In The Marketplace
May 26, 2005
Highlights of the latest equipment leasing news from around the country.
Eureka v. Wentworth: Further Erosion of the 'Hell or High Water' Principle
May 26, 2005
A fundamental tenet of equipment leasing has been the concept of "hell or high water" rental payments. Once the lease is signed and the lessee accepts the goods, then the lessee's promises under the lease become irrevocable, especially the promise to pay rent. The draftsmen of UCC Article 2A recognized this critical element and codified it with respect to a finance lease in UCC §2A-407(1)-(2) (all citations herein refer to Uniform Commercial Code Article 2A pre-2003 revisions). A finance lease is a particular type of "true" equipment lease in which the lessee itself selects the item of equipment it wants and instructs the lessor to acquire it for lease to the lessee. UCC §2A-103(g). A finance lessor is neither the manufacturer nor supplier of the item of equipment; it is merely providing the money. Article 2A of the Uniform Commercial Code (the "Code" or the "UCC") extends certain benefits to finance lessors, one of the most important of which is that the lessee's promises are not subject to termination, modification or repudiation; in other words, the lessee must comply with them come "hell or high water." UCC §2A-407(2)(b).
EAEL Elects New Board
May 26, 2005
The Eastern Association of Equipment Lessors elected a new board at its annual business meeting on April 15, 2005.
Substance over Form in the Bankruptcy Courts
May 26, 2005
The old saw is that if it walks like a duck and sounds like a duck, it must be a duck. Although bankruptcy is sometimes viewed by its detractors as defiant of common sense, the common sense duck adage is alive and well in bankruptcy courts. No matter what the parties or their lawyers may call an agreement or transaction, the courts are inclined to change the label and treatment to match what they see as the parties' true intention, risk retention, or economic reality. In bankruptcy parlance, the duck rule is called "recharacterization" and it is most commonly seen when courts are asked to consider shareholder loans, personal property leases, factoring arrangements, and asset backed securitizations. Through recharacterization, loans become capital contributions, leases become security agreements, and claimed true sales (the linchpin of factoring and securitizations) become loans. The impact of relabeling an agreement or transaction is significant. What was intended to be "bankruptcy remote" may find itself at bankruptcy central. The purpose of this article is to canvass just those situations where a lender, lessor and buyer could be very surprised, and how the recharacterization can affect the parties' expectations.
Electronic Waste Recycling Laws Challenge the Leasing Industry
May 02, 2005
An increasing number of state legislatures are deciding that there is a need to recycle computer components and other electronic waste, also known as "e-waste," and thus are proposing diverse laws intended to encourage or require such recycling. Equally diverse, to the point of creating conflicts and confusion, are the ways in which the various state legislatures propose to raise the funds to pay for such programs. Two states, California and Maine, have enacted such legislation and, at press time, 14 states have proposed such legislation. On Jan. 1, 2005, California's law was the first to go into effect. This article describes the Equipment Leasing Association's policy on legislation requiring advanced recycling fees. The article reviews California's new e-waste law and highlights some of the concerns to the leasing industry with regard to California's law.
'Floating' Forum-Selection Clauses: The M/S Bremen Afloat in the Wake of Norvergence
May 02, 2005
On June 30, 2004 an Involuntary Petition under Chapter 11 of the Bankruptcy Code was filed against NorVergence, Inc., the New Jersey telecommunications company. While this filing represented the likely end of a telecommunications company which, at its zenith, employed 1500 people, with more than 11,000 equipment leases in effect worth some $200 million, it also marked the beginning of litigation arising out of those leases now being waged in various state and federal courts across the country involving thousands of lessees, scores of finance companies and dozens of governmental agencies.
In The Marketplace
May 02, 2005
Highlights of the latest equipment leasing news from around the country.
Lease Termination Agreements: Get Out Quickly, But Carefully
April 04, 2005
Regardless of the route a landlord and tenant take to arrive at the mutual decision to terminate a lease, the final steps will require execution of a lease termination agreement. Sometimes, in their haste to get out quickly, landlords and tenants overlook many issues they should consider before signing. This article will help landlords and tenants continue to get out quickly, while preventing them from overlooking issues they should consider before executing such an agreement.
Spring Leasing Seminars and Conferences
April 01, 2005
2005 ELA Legal Forum: May 15-17, 2005, Loews Miami Beach Hotel, Miami Beach, FL. Sponsor: Equipment Leasing Association of America, 1300 N. 17th Street,…
