SEPTEMBER 2005
BUSINESS LEASING NEWS
"Offering leasing and financing strategies for your success"
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Welcome to the September 2005
edition of Business Leasing News.
About BLN: This e-newsletter offers timely, concise information and
analysis backed by supporting research. BLN covers secured transactions,
leasing and banking as well as public, project and corporate finance
relating to transportation equipment such as business and commercial
aircraft, energy/wind power projects, production facilities, hardware
and software and health care assets.
Our subscribers come from more than 24 countries. We appreciate each of
you taking your valuable time to read BLN! If you are not a
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From:
David G. Mayer, a
partner at the law firm of Patton Boggs LLP. David is a member of the
firm’s
Business Practice Group. He is the founder of BLN (Jan. 2002) and
the author of the book, Business Leasing for Dummies ® (BLFD). BLFD may
be available on
Amazon.com.
|
1. Texas Legislature Takes Step Toward Business-Friendly Usury Law The 79th Texas
Legislature recently passed omnibus legislation that touches nearly every
aspect of state-regulated financial practices. Amending no less than 27
chapters of the
Texas Finance Code
(effective September 1, 1997) (Fin. Code),
House Bill 955 (HB
955) makes several significant changes to rules governing consumer and
commercial lending, including rules that take a more business-friendly approach
to setting rates of interest considered to be usurious under Texas law. *Terms to Know: In Texas, "Interest" means compensation for the use, forbearance, or detention of money. The term does not include time price differential, regardless of how it is denominated. "Usurious interest" means interest that exceeds the applicable maximum amount allowed by law. Fin. Code §§301.001(4) and (17). HB 955 is the result of an
interim study conducted by the Texas Legislature to identify those portions of
Texas law, such as cumbersome usury rules, that discourage major lending
institutions from locating in Texas and discourage commercial lending by
Texas-based institutions. Texas is one of very few states that regulates
interest rates for commercial loans among sophisticated parties. According to
the study, most states have no effective commercial usury laws for large
commercial loans, and only five other states cap interest rates for these
loans. See:
Senate
Committee on Business and Commerce, Interim Report to the 79th Texas
Legislature on Texas Usury Laws and Credit Counseling Services dated December 1, 2004 (at
p 4). Constitutional Changes Required
While
most of HB 955’s provisions were effective as of September 1, 2005, the
commercial lending rules involving usury require amendments to the Texas
Constitution. “Proposition
5”, which passed also as Senate Joint
Resolution (SJR) 21 during the 79th Regular Session, has been placed
on the November 8, 2005 statewide ballot. Proposition 5 would authorize the
Legislature to exempt commercial loans from state usury laws that set maximum
interest rates. *Technical Point: "Commercial loans" are loans made primarily
for business, commercial, investment, agricultural, or similar purposes and not
primarily for personal, family, or household purposes. Proposition 5 (SJR 21) reads proposes a “…constitutional
amendment allowing the legislature to define rates of interest for commercial
loans." Currently, the Texas
Constitution authorizes the Legislature to define interest and fix maximum
rates of interest, but does not provide the Legislature with the authority to
create outright exemptions from the maximum rates.
Texas
Constitution, Article XVI, §11. Several provisions of HB 955 depend upon approval of Proposition 5 by Texas
voters. If Proposition 5 fails in November, the commercial loan usury reforms
in HB 955 will become null and void. Industry Interest
Changes to usury laws are of interest to the
equipment leasing and finance industries because Texas courts often are asked
to determine whether a
lease arrangement
is a “true lease” or a “lease intended as security”. See:
Beating True Lease Challenges: A
Lessor's Guide to Structuring and Defending True Leases, by David G.
Mayer, LNJ’s Equipment Leasing Newsletter (Aug. 2004).
