2009 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 8-28-2009 

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____________ F IS H E R , C i r cui tJudge . H unt s Poi ntC ooper at i ve M arket , I nc. ( “H unt s Poi nt ”) appea l s fr om the D i s tr i ct Cou r t ’ s o r d e ri n whi c h i tf o u n d Hun t s Po i n tl i a b l e t o M a d i s o n Fi n a n c i a l LLC ( “M adi s on”) forthe amountof $1, 010, 435. 00. M adi s on or i gi nal l ys ued H unt s Poi nt cl ai m i ng br eac h of contr actfol l ow i ng H unt s Poi nt ’ s fai l ur e t o paym oneyow ed on fi ve not i ces of pur chas es ( an “N O P” orthe “N O Ps” ) , as w el l as col l ect i on of ac count s under U n if o rm C o m m e rc ial C o d e (“ U .C .C .”) A rticle 9 . T h e D istric t C o u rt h e ld th a t H u n ts Poi ntbr eac hed i t s contr actual obl i gat i ons beca us e the N O Ps w er e val i d and enf or cea bl e, an d thu s d ec li n ed to rea ch M ad ison ’s U . C . C . A rt icl e 9 claim s an d H u n ts Po int’ s corr es pondi ng A r t i cl e 9 def ens es . I tal s o deni ed M adi s on an aw ar d of pr ej udgm ent in ter e st. H u n ts P o in t ar g u e s o n a p p e a l, i n ter a lia, th a t th e D istric t C o u rt e rre d in f a ili n g to cons i deri t s A r t i cl e 9 def ens es . I n M adi s on’ s cr os s - appea l , M adi s on ar gues thattheF ac tori n g is de fin ed as “ [t]he b u y ing o f a cc o u n ts r ec eiva b le at a d isco u n t, ” w h ere 1 “ [ t]h e p ric e is d isc o u n ted b e c a u se th e f a c to r (w h o b u y s th e m ) a ss u m e s th e risk o f d e lay i n col l ect i on and l os s on the ac count s r ece i vabl e. ” B lack’s La w D i ct i on ary 630 ( 8th ed. 2 0 0 4 ). A n a c c o u n t re c e iv a b le is “ [ a ]n a c c o u n t re f lec tin g a b a lan c e o w e d b ya d e b to r; a debtow ed bya cus t om ert o an ent erpr i s e forgoods ors ervi ces . ” I d. at18. 3 D is tr ic t C o u rt a b u s e d its d is c re tio n in n o t a w a rd in g p re ju d g m e n t in te re s t o n th e d a m a g e s . B eca us e w e agr ee thatthe N O Ps w er e val i d and enf or cea bl e contr act s , w e w i l l aff i r m t he D i s tr i ctC our t ’ s j udgm enti n favorof M adi s on, butw e w i l l r educe the amountof damages b yth e a m o u n t o f

$ 2 6 3 ,4 9 7 .7 4 . W e w ill a lso a f f irm th e D istric t C o u rt’s d e c isio n n o t to a w a rd M a d iso n p re

ju d g m e n t in ter e st. I. W e w r i t e exc l us i vel yforthe part i es , w ho ar e fa m i l i arw i th the fa ctual cont extand l egal hi s t oryof thi s cas e. T her efor e, w e w i l l s etfor th onl ythos e fa ct s nece s s aryt o our analy si s. A . B ackground on M adi s on A r ound M ar ch 1999, C hr i s t opherM agui r e and G eor ge Sneddon ( M agui r e’ s thenfather - i n- l aw ) form ed M adi s on Fi nanci al C orpor at i on ( “M FC ”) , a N ew J er s ey c o rp o ra tio n , to p ro v id e f a c to ri n g s e rv ic e s . S n e d d o n o w n e d 1 0 0 % o f M F C ’s s to c k . 1 M adi s on i s a N ew J er s eyl i m i t ed l i abi l i tycompanythatar os e fr om M FC and w as e s ta b lis h e d o n J u n e 1 0 , 1 9 9 9 , a ls o w ith th e p u rp o s e o f f a c to ri n g a c c o u n ts re c e iv a b le . A ccor di ng t o M adi s on’ s N ovember12, 1999 O per at i ng A gr eement( the “O per at i ng A gr eement ”) , M adi s on w as or i gi nal l yform ed w i th thr ee mem ber s : C herbr ooke4

A s s oci at es , L L C ( “C herbr ooke”) , as r epr es ent ed byi t s part - ow nerJ ohn M ar ozzi ; the M orr occo G r oup, L L C ( “M orr occo G r oup”) , as r epr es ent ed byV i ncentM orr occo a nd M ar ozzi ; and Servi ce Capi t al C orpor at i on, L L C ( “Servi ce Capi t al ”) , a companyow ned by M agui r e. T hr ough a St ock Pur chas e A gr eementdat ed D ece m ber21, 1999, M adi s on pur chas ed 100% of M FC ’ s s t ock fr om Sneddon, i t s s ol e s har ehol der , and M FC s ucce eded t o the i nt er es t s of M adi s on. U nderthe O per at i ng A gr eement , M adi s on had no managi ng m e m b e r a n d in s te a d w a s to b e d ir e c te d b ya b o a rd o f m a n a g e rs a p p o in te d b yits m e m b e rs . D o n n a B re w e r- R o s s i jo in e d M a d is o n in J u n e 1 9 9 9 a n d c u rr e n tly se rv e s a s its C o n tr o lle r. D ur i ng the cour s e of the eve nt s gi vi ng r i s e t o the i ns t antappea l , B r ew er - R os s i and M ar ozzi w or ked outof M adi s on’ s Pi ne B r ook, N ew J er s eyoffi ce, and M agui r e and Sneddon w or ked outof M adi s on’ s B r i dgew at er , N ew J er s eyoffi ce ( w hi ch theys har ed w ith S erv ice C ap it al). Sneddon s erved as di r ect orand vi ce pr es i dentof M adi s on, and w as r es pons i bl e for exec ut i ng nece s s arydocument s s uch as fac t or i ng agr eement s , as s i gnm ent s , es t oppel agr eement s ( orN O Ps) , U . C . C . form s , and not i ce l ett er s eac h t i m e M adi s on pur chas ed an acc ount . Sneddon w as al s o r es pons i bl e forver i fy i ng the ac count s befor e M adi s on a d v a n c e d f

u n d s to its c lien ts, in c lu d in g ru n n in g a c re d it ch e c k o n a p ro sp e c tiv e c lien t, obt ai ni ng the under l y i ng contr act s betw een the cl i entand ac countdebt or , and conf i r m i ng w i th the debt orthatthe i nvoi ce a m ount s w er e due a nd ow i ng. Forpr i vat e ac count debt or s , M adi s on w oul d us ual l yver i fythatthe amount s i n the i nvoi ces w er e ac tual l ydue5

bys endi ng an N O P t o t he ac countdebt ort o acknow l edge, s i gn, and r eturn. Sneddon w oul d not i fyal l part i es thatthe cl i enthad s ol d i t s acc ount s r ece i vabl e t o M adi s on and i nform the ac countdebt ort o t her ei naft erpayM adi s on di r ect l yforthe amount s on the i nvoi ces i ns t ead of

