

discussed

or

presented to the board of Neighbors, and were 'a mess,' not even

5 Defendants also argue that plaintiff has failed to establish that
"3i acted in good faith." Def. Opp. at 15-16. But whether or not
3i acted in good faith does not bear on the va 1 idi ty of the
contracts, only on Neighbors' obligation to perform under them.
See, e.g., Sons of Thunder v. Borden, Inc., 148 N.J. 396, 421-24
(1997) (discussing the "obligation to perform in good faith").

9

properly reflecting the corporate structure." Id. Since there is
"no

evidence

that

anyone

from

3i

or

Signature

did

any

real

diligence to confirm whether these" certificates were accurate,
defendants conclude that this is a genuine issue of material fact
precluding summary judgment. Id.
Under New Jersey law,

an agent can bind his principal for

such acts that are within his actual or apparent authority. New
Jersey Lawyers' Fund for Client Protection v. Stewart Title Guar.
Co.,
the

203 N.J. 208, 220
time

of

taking

(2010). Actual authority exists where "at

action"

an

"agent

reasonably

believes,

in

accordance with the principal's manifestations to the agent, that
the principal wishes the agent so to act." Id. Apparent authority
"arises when a third party reasonably believes the actor has the
authority to act on behalf of the principal and that belief is
traceable to the principal's manifestations." Id.
Here there is no doubt that defendants' agent John Decker defendants' Chief Financial Officer - had both actual and apparent
authority to sign the Signature Leases. Not only had Neighbors'
Chief Executive Officer signed documents expressly confirming that
Decker had the authority to execute the Leases,

see Secretary's

Certificate Relating to Incumbency and Corporate Resolutions dated
September 1, 2015, Secretary's Certificate Relating to Incumbency
and

Corporate

Resolutions

dated

February

2,

2016,

Secretary's

Certificate Relating to Incumbency and Corporate Resolutions dated
10

July 11, 2016,

Dkt.

31-33, but Decker's title meant that he was

"cloaked with the authority to enter into contracts and obtain
financing

on

[Neighbors' ] behalf."

Prof'l Sports Grp.,
Moreover,

to

See,

e.g.,

Eag lebank

v.

BR

Inc., 649 Fed. Appx. 209, 213 (3d Cir. 2016).
the

extent

Decker

authority to sign these leases,

did

not

have

the

actual

defendants point to no evidence

suggesting that 3i or Signature should have known that.

To the

contrary, even Neighbors' employees thought that Decker was acting
on

behalf

leases.

See

Deposition of Tommy Abraham dated February 19, 2018 at 76,

Dkt.

34-1

of

the

company

when

he

signed

these

(explaining that the "responsibility of finances would go to

John Decker"); Deposition of John Leonard Decker IV dated February
20,

2018

("Decker Dep.")

at

76-77,

Dkt.

34-2

(testifying that

Neighbors' CEO approved various contested aspects of the pricing
of the Leases)

.6

Indeed, Neighbors,

in their Answer, admits to entering into

these lease agreements. See Answer
Accordingly,

~~

11, 20, 34, 48, 62, 76, 86.

the Court finds that Signature has demonstrated the

existence of valid contracts by producing the Master Leases, see

6
Defendants' argument that Decker did not follow the proper
approval process and that Neighbors' Board of Directors did not
carefully consider the appropriate extent of Decker's authority is
inapposite. Defendants' business may have been poorly run but that
does not permit defendants to selectively repudiate duly executed
contracts.

11

McGowan Aff.,

Exs.

A,

N,

and the five Equipment Schedules,

id.

Exs. B-E, 0.
B. Performance

Defendants also argue that a genuine dispute of material fact
exists with respect to whether Signature performed its contractual
obligations. See Def. Opp. at 16. According to defendants, neither
Signature nor 3i has delivered the "M-Files" licenses or document
retention services included in the Leases. Id.
Signature,
provide

these

assumed

3i' s

however,

Additionally,
"obligations

had no obligations under the Leases to

services
rights
the
to

or

but

not

Leases

pay

Rent

licenses.
its

obligations.

plainly
in

Signature,

full

provide
when

See

as

Lease

are

<JI

21.

defendants'

that

due

assignee,

absolute

unconditional and shall not be subject to any

and

defense or

other right which Lessee may have or assert against" 3i. Lease
4.