Generally, a true lease
will not be subject to interest rate usury provisions of the Finance Code, as
payments under the lease will be treated as rent and not interest. See, e.g., Transamerica Leasing Co. v. Three Bears,
Inc., 586 S.W.2d 472 (Tex. 1979). However, certain provisions of a lease
may be subject to the usury provisions of the Finance Code. See, e.g., Whitehead Utilities,
Inc. v. Emery Fin. Corp., 697 S.W.2d 460 (Tex. App.-Beaumont 1965)
(applying usury limitations to provision(s) requiring interest for past due
rental payments). By contrast, a lease intended as a security interest or
secured loan may be subject to the usury provisions and to differing applicable
rates of interest limits depending on the use or purpose set forth in the loan
or lease agreement. The economic terms of the agreement at the inception of the
transaction will generally dictate the treatment of the lease.
Certain Charges Not
“Interest” HB 955 limits the
application of usury rules. It does so by stating that creditors are authorized
to charge “all reasonable expenses and fees incurred in connection with making,
closing, disbursing, extending, readjusting or renewing a loan not secured by
real property, whether or not those expenses or fees are paid to third parties.
See: §2.03 of H.B. 955, adding a new §303.017 to the Finance Code. HB 955 also clarifies that prepayment premiums, make-whole
premiums or other similar charges do not constitute “interest” for usury
calculations. §2.12 of H.B. 955, amending §306.005 to the Fin. Code. Furthermore, HB 955 declares that a commercial obligor’s
assumption, payment or guaranty of another person’s obligations does not
constitute “interest” to the obligor. §2.14 of HB 955, adding a new
§306.007 to the Finance Code. This provision is a
response to the Texas Supreme Court’s opinion in Alamo Lumber Co. v. Gold, 661 S.W.2d 926, 928 (Tex. 1983). In that
case, the court held that a bank can be liable for usury when, as a condition
to making a loan, the bank required a debtor to assume third party debt. The
debt is treated as interest for purposes of the usury law and may cause a usury
violation. Interest Rates Generally In general, unless other provisions of Texas law govern the transaction, a creditor may charge six percent (6%) interest on loans where the creditor and borrower have not agreed upon an interest rate. Fin. Code §302.002. If a borrower has agreed to pay to a creditor any compensation that constitutes interest, the borrower is considered to have agreed on the rate produced by the amount of that interest, regardless of whether that rate is stated in an agreement. Furthermore, if the intent of the parties is to apply the optional rate ceilings applicable under the Finance Code, the maximum rate could range from 24% to 28% depending on the rate selected. Usury Exemptions
HB 955 affects
transactions “in which one or more persons as part of the same transaction
lends, advances, borrows, or receives, or is obligated to lend or advance or
entitled to borrow or receive, money or credit with an aggregate value of …(B)
$500,000 or more if the commercial loan is not primarily secured by real
property.” Such a loan is defined as an
“exempt commercial loan” and has no usury cap under HB 955. §2.09 of HB 955,
adding a new §306.001(9)(5-a)(B) to the Fin. Code. Further, Section 2.09 of HB
955 states that any transaction similar to the “Exempt commercial loan” (or
renewal of the loan) that involves an amount of between $100,000 and $500,000
and is not primarily secured by real property, may be treated as a “Qualified
commercial loan.”
*Tip: To gain commercial loan status, the loan or lease documents
(including any renewal/extension documents) should contain a written
certification from the borrower/lessee to the following effect (with some
different rules for motor vehicles):
(1) the borrower/lessee has been advised by the lender to seek the
advice of an attorney and an accountant in connection with the commercial loan;
and (2) the borrower/lessee has had the opportunity to seek the advice of an
attorney and accountant of the borrower's choice in connection with the
commercial loan. Lenders and lessors should consider adding this language as a
precaution in all but the clearest true lease transactions. Liability for Usurious Interest and the Opportunity to Cure
Courts presume that
parties intend to enter into non-usurious contracts. Under Texas law, a party
claiming damages against one that “contracts for” usurious interest must show
that the contract, as construed, is usurious on its face. See: Coastal Cement Sand, Inc. v. First
Interstate Credit Alliance, Inc., 956 S.W.2d 562 (Tex. App. – Houston [14th
Dist.] 1997). *Technical Point: However, a creditor need not have
the specific intent to charge usurious interest in order to violate the usury
statutes, but must only intend to charge the rate actually charged. William C. Dear & Assocs., Inc. v.
