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General Capital Corp. v. FPL Service Corp.

United States District Court, N.D. Iowa, Cedar Rapids Division

December 3, 2013

GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware Corporation, Plaintiff,

Page 1030

For General Electric Capital Corporation, a Delaware corporation, Plaintiff: Robert E Konchar, LEAD ATTORNEY, Simmons Perrine Moyer Bergman, PLC, Cedar Rapids, IA; Erin R Nathan, Simmons, Perrine, Moyer & Bergman, PLC, Cedar Rapids, IA.

For FPL Service Corp., Defendant: Douglas R Lindstrom, Jr, LEAD ATTORNEY, Lane & Waterman, LLP, Davenport, IA.


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A. Factual Background

B. Procedural Background


A. Summary Judgment Standards

B. Default

C. Disposition of Collateral

1. Is this a lease or a secured transaction?

2. Did GECC comply with Article 9 in disposing of the


a. Did GECC dispose of the copiers in a

commercially reasonable manner?

b. Did GECC give proper notice?

D. Damages


In late October and early November of 2012, Hurricane Sandy devastated the East Coast, causing 186 deaths and billions of dollars in damage to the states, businesses, and homes caught in its path.[1] The defendant, FPL Services Corporation (FPL), was one of the businesses destroyed by the storm. In particular, flood waters from Hurricane Sandy destroyed two of FPL's industrial copiers, which it leased from the plaintiff, General Electric Capital Corporation (GECC). Because the copiers were destroyed, FPL stopped making lease payments to GECC. GECC repossessed and resold the copiers, and now seeks damages, claiming that FPL breached the parties' lease contract. FPL claims, among other things, that Hurricane Sandy excuses FPL from performing.

This case is now before me on GECC's motion for summary judgment (docket no. 9). In its motion, GECC claims that FPL is liable under the parties' contract despite Hurricane Sandy, and requests $258,424.39, plus attorney's fees and costs. For the reasons discussed below, GECC's motion is granted as to FPL's liability, but I will defer ruling on the issue of damages until after the parties submit additional evidence as discussed below.


Because GECC moves for summary judgment, I recite the following facts in the light most favorable to FPL, the non-moving party. Wells Fargo Fin. Leasing, Inc. v. LMT Fette, Inc., 382 F.3d 852, 855 (8th Cir. 2004).

A. Factual Background

This case is about the enforceability of a contract between GECC and FPL. GECC is a Delaware corporation that does business

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in Iowa. FPL is a New York direct-marketing corporation located near the southern shore of Long Island, in Oceanside, New York. On June 14, 2011, GECC and FPL entered into a contract, which is entitled " Lease Agreement." [2] Under the contract, GECC agreed to provide FPL with two Ricoh Pro C901 copiers (the copiers), and related equipment. In return, FPL agreed to make 60 rental payments of $6,229.30 to GECC. For over a year, the parties performed under the contract without incident. But, in late October of 2012, Hurricane Sandy struck Long Island, destroying nearly all of FPL's equipment, including the two copiers it leased from GECC.

After the hurricane, FPL stopped making its rental payments. To this day, FPL has made only 19 of the 60 payments it agreed to make. In addition to FPL's rental payments, the parties' contract describes FPL's options if the copiers were to be damaged:

If any item of Equipment is . . . damaged, [FPL] will (and Rental Payments will continue to accrue without abatement until [FPL]), at [FPL's] option and cost, either (a) repair the item or replace the item with a comparable item reasonably acceptable to [GECC], or (b) pay [GECC] a sum equal to (1) all Rental Payments and other amounts then due and payable under the Lease, and (2) the present value of (i) all Rental Payments to become due during the remainder of the Lease term, and (ii) the Purchase Option amount set forth in this Lease, each discounted at . . . (y) the lease charge rate (as determined pursuant to Section 16) if this Lease provides for A dollar Purchase Option . . . [GECC] will then transfer to [FPL] all [of GECC's] rights, title, and interest in the Equipment " AS-IS, WHERE IS" WITHOUT ANY REPRESENTATION OR WARRANTY WHATSOEVER, Insurance proceeds will be applied toward repair or replacement of the Equipment or payment hereunder, as applicable.

(Docket no. 9-3, at 7). Though the copiers were damaged after Hurricane Sandy, FPL never paid to replace or repair them, nor did it pay GECC a sum equal to its then-due rental payments plus the present value of its future rental payments.