This clause is enforceable under New Jersey law.

See,

<JI

e.g.,

Hewlett-Packard Fin. Servs. Co. v. One20ne, LLC, No. 05 Civ. 4045,
2006 WL 1281335, at *4
law,

(D.N.J. May 8, 2006)

("[u]nder New Jersey

a promise to make all requisite payments and not to assert

any defenses

to payment

[is]

valid and enforceable")

(internal

quotation omitted).

Accordingly,

the Court finds that Signature

has

a

law

established as

matter

of

contracts.
C. Damages

12

its

performance

under

the

Finally,

defendants

establish damages
obligations

argue

because

which

are

that

Signature
not

Signature
seeks

being

damages

performed,"

calculations were not timely disclosed,

has

failed

to

"for

ongoing

its

damages

and there is no evidence

of the amount owed for each Schedule when it went into default,
the allocation of that amount between equipment and services, and
the rate of default interest, late fees, taxes, and fees calculated
on each of those items. See Def. Opp. at 16-17.
In fact, however, not only did Signature's complaint contain
a calculation of damages

(and Neighbors never sought a deposition

of Signature in this case, see Plaintiff Signature Financial LLC's
Reply Memorandum of

Law

in

Further

Support

of

its

Motion

for

Summary Judgment at 13, Dkt. 35), but Signature's damages are set
forth in detail in the McGowan Affidavit, which outlines the sums
due,

default interest,

with

interest.

See

Pl.

late fees,
Mem.

at

and applicable taxes and fees
8

(citing McGowan Aff.

'II

77).

Plaintiff's rights to collect default interest at the rate of 1.5%
per month,

and late fees equal to 10% of the amount of the late

payment or twenty dollars, whichever is greater, are set forth in
the Leases. See Lease 'lI'lI 19, 3. Moreover, defendants concede that
plaintiff paid in full for the Signature Leases and that defendants
ceased making payments on them. Accordingly, the Court finds that
plaintiff has established its breach of contract claims.

III. Affirmative Defenses
13

Defendants

also

precluding

summary

affirmative

defenses.

Defendants,

however,

argue

that

judgment
See

genuine

exist

Verified

do not

with

respect

Answer

support

disputes

at

of

to

13-16,

fact

various
Dkt.

27.

their affirmative defenses

with any specific factual allegations.

See Def.

56.1 St. Nor do

defendants even mention their sixteenth, seventeenth, eighteenth,
and

twentieth

defendants

affirmative

formally

defenses

withdraw)

in

(the

first

their

three

of

which

papers. 7

answering

Accordingly, at the outset, the Court hereby dismisses these four
defenses.
Below,
defendants

the

Court

considers

those

contend would vitiate

the

remaining

defenses

lease agreements

that

entirely

(their fourth, sixth, eighth, tenth, and eleventh, and nineteenth
defenses)
their

as well as those other defenses defendants dispute in

answering

papers

(their

second,

third,

fifth,

seventh,

ninth, twelfth, thirteenth, fourteenth, and fifteenth defenses).
A. Fraudulent Inducement

Primarily,

defendants

argue

that

fraud

in

the

inducement

voids the Leases, including the Leases' waiver of defenses clause
and hell or high water clause. See Def. Opp. at 18.

Defendants have also withdrawn part of their fourth affirmative
defense alleging duress. See Stipulation Withdrawing Defendants'
Specified Affirmative Defenses, Dkt. 31-9.
7

14

To

establish

fraud

under

New

Jersey

law,

defendants must

demonstrate that there was (1) a false representation of a material
presently existing or past fact;
falsity;
(4)

( 2)

made with knowledge of its

(3) with the intention that the other party rely thereon;

resulting

in

reliance by

that

party;

(5)

to

that

party's·

detriment. See RNC Sys., 861 F. Supp. 2d at 451.
"When

an

opponent

of

a

contract

alleges

fraud

in

the

inducement as an affirmative defense they must sustain the burden
of persuasion." 720 Lex Acquisition LLC v.