Plastronics, Inc., 913 S.W.2d 251, 254 (Tex. App. – Amarillo 1996, writ
denied). HB 955 provides the
creditor a 60-day correction or cure period after actually discovering the
violation. *Technical Point: A violation is “actually
discovered” at the time of the discovery of the violation in fact and not at
the time when an ordinarily prudent person, through reasonable diligence, could
or should have discovered or known of the violation. Tex. Fin. Code Ann. §305.103(b) (Supp. 2005). This cure includes
correcting the violation by taking any necessary action and making any
necessary adjustment, including the payment of interest on a refund. Because
usury statutes are penal in nature, they must be strictly construed, and if
there is any doubt as to legislative intent to punish the activity complained
of under usury statutes, the doubt must be construed in the favor of the lender
(creditor). See: Domizio v. Progressive
County Mut. Ins. Co., 54 S.W.3d 867 (Tex. App. – Austin 2001, no writ) (no
reduction in liability in the event the creditor corrects the violation after
the 60-day window period). Savings Clauses – Not So Safe
When
a transaction is unambiguously usurious, a creditor may not dodge a claim by
virtue of a contract clause stating that the parties did not intend to violate
the usury laws and any excess interest should be remitted to the debtor. In
addition, a savings clause may supply a reason for a court to select an
interpretation of ambiguous transaction terms that avoid violation of the usury
laws. Warning: A savings clause directly contrary to the explicit terms of
the contract may be ineffective. See: Pentico
v. Mad-Wayler, Inc., 954 S.W.2d 708, 714 (Tex. App. – Corpus Christi 1998,
pet. denied); Coastal Cement Sand, Inc.
v. First Interstate Credit Alliance, Inc., 956 S.W.2d 562, 571-72 (Tex.
App. – Houston [14th Dist.] 1997, pet. denied). This rule prevents a
creditor from freely contracting for usurious interest knowing that, for the
few debtors who do complain, the creditor will escape penalty by simply
referring to a boilerplate amount. See: Terry
v. Teachworth, 431 S.W.2d 918, 926 (Tex. Civ. App. – Houston [14th
Dist.] 1968, writ ref’d n.r.e.). For those lenders or lessors who become
subject to usury laws and lend as a “lender of last resort” or other high-rate
lender, the usury laws in Texas may pose a substantial risk if or when the
debtor challenges the transaction as usurious. See, e.g., Kaplan v. Tiffany Development Corp., 69 S.W.3d 212, 219-20 (Tex.
App. – Corpus Christi 2001, no pet. h.) (where evidence showed that effective
interest rate ranged from 37.54 to 45.88 percent). Bright Future For Commercial Loans/Lease Despite the apparent
complexity of the usury laws in Texas, HB 955 could—and if the
Constitutional amendment in Proposition 5 passes, HB 955 should—ease
restrictions on lending and financing leases in Texas. Lenders and lessors
complete millions of dollars of business each year in Texas without any major
concern about the current usury laws. For creditors and commercial debtors, the
passage of Proposition 5 will open the pathway to more and larger deals that
will be free of most usury restrictions. Thanks
to
Rafael
Anchia for contributing this article. Rafael serves as the Texas
State Representative for District 103.
He is a member of the
Corporate
Finance,
Public
Finance, and
Public
Policy and Lobbying practice groups at Patton Boggs LLP in the firm’s
Dallas office.
2. Vehicle Lessors Get Back to Business Under New Vicarious Liability Law Vehicle leasing started to vanish in the last year or so because lessors faced vicarious liability arising out of rental or leases of cars, trucks and other vehicles. This archaic rule was a mutli-million dollar thorn in the side of the leasing industry. See: Federal Highway Bill Bans Vicarious Liability of Car Leasing Firms, Insurance Journal (Aug. 1, 2005).
