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Pietrangelo Cook attorneys prevail in $700,000 contract dispute

Wednesday, October 19th, 2011

On October 18, 2011, Pietrangelo Cook successfully defended its client, National Capital Management, LLC (“NCM”), against a $700,000 breach of contract claim and obtained a favorable judgment in its counterclaim against the Plaintiff.  The United States District Court for the Western District of Tennessee agreed with Pietrangelo Cook attorneys Jon Lakey and John Cook, that the plaintiff’s breach of contract claim was without merit.

The litigation primarily involved the proper interpretation of a commercial contract involving the sale of unpaid consumer accounts.  In the contract, the plaintiff, who was the seller, represented that all of the accounts would be “legal, valid and binding obligations” of the account debtors as of the date of sale.  However, the bulk of the accounts delivered by the seller were time barred and beyond the applicable statute of limitations.  Relying on the representation in the contract, NCM rejected the time barred accounts, and thereafter was sued by the seller.

In granting summary judgment to NCM, the court adopted Pietrangelo Cook’s proffered interpretation of the contractual language and held that time barred accounts were not “legal obligations”.  According to the court, “[u]nder Tennessee law, a time-barred debt ceases to be a legal obligation, instead surviving as a mere moral obligation, upon the running of the statute of limitations—unless and until the debtor fails to assert the statute of limitations affirmative defense or another applicable defense.”  Because the seller had failed to provide accounts which satisfied the contractual representation, Pietrangelo Cook’s client was entitled to summary judgment on the breach of contract claims.

The opinion, Genesis Financial Solutions, Inc. v. National Capital Management., No. 09-cv-02104 (W.D.Tenn.), can be viewed in its entirety here.

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