Guess? Retail,

Inc.,

No. 09 Civ. 7199, 2011 WL 5039780, at *5 (S.D.N.Y. Oct. 21, 2011).
"The burden of proving fraud in the inducement requires that the
proof be by clear and convincing evidence." Id. Accordingly, "'at
the summary judgment stage, a party must proffer enough proof to
allow a reasonable jury to find by clear and convincing evidence
the existence of each of the elements necessary to make out a claim
for fraud in the inducement.'" Id.
Hilton Hotels

Corp.,

528

F.

(quoting Century Pac., Inc. v.

Supp.

2d 206,

219

(S.D.N.Y.

2007)

aff'd, 354 Fed. Appx. 496 (2d Cir. 2009)).
Defendants here do not even meet the pleading standard set
forth in Rule 9(b). See De Sesto v. Slaine, 171 F. Supp. 3d 194,
200

(S.D.N.Y.

things,

2016)

(citing Fed.

R.

Civ.

P.

9(b)).

Among other

defendants do not specify a single misrepresentation or

15

omission of fact in their Answer. 8 And while defendants allege as
many as three misrepresentations/omissions in their papers,

they

marshal scant evidence that such misrepresentations/omissions were
ever made and no evidence that they were relied upon or intended
to defraud defendants. See Def. Opp. at 19-20.
For

example,

defendants
Neighbors'

they

defendants
could

not

argue

rely

on

that

3i

failed

price

quotes

to

tell

provided

to

IT department. But defendants cite no facts in support

of this contention in their 56 .1 Statement and,
section of their brief,

in the "Facts"

defendants assert only that "3i did not

advise" Neighbors "in writing that the quotes could not be relied
on." Id.

at 7

(emphasis added).

Indeed, uncontroverted testimony

establishes that the documents with the price quotes were provided
to Neighbors

solely to

confirm the

expressly informed Neighbors'
documents were not accurate.

equipment

IT department

list

that

and

that

3i

the prices

in

See Deposition of John Christopher

Mitchell dated February 21, 2018 at 55-56, Dkt. 31-14

(testifying

that he told Abraham "these are not your prices" and that these
prices have "nothing to do with the lease,

this is specifically

just the parts you're getting").

s See Answer at 14 (" [p] laintiff' s claims fail, in whole or in
part, because any alleged contract, promise, or agreement was
induced
by
fraud,
duress,
or
undue
influence");
id.
("[p]laintiff's assignors or assignees obtained Neighbors' consent
to the alleged contract, promise, or agreement through fraud,
deceit, or misrepresentation") .

16

Moreover,

defendants'

Chief

Financial

Officer,

who was

in

charge of negotiating the financial terms of the leases, testified
that he never saw the "quotes" and that he negotiated a top-line
number with 3i based on the amount of money it cost Neighbors to
outfit a center by buying equipment outright. See Decker Dep. at
96-97,

Dkt.

the centers,

34-2

(testifying that "if you look at the budget on

you see the IT spend was about $200,000. And so to

finance this, you know, it kind of - it was kind of a negotiation
to come up with what kind of number can we plan on for budgetary
purposes

to get

each center open,

and the

number ended up at

$3,800. And that was agreeable to everybody.");

id.

(testifying

that "the way I looked at these was this was all of the stuff that
was needed to open a center at $3,800 a month")
Thus, defendants'

.9

fourth and tenth affirmative defenses are

improperly plead and fail as a matter of law.
B. No Performance/No Consideration

9

Defendants also argue in their papers that the leases "contain
items outside of the quotes which had not been approved by the IT
department, legal, or the board of directors" and that "M-Files
licenses, document retention, and services were included [] when
3i knew the M-Files project was on hold." Def. Opp. at 19. But
defendants do not explain how defendants' failure to follow their
own internal processes constitutes a misrepresentation or omission
by 3i. Nor do defendants cite any evidence in support of their
contention that 3i
knew M-Files was on hold or that 3i
misrepresented that M-Files were not in the leases.
17

