Platinum Funding Serv. LLC v. Petco Insulation Co. Inc

• Decision Date: 02 May 2011
• Docket Number: No. 3:09cv1133 (MRK),3:09cv1133 (MRK)
• Court: U.S. District Court — District of Connecticut
• Parties: PLATINUM FUNDING SERVICES, LLC, Plaintiff, v. PETCO INSULATION CO., INC., d/b/a D & N INSULATION, CO.; INCOR GROUP, INC.; WOMCO INSULATION, INC.; PETCO REALTY, LLC; EDWARD R. PETRUCCI; KRISTEN L. PETRUCCI; SUSAN A. PETRUCCI; DENISE DEFELICE; HARRY GRODSKY & CO., INC.; TUCKER MECHANICAL, INC.; WALTER D. SULLIVAN CO., INC., Defendants.

PLATINUM FUNDING SERVICES, LLC, Plaintiff,

v. PETCO INSULATION CO., INC., d/b/a D & N INSULATION, CO.; INCOR GROUP, INC.; WOMCO INSULATION, INC.; PETCO REALTY, LLC; EDWARD R. PETRUCCI; KRISTEN L. PETRUCCI;SUSAN A. PETRUCCI; DENISE DEFELICE; HARRY GRODSKY & CO., INC.; TUCKER MECHANICAL, INC.; WALTER D. SULLIVAN CO., INC., Defendants.

No. 3:09cv1133 (MRK)

UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT

Dated: May 2, 2011

MEMORANDUM OF DECISION

Plaintiff Platinum Funding Services, LLC ("Platinum Funding") is a factoring firm. Factoring is a form of financing which involves "[t]he buying of accounts receivable at a discount." See Black's Law Dictionary 671 (9th ed. 2009); see Coosemans Specialties, Inc. v. Garguilo, 485 F.3d 701, 704 n.1 (2d Cir. 2007). However, when Platinum Funding enters into a factoring agreement with a business, Platinum Funding does not buy all of that business's accounts receivable outright. Instead, Platinum Funding buys the option to purchase specific invoices from that business. See Ex. 2 to Second Wattenmaker Aff. [doc. # 216-5] at 1; Black's Law Dictionary 1203 (9th ed. 2009) (defining an option as "a contractual obligation to keep an offer open for a specified period, so that the offeror cannot revoke the offer during the period").

In this case, Platinum Funding seeks to recover payments it alleges are owed to it as a result of its factoring agreements with several former clients-including, as relevant to this Memorandum of Decision, Petco Insulation Co., Inc. ("Petco Insulation") and Womco Insulation, Inc. ("Womco Insulation"). Platinum Funding also seeks to recover payments that other companies made to Petco Insulation and Womco Insulation while those businesses were receiving financing from Platinum Funding. Defendant Tucker Mechanical, Inc. ("Tucker Mechanical") is one of those companies. Tucker Mechanical did business with Petco Insulation and Womco Insulation while those two companies were receiving financing from Platinum Funding, but did not directly contract with Platinum Funding.

Pending before the Court is Tucker Mechanical's Motion for Partial Summary Judgment [doc. # 206] pursuant to Rule 56(a) of the Federal Rules of Civil Procedure. Platinum Funding sent notices to Tucker Mechanical directing it to send all payments on any invoices it received from Petco Insulation or Womco Insulation to Platinum Funding. Tucker Mechanical ignored those notices. The central issue raised by Tucker Mechanical's motion is whether the notices alone entitle Platinum Funding to recover payments that Tucker Mechanical made to Petco Insulation or Womco Insulation, even if those payments were made on invoices that Platinum Funding never actually purchased. For the reasons set forth below, the Court agrees with Tucker Mechanical that the notices alone do not entitle Platinum Funding to recover from Tucker Mechanical, and therefore GRANTS Tucker Mechanical's motion.

I.

Because this case is currently at the summary judgment stage, the Court sets forth the facts in the light most favorable to Platinum Funding, the nonmoving party here. See, e.g., DeFabio v. E. Hampton Union Free Sch. Dist., 623 F.3d 71, 74 (2d Cir. 2010) (per curiam).Unless the Court notes otherwise, the facts set forth in this Memorandum of Decision are undisputed.

On February 21, 2006, Petco Insulation and Womco Insulation, along with a third Defendant, Incor Group, Inc. ("Incor Group"), entered into a factoring agreement ("the First Agreement") with Platinum Funding. See Ex. 2 to Second Wattenmaker Aff. [doc. # 216-5]. The First Agreement provided:

Sellers [Petco Insulation and Womco Insulation] will tender to Platinum certain of Sellers' invoices to be rendered to Sellers' customers ("Account Debtors") with respect to goods sold and delivered to, or services performed for, such Account Debtors (individually, an "Account Receivable" and collectively, the "Accounts Receivable"). Such invoices shall be delivered by Platinum to the respective Account Debtors, in accordance with the standard billing procedures of Platinum, together with or after notice from Sellers and/or Platinum to such Account Debtors of the irrevocable assignment to Platinum of payment thereunder. Platinum will conduct such examination and verification of the invoices so tendered, and such credit investigations of such Account Debtors, as Platinum considers necessary or desirable, and will notify Sellers as to which of the individual Accounts Receivable so tendered, if any, Platinum elects to purchase. Platinum shall at all times have the absolute right in its sole discretion to reject any or all of the Accounts Receivable, whether or not Platinum has previously purchased Accounts Receivable from Sellers or previously purchased Accounts Receivable of any Account Debtor.

