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Santander Bank, N.A. v. Durham Commercial Capital Corp.

United States District Court, D. Massachusetts

January 15, 2016

SANTANDER BANK, N.A., Plaintiff and Counterclaim-Defendant,
DURHAM COMMERCIAL CAPITAL CORP., Defendant and Counterclaim-Plaintiff, and CONNOLLY, GEANEY, ABLITT & WILLARD, P.C., Defendant.



This lawsuit arises out of a factoring agreement between defendant Durham Commercial Capital Corp. and defendant Connolly, Geaney, Ablitt, & Willard, P.C. (“CGAW”). Under the agreement, CGAW, a law firm, assigned its accounts receivable to Durham.[1] Plaintiff Santander Bank, N.A., a former client of CGAW, seeks a declaratory judgment that it has no obligation to pay Durham (the assignee) for legal services performed by CGAW (the assignor) for which Santander paid CGAW directly. Santander also asserts a claim for common-law conversion against Durham, and a claim against both defendants for unfair or deceptive trade practices under Mass. Gen. Laws ch. 93A.

In response to Santander’s complaint, Durham filed a counterclaim alleging that Santander breached its statutory duty to pay the fees due on its accounts assigned to Durham.

Santander and Durham have filed cross-motions for summary judgment. Only Santander’s claims against Durham and Durham’s counterclaims against Santander are at issue. For the reasons stated below, both motions will be denied.

I. Background

A. Factual Background

Unless otherwise stated, the basic facts of the case are not in dispute.

In June 2011, plaintiff Santander Bank retained the law firm of Connolly, Geaney, Ablitt, & Willard, P.C. to represent it in connection with various claims related to defaulted loans. (Hobson Aff. ¶ 5, Ex. A).[2] CGAW’s representation of Santander was formalized in a written “Legal Services Agreement.” (Hobson Aff. ¶ 5). The agreement contained the following provisions:

1.3. [Santander] shall be the named client and shall be the sole owner of all deliverables submitted to [Santander] hereunder, including all documents, tiles [sic; probably “files”], diskettes, writings and other works of whatever nature generated or produced by Counsel in connection with the Services, excluding any pre-existing materials or other property of Counsel. Such deliverables shall be considered a work made for hire by Counsel on behalf of [Santander], and shall be considered part of [Santander’s] information to be kept confidential pursuant to Section 6 of this Agreement . . . .
2.6. All invoices must identify [Santander’s] loan number, borrower name and address of property (if part of the collateral). A detailed itemization of all fees, permitted expenses and disbursements must also be provided along with a description of the specific Services performed . . . .
6. Confidentiality Agreement. Counsel agrees to the terms and conditions of the Confidentiality Agreement in Exhibit A, which is attached to and made a part of this Agreement . . . .

(Hobson Aff. Ex. A). The “Confidentiality Agreement” referred to in section 6 and attached to the legal services agreement provided:

1. The term “Information” refers to . . . customer information, . . . and all technical, financial, business, or other information of the Bank, whether received prior to, on or after the date of this Agreement, orally, in writing, in electronic format, by electronic or other means.
2. . . . Consistent with the provisions of the [Gramm-Leach-Bliley Act] and such other laws and regulations, Counsel shall implement appropriate measures designed to satisfy the requirements of GLBA, including to: . . . (iv) protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer; and (v) take appropriate action to address incidents of unauthorized access to Nonpublic Personal Information, including, without limitation, notifying the Bank as soon as possible of any such incident. . . .
3. Counsel agrees to: (a) keep the Information confidential and secure; (b) restrict disclosure of the Information solely to its officers, employees, affiliates and agents with a need to know such Information for purposes of the business dealings between Counsel and Bank . . . (c) not disclose to any other person or copy the Information without the approval of Bank; (d) use the Information solely for purposes of the business dealings between Counsel and Bank and not in any way directly or indirectly detrimental to Bank . . . .


Durham Commercial Capital Corp. “factors” accounts receivable-that is, it purchases accounts receivable at a discounted price from its customers. In exchange, Durham’s customers transfer and assign those accounts receivable to Durham, which then owns the rights to any payments received. (Gentilli Aff. Ex. D, at 7-8).

On November 7, 2012, Durham entered into a factoring agreement with CGAW and received a security interest in certain CGAW accounts in return. (McGrain Dep. 22; Gentilli Aff. Ex. F). In order to submit an account for factoring, CGAW would forward to Durham copies of the invoices it desired to be factored. (McGrain Dep. 22-24; Connolly Dep. 18; Mosher Dep. 9). If Durham approved, it would purchase the account from CGAW. (Id.).

Santander’s accounts were among those factored by Durham. In total, CGAW sent Durham copies of at least 160 separate invoices sent to Santander. (Gentilli Aff. ¶ 5, Ex. E). Those invoices included the names of the borrowers on the defaulted loans and a description of the services performed by CGAW. (Gentilli Aff. Ex. E).

On September 10, 2013, Durham sent Santander the following letter:

Dear Business Colleague,
I am pleased to inform you that Connolly, Geaney, Ablitt, & Willard, PC has attained Durham Commercial Capital Corp (Durham) as a source of capital and accounts receivable processor. This will enable Connolly, Geaney, Ablitt & Willard, PC to accommodate the growth and development of their business while maintaining a high level of customer service.
As part of the program the accounts receivable of Connolly, Geaney, Ablitt & Willard, PC have been assigned to Durham and are processed through Durham. Therefore payments for invoices should be made payable to and mailed directly to:
Durham Commercial Capital Corp for the account of: Connolly, Geaney, Ablitt & Willard, PC 101 Sully’s Trail, Bldg 20 Pittsford, NY 14534
This assignment has been duly recorded under the Uniform Commercial Code. Please make the proper notations on your ledger and acknowledge receipt of this assignment by signing at the place provided and fax a copy to Durham at []. Payment to any other party or address will not constitute payment. A hard copy will be made available to you at your request. This notice and instructions herein will remain in full force and effect until you are notified to the contrary in a writing signed by Durham Commercial Capital Corp.
Should you have any questions concerning this letter or your billing, please feel free to call Durham at the below listed number. Thanking you in advance for your cooperation.
Sincerely, Timothy Mura Durham Commercial Capital Corp and Connolly, Geaney, Ablitt & Willard, PC
AGREED AND ACCEPTED - Sovereign Bank, N.A.
Signed: ________Dated:_________
By:________ Phone:_________
Email:__________ ...

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