the cl i ent . Sneddon gener al l yr equi r ed al l thr ee pa r t i es – M adi s on, t he cl i ent , and the ac countdebt or– t o s i gn a documentacknow l edgi ng the s al e of the i nvoi ce t o M adi s on and M adi s on’ s fundi ng t o the cl i ent , and typi cal l yobt ai ned a s i gned copyof an N O P foreac h acc ount . Sneddon’ s typi cal pr act i ce w as t o cal l the ac countdebt oraft er re c e iv in g its sig n e d N O P in o rd e r to v e rif yth e sig n a tu re o n it. A f ter S n e d d o n re c e iv e d a ll th e re q u ire d p a p e rw o rk , h e f a x e d a f u n d in g re q u e st, w ith its su p p o rtin g d o c u m e n ts, to B rew er-R o ssi i n M ad ison ’s P ine B roo k o ff ice. U p o n rec eipt o f th at i n fo rm ati o n , B rew erR os s i w as author i zed t o w i r e money– typi cal l y70% of the cl i ent ’ s acc ount s r ece i vabl e – t o M adi s on’ s cl i ent , and M adi s on w oul d ther ebypur chas e the ac count s r ece i vabl e. A ft er m aki ng the w i r e tr ans fer , B r ew er - R os s i ent er ed i nform at i on aboutthe tr ans act i on i n the company ’ s r eport s . B as ed on i t s agr eementw i th the cl i ent , M adi s on w oul d col l ecta fe e fori t s s ervi ces on t he ac countand, w hen appr opr i at e, cr edi ti t s cl i entanyamount due that it co llec ted . M a d iso n w o u ld re tain th e re m a in in g 3 0 % b a lan c e o n th e a c c o u n ts re c e iv a b le pur chas ed i n “r es erve” unt i l the ac countdebt orpai d M adi s on i n ful l , atw hi ch poi nt M adi s on w oul d m ark t he i nvoi ce a s “cl os ed” on i t s books , t ake i t s fee ( as det erm i ned by the amountof t i m e an i nvoi ce r emai ned unpai d) , and payi t s cl i entthe netamount r ece i ved.6 B. Backg r ound o n W e s t w ay and H unt s Poi nt W e s tw a y , a N e w Y o rk c o rp o ra tio n , p ro v id e d c o n s tru c tio n s e rv ic e s a s its b u s in e s s . M adi s on ent er ed i nt o a pur chas e agr eement( the “Pur chas e A gr eement ”) w i th W es tw ay o n Jan u ary1 0 , 2 0 0 0 , thro u g h w h ich it pu rch ase d all o f W estw ay ’s ex ist ing an d fu ture a c c o u n ts re c e iv a b le. In c o n sid e ra tio n , M a d iso n a g re e d to m a k e m o n e tar ya d v a n c e s to W e stw a y . W e stw a ysu b m itt e d to M a d iso n in v o ice s o r p a ym e n t re q u isitio n s f o r its acc ount s r ece i vabl e fr om four t een a ccountdebt or s , i ncl udi ng H unt s Poi nt . M adi s on p u rc h a se d th e a c c o u n ts re c e iv a b le f o r th e re q u isitio n s W e stw a yh a d f o rw a rd e d in acc or dance w i th t he t erm s of the Pur chas e A gr eement . M adi s on then s entN O Ps t o not i fy the pr i vat e ent i tyacc ountdebt or s , underi t s typi cal pr ocedur e, thatal l futur e paym ent s of acc ount s r ece i vabl e s houl d be made t o M adi s on. U n d e r th e P u rc h a se A g re e m e n t, W e stw a yo b tain e d $ 6 m ill io n in c re d it fo r its o u tsta n d in g a c c o u n ts re c e iv a b le a n d w a s re sp o n sib le f o r p a y in g M a d iso n f

o r a ll ac c o u n ts o r i n v o ic e s th a t r e m a in e d u n p a id b yth e a c c o u n t d e b to r n in e ty d a y s a f te r t h e irf

a c to ri n g . D e sp ite th e se ter m s, W e stw a yh a d n u m e ro u s p a ym e n ts o u tsta n d in g f o r m o re th a n n in e ty d ay s (i n clud ing so m e o u tst an d ing m o re tha n 1 5 0 d ay s) an d , in total, W estw ayh ad m o re th a n $ 8 mi l l i o n i n o u t s t a n d i n g i n v o i c e s . M a r o z z i t e s t i f i e d th a tM a d i s o n v i o l a t e d i t s o wn po l i ci es i n n um erous w ay s i n the cou rs e of h and l i ng W estw ay ’s fact ored i nv oices . H unt s Poi nti s a coope r at i ve w hol es al e meatdi s tr i but i on m arketl ocat ed i n the B r onx, N ew Y or k. I n m i d- 1999, H unt s Poi ntdeci ded t o cons tructa new r efr i ger at ed7

wa r e h o u s e ( th e “ P r o

j e c t ” ) wi th c i tya n d s t a t e f u n d i n g . Hu n t s P o i n te n t e r e d i n t o two c o n tr a c t s wi th We s twa yf o rc o n s tru c t i o n s e r v i c e s . Hu n t s P o i n th i r e d J e f f r e yM . Br o wn A ss o c iate s, In c . (“B ro w n ” ) a s its c o n stru c tio n m a n a g e r, an d B ro w n b e g a n to su b m it appl i cat i ons forpaym entt o H unt s Poi nt , s peci fy i ng i n eac h of the ei ghtappl i cat i ons t hat paym ents houl d be made t o W es tw ay . E i therB ruce Rei ngol d, H unt s Poi nt ’ s G ener al M a n a g e r, o r a n o th e r re p re se n tativ e , rev iew e d e a c h o f W e stw a y ’s a p p lica tio n s, a n d H u n ts P o in t ap p ro v e d e a c h o n e a n d f o rw a rd e d th e m to th e g o v e rn m e n t f o r p a ym e n t. R e in g o ld is res po nsi ble for the d ay -t o-dayact i vit i es atH un t s Po i nt – i ncludi ng fi nan ci al affair s, oper at i onal and s ecur i tym att er s – and s erves as the per s on t o w hom al l depart m entheads r eport . R ei ngol d w or ks w i th H unt s Poi nt ’ s acc ount ant s i n the pr epar at i on of fi nanci al s t at ement s , handl es the col l ect i on of r ent s , over s ees cons truct i on pr oj ect s ( i ncl udi ng t he Pr oj ect ) , and over s ees and appr oves i t s paym ent s t o cons truct i on contr act or s . A m ong t he W es tw ayacc ount s pur chas ed byM adi s on w er e fi ve ac count s on w hi ch H unt s Poi ntw as W estw ay ’s ac co u n t deb tor. C. The NO Ps M a d iso n a n d W e stw a ye x e c u ted f iv e w ritten a ss ig n m e n ts (th e “ A ss ig n m e n ts” ) to e v id e n c e M a d iso n ’s p u rc h a se o f th e a c c o u n ts re c e iv a b le a t issu e . E a c h a ss ig n m e n t li sts H unt s Poi ntunderei therthe “A ccountN ame and A ddr es s ” fi el d oras the “Cust om er ” and i ncl udes an i nvoi ce a nd amount due. T he A s s i gnm ent s , corr es pondi ngl y , r el at ed t o fi ve r equi s i t i ons i s s ued byW es tw ayand del i ver ed t o M adi s on. I n acc or dance w i th nor m al8

