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RFC Capital Corporation v. EarthLink, Inc.

55 U.C.C. Rep. Serv. 2d 617 (2004)

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RFC Capital Corporation v. EarthLink, Inc.

Ohio Court of Appeals

55 U.C.C. Rep. Serv. 2d 617 (2004)

Facts

In exchange for a $12 million loan, Internet Commerce & Communications, Inc. (ICC) granted to RFC Capital Corporation (RFC) (plaintiff) a security interest in ICC’s customer base. Thereafter, ICC contracted to sell its customer base to EarthLink, Inc. (EarthLink) (defendant), promising EarthLink that at least 40,000 customers would transfer to EarthLink. Despite ICC’s assurances to EarthLink that RFC had already agreed to release the collateral from RFC’s security interest, RFC had not done so. In 2001, RFC and ICC executed an amendment to their security agreement, which provided that RFC consented to the sale of ICC’s customer base and agreed to release RFC’s security interest in the purchased customer base upon ICC’s complete performance of obligations under the security agreement. However, only 25,144 customers transferred to EarthLink, and EarthLink suspended payments to ICC. RFC brought suit against EarthLink, claiming an impairment of RFC’s interest in the customer base. A jury found in RFC’s favor, and the trial court entered a judgment of $6 million against EarthLink. EarthLink appealed, arguing that RFC had released its security interest upon execution of the amendment.

Rule of Law

Issue

Holding and Reasoning (Klatt, J.)

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