With his
signature
on August 10, 2005, on
H.R. 3,
President Bush enacted into law federal legislation “[t]o authorize funds for Federal-aid highways,
highway safety programs, and transit programs.” The law included a provision
that federal law preempts state law from imposing
vicarious liability on lessors of vehicles when the owner is not at fault.
Rep. Sam Graves (R-Mo.) inserted the provision by an
amendment to H.R. 3.
The amendment is intended to eliminate
liability under state law for owners of motor vehicles or their affiliate who
is engaged in the business of renting and leasing motor vehicles, provided
there is no negligence or criminal wrongdoing on the part of the motor vehicle
owner or affiliate. The owner or affiliate must maintain the required state
limits of financial responsibility for each vehicle in accordance with the laws
of the states where the vehicle is registered. *Term to Know:
Vicarious liability is a well-established legal doctrine that imposes liability on an owner of an
asset for the negligence of the user or operator of the asset. Often seen in
the context of automobile leasing, vicarious liability rests on a public policy
that third parties should be protected by an owner for the wrongful acts of a
user of an asset who can't pay for the harm he or she causes. Vicarious
liability is sometimes used in the employment principle of “respondeat superior”
—the employee’s superior responds and pays for the acts of the employee,
though wrongful, within the scope of his or her employment. The
new highway bill should lower the cost of commercial leasing by reducing the
potential for owner/lessor liability under circumstances in which the owner is
at fault. Although the new law leaves potential liability with lessees/renters,
advocates have argued that the renter is the person most capable of avoiding
the risks and taking direct responsibility for his or her actions. *Tip: Lessors can take steps to distance
themselves from liability under, and comply strictly with, the provisions of
the new law. For example, a lessor should:
The legislation is expected to bring vehicle
leasing back to New York.
Chrysler
announced its return immediately on August 10, 2005. Other states will likely
follow New York’s lead and lessors will probably also jump back into the market
behind Chrysler. That’s good for leasing and good for driver responsibility.
Lessors and lessees alike would be well advised to pay attention to their
respective responsibilities on the road.
Over the last few years, the level of activity of lease financing
for the benefit of states and political subdivisions has grown substantially.
This increasing interest in lease financing for governmental units reflects a
number of significant factors that show the fundamental value of leasing in
managing municipal and state budgets. Lease Financing - Appealing Alternative Lease financing provides an appealing alternative for many states and local governments that face fiscal or budgetary limitations. In a growing number of states, local governments are prohibited from incurring multi-fiscal year obligations without the prior approval of its electorate. This limitation has made the traditional route of general obligation or other bond financing more challenging as taxpayers begin to resist increases in taxes and spending. In most states, lease financing is not treated as a multi-fiscal year obligation of a state or its local government. See e.g., Colorado Constitution, Article X, §20; Constitutional Tax and Expenditure Limitation in Colorado: The Impact on Municipal Governments Public, Budgeting and Finance, Vol. 20, Issue 3, Page 29 - Fall 2000. If structured properly, a lease financing will not trigger
the requirement of electoral approval or otherwise constitute a multi-fiscal
year obligation for states and local governments. This result makes lease
financing an appealing alternative for capital projects for many states and
political subdivisions. In addition to legal limitations on state borrowing and
financing, many states and local governments have seen economic pressures limit
their budgetary capacity. Stagnant tax collections and rising operating costs
have made capital projects more difficult to fund for many political
subdivisions. See: “Report on Local Finance,” Government Finance
Officers Association.