pr ocedur e, M adi s on ( vi a Sneddon) forw ar ded an N O P t o H unt s Poi ntforeac h of the W e stw a ya c c o u n ts re c e iv a b le o n w h ich H u n ts P o in t w a s th e a c c o u n t d e b to r. R e in g o ld s i gned ea ch of the fi r s tfi ve N O Ps on be hal f of H unt s Poi nt , and l at eradmi t t ed thathe w as author i zed t o do s o. O n eac h N O P, Sneddon fi l l ed i n the exa ctdol l aramount due on the r efe r ence d acc ount , pr i ort o s i gni ng i thi m s el f and pr i ort o forw ar di ng i tt o R ei ngol d. Sneddon, R ei ngol d, and St ephen N i gr o ( Pr es i dentof W es tw ay ) eac h exec ut ed the fi r s tN O P, dat ed M ar ch 1, 2000, on behal f of thei rr es pect i ve part i es t o the paym ent arr angementforthe ac countr ece i vabl e. Sneddon r ece i ved the s i gned N O P fr om R ei ngol d on M ar ch 2, 2000 and, i n acc or dance w i th M adi s on’ s nor m al pr ocedur e for han dli ng the fir stN O P w i th an enti ty , cal l ed R ei ng old t o en sure the invoice w as l egi t i m at e and thatthe moneyw as due and pa y abl e. Sneddon’ s copyof the fi r s tN O P has a handw r i t t en not e thats t at es : “Spoke w /B ruce Rei ngol d 3- 2- 00. H e ver i fi ed s i gni ng att ac h ed let ter. ” T elep h o n e re co rds in d icate tha t som eo n e in M ad ison ’s B ri d g ew ater, N ew J er s ey , offi ce pl ace d a phone c al l t o H unt s Poi nt ’ s B r onx, N ew Y or k, offi ce a t 2 :3 6 p .m . tha t las ted f

o r 5 2 se c o n d s o n M a rc h 2 , 2 0 0 0 . S n e d d o n tes tifie d th a t d u rin g h is c o n v e rsa tio n w ith R e in g o ld , h e re c e iv e d th e im p re ss io n th a t R e in g o ld “ u n d e rsto o d th is w as an as s i gnm entof an i nvoi ce thatW es tw ayw as gi vi ng t o, as s i gni ng t o M adi s on F in a n c ial a n d th a t [ R e in g o ld ] u n d e rsto o d th e p a ym e n ts f o r th a t in v o ice w e re to g o to M adi s on Fi nanci al L L C . ” R ei ngol d di d notdenythatthe phone c al l betw een hi m and9

Sneddon t ook pl ace , butt es t i fi ed thathe coul d notr emem beri t . T he D i s tr i ctC our tfound S n e d d o n ’s te stim o n yc re d ib le, a s s u p p o rte d b yth e p a p e r e v id e n c e , an d a d o p ted it as f a c t. Eac h o f M a di s on ’ s N O Ps w i th W e s tw a ya nd H un t s Poi nt , i nc l ud i ng the fi r s tN O P, l i s t ed a s peci fi c amountthatH unt s Poi ntow ed M adi s on, “pur s uantt o the att ache d i nvoi ce( s ) , ” and s t at ed that , byexec ut i ng the N O P, the amountt o be pai d t o M adi s on w as “ow ed abs ol ut el y ” and thatH unt s Poi nthad no def ens es t o paym ent . A ddi t i onal l y , the N O P s s tate d th a t, by sig n in g , H u n ts P o in t “a c k n o w led g e s th a t th e [ sp e c if ic d o llar a m o u n t] o w in g b y[ H u n ts P o in t] to [ W e stw a y ] sh a ll b e p a id d ire c tlyto [ M a d iso n ]. T h is as s i gnm entm ayonl ybe r el eas ed by[M adi s on] and no ac t i on of [W es tw ay ] s hal l aff ect a n yo f [ Hu n t s P o i n t ’ s ] o b l i g a t i o n s t o ma k e p a yme n td i r e c t l yt o [ M a d i s o n ] . ” T h e NOP al s o s t at es that“[t ] he U nder s i gned [i . e. , H unt s Poi nt ] acknow l edges thatpaym entt o any p a rtyo th e r th a n [ M a d iso n ] w ill n o t co n stitu te p a ym e n t o f in d e b ted n e ss o w in g b y[ H u n ts Poi nt ] t o [W es tw ay ] . ” H ow ever , M adi s on di d notatt ach a n i nvoi ce t o the fi r s tN O P, or a n yo f th e f o llo w in g N O P s it se n t to H u n ts P o in t. R e in g o ld tes tifie d a t trial th a t: I s i gned the fi r s tnot i ce of pur chas e i n I gues s on M ar ch 1s t . I had r ece i ved the phone c al l fr om G aryPar kerw ho I bel i eve w as the vi ce- pr es i dentof W e stw a yIn d u strie s. H e to ld m e th a t h e w a s in th e a re a , n e e d e d to talk to m e a n d c o u ld h e sto p u p a n d se e m e . A n d a f e w m in u tes late r h e p u lled in to th e M a rk e t an d c a m e u p to m yo f f ice , an d p re se n ted th is p iec e o f p a p e r to m e a n d a sk e d if

I w o u ld sig n it i n c o n n e c tio n w ith h e lp in g W e stw a yo b tain a l oan forthi s pr oj ect . I s i gned the documentatthatt i m e.

. . .10

I a s k e d h i m a tth e t i m e w h e n h e w o u l d h a v e m o r e p e o p l e o n th e j o b . We w er e gett i ng a l i t t l e frus tr at ed and he had made s om e pr om i s es t o us that theyw er e goi ng t o be abl e t o s t arti m m edi at el y . H e t ol d m e theyneede d s om e money . M oneyw as pai d up i n s om e otherj obs . I f I coul d s i gn a re q u isitio n f

o r th e m to g e t a lo a n , the yw o u ld h a v e p e o p le th e re a little q u icke r. S o in c o n n e c tio n w ith th a t, I sig n e d th e d o c u m e n t. A d d iti o n a lly , R e in g o ld tes tifie d in h is p re trial d e p o sitio n th a t “[ i]t w a s c e rta in lyin H u n ts Poi nt ’ s i nt er es tt o m ake s ur e thatW es tw ayw as abl e t o s t aff the j ob pr oper l y . B ys i gni ng the document , thati s w hatI thoughtI w as doi ng. ” R ei ngol d r ei t er at ed thi s s ent i m entat tr i al , t es t i fy i ng thathe s i gned the fi r s tN O P becaus e he be l i eved he w as hel pi ng W es tw ay ob t ai n a loan t o acq uir e fi nan ci ng for the P roj ect , w hich w as i n H un t s Po i nt’ s i nter est b e c a u se h e w a n ted c o n stru c tio n to c o n tin u e . A lth o u g h R e in g o ld sa id it w a s g e n e ra llyh is pr act i ce t o r ead doc um ent s befor e s i gni ng them on behal f of H unt s Poi nt , he t es t i fi ed that he di d notr ead the fi r s tN O P befor e s i gni ng i t , nothi ng w as att ache d t o i t , and he di d not n o t i c e th a tth e d o c u me n t ’ s c a p t i o n s a i d “ n o t i c e o f p u r c h a s e o f

a c c o u n t s r e c e i v a b l e . ” He tes tifie d th a t: I d i d n ’ tr e a d i t . I h a d n o r e a s o n t o b e l i e v e wh a t[ P a r k e r ] wa s t e l l i n g me w oul d be i ncorr ect . I t ook hi m athi s w or d. I thoughti tw as goi ng t o be s om ethi ng thatw oul d hel p hi m do the j ob a l i t t l e bi tqui ckerand I s i gned the document . . . . I thoughtI w as s i gni ng s om ethi ng acknow l edgi ng that w e had a contr actw i th t hem and t hen [Parker ] w as goi ng t o be abl e t o go o u t an d b o rro w m o n e ya g a in st th a t w ith o u t co m m itt in g H u n ts P o in t to anythi ng. T hat ’ s w hatI thoughtI w as s i gni ng. M adi s on i s s ued fi ve more N O Ps, and W es tw ay , H unt s Poi nt( vi a R ei ngol d) , and M a d iso n e x e c u ted f

