Prof'l Solutions v. Seidman
19-0514
| Iowa | Jun 25, 2021Background:
- From 2005–2009, NCMIC financed purchase of Exhibeo multimedia systems for hundreds of optometrists/dentists under nearly identical finance agreements containing a hell‑or‑high‑water clause, a floating forum‑selection clause, and an 18% default interest provision.
- Vendor Brican allegedly promised ad revenue and buyback; advertising stopped, Brican refused to repurchase, and buyers stopped paying NCMIC/its assignee.
- After putative class suits in Florida, NCMIC created and assigned contracts to a wholly owned subsidiary, PSFS 3, to trigger the floating forum‑selection clause and sued hundreds of defendants in Polk County, Iowa.
- Federal MDL in Florida litigated common issues and issued rulings favorable to plaintiffs; Polk County stayed then later lifted its stay after Florida litigation concluded.
- Parties stipulated to try two bellwether cases whose rulings would be binding; district court used the bellwether damages methodology (missed payments × monthly amount) to enter judgments in those cases and later entered judgments against remaining defendants after PSFS 3 submitted individualized proposed judgments and defendants did not timely resist.
- Defendants appealed, raising personal jurisdiction (assignment/floating clause, sham assignment, res judicata), Chapter 535 disclosure/usury challenges, damages proof and due‑process for individualized damages, unconscionability of 18% default interest, and attorney‑fee issues.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of floating forum‑selection clause / assignment to PSFS 3 | Assignment valid; clause enforces jurisdiction where assignee HQ is located; PSFS 3 is a properly organized, capitalized subsidiary | Assignment was a post‑suit forum‑shopping sham; bare legal title transfer preserving benefits to NCMIC; therefore clause unenforceable | Assignment not a sham; clause enforceable unless unfair/unreasonable; jurisdiction in Iowa upheld |
| Res judicata effect of Florida MDL rulings on Iowa jurisdiction | Florida rulings denying transfer did not rule Iowa lacked jurisdiction; no identity of issues | Florida courts’ refusal to transfer forecloses Iowa actions | Res judicata not applicable; prior courts declined transfer but did not decide Polk County jurisdiction |
| Actions filed pre‑assignment (substitution of PSFS 3 as real party) | Substitution under Iowa R. Civ. P. 1.201 cures defect; defendants had notice | Original filings were nullities for lack of jurisdiction; amendment is void; due process violated | Substitution/ratification cured issue; due process not violated because defendants had notice and opportunity to defend |
| Wineinger defendants (unique contract lacking forum clause) | PSFS 3: Wineinger failed to preserve specific jurisdiction challenge | Wineinger: unique agreement contains no forum clause so Polk County lacks jurisdiction | Wineinger sufficiently denied jurisdiction but failed to press the issue in district court; claim forfeited |
| Chapter 535 disclosure (535.17) and usury (535.2) challenges | Agreements disclosed payment amount and number of payments—sufficient under Iowa law; transactions are business credit not subject to usury limits | Omitted interest rate is a material term; inability to calculate interest violates disclosure statute; undisclosed rate may be usurious | Rejected; Wolfe controls—disclosure of payment amount and term suffices; transactions are business purpose so usury provision inapplicable |
| Proof and method of damages (missed payments × payment amount) | Contract accelerates future payments; damages measured by accelerated unpaid payments; parties contracted remedies | Plaintiff failed to prove damages with reasonable certainty; must apportion principal/interest; amortization never provided | Court upheld plaintiff’s damage formula as a proper measure and consistent with contractual acceleration |
| Due process right to individualized trials on damages | PSFS 3: defendants had notice and opportunity to object to proposed individualized judgments; many did not respond | Defendants: deprived of a trial on individual damages; final judgments entered without individualized adjudication | Court held defendants were afforded opportunity to contest; their failure to timely resist meant no due‑process violation |
| Unconscionability of 18% default interest | PSFS 3: 18% is standard in industry and not unconscionable; parties negotiated business terms | 18% plus implicit interest produces punitive/double recovery and is unconscionable | 18% default interest not unconscionable under the record; doctrine requires extreme unfairness and was not met |
Key Cases Cited
- C & J Vantage Leasing Co. v. Wolfe, 795 N.W.2d 65 (Iowa 2011) (finance‑agreement disclosure/usury issues; payment amount and term can satisfy disclosure)
- Shams v. Hassan, 829 N.W.2d 848 (Iowa 2013) (prima facie standard for personal jurisdiction inquiries)
- Karon v. Elliott Aviation, 937 N.W.2d 334 (Iowa 2020) (forum‑selection clause enforceability: test for unfairness/unreasonableness)
- Aurora Bus. Park Assocs., L.P. v. Michael Albert, Inc., 548 N.W.2d 153 (Iowa 1996) (measure of contract damages—place plaintiff would have been)
- Bagelmann v. First Nat’l Bank, 823 N.W.2d 18 (Iowa 2012) (limits on implying new substantive contract terms via good faith/fair dealing)
- Iowa Supreme Ct. Comm’n on Unauthorized Practice of Law v. A–1 Associates, Ltd., 623 N.W.2d 803 (Iowa 2001) (sham assignment context cited by defendants)
- Emps. Mut. Cas. Co. v. Van Haaften, 815 N.W.2d 17 (Iowa 2012) (res judicata requires identical issues)
- Casey v. Lupkes, 286 N.W.2d 204 (Iowa 1979) (standard for unconscionability)