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FED Cetera LLC v. National Credit Services Inc.

United States District Court, D. New Jersey

January 30, 2018

FED CETERA LLC, Plaintiff,
v.
NATIONAL CREDIT SERVICES INC., Defendant.

          OPINION

          ROBERT B. KUGLER United States District Judge

         This breach of contract action comes before the Court on Defendant National Credit Services' (“NCS”) motion for Judgment on the Pleadings. (Doc. No. 14.) Plaintiff Fed Cetera, LLC seeks to recover a finder's fee for a debt-collection contract NCS entered into with the Department of Education, but NCS maintains that a finder's fee is inappropriate because it did not “consummate” the contract until after the expiration of the governing agreement between Fed Cetera and NCS. As we explain below, NCS's motion is GRANTED, as NCS has no obligation to pay Fed Cetera.

         I. THE FACTS

         This is, and only is, a breach of contract action. NCS is a Washington corporation in the debt collection business. (Compl. at ¶¶ 2, 5.) Net Gain is a consulting and business development firm that provides services related to the acquisition of federal contracts to businesses in the debt collection business. On February 1, 2010, NCS and Net Gain entered into a contract (the “Agreement”). (Id. at ¶ 2.)

         Under the Agreement, Net Gain was to seek and secure business for NCS, for which it would be paid a finder's fee. (Id. at 8.) A few years after entering the Agreement, on January 1, 2013, Net Gain assigned its rights to Plaintiff Fed Cetera, LLC, a New Jersey limited liability company. (Compl. at ¶ 9.) Today we consider the scope of Fed Cetera's rights under the Agreement, in particular and as relevant under this section:

If at any time during the term of this agreement, or one year thereafter (the “Applicable Period”), any Fee Transaction (as hereinafter defined) is consummated by Principal [NCS] or any entity controlling, controlled by or under common control with Principal (hereinafter referred to as a “Principal Affiliate”), then Principal shall pay to Consultant [Fed Cetera], for the duration of the term of any agreement resulting in Said Fee Transaction (a “Principal-Third Party Agreement”), including renewals, a finder's fee (the “Fee”) in the amount of two and one-half percent (2.5%) of gross revenues paid pursuant to the Principal-Third Party Agreement.
* * *
The term “Fee Transaction” also means the subsequent consummation of any contract with any Federal government agency for which Principal [NCS] has been invited to compete, and is later awarded a contract to perform, which both parties herein expressly agree shall have arisen due to any “teaming” or “subcontracting” engagement Finder [Net Gain] may have facilitated in advance of any such award of a contract by a Federal government agency.
The Fee shall be due and payable until fees are no longer generated from any and all Fee Transactions, within thirty (30) days after each receipt during such period by Principal or Principal Affiliate of revenue resulting from or in any way related to the Fee Transaction, including any fees paid after the expiration or termination of any contract by such Third Party.

(Compl. Ex. A ¶ 5.)

         It is clear the “Applicable Period” of the Agreement was for five years from the date of contracting, i.e. from February 1, 2010, to February 1, 2015. This is extended “for one year thereafter, ” or until February 1, 2016, for the payment of fees under the Agreement. We note also that the Agreement has an integration clause and is governed by the law of New Jersey.

         Net Gain had previously introduced NCS to the company Account Control Technology, a Private Collection Agency (“PCA”) with which NCS subsequently subcontracted. (Compl. at ¶¶ 11-12.) This appears to have been a “Fee Transaction” within the meaning of the Agreement, and Fed Cetera asserts that NCS has been paying what is essentially a commission fee for this introduction. (Compl. at ¶ 13.)

         In 2013, the Department of Education published a solicitation to contract with it as a PCA for collecting student loan debts. (Compl. at ¶¶ 6-7, 15.) The Department expressly invited NCS to participate. (Compl. at ¶ 15.) NCS and the Department then signed a contract (the “DOE Contract”) on September 30, 2014. (Id.) However, NCS did not begin performing work for the Department as a PCA until September 2016. (Compl. at ¶ 17.)

         Fed Cetera seeks a finder's fee for the DOE Contract, as it contends was provided for in the Agreement. Put differently, Fed Cetera argues the DOE Contract is a “Fee Transaction” consummated before February 1, 2016, arguing consummation of the DOE Contract occurred when it was executed on September 30, 2014. NCS disagrees, and has moved for judgment on the pleadings. It argues consummation of the ...


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