o u r o f th e m . T h e ter m s o f

N O P s tw o th ro u g h f

iv e w e re id e n tica l toM a d iso n d id n o t se e k re c o v e ryin th e f o rm o f d a m a g e s f

o r th e a m o u n t in th e six th 2 N P O in its c a se b e f

o re th e D istric t C o u rt. 11 the fi r s tN O P, exce ptthateac h r efl ect ed a di ffe r enti nvoi ce a m ountthatH unt s Poi ntow ed M a d iso n . R e in g o ld tes tifie d th a t h e d id n o t re a d N O P s tw o th ro u g h f iv e , d id n o t re tain c o p ie s o f th e m , a n d d id n o t in f

o rm a n y o n e a t H u n ts P o in t th a t h e h a d s ig n e d th e m . R e in g o ld re f

u se d to sig n th e six th N O P b e c a u se o f H u n ts P o in t’s d iss a tisf a c tio n w ith W e stw a y ’s p e rf

o rm a n c e o n th e P rojec t. 2 Forthe fi r s tN O P, Sneddon forw ar ded a f undi ng r eques tt o B r ew er - R os s i bas ed on the February28, 2000 r equi s i t i on, w hi ch cons i s t ed of the document s Sneddon obt ai ned and as s embl ed bef

or e M adi s on advanc ed anyfunds , i ncl udi ng var i ous i nform at i on r el at ed t o the tr ans act i on and H unt s Poi nt ’ s fi nanci al condi t i on. Sneddon t es t i fi ed thathe f o llo w e d th e sa m e p ro c e d u re f o r f u n d in g e a c h o f

th e o th e r f

o u r H u n ts P o in t ac c o u n ts fr om W es tw ay . B r ew er - R os s i funded e ach of the r equi s i t i ons byarr angi ng a w i r e tr ans fer fr om M adi s on t o W es tw ayforappr oxi m at el y70% of thei rfac e amount . She t es t i fi ed that M a d iso n w ire -tra n sf

e rre d th e m o n e yto W e stw a yf o r th e f irst f iv e N O P s o n lya f

ter it r ece i ved document at i on thatthe N O P w as exec ut ed byal l thr ee pa r t i es . I n t ot al , M adi s on a d v a n c e d a to ta l o f

$ 1 ,9 6 1 ,1 4 9 .7 0 to W e s tw a yb a s e d o n th e H u n ts P o in t a c c o u n ts . Subt r act i ng the amountw i r ed forthe s i xth N O P, w hi ch R ei ngol d nevers i gned, M adi s on adv anced $1 , 79 8, 30 0. 00 t o W estw ay , i ncludi ng $2 50 . 00 i n ex tra fees.12 D . P robl em s at M adi s on S n e d d o n , M a r o z z i , Br e we r - Ro s s i , a n d M a g u i r e a l l t e s t i f i e d th a ta tth e t i me S ned do n recei ved the assi gn m ents and si gn ed the fi ve N O P s for the W estw ayaccou nts , M a d iso n w a s n o t aw a re th a t W e stw a yw a s in d e f a u lt fo r a n yo f

its o b lig a tio n s to H u n ts Poi ntorthatanyof the r equi s i t i ons w as fal s e orfr audul ent . I n fac t , H unt s Poi ntm ade r egul arpaym ent s on t he N O Ps fr om A pr i l 2000 t o Sept ember2000, i ncl udi ng fourchec ks pay abl e t o W es tw aythatw er e endor s ed t o M adi s on t ot al i ng $1, 358, 565. 00. M adi s on c re d ite d th e s e p a ym e n ts to w a rd th e m o n e yH u n ts P o in t o w e d o n th e W e s tw a ya c c o u n ts . H u n ts P o in t m a d e tw o a d d iti o n a l p a ym e n ts p a y a b le to W e stw a yth a t w e re e n d o rse d to S e rv ic e C a p ita l, to ta lin g $ 2 6 3 ,4 9 7 .7 4 , w h ic h M a d is o n d id n o t r e c e iv e a n d d id n o t c re d it. H unt s Poi ntdr ew anotherchec k i n the amountof $60, 000. 00 t o the or derof W es tw ayt hat w as al s o endor s ed byW es tw ay . M adi s on l i kew i s e di d notr ece i ve orcr edi tthi s chec k beca us e the pl ai n l anguage of the N O Ps di d notal l ow H unt s Poi ntt o payW es tw ay di r ect l yforthe amount s due on them. M adi s on r ece i ved a c as hi er ’ s chec k dat ed Sept ember25, 2000, i n t he amountof $200, 000. 00, and agr eed t o cr edi tthats um t o t he H u n t s P o i n ta c c o u n ta n d r e d u c e i t s d a m a g e s c l a i m a c c o r d i n g l y. M adi s on fi r s tl earned of H unt s Poi nt ’ s di s s at i s fac t i on w i th W es tw ay ’ s w or k on t he P rojec t in S e p tem b e r 2 0 0 0 . In a S e p tem b e r 1 1 , 2 0 0 0 f a x , S n e d d o n se n t th e six th N O P to H unt s Poi ntand W es tw ayfors i gnatur es t o appr ove a $233, 000. 00 advanc e fr om M adi s on to W e stw a y , w h ich H u n ts P o in t re f u se d to sig n . M a d iso n w ire -tra n sf e rre d th e a d v a n c e to13

W estw aybefo re obt ai ning H un t s Po i nt’ s si gn ature on the N O P . H un t s Po i nt m ade it s l ast paym entt o W es tw ayon Sept ember20, 2000. R ei ngol d s t at ed thatbyO ct ober16, 2000, he had appr oved over$2 m i l l i on of paym ent s fr om H unt s Poi ntt o W es tw ayunderthe part i es ’ tw o cons truct i on contr act s r el at i ng t o the Pr oj ect . I n a l ett erdat ed O ct ober5, 2 0 0 0 , H u n ts P o in t in f

o rm e d W e stw a yth a t itw a s in d e f a u lt u n d e r o n e o f

th e c o n tra c ts and, i n an O ct ober12, 2000 l ett er , W es tw aydeni ed thati tw as i n defa ul t . I n a D ece m ber 20, 2000 l ett er , M adi s on i nform ed H unt s Poi ntthatW es tw ayhad def aul t ed underthe Pur chas e A gr eementand advi s ed H unt s Poi ntthatal l m oneydue t o W es tw ayw as t o be pai d di r ect l yt o M adi s on. O ne orm or e r epr es ent at i ves fr om M adi s on cal l ed H unt s Poi nt t o demand paym ent s on t he out s t andi ng acc ount s . H unt s Poi ntdeni ed thati tow ed money a n d m a d e n o p a ym e n ts to M a d iso n . B re w e r-R o ss i ca lcu late d th e to tal a m o u n t H u n ts Poi nts t i l l ow ed M adi s on as $1, 010, 435. 00. I n 1999 and 2000, M adi s on had appr oxi m at el yfi ft een t o tw entycl i ent s , i ncl udi ng W estw ay . F ew er tha n tw o y ea rs af ter i ts fo rm ati o n , M ad ison d isco v ere d that M ag u ir e wa s d i v e r t i n g p a yme n t s t o S e r v i c e Ca p i t a l . Br e we r - Ro s s i a n d M a r o z z i b e c a me s us pi ci ous of ce r t ai n defa ul t ed ac countpaym ent s , and bega n thei row n i nt ernal i nves t i gat i on. T heyconfr ont ed M agui r e w i th thei rfi ndi ngs i n N ovember2000, and he confe s s ed t o s t eal i ng funds fr om M adi s on and pr om i s ed t o payback the moneyhe had t aken. M ar ozzi t es t i fi ed thatM agui r e comm i t t ed a “ m as s i ve fr aud, ” r es ul t i ng i n a fi nan ci al l oss t o M adis on of o ver $7.6 m i l l i on . A round this t i m e, S ned do n als o14

