Court Allows A.G. Schneiderman's Lawsuit Against Northern Leasing Systems, Inc. To Proceed

News from Attorney General Eric T. Schneiderman

FOR IMMEDIATE RELEASE
December 6, 2017

Attorney General’s Press Office / 212-416-8060
nyag.pressoffice@ag.ny.gov
Twitter: @AGSchneiderman
 

COURT ALLOWS A.G. SCHNEIDERMAN’S LAWSUIT AGAINST NORTHERN LEASING SYSTEMS, INC. TO PROCEED 

AG Sued Northern Leasing for Deceptive Business Practices, Abuse of Judicial Power for Trapping Small Businesses into Equipment Leases, Then Suing to Collect Payment 

NYS Supreme Court Denies Northern Leasing’s Motion to Dismiss AG’s Fraud Suit 

Schneiderman: These Fraudulent Tactics Will Not Be Tolerated in New York 

NEW YORK—Attorney General Eric T. Schneiderman announced today that New York State Supreme Court Justice Lucy Billings has allowed his office’s lawsuit against Northern Leasing Systems, Inc. and related entities to proceed, finding that the lawsuit had adequately alleged that the companies engaged in fraud.

In April 2016, the Attorney General’s office filed a lawsuit against Northern Leasing Systems, Inc., a New York company, 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 alleges that Northern Leasing traps small businesses into never-ending lease agreements for over-priced credit card processing equipment and abused the judicial process by suing to collect on these leases in the Civil Court of the City of New York.

“This decision validates our efforts to take on those who deceive hard-working small business owners – and then abuse the court system to harass them with fraudulent and deceptive debt collection practices,” said Attorney General Schneiderman. “We’ll continue to move our lawsuit forward to make clear that these fraudulent tactics will not be tolerated in New York.”

Since 2010, Northern Leasing and its related entities have filed over 30,000 actions in New York County Civil Court and obtained over 19,000 default judgments. In 2014 and 2015, their filings accounted for over one fourth of the total general, commercial, and consumer debt filings in New York County Civil Court. From 2010 through 2015, Northern Leasing and related entities also generated the highest volume of complaints received by the Attorney General’s office. Over 95 percent of the small business owners sued by Northern Leasing do not reside in New York State, and many cannot afford to physically appear in New York or hire an attorney to represent them.  Deputy Chief Administrative Judge Fern A. Fisher, as a co-petitioner in the proceeding, was seeking to vacate default judgments obtained by fraud, misrepresentation or other illegal means.

The Court found that the Attorney General’s petition sufficiently alleged that Northern Leasing is engaged in fraudulent and illegal conduct. In particular, the Court found that lease provisions which might otherwise be enforceable – such as non-cancellation clauses, forum selection clauses allowing Northern Leasing to sue lessees in New York Civil Court, and agreements to accept service by mail – could be unconscionable and unenforceable in leases whose “formation is permeated with fraud” and where “lessees did not knowingly and freely give their consent to the leases’ terms.”

The Court also allowed claims seeking to dissolve Northern Leasing as a business to move forward and refused to dismiss Judge Fisher’s claims seeking to vacate thousands of default judgments received by Northern Leasing through its alleged abusive litigation practices. 

The Court additionally granted a motion by the New York City Bar Association to submit an amicus brief arguing that Northern Leasing should not be permitted to use the New York City Civil Court to collect on leases from around the country. The Bar Association’s brief described the harm done by Northern Leasing to lessees from around the country who must spend prohibitive amounts of money to defend against improper collections in New York City, as well as the impact of Northern Leasing’s large docket of collection cases on the limited resources of the court itself. The Court found that the Bar Association “presents the perspective of regular users of the New York City Civil Court . . . who are impacted by the deluge of thousands of collection actions that respondents commence in that court annually, which bear no connection to New York.”

In addition to Northern Leasing Systems, Inc., the Attorney General’s lawsuit named several other affiliated companies, 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.  The court dismissed the claims against Joseph I. Sussman, P.C., the law firm that represents Northern Leasing in New York City Civil Court, and its two lawyers, Joseph Sussman and Eliyahu Babad. 

Consumers who believe they have been a victim of Northern Leasing’s deceptive practices are urged to file complaints online or call 1-800-771-7755.

For more information about the Attorney General’s lawsuit, please visit http://ag.ny.gov/NLFAQ.

This proceeding is being handled by Special Counsel Mary Alestra and Assistant Attorney General Mark Ladov of the Consumer Frauds and Protection Bureau, under the supervision of Laura J. Levine, Deputy Bureau Chief of the Consumer Frauds and Protection Bureau, Bureau Chief Jane M. Azia, and Manisha M. Sheth, Executive Deputy Attorney General for Economic Justice.