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United Capital Funding Corp. v. Ericsson, Inc.

United States District Court, W.D. Washington, Seattle

July 30, 2018

UNITED CAPITAL FUNDING CORP, Plaintiff,
v.
ERICSSON, INC, Defendant. ERICSSON, INC, Third-Party Plaintiff,
v.
KYKO GLOBAL, INC, Third-Party Defendant.

          ORDER DENYING MOTION TO DISMISS

          JAMES L. ROBART UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION

         Before the court is Defendant and Third-Party Plaintiff Ericsson, Inc.'s ("Ericsson") motion to dismiss Plaintiff United Capital Funding Corp.'s ("United") Uniform Commercial Code ("UCC") § 9-406 claim. (MTD (Dkt. # 140).) United opposes the motion. (Resp. (Dkt. #141).) The court has considered the motion, the parties' submissions in support of and in opposition to the motion, the relevant portions of the record, and the applicable law. Being fully advised, [1] the court DENIES the motion.[2]

         II. BACKGROUND

         This case concerns four businesses: United, Ericsson, Third-Party Defendant Kyko Global, Inc. ("Kyko"), and non-party Prithvi Solutions, Inc. ("Prithvi"). (See MTD; Resp.) The dispute centers on the legitimacy of assignments that Prithvi made to United. (See Compl. (Dkt. # 1).) The court details the factual background of this case before turning to the procedural background.

         A. Factual Background

         United is in the business of "factoring"-purchasing accounts receivable from other entities. (Compl. (Dkt # 1) ¶ 7.) On September 27, 2010, United purchased some of Prithvi's accounts, including accounts receivable Prithvi had with Ericsson. (Id. ¶¶ 10, 12.) Specifically, United purchased, among others, 22 invoices totaling $184, 539.50. (Id. ¶ 12.) Pursuant to that purchase, United sent a letter to Ericsson "giving notice that Prithvi's present and future [a]ccounts had been assigned to United, and providing that all present and future payments owing to Prithvi should instead be paid by Ericsson to and only to United." (Id. ¶\\\see also id., Ex. 1 (Dkt. #1-1) ("Notice Letter") at 1 ("[Prithvi has] assigned [its] present and future Accounts Receivable to [United]. . .. Payments should be made payable to [United]. Payment to any other party will not discharge this obligation.").)

         Ericsson did not pay United any of the amounts due on the 22 outstanding invoices. (Compl. ¶ 15.) Instead, Ericsson paid another creditor, Kyko, in satisfaction of a writ of garnishment Kyko obtained on June 14, 2014, in state court. (12/15/15 Order (Dkt. # 98) at 3; 4/26/18 Order (Dkt. # 118) at 2; 9th Cir. Order (Dkt. # 133) at 3.)

         B. Procedural Background

         In November 2014, United brought suit against Ericsson for $184, 539.50 in unpaid payments that United claims it is owed under the assignment from Prithvi. (See Compl.) United asserts that Ericsson "failed to fulfill its obligation to make payment to United under the terms of the invoices and as statutorily required by [§] 9-406 of the UCC." (Id. ¶ 17.) United alleges that "its claim against Ericsson is for damages that have arisen in connection with an oral or written agreement between Ericsson and its vendor, Prithvi, the rights to which now lie with United." (Id. ¶ 18.) United sues Ericsson for "breach of Ericsson's [s]tatutory [d]uty to [p]ay United." (Id. at 1.)

         On December 15, 2015, the Honorable John C. Coughenour granted summary judgment to Ericsson and dismissed United's claim.[3] (See 12/15/15 Order.) Specifically, the court agreed with Ericsson that Prithvi's assignments to United were invalid and that Ericsson is immune from suit as a garnishee who paid in accordance with a court judgment; both grounds entitled Ericsson to summary judgment. (Id. at 5-7.) United appealed. (Not. of Appeal (Dkt. # 123).)

         The Ninth Circuit Court of Appeals reversed the grants of summary judgment and remanded the matter. (See 9th Cir. Order.) The Ninth Circuit found that there was a genuine dispute of material fact regarding whether the assignment was invalid and that Ericsson was not entitled to immunity. (Id. at 5-7.) The Ninth Circuit further declined to address Ericsson's argument, raised for the first time on appeal, that UCC § 9-406 does not create a private right of action for assignees. (Id. at 6 n.3.) The court explained that it "will not address this contention as Ericsson failed to raise it below and, thus, did not adequately preserve it." (Id.)

         Upon remand, Judge Coughenour recused himself, and this matter was reassigned to the undersigned judge. (See Min. Order (Dkt. #135).) Ericsson subsequently filed the instant motion to dismiss pursuant to Rule 12(b)(6), raising the argument that the Ninth Circuit declined to address: whether UCC § 9-406 provides United a private cause of action to bring its claim against Ericsson. (See MTD; see also Jt. Statement (Dkt. #138) ...


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