di s cover ed s om e tr oubl i ng fac t s r egar di ng M adi s on’ s m ai nt enanc e of the W es tw ay acc ount s and, al though he di d notconfr ontW es tw aydi r ect l yw i th thes e fi ndi ngs , he r el ay ed hi s conce r ns t o M agui r e and the i ndi vi dual s atM adi s on’ s Pi ne B r ook offi ce, w ho to ld h im th e yw o u ld “ ta k e c a re o f it.” A s a re su lt o f

M a d iso n ’s d isc o v e ryo f h is f ra u d , M a g u ire tra n sf

e rre d h is in ter e st in M adi s on, as hel d t hr ough Ser vi ce Capi t al , t o C herbr ooke and the M orr occo G r oup by as s i gnm enton J anuary11, 2001. H e r es i gned fr om M adi s on and w as barr ed fr om conduct i ng anyfutur e bus i nes s on i t s behal f. E ventual l y , M agui r e and Servi ce Capi t al exec ut ed a c ons entj udgm entfor$1. 3 m i l l i on i n favorof M adi s on, ent er ed i n the Super i or C our tof N ew J er s ey . A N ew J er s eygr and j uryi ndi ct ed M agui r e on N ovember7, 2001, forfi r s t - degr ee moneyl aunder i ng, s econd- degr ee theftbydece pt i on and bad c heck char ges , as w el l as offe ns es r el at ed t o the moneyhe s t ol e fr om M adi s on. I n 2002, M agui r e w as convi ct ed of a fel onybas ed on the cha r ges ar i s i ng outof hi s oper at i on and m anage m entof M adi s on fr om 1999 t o 2000. E . P roce dural H i s t ory M adi s on fi l ed i t s compl ai ntagai ns tH unt s Poi nti n the D i s tr i ctC our t , cl ai m i ng co ll ec ti o n o f a cc o u n ts un d er U . C . C . A rt icl e 9 , b rea ch o f c o n tr ac t, an d p rom issory es t oppel . Fol l ow i ng di s covery , M adi s on fi l ed a mot i on fors um m aryj udgm ent , w hi ch the D i s tr i ctC our tdeni ed on M ar ch 1, 2004, the daybefor e tr i al comm ence d. T he D i s tr i ct C o u rt h e ld a b e n c h trial. O n M a rc h 1 7 , 2 0 0 8 , the D istric t C o u rt d e ter m in e d th a t H u n ts15

P o in t w a s lia b le to M a d iso n f o r b re a c h o f

c o n tra c t, co n c lu d in g th a t th e N O P s w e re v a lid an d en fo rce ab le, an d , in the alt ern ati v e, de term ining that the d o ctri n e o f p rom issory e s t o p p e l wo u l d a l s o r e n d e rth e NOPs e n f o r c e a b l e . I td e c l i n e d t o r e a c h M a d i s o n ’ s U. C. C. A r t i cl e 9 cl ai m s , s t at i ng that“damages w oul d be no gr eat erthan thos e forl i abi l i tyfor b rea ch o f c o n tr ac t” i f itfo u n d H u n ts Po int l iable u n d er A rt icl e 9 . T h e D istri ct C o u rt or der ed j udgm enti n favorof M adi s on i n the amountof $1, 010, 435. 00, the ful l amount of i t s cl ai m , pl us pos t -

j udgm enti nt er es tand cos t s t o be t axed, butdeni ed pr ej udgm ent in ter e st to M a d iso n . H u n ts P o in t f iled a tim e lyn o tice o f

a p p e a l. M a d iso n f

iled a tim e ly not i ce of cr os s - appea l , i n w hi ch i ts eeks pr ej udgm enti nt er es tof atl eas t$396, 830. 11. II. T he D i s tr i ctC our thad s ubj ectm att erj ur i s di ct i on overthi s di ver s i tyact i on pur s uantt o 28 U . S. C . § 1332( a) . W e exe r ci s e j ur i s di ct i on overthi s appea l under28 U .S .C . § 1 2 9 1 . T h e “ iss u e o f c o n tra c t f

o rm a tio n in v o k e s a m ix e d sta n d a rd o f a p p e llate revi ew . T he d i stri ctcou rt ’s factual fi nd i ng s, especi al l yw i th respectt o the part i es’ in ten tio n s, w ill n o t b e re v e rse d u n les s th e re c o rd d e m o n stra tes th a t th e ya re c lea rly err oneous . ” A TA CS C or p. v. Trans W

or ld C om m ’ ns , 1 5 5 F . 3 d 6 5 9 , 6 6 5 (3d C ir . 1 9 9 8 ); see al so F e d . R . C iv . P . 5 2 (a ). “S im ilarly , the in terp re tatio n o f c o n tra c tu a l lan g u a g e to d iscern co n tr ac tual inten t i s a f ac tual q u esti o n , w h ich w e w il l acc o rdin g lyrev iew u n d er a cl ear l yerr oneous s t andar d. C oncl us i ons dr aw n w i th r es pectt o the l egal eff ectof any agr eement , how ever , ar e ques t i ons of l aw and ther efor e s ubj ectt o pl enaryr evi ew . ”16

AT ACS , 15 5 F . 3d at66 5 (ci t at i on om i t t ed). R egardi ng H un t s Po i nt’ s ot her ar gu m ents ,

“ [ t]h e d istric t co u rt’s f

in d in g s o f

f a c t ar e su b

jec t to th e c lea rlye rro n e o u s s tan d a rd , an d its concl us i ons of l aw ar e s ubj ectt o pl enaryr evi ew . ” Meni chi niv. G r ant , 995 F. 2d 1224, 1228 ( 3d C i r . 1993) . “A s a fe der al courtexer ci s i ng di ver s i tyj ur i s di ct i on, w e ar e obl i ged t o appl ys t at e s ubs t ant i ve l aw . . . . ” I d. at 12 2 8 n . 2 . F inally , w ith resp ec t t o M ad ison ’s cr os s - appea l , “[w ] e r evi ew a di s tr i ctcourt ’ s det erm i nat i on t o r equi r e the paym entof pr ej udgm enti nt er es tforabus e of di s cr et i on. ” T h a b a u lt v. C h a it , 541 F. 3d 512, 533 ( 3d C i r . 2008) ( ci t i ng A mb r o mo v a g e v . Un i t e d Mi n e Wo rke rs o

f A m. , 726 F. 2d 972, 982 ( 3d C ir . 1 9 8 4 )).W h e th e r M a d is o n e n g a g e d in f ra u d u le n t c o n d u c t in f

