## Facts

- Brookridge Funding Corporation was an accounts-receivable factoring firm that purchased invoices at a discount and assumed collection risk.
- Northwestern Human Services was the account debtor connected to construction of a minor-league baseball stadium project in Allentown, Pennsylvania.
- Contracting Systems, Inc. II (CSI), the construction manager/general contractor, issued project invoices to Northwestern totaling about $2.7 million.
- Brookridge purchased certain CSI invoices tied to the project as part of an accounts-receivable financing arrangement.
- In July 1999, Brookridge, CSI, and Northwestern executed a “Notice of Purchase of Accounts Receivable” in which Northwestern:
  - Acknowledged it owed CSI approximately $2,759,024.43,
  - Agreed to pay Brookridge directly, and
  - Waived defenses (including setoff/counterclaim-type defenses) to payment.
- After Brookridge funded CSI based on the notice, Northwestern refused to pay Brookridge.
- Northwestern asserted that the notice lacked consideration, there was no meeting of the minds on the waiver, and that Northwestern could still assert defenses and setoff based on disputes arising from the stadium project.

## Issues

1. Whether former UCC § 9-206 applies to a debtor’s waiver of defenses contained in a separate, later-executed three-party acknowledgment used to induce an assignee to purchase accounts.
2. Whether the July 1999 notice was an enforceable contract, including whether it was supported by consideration and reflected mutual assent to the waiver and payment terms.
3. Whether Brookridge, as assignee, satisfied § 9-206 prerequisites (value, good faith, and lack of notice of claims or defenses) sufficient to enforce the waiver on summary judgment.

## Decision

- Northwestern’s motion for summary judgment was denied.
- Brookridge’s motion for summary judgment was granted in part and denied in part.
- The court held that Article 9 governed the accounts-receivable financing transaction and that § 9-206 could apply to a waiver in a separate three-party notice.
- The court rejected Northwestern’s categorical legal arguments that the waiver was ineffective merely because it appeared outside the original underlying contract.
- The court found evidence supporting consideration and assent sufficient to defeat Northwestern’s attempt to invalidate the notice as a matter of law.
- The court determined that Brookridge gave value, but left material factual questions (including good faith and notice of disputes/defenses) that prevented complete summary judgment for Brookridge across all theories and elements.

## Legal Principles

- Former UCC § 9-206(1) permits enforcement of an account debtor’s agreement not to assert claims or defenses against an assignee if the assignee gives value, takes in good faith, and takes without notice of claims or defenses (subject to statutory limits).
- A waiver of defenses in favor of an assignee is not confined to the original debtor–assignor contract; it may be enforceable when made in a separate acknowledgment executed to induce assignment and financing.
- In a commercial financing setting, consideration may be shown where the debtor receives a benefit from the assignee’s funding that enables continued performance on the underlying project.
- Summary judgment is improper where record evidence leaves genuine disputes about the assignee’s knowledge of defenses or the assignee’s good faith in taking the assignment.

## Conclusion

The court treated the transaction as an Article 9 accounts assignment and held that a debtor’s waiver of defenses in a three-party notice can be enforceable under former UCC § 9-206, but it denied full relief to the assignee because factual disputes remained on elements such as good faith and notice.


Brookridge Funding Corp. v. Nw. Hum. Servs., Inc., 175 F. Supp. 2d 355 (D. Conn. 2001)