Id. at 1 (emphasis added). The First Agreement further provided that "[t]hose Accounts Receivable which Platinum elects to purchase from Sellers shall be purchased upon the terms and subject to the conditions of separate Purchase and Sale Agreements." Id. at 2.¹

Petco Insulation and Womco Insulation entered into a second factoring agreement ("the Second Agreement") with Platinum Funding on February 28, 2008. See Ex. 2 to Second Wattenmaker Aff. [doc. # 216-6]. The terms in the Second Agreement that are relevant for purposes of resolving the pending motion are identical to the terms in the First Agreement. See, e.g., id. at 1 ("Platinum will conduct such examination and verification of the invoices so tendered, and such credit investigations of such Account Debtors, as Platinum considers necessary or desirable, and will notify Sellers as to which of the individual Accounts Receivable so tendered, if any, Platinum elects to purchase."). Petco Insulation, Womco Insulation, and Platinum Funding also agreed to amend the terms of the Second Agreement on September 15, 2008. See Ex. 3 to Second Wattenmaker Aff. [doc. # 216-7]. But again, the amendments do not appear to have changed the terms that are relevant for purposes of resolving the pending motion, and in any case, neither party has made any argument based on the amendments.

Tucker Mechanical is a mechanical contractor that has worked on numerous projects with Petco Insulation; with Petco Insulation's subdivision D & N Insulation, Inc. ("D & N Insulation"); and with Womco Insulation. On February 22, 2006, the day after Petco Insulation entered into the First Agreement with Platinum Funding, Account Executive Santo A. Caruso at Platinum Funding sent a letter to Tucker Mechanical informing it of the following: "PLATINUM FUNDING SERVICES LLC, as factor, is the irrevocable assignee of PETCO INSULATION CO., INC. (the 'Company') for all invoices which are now due and which in the future will become due to the company." Ex. B to Levy Aff. [doc. # 209-1] at 12. The following letter from Petco Insulation's President, Edward R. Petrucci, was attached: "In order to manage the growth of our business and plan for our continued success, we have entered into a financing arrangement with PLATINUM FUNDING SERVICES LLC. You are hereby authorized and instructed to paythe full amount of all invoices now due, and all invoices which in the future are submitted or become due and payable, directly and solely to: PLATINUM FUNDING SERVICES LLC...." Id. at 13. The same day, Mr. Caruso sent an essentially identical letter to Tucker Mechanical regarding Womco Insulation, see Ex. C to Levy Aff. [doc. # 209-1] at 18, along with an attached letter from Womco Insulation's President, Kristen L. Petrucci. See id. at 19.

Tucker Mechanical continued to do business with D & N Insulation-again, Petco Insulation's subdivision-and with Womco Insulation after receiving the two notices from Platinum Funding. First, Tucker Mechanical hired Womco Insulation to work on the construction of the Mohegan Government Center in Uncasville, Connecticut ("the Mohegan Project"). Womco Insulation apparently issued invoices related to the Mohegan Project. However, Womco Insulation never actually performed any work on the Mohegan Project, and Tucker Mechanical therefore never made any payments to Womco Insulation. Second, Tucker Mechanical made payments to D & N Insulation and Womco Insulation based on the following three invoices: Invoice No. 10123831 from D & N Insulation, for $37,000; Invoice No. 10123927 from D & N Insulation, for $23,125; and Invoice No. 30100731 from Womco Insulation, for $53,650.00. It is undisputed that Tucker Mechanical made the three payments after receiving the notices.

However, there is no evidence in the record that Platinum Funding ever exercised its option to purchase those three invoices. Platinum Funding explicitly acknowledges that it did not purchase the two invoices from D & N Insulation. Platinum Funding's position with regard to the invoice from Womco Insulation is somewhat perplexing. In its Local R. 56(a)1, Platinum Funding admitted that it did not purchase Womco Invoice No. 30100731 for $53,650. See Platinum Funding's Local R. 56(a)2 Statement [doc. # 210] ¶ 7 ("Admitted."). But in the same Local R. 56(a)2 Statement, Platinum Funding stated: "Tucker's Motion with respect to the thirdinvoice No. 30100731 in the amount of $53,650 is premature. Platinum has not conceded that it did not purchase this invoice and, as such there is a dispute of material fact with respect to such invoice." Id. at 2. At oral argument on the pending motion, counsel for Plaintiff Funding admitted that his client has no evidence in its own records that it ever purchased the invoice from Womco Insulation, and that it has not located any such evidence through discovery. While Platinum Funding's counsel asserted at the oral argument that his client still has a "subjective belief" that it purchased the invoice from Womco Insulation, there is no objective evidence in the record to support that subjective belief.

Platinum Funding filed its Complaint [doc. # 1] in this case on July 17, 2009,...