lu e n c e s m u c h o f

o u r a n a lysis . 3 H unt s Poi ntar gues thatthe D i s tr i ctC our terr oneous l yfound thatM adi s on di d not part i ci pat e i n W es tw ay ’ s fac t or i ng of fa l s e i nvoi ces and di d notknow ors houl d nothave know n of thi s fr aud. B as ed on ourr evi ew of the fa ct s , w e ca nnotconcl ude thatthe D i s tr i ctC our tcl ear l yerr ed i n i t s fi ndi ngs , and thus r ej ectH unt s Poi nt ’ s ar gum ent s al ong thos e l i nes . W hi l e i ti s cl earthatM agui r e comm i t t ed fr aud w hi l e a pr i nci pal atM adi s on, w e ar e notconvi nced thatM adi s on ori t s otherempl oy ees knew ors houl d have know n of h is p e rv a siv e f

ra u d . O u r c o n c lu sio n th a t th e D istric t C o u rt’s d e ter m in a tio n o f th e f a c ts w a s la rg e ly co rr e c t u n d e rl ie s o u r l e g a l c o n c lu s io n s . See F e d . R . C iv . P . 5 2 (a )(6 ); see al so A n d e rs o n v . B e ss e m e r C ity , 4 7 0 U . S . 5 6 4 , 5 7 3 -76 (19 8 5 ). Fur ther , H unt s Poi ntar gues thatthe D i s tr i ctC our terr ed i n fai l i ng t o bi nd M adi s on bythe ac t s of i t s agent s , Sneddon and M agui r e. B eca us e w e fi nd i tques t i onabl e w hether Sneddon had know l edge of anyfr aud i n the i nvoi ces he fa ct or ed on the H unt s Poi nt acc ount s , w e conc l ude thatthe D i s tr i ctC our tdi d noterri n fi ndi ng i ns uffi ci entevi dence thatthe N O Ps w er e fr audul entorthatSneddon had know l edge of fr aud w hen pr epar i ng the pape rw or k forthe H unt s Poi ntN O Ps. A ddi t i onal l y , M agui r e’ s m as s i ve fr aud w as not w i thi n the s cope of

hi s empl oym entatM adi s on beca us e hi s act s w er e cl ear l ycr i m i nal and n o t in h is e m p lo y e r’ s in te re s t. See G ot thel f v. P r op. M

gm t . Sys . , I

nc. , 459 A . 2d 1198, 1 1 9 9 -12 0 0 (N . J. S u p er. C t. A p p . D iv. 19 8 3 ). 17 III . 3 A . C ont ract T heori es H u n ts P o in t ar g u e s th e D istric t C o u rt e rre d in h o ld in g th a t th e N O P s w e re v a lid and enf or cea bl e contr act s , as s ert i ng thattheyfai l forl ack of cons i der at i on, the i nvoi ces w er e fa l s e and una t t ache d t o t he N O Ps w hen M adi s on r ece i ved the s i gned and de l i ver ed c o p ies , an d M a d iso n w a iv e d its rig h t to in sis t o n p a ym e n t f ro m H u n ts P o in t b yk n o w in g ly al l ow i ng H unt s Poi ntt o payW es tw aydi r ect l y . W e conc l ude, how ever , thatH unt s Poi nt breached i t s obli gati on t o p aythe am ou nts ow i ng i n the N O P s und er cont ractpri ncipl es.18

H unt s Poi ntar gues the N O Ps fa i l forl ack of cons i der at i on beca us e W es tw ayhad a pr eexi s t i ng dutyt o per form the cons truct i on contr act s , the N O Ps w er e not“bar gai ned for in f a c t,” a n d H u n ts P o in t d id n o t re c e iv e th e b e n e f it o f W e stw a yc o m p letin g its c o n tr a c tu a l d u t i e s a s a r e s u l to f i t s a l t e rn a t e f

u n d i n g s o u r c e . Un d e rNe w J e r s e yl a w, “[v] al uabl e cons i der at i on m ayt ake the form of ei thera detr i m enti ncurr ed bythe pr om i s ee ora bene fi tr ece i ved bythe pr om i s or . ” C ont ’ lB ank of P a. v. B ar clay Ri di ng A cad. , I nc. , 4 5 9 A. 2 d 1 1 6 3 , 1 1 7 2 ( N. J . 1 9 8 3 ) . I n a s i mi l a rCo n n e c t i c u tc a s e , wh i c h we fi nd per s uas i ve, a di s tr i ctcourthel d thatN O Ps of a ccount s r ece i vabl e w er e s uppor t ed by cons i der at i on w her e the deve l operof a ba s ebal l s t adi um agr eed t o as s i gn hi s debtt o a fac t or i ng companythr ough t he N O Ps a nd, i n doi ng s o, r el i nqui s hed hi s r i ghtt o paythe s u b c o n tr a c to r d ir e c tly f o r t h o s e d e b ts . See B r ookr i dge Fundi ng C or p. v. N w . H um an Servs. , 1 7 5 F . S u p p . 2 d 3 5 5 (D . C o n n . 2 0 0 1 ), m odi f i ed , 2004 W L 1897004 ( D . C onn. A u g . 1 8 , 2 0 0 4 ), m odi

f i ed , 2 0 0 7 W L 1 8 3 4 1 7 5 (D . C o n n . Ju n e 2 6 , 2 0 0 7 ) (B ro o krid g e III ), a ff’d , 2009 W L 1174666 ( 2d C i r . M ay1, 2009) ( notpubl i s hed) . T he courthel d thatt he devel oper , i n s i gni ng the N O Ps, r ece i ved the bene fi tof the s ubcontr act orcont i nui ng cons truct i on on the s t adi um , as oppos ed t o pos tponi ng the pr oj ectt o w ai tforthe su b co n tr ac tor’s origina l fi n an cing so u rce , an d that ad eq u ate c o n side rati o n there fo re re n d e re d th e N O P s e n f

o rc e a b le . B ro o krid

g e III, 2 0 0 7 W L 1 8 3 4 1 7 5 , a t* 1 - 3 . S i m i l a r l y, h e re , R e in g o ld ’s te stim o n yin d ica tes th a t h e sig n e d th e N O P s b a se d o n h is d e sire to e x p e d ite c o n stru c tio n o n th e P rojec t. A lth o u g h W e stw a ya lre a d yh a d a c o n tra c tu a l d u tyT o the ext entthatH unt s Poi ntar gues R ei ngol d w as fr audul ent l yi nduced t o s i gn 4 the N O Ps byW es tw ay ’ s empl oy ees ’ r epr es ent at i ons , w e di s agr ee. T he evi dence does not demonstr at e thatW es tw aym ade s peci fi c mi s r epr es ent at i ons on w hi ch R ei ngol d r el i ed, n o r d o e s it sh o w th a t an y o n e p re v e n ted R e in g o ld f ro m re a d in g th e N O P s to a sc e rta in th e ir m eani ng hi m s el f, orthatR ei ngol d w as unabl e t o as k Sneddon aboutthei ri m por tdur i ng th e M a rc h 2 , 2 0 0 0 p h o n e c a ll o r o n h is o w n in itia tiv e . See G r as v. A s s ocs . F i rs tC api tal C or p. , 786 A . 2d 886, 894 ( N . J . Super . C t . A pp. D i v. 2001) ( “Fai l i ng t o r ead a contr act does notexcus e per form ance unl es s fr aud orm i s conductbythe otherpartypr event ed one fr om r eadi ng. ” ( i nt ernal quot at i on m arks om i t t ed) ) . T her efor e, w e nee d notr eac h the ci vi l pr ocedur e i s s ue of w hetherH unt s Poi nteff ect i vel yr ai s ed the def