Defendants' sixth, eighth, and eleventh affirmative defenses
relate

to

According

performance
to

and

defendants,

consideration.
"lack

of

See Answer

consideration

at

and

14-15.
lack

of

performance" void the leases including their waiver and hell or
high water clauses. See Def. Opp. at 17.
First, defendants argue, there are "ongoing obligations under
the Schedules

(including software licenses,

and services),

which make" Neighbors'

Signature and not against

3i

waiver of defenses clause).
that

3i,

not

Signature,

services to Neighbors.
assumed

3i' s

rights

retention,

defenses directly against

(and therefore not barred by the
Id.

has

But the Leases plainly provide

the

ongoing obligation to provide

See Lease '.II 21

but

document

not

its

(providing that Signature

obligations) .

Moreover,

it

is

undisputed that valuable goods were provided to Neighbors by 3i
pursuant to the lease agreements, which goods Neighbors continues
to use and possess. See Def. 56.1 '.II 27, 29. Only an absence of any
performance at all could void the lease terms entirely (and nullify
the waiver of defenses clause).
Second,

defendants argue that the waiver and hel 1 or high

water clauses "do not defeat the

date

defendants,

of

the

Schedule."

that

at

least under the

the location was closed before

Signature Bellaire Schedule .
the

fact

Def.

Opp.

at

20.

no items are "being provided at that

18

According

to

location" and

there

is "no evidence"

that

"equipment,

software,

or services"

were received from Ji in connection with the Bellaire Lease. Id.
But

defendants

Statement
papers,

make

in support

11.

factual

And,

and that,

it was

(testifying "we had a

center

replaced by a
See Decker Dep.

-

Bellaire was

Rice Avenue,

better");
small");

Id.

at 10-

original

"bigger and
at 93,
the

Dkt.

original

and then we built a new center up about three blocks or

something like that"); Gruenert Dep. at 59
South

the deposition of

show that Bellaire was Neighbor's
in 2016,

56 .1

the deposition of their former

better" location a few blocks away.

center,

their

and an affidavit submitted by Gruenert.

The deposit ions

location,

Gruenert;

in

in their answering

defendants cite only three documents:

Decker;

34-2

assertions

of this position.

their General Counsel,
CFO,

no

id.
id.

at 59
at 60

the

new

Bellaire

(testifying that 3413

location,

was

"bigger and

(testifying that "6030 South Rice was
(testifying that "old" Bellaire is 6030 South

Rice") .
They also show that some of the IT equipment from the original
Bellaire location went to the new Bellaire location. See id. at 58
(testifying that "6030 South Rice was closed and the same day,
5413 South Rice started to receive the equipment that was moved
from 6030,

and at least some of the

IT and televisions at

were installed at the new location"); id. at 59

6030

(testifying that

not "all" of the equipment would have been moved" as the "radiology
19

suite

would

have

been

delivered while

old

Bellaire

was

still

operating" because you "have to get your radiology stuff in the
building and get it set up weeks before you open") .
The affidavit attests that there are "double schedules" for
the Bellaire location. See Gruenert Aff.
"are

double

schedules

for

at

least

~

(5)

32 (affirming that there
Neighbors'

locations,

including Bellaire (Schedules 41343964 and 41404494)"). But it is
undisputed that the Schedule 41404494 is connected with the new
Bellaire

location and

is

the

subject of a

separate

litigation

against a different assignee. See Gruenert Dep. at 84 (testifying
that Lease 4494 was not assigned to Signature);

id.

(testifying

that "the invoicing and payments under the old Bellaire schedule,"
which was assigned to Signature, "did not end after old Bellaire
closed" because the "equipment was relocated and" the new Bellaire
schedule was signed); id. at 85 (testifying that he "cannot"

have

"any knowledge of any reason why old Bellaire would need a suite
of equipment . .

when it was closing and the location was moving

and new location was started up");

id. at 86-87

(testifying that

the new Bellaire lease is the subject of a different litigation
with a different assignee).
The Bellaire Schedule at issue in this case was executed on
April 22,

2016 and began on May 1, 2016.

dated May 1,

2016,

Dkt.

