## Facts

- The City of Glendale contracted for temporary staffing services through businesses operated by Michelle and Jeffery Griffin.
- The Griffins operated two similarly named entities: JG Staffing, Inc. (a Texas corporation) and JG Staffing Arizona, LLC (an Arizona LLC).
- Procurement records and communications were inconsistent about which entity was the City’s contracting counterparty; the executed contract used a non-existent hybrid name (“JG Staffing Inc., a Arizona corporation”).
- ARA had a prior factoring/security arrangement with JG Staffing, Inc. under which ARA purchased or took a security interest in JG Staffing, Inc.’s accounts receivable; JG Staffing, Inc. later defaulted, and ARA obtained a judgment against it.
- After learning of the City staffing contract, ARA sent the City an authenticated letter asserting entitlement to future payments owed to JG Staffing, Inc. and directing the City to remit future payments to ARA.
- The City continued paying the Griffins’ staffing operation, asserting its contract was with JG Staffing Arizona, LLC, not JG Staffing, Inc.
- ARA sued, asserting claims under U.C.C. §§ 9-607 and 9-406 and related contract/account theories; both sides moved for summary judgment.

## Issues

1. Whether a genuine dispute of material fact existed as to which Griffin-affiliated entity was the City’s contract counterparty.
2. Whether ARA’s July 2016 notification satisfied U.C.C. § 9-406 such that, if the City owed payment to ARA’s debtor, the City could not discharge its obligation by continuing to pay the assignor.

## Decision

- The court denied summary judgment to both parties on the identity of the City’s contracting counterparty because the record contained conflicting evidence requiring jury resolution.
- The court rejected the City’s argument that it was entitled to judgment as a matter of law based on allegedly deficient notice under U.C.C. § 9-406.
- The case proceeded with the counterparty issue for the jury, with the court’s § 9-406 ruling governing the effect of ARA’s notice if the jury found the City’s contract was with ARA’s debtor.

## Legal Principles

- Summary judgment is inappropriate where evidence would permit reasonable jurors to reach different conclusions on a material fact, including the identity of a contracting party.
- Under U.C.C. § 9-406, an account debtor may pay the assignor until it receives authenticated notification that the amount due has been assigned and payment is to be made to the assignee; after effective notification, payment to the assignor does not discharge the obligation.
- Notification under § 9-406 is sufficient if it reasonably informs the account debtor that payment rights have been assigned and directs future payment to the assignee; strict, technical wording is not required.
- An account debtor may demand proof of the assignment; absent such a demand (or pending proof), the core statutory question remains whether the notification effectively directed payment to the assignee.

## Conclusion

The court held that ARA’s letter could satisfy U.C.C. § 9-406 because it clearly asserted an assignment/security interest and directed the City to pay ARA, but denied summary judgment on liability because a jury had to determine whether the City’s staffing contract was actually with ARA’s debtor.


ARA Inc. v. City of Glendale, 360 F. Supp. 3d 957 (D. Ariz. 2019)