ens e of f r audul ent in d u c e m e n t b e f

o re th e D istric t C o u rt. 19 t o pr ovi de the cons truct i on s ervi ces t o H unt s Poi nt , R ei ngol d s i gned the N O Ps t o al l ow H u n ts P o in t th e a d d iti o n a l b e n e f it o f W e stw a y ’s c o n stru c tio n w o rk o c c u rrin g b e f o re it o th e rw i s e w o u l d h a v e , a b s e n ts u f f i c i e n tf u n d i n g . F u r th e r m o r e , M a d i s o n , n o tW e s tw a y, advanc ed the funds , and thus the bene fi t , t o H unt s Poi nt , and M adi s on s uffe r ed a cons i der abl e detr i m enti n advanc i ng l ar ge s um s of m oneyt o W es tw ay . T her efor e, c o n sid e ra tio n e x ists b o th a s to th e b e n e f its H u n ts P o in t re c e iv e d , an d th e d e trim e n ts M adi s on s uffe r ed. B eca us e w e r es ol ve thi s i s s ue undercontr actpr i nci pl es , w e nee d not 4 d e c id e w h e th e r th e N O P s a re a lso e n f o rc e a b le u n d e r th e d o c trin e o f p ro m iss o rye sto p p e l. N e x t, w e a g re e w ith M a d iso n th a t th e N O P s a re v a lid a n d e n f o rc e a b le d e sp ite bei ng exec ut ed w i thoutthe r efe r ence d i nvoi ces att ache d. B oth part i es agr ee thatthe dol l aramount i ndi cat i ng the moneyH unt s Poi ntow ed M adi s on w as pr es enton the fa ce of eac h N O P, and thus the es s ent i al t erm ati s s ue w as cons pi cuous l yavai l abl e for in te rp re ta tio n b yb o th H u n ts P o in t a n d th e D is tr ic t C o u rt . See M alakerC or

p. St ockholders P r ot ect i ve Com m . v. F i rs tJer s ey Nat ’ lB ank , 39 5 A . 2d 22 2, 22 7 (N . J.20

Super . C t . A pp. D i v. 1978) ( expl ai ni ng thata contr acti s defi ni t e enough a nd cont ai ns e ss e n tial te rm s w h e n it en a b les a c o u rt to d e ter m in e w h a t “th e p ro m iso r u n d e rto o k to do”) . Fur ther , w e fi nd the ca s e upon w hi ch H unt s Poi ntr el i es forthe pr opos i t i on thatt he N O P s a re in v a lid w ith o u t th e a tta c h e d in v o ic e s d is tin g u is h a b le . See 21s tC api talC or p. v. Ti f f any & C o. , N o . L -1 9 8 8 -0 4 , 2 0 0 8 W L 3 1 3 4 5 5 (N .J . S u p e r. C t. A p p . D iv . F e b . 6 , 2 0 0 8 ). I n contr as tt o t he N O Ps a ti s s ue her e, the N O P- equi val enti nvoi ce i n 21s tC api talw as w h o lly a n d c le a rl yf

ra u d u le n t. I

d. at*2. W e nex tcon si der H un t s Po i nt’ s ar gu m ent that M adis on w ai ved i t s r i gh tt o insi st on s tr i ctcompl i ance w i th t he N O Ps byknow i ngl yal l ow i ng H unt s Poi ntt o payW es tw ay the amount s M adi s on i ns i s t s w er e due t o i t . W e di s agr ee, i n part , beca us e H unt s Poi nt neverpai d ei therM adi s on orW es tw aythe maj or i tyof the moneyati s s ue, and thus M a d is o n h a s n o t w a iv e d H u n ts P o in t’ s n o n p a ym e n t o f th a t a m o u n t u n d e r a n yth e o ry. H ow ever , w e fi nd per s uas i ve H unt s Poi nt ’ s ar gum entthatthe D i s tr i ctC our ts houl d have cr edi t ed tw o addi t i onal paym ent s H unt s Poi ntm ade t o W es tw ayw hen i tcal cul at ed the amount of M adi s on’ s damages . H unt s Poi ntm ade the A ugus t2000 and Sept ember2000 paym ent s di r ect l yt o W es tw ay , exac t l yas i thad done w i th the fourear l i erchec ks , but W e stw a ye n d o rse d th e c h e c k s to S e rv ice C a p ital ra th e r th a n M a d iso n . M a d iso n d id c re d it fourear l i erpaym ent s H unt s Poi nthad made t o W es tw aythatw er e s ubs equent l yendor s ed t o M adi s on. B eca us e M agui r e ow ned Servi ce Capi t al , Ser vi ce Capi t al w as an or i gi nal c o rp o ra te m e m b e r o f

M a d iso n , itsh a re d M a d iso n ’s B rid g e w a ter , N e w Je rse yo f f ice w ith21

M agui r e and Sneddon, and M agui r e us ed Servi ce Capi t al as a vehi cl e thr ough w hi ch he p e rp e tr a t e d h i s f

r a u d , we c o n c l u d e th a tHu n t s P o i n ts h o u l d n o tb e a rth e l o s s f o rth e two p a ym e n ts th a t w e re im p ro p e rlyd iv e rte d f ro m W e stw a yto S e rv ice C a p ital. T h u s, w e w ill r e d u c e M a d i s o n ’ s d a ma g e s a wa r d b y$ 2 6 3 , 4 9 7 . 7 4 t o c r e d i tHu n t s P o i n tf o rth e two c h e c k s it m a d e p a y a b le to W e stw a yth a t w e re e n d o rse d to S e rv ice C a p ital, b u t w ill otherw i se affi rm the D i stri ctC ou rt ’s cal culat i on of d am ages.

B . H unts P oi nt ’ s U . C . C . A rt i cl e 9 D ef ens es H unt s Poi ntar gues thatthe D i s tr i ctC our ts houl d have appl i ed the pr i nci pl es of the N e w J e rs e ya d a p ta tio n o f U .C .C . A rt ic le 9 , s ee N .J. S tat. A n n . § 1 2 A :9 -4 0 3 (b ), in res olvi ng this case. T his w ou l d h ave all ow ed H un t s Po i nt t o asser tdefe nses against W e stw a ya n d w o u ld h a v e re su lted in a f in d in g th a t H u n ts P o in t w a s n o t li a b le to M adi s on. M adi s on cont ends thati tcl ai m ed A r t i cl e 9 col l ect i on of ac count s as an addi t i onal gr ound forr el i ef a gai ns tH unt s Poi ntand, beca us e the D i s tr i ctC our tfound H unt s Poi ntl i abl e undercontr actl aw , i tw as unnece s s aryt o r eac h M adi s on’ s A r t i cl e 9 arg u m en ts, an d there fo re the D istri ct C o u rtp rop erlyref u sed to co n side r H u n ts Po int’ s corr es pondi ng A r t i cl e 9 def ens es . T he part i es do notdi s put e thatA r t i cl e 9 appl i es t o the N O Ps a ti s s ue, butr athercont es tw hetherH unt s Poi nt ’ s A r t i cl e 9 def ens es pr ovi de i tany a p p e llate re lief

in lig h t o f

H u n ts P o in t’s c o n tra c tu a l li a b ili tyto M a d iso n . W e a g re e w ith M adi s on thatthe D i s tr i ctC our tdi d noterri n decl i ni ng t o r eac h H unt s Poi nt ’ s A r t i cl e 9 d e f e n se s in lig h t o f