31-38.

See Equipment Schedule

According to

Decker,

the

first

Bellaire Schedule is "probably for the new Bellaire." See Decker
20

Dep. at 92-94

("when we first started doing business with 3i, our

businesses were not mature enough that our original company that
we were basically financing through was actually Bellaire because
it

was

five

years

old.

So

there

maybe

something

paperwork

somewhere that says Bellaire was the buyer, but that's not where
equipment would have went"); id.
these were for new centers.

("as far as these type of leases,

So this one right here I expect is

probably for the new Bellaire. There would be no reason to go to
the old Bellaire").
The second Bellaire lease, which defendants did not put into
evidence,

begins August

15,

2016 and was

executed on July 27.

Equipment Schedule dated August 15, 2016. This lease was emailed
to the Court at the Court's request.
16,

2018 at 2.

See Transcript dated April

Unlike the first lease,

which is for $3, 800 per

month, the second lease is for $4,581.88. Aside from the fact that
both leases include M-Files licenses, defendants point to no other
duplication between the two leases which appear to include dozens
of

different

pieces

of

IT

equipment.

While

no

Certificate

Acceptance is in evidence with regard to the second schedule,

of
a

duly executed Certificate of Acceptance is before the Court with
respect

to

Certificate
Decker,

CFO,

the

first

dated April
certifying

schedule.
22,

2016,

that

the

See

Delivery

Dkt.

31-32

equipment

and

and

Acceptance

(signed by

John

other property

referred to in the Bellaire Schedule was delivered, inspected, and
21

accepted for purposes of the agreement). Defendants do not contest
that

John Decker,
~

56.1 St.

their CFO,

signed this certificate.

See Def.

30 ("not contested").

On this record,

the Court finds that defendants have failed

to identify evidence sufficient to preclude summary judgment on
their

affirmative

defense

of

no

performance

(and/or

no

consideration) with respect to the Bellaire Schedule. Not only is
defendants' contention that there was no performance speculative,
it is contradicted by a document signed by their CFO at the time,
as well as by the testimony of their current General Counsel. See
Gruenert

Dep.

payments

under

at

84

the

(testifying

old Bellaire

that

the

schedule,

"invoicing
which

I

and

the

believe was

assigned to Signature, did not end after old Bellaire closed" and
that the "equipment was relocated")
therefore

dismisses

defendants'

10

The Court

and

eleventh

(emphasis added).
sixth,

eighth,

affirmative defenses.
C. Other Defenses

None of defendants remaining affirmative defenses, see Answer
at 13-16, is sufficient to defeat plaintiff's motion:

It may be that there was no performance with respect to the
second Bellaire schedule, i.e., that no additional equipment was
provided pursuant to that agreement or that Neighbors was billed
again for equipment already provided pursuant to the initial
Bellaire lease here, but that question is not before the Court and
does not preclude summary judgment on Counts XIII, XIV, and XV.
10

22

Defendants'
claim

fails

Defendants'

first affirmative defense for

second

the

reasons

affirmative

subject matter jurisdiction -

set

forth

defense

failure to state a
in

Part

lack

of

II,

supra.

personal

and

fails for the reasons set forth in

the Court's Opinion dated December 19, 2017, see Dkt. 28, as well
as because there is complete diversity between the parties and the
matter in controversy exceeds $75,000, see Notice of Removal, Dkt.
1. Defendants'

third affirmative defense -

fails

reasons

for

the

December 19, 2017.
Defendants'
fifteenth

11

set

forth

in

the

improper venue - also
Court's

Opinion dated

See Dkt. 28.

