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Lease Finance Group, LLC v. Qazi

Civil Court of the City of New York, New York County

June 28, 2017

Lease Finance Group, LLC, Plaintiff,
Kamran A Qazi A/K/A Kamran Qazi, Defendant.

          For Plaintiff: Joseph I. Sussman, P.C.

          For Defendant: Kamran A Qazi, pro se

          Melissa A. Crane, J.

         Plaintiff Lease Finance Group LLC ("LFG") commenced this action for breach of a personal guaranty. It is undisputed that defendant, Kamran Qazi, signed an Equipment Finance Lease to pay $198.00 per month over a four-year period beginning April 28, 2014. Mr. Qazi also signed a personal guaranty that guaranteed payment of the lease. The lease was for two Verifone VX 520s credit card processing terminals. It is also undisputed that defendant failed to make monthly payments after November 1, 2014. Plaintiff seeks $8, 118.00 for the remaining unpaid lease payments and compensation for attorneys' fees.

         The lease defendant signed contained a "no cancellation" provision that stated:

You cannot cancel this Lease during the Lease Term for any reason. You do not have a free trial period. Your duty to make the monthly lease payments is absolute, unconditional and irrevocable.

         This type of equipment lease is what is known as a "hell or highwater" lease, where, upon the lessee's acceptance of the equipment, the lessee's obligations become "irrevocable" and not subject to cancellation" (see NY Uniform Commercial Code [UCC] s 2-A-407]). The lessee also waives all defenses and warranties to the enforceability of the equipment finance agreement.The original lessor was Americorp Leasing LLC. On April 19, 2014, Americorp assigned the lease to plaintiff. This was also the same day that defendant signed the lease.

         English is not defendant's first language. Defendant claims that the vendor capitalized on this and tricked him into signing the lease. The vendor told him that he (defendant) would save money by switching companies providing processing services (see Letter from defendant to the court [defendant's opposition] dated January 30, 2017). [1] Defendant claims the vendor manipulated him into signing the lease by misrepresenting that "this is just a paper which makes you responsible for damage or misuse of the equipment (id.)." Thus, defendant did not understand that he was entering into an equipment lease, but instead thought he was agreeing to cover any costs for broken or damaged equipment. Defendant claims at no point did the vendor mention anything about a long-term equipment lease, noncancelable or otherwise (id.). Defendant claims that the equipment did not function properly (id.). He asserts that he made repeated attempts via phone to contact the lessor and the vendor to return the equipment, but was never able to reach anyone (id.). When defendant ceased payments, plaintiff sued him under the personal guaranty. By this motion, plaintiff moves for summary judgment pursuant to CPLR 3212. For the following reasons, the court denies plaintiff's motion in its entirety.

         While this particular claim and request for relief may not seem unusual, the surrounding situation is. This case is one of thousands of similar lawsuits plaintiffs and related entities have filed in New York County Civil Court since 2010 (see Verified Petition ¶ 9 in State of New York v Northern Leasing et al, Index No. 450460/2016, dated April 11, 2016).

         The Attorney General for the State of New York, Eric Schneiderman, has sued plaintiff and supposedly related entities, for allegedly engaging in a fraudulent scheme to ensnare unsophisticated business owners in equipment leases with mandatory forum selection clauses that designate New York courts, and contain other onerous terms, like the "hell or highwater" clause mentioned earlier. According to the Attorney General, plaintiff buries these clauses in fine print (id. ¶ 5).

         Plaintiff often does not sell or market the leases directly. Instead, a salesperson from a separate company packages the lease with credit card processing services that an entirely different company provides (id. ¶ 42). The salesperson often fails to mention that the merchant is about to enter contracts with two separate companies, one to lease the equipment and the other to provide processing services (id. at ¶¶42-44). Indeed, according to the Attorney General's lawsuit, "some representatives never mention any lease and consumers unwittingly sign an equipment lease that is buried in paperwork for processing services" (id. at ¶ 43).

         Generally, the individuals the salespersons target are unsophisticated and without attorney representation (id.). Many are over 65, immigrants with poor English skills, veterans, and/or disabled (id. 50-52). If individuals refuse to pay Northern Leasing for various reasons, including that the equipment did not work, plaintiff files suit in New York State, typically against the personal guarantor (id. ¶ 7).

         When considering a motion for summary judgment, the court must weigh the facts in favor of the nonmoving party (Adams v Bruno, 124 A.D.3d 566, 567 [2nd Dept 2015]). A prima facie case for summary judgment on a personal guaranty requires producing a valid guaranty and demonstrating the guarantor's failure to meet its payment obligations (see Reliance Const Ltd v Kennelly, 70 A.D.3d 418, 419 [1st Dept 2010]).

         Plaintiff urges it is entitled to summary judgment because of the irrevocable and unconditional nature of the equipment lease and personal guaranty regardless of any possible underlying fraud. However, as the party seeking summary judgment on a hell or highwater lease, it is for plaintiff to show that a fraud defense lacks merit (see Sterling Nat'l Bank v Kings Manor Estates LLC,9 Misc.3d 1116 (A) at *4 [New York ...

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