n o t d e c id in g th e p re lim in a ryiss u e o f w h e th e r H u n ts P o in t w a s lia b leN e v e rth e les s, e v e n if w e a g re e d w ith H u n ts P o in t th a t w e sh o u ld c o n sid e r its 5 A r t i cl e 9 def

ens es , thatdoes notm ean i tw oul d pr evai l on s uch an a r gum ent . H unt s Poi nt ar gues thatW es tw ay ’ s as s i gnm entof the N O Ps t o M adi s on w as notenfor cea bl e under N . J . St at . A nn. § 12A : 9- 403( b) beca us e M adi s on w as nota hol deri n due cour s e of the N O P s. T he st atute r eads: [A ]n a g ree m en t betw ee n an ac co u n t deb tor an d an assig n o r no t t o asse rt agai ns tan as s i gnee a nycl ai m ordefe ns e thatthe ac countdebt orm ayhave a g a in st th e a ss ig n o r is e n f o rc e a b le b ya n a ss ig n e e th a t tak e s a n a ss ig n m e n t: ( 1) forval ue; ( 2) i n good fai th; 22 t o M adi s on underA r t i cl e 9. Fur ther , w e ar e notper s uaded byanycas e l aw H unt s Poi nt has advanc ed thatw e ar e r equi r ed t o cons i dera def ens e t o the s t atut e abs enta fi ndi ng of l i abi l i tyunder§ 12A : 9- 403( b) . H unt s Poi ntar gues thatthe D i s tr i ctC our tacknow l edged i n anothercas e that“i tappea r s that[A r t i cl e 9] w oul d appl yunderthe N ew J er s ey A ppel l at e D i vi s i on’ s r ece ntdeci s i on i n 21s tC api tal . ” C api tal pl us E qui t

y, LLCv. P r is m at i c D ev. C or

p. , N o . 0 7 -0 3 2 1 , 2 0 0 8 W L 2 7 8 3 3 3 9 , * 5 (D .N .J . J u ly 1 6 , 2 0 0 8 ). H ow ever , as w e expl ai ned ea r l i er , w e fi nd 21s tC api talfac tual l ydi s t i nctfr om the i ns t ant cas e, and w e al s o fi nd C api tal pl us dis t i ng uis hab l e beca use t he d efen dan ti n thatcase n e v e r s ig n e d a w a iv e r o f d e f e n s e s c la u s e in its N O P -e q u iv a le n t f o rm , a s R e in g o ld d id . I d. a t * 4 , * 8 . B e c a u se H u n ts P o in t h a s f a iled to c o n v in c e u s th a t w e m u st a p p lyA rticle 9 to r es ol ve the i ns t antappea l , and bec aus e i tw ai ved i t s defe ns es i n s i gni ng the N O Ps, our r evi ew of i t s U . C . C . cl ai m w oul d t hus r es ul ti n the s ame out come as ouranal y s i s under c o m m o n law c o n tra c t p rin c ip les . W e th e re f o re re jec t H u n ts P o in t’s a rg u m e n ts th a t it shou l d b e rel i eved of li abil i tybased o n it s purport ed A rt i cl e 9 d efen ses. 5( 3) w i thoutnot i ce of a cl ai m of a pr opertyorpos s es s oryr i ghtt o the pr opertyas s i gned; and ( 4) w i thoutnot i ce of

a def ens e orcl ai m i n r ecoupmentof the type th a t m a yb e a ss e rte d a g a in st a p e rso n e n tit led to e n f o rc e a n e g o tiab le instrum en t un d er 1 2 A :3-3 0 5 a [ i. e., a h o lder in d u e c o u rse]. N .J. S tat. A n n . § 1 2 A :9 -4 0 3 (b ) (f o rm e rlyN .J. S tat. A n n . § 9 -2 0 6 ); see al so N . J . St at . A nn. § 12A : 9- 109( a) ( 3) . A l though w e nee d not , and w i l l not , undert ake a ful l anal y s i s of ea ch fac t ori n the s t atut e bec aus e w e have al r eadydeci ded thi s appea l undercontr act p rin c ip les , w e e x p re ss d o u b t th a t su c h a n in q u iryw o u ld p ro v e f ru itfu l f o r H u n ts P o in t – part i cular l ybecau se i tw ai ved anydefe nses i n si gn i ng the N O P s. In a d iv e rs ity a c tio n , w e a p p ly sta te la w in d e te rm in in g p re ju d g m e n t in te re s t. 6 Jar vis v. Johns on , 6 6 8 F . 2 d 7 4 0 , 7 4 6 (3d C ir . 1 9 8 2 ). 23 C . P rejud gm en t I n teres t M adi s on cr os s - appea l s the D i s tr i ctC our t ’ s deni al of an a w ar d of pr ej udgm ent i n t e r e s t . We r e v i e w th i s d e c i s i o n f o ra b u s e o f

d i s c r e t i o n a n d , u n d e rNe w J e r s e yl a w, a 6 “di s tr i ctcourtm ayexer ci s e [i t s ] di s cr et i on [t o aw ar d pr ej udgm enti nt er es t ] upon

‘ cons i der at i ons of fa i r nes s ’ and pr ej udgm enti nt er es tm aybe deni ed ‘ w hen i t s exac t i on w oul d be i nequi t abl e. ’ ” T h a b a u lt , 541 F. 3d at533 ( quot i ng A m br om ovage , 726 F. 2d at 98 2). “[T ]he purpo se of p rej ud gm ent i nter esti s t o ‘com pen sat e t he p l ai nti ff fo r the loss of i ncome t hatw oul d have be en ea rned on the j udgm enthad i tbeen pa i d ear l i er . ’ ” I d. ( quot i ng R uf

f v. W ei ntr aub , 519 A . 2d 1384, 1390 ( N . J . 1987) ) . “[T] he aw ar d of pr ej udgm enti nt er es ton contr actand equi t abl e cl ai m s i s bas ed on equi t abl e pr i nci pl es . ” C ount y of Es s ex v . F i rs tU

ni on N at ’ lB ank , 8 9 1 A . 2 d 6 0 0 , 6 0 8 (N . J. 2 0 0 6 ). F u rth er, “[t ] he tr i al courti s ves t ed w i th s ubs t ant i al di s cr et i on t o aw ar d ordenypr e- j udgm ent i nt er es ti n contr actcas es , and i t s exer ci s e of s uch di s cr et i on w i l l be s us t ai ned on appe al24

unl es s i tcons t i tut es a mani fes tdeni al of j us t i ce. ” P .F.I., In c . v. Ku lis , 832 A . 2d 931, 936 ( N . J . Super . C t . A pp. D i v. 2003) . T hus , w e cons i dernotw hetherw e w oul d have w ei ghed th e e q u iti e s d if

f e re n tlyth a n th e D istric t C o u rt d id , b u t w h e th e r it ab u se d its d isc re tio n in m aki ng i t s ow n det erm i nat i on. O n thes e fa ct s , w e ca nnotconcl ude thati tdi d. I V. Forthe af

or ement i oned r eas ons , w e w i l l aff i r m the D i s tr i ctC our t ’ s or deron the g r o u n d s th a tth e f

i v e NOP s a ti s s u e a r e v a l i d a n d e n f o r c e a b l e c o n tr a c t s . Ho we v e r , we w i l l r educe M adi s on’ s damages i n the amountof $263, 497. 74 t o cr edi tH unt s Poi ntfor tw o ad d it ion al pa ym en ts i t m ad e to W estw ay . F inally , w e w il l aff irm the D istri ct C o u rt ’s deni al of pr ej udgm enti nt er es tt o M adi s on.