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Capitalwerks Responds To Jury Verdict
www.leasingnews.com
CapitalWerks states the issue is not about Advance Rentals or a deposit, as they state no contract or money exchanged hands. The award was due to a broadcast fax with pre-approval language. Even if they win on appeal, Jim Raeder states by Alabama law, the maximum fine would be $160,000, not $9 million dollars.
He also was aware this group, plus perhaps a few others, were planning a new company and the news of the loss of the law suit may have been the impetuous to move forward their time table.
I think it's important to make your readers aware of the potential pitfalls involved with any and all direct marketing, Jim Raeder said in an e-mail. I would also like to make it clear that we worked very hard to secure an approval for this tough credit customer all without a signed commitment letter or a deposit check. This situation arose in October, 2002 regarding a D & B profiled marketing flyer pre-qualifying the customer for an equipment lease up to $150,000.00. The marketing flyer was sent without specifying any payment, term or structure to a customer in Barbour County , Alabama.
The client responded to the marketing piece requesting information to lease a used forklift for $35,000 and filled out an application. After several discussions regarding his equipment needs, the client increased his request to include a work truck for an additional $34,000. Knowing this amount was a reach for a 570 FICO with paid tax liens, we sought out a specialty lender that would understand this type of challenged credit with good collateral. Additional information was provided, and an approval requiring a security deposit equal to 20% of the equipment cost was given. The client was notified of the approval and the requirement of a 20% down payment, and requested we prepare documents for his review. After several calls went unanswered to get the signed agreements back to complete the transaction, we closed the file.
Less then 30 days later we received a law suit from the Johnny Cochran law firm in Alabama asking for unspecified damages caused by the client's reliance on this marketing piece, as he claimed to have entered into contracts he couldn't complete without the use of this leased forklift, Raeder explained. Although he was unable to provide documented proof of any monetary damages, the jury still found in his favor for the ridiculous amount of $9,000,000.
We have notified our insurance carrier, The Hartford, to assist in the appeal and settlement process and intend on fighting this injustice to the Supreme Court if needed. I would also like to seek the help of Equipment Leasing Association and United Association of Equipment Leasing to assist in this case to help brokers and lenders avoid similar traps in the future.
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