A trucking company ("Assignor") filed for bankruptcy protection. During the bankruptcy proceedings, the Assignor assigned its accounts receivable to a factoring company ("Plaintiff-assignee"), which held a secured lien on the Assignor's accounts receivable. Among the assigned accounts receivable were invoices that Account Debtor, a construction firm, owed Assignor for trucking services provided to Account Debtor by Assignor. The mutual exchange of services between the Assignor and the Account Debtor historically allowed the Assignor and Account Debtor to set off their respective invoices against each other.
In analyzing whether the UCC allowed a setoff of the debt assigned to Plaintiff-assignee against the unrelated debt owed to Account Debtor by the Assignor, the Court examined whether the unrelated debt constituted "any other defense or claim . . . against the assignor which accrue[d]" before the Account Debtor had notice of the assignment of the accounts-receivable debt.
Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
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