Brookridge Funding Corp. v. Northwestern Human Services

Brookridge Funding Corporation (Brookridge) (plaintiff) was an accounts-receivable factoring firm. Brookridge purchased two accounts due to Contracting Systems, Inc. II (CSI). CSI was owed just over $2.7 million from Northwestern Human Services (Northwestern) (defendant), which was the owner of a parcel of land on which a baseball stadium was being constructed. In some documents, Federal Development Company (Federal) was listed as the owner of the land, as an agent for Northwestern. In July 1999, Brookridge, CSI, and Northwestern all executed a notice of purchase of accounts receivable. As part of that notice, Northwestern warranted that it did owe the $2.7 million to CSI and that Northwestern waived its rights regarding any type of counterclaim, setoff, or deduction against that $2.7 million. Northwestern later refused to pay the $2.7 million to Brookridge. Brookridge and Northwestern filed competing motions for summary judgment. Brookridge argued that Northwestern had breached its contract by failing to pay and that the three-party notice was an enforceable waiver of defenses under Uniform Commercial Code Article 9. The relevant section of Article 9 provided that an agreement by a buyer or lessee that it will not assert any claim or defense will be enforceable by an assignee who 1) gives value for the assignment, 2) takes the assignment in good faith, and 3) lacks notice of a claim or defense. However, the Article 9 provision typically regards waivers within the original contract between the debtor and the assignor, rather than a separate agreement made to induce such an assignment. Northwestern argued that the notice lacked any consideration, that there was not a meeting of the minds in regard to the execution of the notice, and that the notice was thus invalid in regard to waiving the right of defenses. Brookridge asserted that the consideration was the continuation of the stadium project.