In January of 2013, GECC repossessed one of the copiers from FPL.[3] The repossession cost GECC $600. On February 28, 2013, GECC sent FPL a " Notification of Disposition" letter, stating that " one or more events of default have occurred under the Loan Agreement," and that GECC intended to " sell the Collateral privately sometime after 10:00 am on March 11, 2013" (docket no. 9-3, at 10). The letter defines the " Collateral" as " the equipment described on the attachment." The attachment to the letter only describes one of the two copiers GECC leased to FPL. FPL never responded to GECC's letter.

On May 6, 2013, GECC's law firm sent a letter to FPL demanding " immediate payment of the entire outstanding balance due on the Lease . . . together with interest and other charges" (docket no. 9-3, at 19). On May 13, 2013, FPL's attorney wrote a reply letter to GECC's attorney disputing GECC's demand and stating that " [t]he other [copier] is still available should [GECC] wish to take it" (docket no. 14-2,

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at 10). On June 5, 2013, GECC repossessed the second copier. After repossessing the copiers, GECC resold them in June and July of 2013 [4] with the help of Remarketing Solutions International, Inc. (Remarketing), a third-party remarketer that resells equipment like the copiers.

I will discuss additional facts as they become relevant to my analysis below.

B. Procedural Background

On June 6, 2013, GECC filed a Complaint in this court alleging that FPL breached its lease agreement with GECC (docket no. 1). On July 8, 2013, FPL answered the Complaint, denying the substance of GECC's allegations and asserting a number of affirmative defenses (docket no. 5). On September 30, 2013, GECC moved for summary judgment, claiming that there are no material factual disputes and that GECC is entitled to damages for FPL's breach of contract as a matter of law (docket no. 9). On October 24, 2013, FPL resisted GECC's motion (docket no. 11), and on November 7, 2013, GECC filed a reply (docket no. 14). I must now decide whether GECC is entitled to summary judgment, or whether this case should instead proceed to trial.


A. Summary Judgment Standards

Summary judgment is only appropriate " if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); see also Woods v. DaimlerChrysler Corp., 409 F.3d 984, 990 (8th Cir. 2005) (" Summary judgment is appropriate if viewing the record in the light most favorable to the nonmoving party, there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law." ); Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The Eighth Circuit Court of Appeals has explained:

The movant " bears the initial responsibility of informing the district court of the basis for its motion," and must identify " those portions of [the record] . . . which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the movant does so, the nonmovant must respond by submitting evidentiary materials that set out " specific facts showing that there is a genuine issue for trial." Id. at 324, 106 S.Ct. 2548, quoting Fed.R.Civ.P. 56(e)(2). " On a motion for summary judgment, 'facts must be viewed in the light most favorable to the nonmoving party only if there is a genuine dispute as to those facts.'" Ricci v. DeStefano, 557 U.S. 557, 586, 129 S.Ct. 2658, 2677, 174 L.Ed.2d 490 (2009) quoting Scott v. Harris, 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007) (internal quotations omitted). " Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge." Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000), quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The nonmovant " must do more than simply show that there is some metaphysical doubt as to the material

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facts," and must come forward with " specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). " 'Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.'" Ricci, 557 U.S. at 586, quoting Matsushita, 475 U.S. at 587, 106 S.Ct. 1348.

Torgerson v. City of Rochester, 643 F.3d 1031, 1042-43 (8th Cir. 2011) (en banc). Summary judgment is particularly appropriate when only questions of law are involved, rather than factual issues that may or may not be subject to genuine dispute. See, e.g., Cremona v. R.S. Bacon Veneer Co., 433 F.3d 617, 620 (8th Cir. 2006).

The parties agree that I should apply Iowa law in resolving GECC's summary judgment motion. In fact, their contract contains a choice-of-law clause, which states that " this lease will be governed by the laws of the State of Iowa" (docket no. 9-3, at 20). Neither party contests this clause, and both parties cite to Iowa law in support of their arguments. Thus, I will apply Iowa law in determining whether summary judgment is appropriate.

B. Default

GECC argues that FPL defaulted under the parties' contract by making only 19 of the 60 payments required under the contract. Accordingly, GECC claims that it is entitled to " $258,424.39, plus its attorneys' fees and costs," which represents GECC's calculation of damages under the contract (docket no. 14, at 5). FPL does not dispute that it stopped making payments to GECC after Hurricane Sandy struck. Instead, FPL argues that, because Hurricane Sandy could not have been anticipated, FPL is excused from performing under the contract.

FPL relies on two sections from the Restatement (Second) of Contracts to support its argument: section 261, which discusses supervening impracticability, and section 265, which discusses frustration of purpose. Iowa law recognizes both sections as defenses in breach-of-contract cases. Mel Frank Tool & Supply, Inc. v. Di-Chem Co., ...

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