Attorney General James Wins Lawsuit Against Northern Leasing Systems, Delivering Major Relief to Thousands of Small Businesses Nationwide
Court Vacates Nearly 30,000 Fraudulently Obtained Default Judgments and Permanently
Bans Northern Leasing from Engaging in Business Practice of Equipment Leasing
NEW YORK – New York Attorney General Letitia James has won a major victory in New York State Supreme Court that will deliver much needed relief to thousands of small business owners across New York and the rest of the nation. The sweeping decision will void what are potentially hundreds of thousands of fraudulently-induced credit card equipment leases; vacate approximately 30,000 default judgments acquired against out-of-state fraud victims in New York City Civil Court; and dissolve Northern Leasing Systems, Inc. Attorney General James’ victory will also force Northern Leasing and related entities, Northern Leasing’s chief executive officer, and others who engaged in the fraudulent scheme to provide restitution to small business owners who were deceptively and illegally induced into abusive and overpriced financing leases for inexpensive credit card processing equipment.
“This decision will put much-needed money back into the pockets of small business owners around the country, which is especially vital as owners and their families are reeling from the impacts of the COVID-19 public health crisis,” said Attorney General James. “This victory will not only provide direct relief to victims of Northern Leasing’s dishonest practices by cancelling future payments on these fraudulent leases, but will also award restitution to defrauded restaurant owners, shopkeepers, and thousands of other small business owners who entered into fraudulent lease agreements.”
In April 2016, the Office of the Attorney General (OAG) filed a lawsuit against the New York company Northern Leasing Systems and several of its affiliated companies, as well as principal Jay Cohen a/k/a Ari Jay Cohen and others involved in Northern Leasing’s operations. The lawsuit alleged that Northern Leasing targeted small, family-owned businesses, such as flower shops, hair salons, automotive repair shops, bodegas, delis, restaurants, and bars, and trapped them into overpriced, never-ending lease agreements for credit card processing equipment. The lawsuit further alleged that Northern Leasing abused the judicial process by suing to collect on these leases in the Civil Court of the City of New York. Deputy Chief Administrative Judge George J. Silver — as a co-petitioner in the proceeding — sought to vacate default judgments obtained by fraud, deception, or other improper means.
Since 2010, Northern Leasing and its related entities have filed tens of thousands of actions in New York County Civil Court and obtained over 29,000 default judgments. Over 95 percent of the small business owners sued by Northern Leasing do not reside in New York State and could not afford to physically appear in New York or hire an attorney to represent them. Over 5,600 complaints have been filed by small business owners with the OAG since 2010 — one of the highest volume of complaints against any entity filed with the OAG.
This ruling found that the OAG proved that Northern Leasing engaged in fraudulent and illegal conduct. In particular, the court found that Northern Leasing’s method of procuring its lease agreements was deceptive and “created an enterprise conducive to fraud.” The court also found that Northern Leasing’s requirement that small business owners across the country defend lawsuits in New York County Civil Court, combined with ineffective service provisions allowing service to obsolete addresses, thwarted the merchants’ ability to defend themselves in court and that the 29,617 default judgments be vacated and dismissed with prejudice, meaning that Northern Leasing cannot refile actions in another court to collect sums purportedly owed. Additionally, the court ordered a permanent injunction against respondents from conducting the business of equipment finance leasing or the collection of debts under equipment finance leases, and blocked them all from purchasing, financing, transferring, servicing, or enforcing equipment finance leases. Defrauded small businesses from April 1, 2013 through the present will receive restitution and their contracts covering the same dates will be null and void. Further, respondents must disgorge unlawful profits and Northern Leasing must dissolve 60 days after the implementation of the previously mentioned relief.
In addition to Northern Leasing Systems, the court’s order and judgment applies to several other affiliated companies named in the OAG’s lawsuit, including Leasing Finance Group LLC; MBF Leasing LLC; Lease Source-LSI; LLC a/k/a Lease Source, Inc.; Golden Eagle Leasing LLC; and Pushpin Holdings LLC. Finally, the court also held Jay Cohen, CEO of Northern Leasing, and Neil Hertzman, Northern Leasing’s vice president of customer service and collections, personally liable, and found Joseph I. Sussman, P.C., the company’s collection attorney, liable for participating in this fraudulent scheme. The firm and two of its attorneys are ordered to disgorge any attorney’s fees they collected from defendants in these cases since April 11, 2013.
The court will set restitution amounts at a later date. Small business merchants do not need to take any action at this time in order to receive restitution or other relief.
This matter was handled by Special Counsel Mary Alestra and Assistant Attorney General Mark Ladov, under the supervision of Deputy Bureau Chief Laura J. Levine and Bureau Chief Jane M. Azia — all of the Consumer Frauds and Protection Bureau. The Consumer Frauds and Protection Bureau is a part of the Division for Economic Justice, overseen by Chief Deputy Attorney General Christopher D’Angelo and First Deputy Attorney General Jennifer Levy.