## Facts

- Santander Bank, N.A. (Santander) retained the law firm Connolly, Geaney, Ablitt, & Willard, P.C. (CGAW) to perform legal work, documented in a written legal services agreement.
- The agreement included confidentiality-related language addressing Santander’s ownership of “deliverables” and treatment of certain materials as confidential.
- CGAW later entered into a factoring/financing arrangement with Durham Commercial Capital Corp. (Durham), under which CGAW assigned accounts receivable, including amounts CGAW billed to Santander.
- Durham sent Santander a notice stating that CGAW’s receivable had been assigned to Durham and directing Santander to make future payments to Durham; the notice also sought Santander’s written acknowledgment/acceptance.
- Santander received the notice but did not sign the requested acknowledgment or otherwise confirm acceptance of the notice’s terms.
- After receiving Durham’s notice, Santander continued paying CGAW directly on CGAW’s invoices.
- The record contained limited evidence suggesting Durham may have been aware that Santander continued to pay CGAW.
- CGAW later filed for bankruptcy.
- Santander filed suit in federal district court seeking a declaratory judgment that it owed Durham nothing on invoices Santander had already paid to CGAW, and also asserted claims including conversion and unfair or deceptive acts under Massachusetts General Laws chapter 93A.
- Durham counterclaimed, alleging that under U.C.C. Article 9 (including the account-debtor payment rule reflected in § 9-406), Santander was obligated to pay Durham after receiving notice and remained liable for amounts it paid CGAW instead.
- Santander argued, among other things, that (i) the legal services agreement’s confidentiality-related terms barred assignment of the receivable, (ii) the assignment was void as against public policy, (iii) Durham’s notice was ineffective or ambiguous because it appeared to require Santander’s acceptance, (iv) Durham waived any claim by knowing about ongoing payments to CGAW, and (v) Santander could assert recoupment.
- Santander and Durham filed cross-motions for partial summary judgment on Santander’s claims against Durham and Durham’s counterclaim against Santander.

## Issues

1. Whether CGAW’s assignment of Santander’s account receivable to Durham was ineffective based on the legal services agreement’s confidentiality-related provisions or public policy concerns tied to the attorney-client relationship.
2. Whether Durham’s notification to Santander satisfied U.C.C. § 9-406 such that Santander was required to pay Durham (and not CGAW) to discharge the obligation.
3. Whether Durham’s alleged awareness of Santander’s continued payments to CGAW supported a waiver defense to Durham’s § 9-406-based counterclaim.
4. Whether Santander could assert recoupment (or other defenses under Article 9) to reduce or defeat Durham’s claim to payment.
5. Whether, on the summary-judgment record, either side was entitled to judgment as a matter of law on Santander’s declaratory and related claims against Durham or on Durham’s statutory counterclaim.

## Decision

- The court denied Santander’s motion for partial summary judgment.
- The court denied Durham’s motion for partial summary judgment.
- The court held that the summary-judgment record did not allow a definitive ruling, as a matter of law, on the parties’ competing theories regarding the assignment, the legal effect and clarity of the notice, and defenses such as waiver and recoupment.
- Because Santander’s tort and chapter 93A theories depended in significant part on whether Durham’s claim to the receivable and demand for payment were legally justified, the court likewise declined to resolve those claims on summary judgment.

## Legal Principles

- Under U.C.C. § 9-406(a), an account debtor may discharge its obligation by paying the assignor until the account debtor receives an authenticated notification that the amount due has been assigned and that payment is to be made to the assignee; after an effective notification, payment to the assignor generally does not discharge the obligation.
- A notification under § 9-406 must reasonably identify the rights assigned and direct where payment is to be made; disputes about what the notice conveyed, and how a reasonable recipient would read it in context, can prevent summary judgment.
- Under U.C.C. § 9-406(c), an account debtor may request reasonable proof of the assignment; questions about whether proof was requested or provided may bear on whether and when a payment duty to the assignee was triggered.
- Under U.C.C. § 9-404, an assignee’s rights are subject to defenses and claims in recoupment arising from the transaction that gave rise to the contract; whether recoupment applies can be fact-dependent.
- Waiver requires a showing, based on evidence, that a party intentionally relinquished a known right; limited evidence of knowledge or inaction may be insufficient to decide waiver as a matter of law.
- Claims such as conversion and Massachusetts chapter 93A often rise or fall with whether the defendant’s assertion of rights to payment was unauthorized or unfair in light of the governing contract and Article 9 rules; unresolved disputes on those predicates can defeat summary judgment.

## Conclusion

The court denied both sides’ partial summary-judgment motions because the record left unresolved disputes and open legal questions about the effect of the legal services agreement and the attorney-client context on the receivables assignment, whether Durham’s notice was effective under U.C.C. § 9-406, and whether defenses such as waiver and recoupment applied—issues that also affected Santander’s related conversion and chapter 93A claims.


Santander Bank, N.A. v. Durham Commercial Capital Corp., 88 U.C.C. Rep. Serv. 2d 838 (2016)