fifth,

affirmative

seventh,

ninth,

defenses

no

11

twelfth,

meeting

of

thirteenth,
the

minds,

and
no

Defendants argue that Paragraph 25 of the Master Leases, which
plaintiff relies upon to establish jurisdiction and venue in this
District, is a "permissive" venue clause, and accordingly should
not be enforced. See Def. Opp. at 12-13. Instead, defendants seek
dismissal in favor of a related action in Texas or transfer to the
U.S. District Court for the Southern District of Texas. Id. But
the Court already considered this argument and rejected it. See
Opinion dated December 19, 2017 at 17-18, Dkt. 28 (holding that
Paragraph 25 "is a mandatory consent to jurisdiction clause"); id.
at 18 (noting that "[al]though the clause allows Signature to
choose between" various venues, "this does not make [the clause]
'permissive,' as defendants argue . ·. . because [the clause] still
requires the lessee [defendants] to submit to jurisdiction [and
venue] in whichever forum Signature chooses"). Defendants now reemphasize that Paragraph 25 states that matters arising under the
leases "may be adjudicated" in New York. See Def. Opp. at 13. But
defendants ignore the end of the sentence, which states: "all at
the sole discretion of the lessor." Lease i 25.
23

agreement on material terms,
no authority,

13

12

unconscionability,

and the parol evidence rulel4 - are barred by the

waiver of defenses in defendants' leases. Lease
Defendants'
mitigate -

inferior goods,

fourteenth

affirmative

~

defense

21.15
failure

to

fails because defendants cite no supporting facts in

their 56.1 Statement or in their brief. Nor do defendants cite any
case (or distinguish the contrary authority cited by plaintiff) in

12

For the reasons season forth in Part II, supra, defendants'
fifth and sixth defenses fail because the duly executed agreements
plainly evidence meeting of the minds and agreement on material
terms.
13 For the reasons set for th in Part I I, supra, defendants'
thirteenth defense also fails because John Decker had authority to
sign the leases as a matter of law.
14 Even if defendants' parol evidence defense were established,
defendants do not specify what testimony would be excluded. See
Def. Opp. at 24-25. Moreover, defendants' arguments on this point
only relate to whether there was performance by 3i not whether
there was performance by Signature. Id. Accordingly, this defense
is unavailing against Signature.
1

5 This term provides in relevant part that Signature, "will not
be subject to any claim, defense or set-off" that Neighbors might
have against the original lessor, 3i. This term is enforceable.
See East Brunswick Sewerage Authority v. East Mill Associates,
Inc., 365 N.J. Super. 120, 125 (App. Div. 2004) (internal citations
omitted) (" [w] hen the terms of a contract are clear, the court
must enforce them as written") (citations omitted); id. (a "court
has no power to rewrite the contract of the parties by substituting
a new or different provision from what is clearly expressed in the
instrument"); AT & T Credit Corp. v. Transglobal Telecom All.,
Inc., 966 F. Supp. 299, 302 (D.N.J. 1997), aff'd sub nom. AT&T
Credit Corp. v. Transglobal Telecom All., Inc., 261 F.3d 490 (3d
Cir. 2001)
("[u]nder New Jersey law, a promise to make all
requisite payments and not to assert any defenses to payment are
valid and enforceable") .
24

support

of

their position

that

a

lender has

a

duty

to

accept

partial payment for a debt or else forfeit their claim to interests
and fees on that portion of the debt.
Accordingly,

the

Court

dismisses

defendants'

remaining

affirmative defenses and finds liability against defendants on all
fifteen counts of plaintiff's complaint.
IV. Remedies
In connection with Counts I, IV, VII, X, and XIII, plaintiff
seeks

judgments

against:

Neighbors

Global

in

the

amount

of

$1,039,862; Lufkin in the amount of $264,224; Greeley in the amount
of $258,546; West Warwick in the amount of $258,546;

Lubbock in

the amount of $258,546; Legacy Holdings in the amount of $215,891;
Health Systems
amount

in the amount

of $215, 891.

Counts III, VI,

of $215, 891;

See McGowan Aff.

IX, XII,

and XV,

err

78.

and Bellaire

in the

In connection with

plaintiff seeks fees and costs

pursuant to Paragraph 19 of the Master Leases. See id. err 79; Pl.
Mem. at 31.
plaintiff

In connection with Counts II, V, VIII, XI,

seeks possession of

the

and XIV,

IT

equipment

covered by the

that

plaintiff

has

failed

to

fees,

costs,

or

leases. See id. at 30-31.
Defendants
establish

its

oppose,
damages

arguing
and

is

not

entitled

to

possession. See Def. Opp. at 16-17, 25. According to defendants,
plaintiff seeks damages
being performed

for

(software,

"ongoing obligations which are not
document
25

retention,

and

services),"

Def. Opp. at 16-17, and plaintiff's "method of damage calculation"
was not timely disclosed.

Id.

at 17.

Defendants also argue that

plaintiff is not entitled to possession of the lease equipment
because defendants offered to pay up front for the equipment that
they did receive and their offer was rejected. Id. at 25.
With regard to Counts I, IV, VII, X, and XIII, plaintiff pled
its damages in its complaint and submitted evidence of its damages
along with its moving papers. See Aff. Of David McGowan
Dkt.

31-23.

~i

77-78,

Defendants sought no discovery on damages and have

submitted no evidence to controvert plaintiff's calculations or to
support

alternative

calculations.

that plaintiff is entitled to

Accordingly,

the

its damages as set

Court
forth

finds
in the

McGowan Affidavit.
With regard to Counts III, VI, IX, XII, and XV, Paragraph 19
of the Leases plainly states that Neighbors "agrees to reimburse
Lessor

[Signature]

on demand for any and all costs and expenses

incurred by Lessor in enforcing its right and remedies hereunder
following

the

occurrence

of

a

Default,

without

including,

limitation, reasonable attorney's fees, the costs of repossession,
storage,
all

insuring,

Equipment,

re-letting,

[and]

all

selling and disposing of any and

prejudgment

and post-judgment

actions

taken by Lessor." Lease i 19. Defendants cite no law or reason why
the Court should not enforce these terms. Accordingly,

26

the Court

awards

Signature

costs

and

expenses

including

reasonable

attorneys' fees.
With regard to Counts II, V, VIII, XI, and XIV, Paragraph 19
of defendants'

leases permit the Lessor to "peacefully repossess

the Equipment without
Neighbors.

Id.

court order"

in the event

of default

by

Defendants make no legally cognizable argument as

to why plaintiff should be denied this relief.

See Def. Opp.

at

25-29.
V. Conclusion

For

the

reasons

stated

above,

the

Court

hereby

grants

plaintiff's motion for summary judgment finding Neighbors Global
and Lufkin jointly and severally liable on Count I in the amount
of

$264,224;

Neighbors

Global

and

Lufkin

liable

on

Count

II;

Neighbors Global and Lufkin liable on Count III; Neighbors Global
and Greeley jointly and severally liable on Count IV in the amount
of

$258, 546;

Neighbors

Global

and

Greeley

liable

on

Count

V;

Neighbors Global and Greeley liable on Count VI; Neighbors Global
and West Warwick jointly and severally liable on Count VII in the
amount of $258,546; Neighbors Global and West Warwick liable on
Count VIII; Neighbors Global and West Warwick liable on Count IX;
Neighbors Global and Lubbock jointly and severally liable on Count
X in the amount of $258,546; Neighbors Global and Lubbock liable
on Count XI;
Neighbors

Neighbors Global and Lubbock liable on Count XII;

Health,

Legacy

Holdings,

27

and

Bellaire

jointly

and

severally liable on Count XIII in the amount of $215,891; Neighbors
Heal th,

Legacy Holdings,

Neighbors Health,
XV.

The

Court

and Bel la ire liable on Count XIV;

Legacy Holdings,

further

awards

connection with Counts

III,

and Bellaire liable on Count

plaintiff
VI,

and

IX,

its

XII,

costs

and XV,

and

fees

in

and permits

peaceable repossession of the lease equipment pursuant to Counts
II, V, VIII, XI, and XIV.
Plaintiff is directed to submit to the Court by May 14, 2018
a proposed Final Judgment and a specification of its recoverable
fees and costs through May 11,

2018,

accompanied by appropriate

"break-downs" for same. Defendants, by no later than May 21, 2018,
may file any objections to the amounts of fees and costs and/or to
the form of the Final Judgment.
The Clerk is instructed to close docket entry number 31.

Dated:

c;;u.~t!:t

New York, NY
May
2018

1:,

28

U.S.D.J.