To acquire an asset by purchase, whether or not involving a borrowing,
necessitates a budgetary expenditure for the full value of the asset in a
current fiscal year. In times of economic stress, this requirement limits the
ability of local governments to acquire needed capital assets. Lease financing
involves a series of periodic expenditures by the political subdivision over
the life of the lease. Thus, the full capital cost of the asset is not treated
as a budgetary expenditure in the current fiscal year for budget and
appropriations purposes. Tax-Exempt Interest -
A Significant Element An additional important element of lease financing is the
ability to access tax-exempt interest for a state or local government. See:
§103(a)
of the Internal Revenue Code of 1986, as amended (IRC). The exemption from
federal income taxation of the interest component payable under a lease means
that the asset can be acquired at a substantially lower cost. Tax-exempt
financing normally carries an interest rate of 150 basis points or more below a
comparable taxable expenditure. The availability of a federal and state tax
exemption for interest on a lease obligation is perhaps the most valuable
element of a state or local lease obligation, and hence the best marketing tool
for the industry. To achieve the desired tax exemption on a lease obligation, the
IRC imposes requirements applicable to the nature of the lessee, the structure
of the lease, and the type of project that is financed and how lease proceeds
and other moneys are invested. Tax-exempt interest is only available for obligations
(including lease obligations) issued by or on behalf of a state or one of its
political subdivisions.
IRC §103(a). The lessee
must be a state or a political subdivision. Some governmental entities that
lack powers of taxation or condemnation, or which do not posses police powers,
typically do not qualify as political subdivisions. In some circumstances,
entities such as nonprofit corporations or joint powers or other authorities,
which are not political subdivisions, may nonetheless have such a close
relationship with a governmental entity that they are treated as agents or
instrumentalities of a political subdivision and therefore may enter into
tax-exempt leases on behalf of the political subdivision. See.
IRC Rev. Rul. 63-20, 1963-1 C.B. 24. Not all leases can qualify for tax-exemption. Only leases
that constitute “financing leases,” in the sense that they involve an
accumulation of equity in the financed asset, can qualify for tax-exempt
treatment. As a result, under most lease transactions the state or political
subdivision is entitled to acquire the property at the end of the lease term
for no additional consideration. Like all tax-exempt obligations, lease financings involving
local governments must comply with federal tax limitations concerning the
involvement of private parties. See:
IRC §142.
These rules can be complex. Generally, a political subdivision must use the
asset to be financed. Further, its use of the asset must not operate to convey
special benefits to one or more categories of private entities. *Technical Point: In this area, the IRS has adopted rules allowing certain “qualified management contracts” as vehicles for involving private management of financed property without losing tax-exemption for the financing. See: Rev. Proc. 97-13, as modified by Rev. Proc. 2001-39, 2001-2 C.B. 38 (management contracts); and Rev. Proc. 97-14, 1997-1 C.B. 634 (research agreements). Other Requirements Other requirements imposed by the IRS include reporting
requirements, prohibitions on federal guarantees of the lease obligation,
limitations on refinancing and other structure requirements. A particular
benefit available to lease financing for local governments is the ability to
allow banks to acquire lease obligations without suffering a reduction in their
cost of deduction for their own tax reporting purposes. *Technical
Point: This special
treatment is available for lease obligations with a political subdivision that
do not incur more than $10 million of tax-exempt obligations in a calendar
year. See:
IRC §265. Dramatic Increase to
Continue Lease financing for local governments has seen a dramatic
increase in recent years. While requirements and limitations in state law vary
from jurisdiction to jurisdiction, most political subdivisions have the
authority to enter into lease financings in a manner that gives them the
ability to acquire assets more easily and at a substantially reduced cost than
a direct acquisition. *Opportunity
Point: These
attributes of lease financing make states and local governments an ideal
opportunity for leasing enterprises. Thanks
to
Greg Johnson,
a public finance lawyer at Patton Boggs LLP and a Partner in the Business
Transactions Department, for contributing this article to BLN. Greg is also a
member of the Municipal Leasing Committee of the Equipment Leasing Association
and will be speaking at the
Municipal Leasing Forum
on September 26-28, 2005, in Miami, at the Trump International Sonesta Beach
Resort in Sunny Isles Beach (Miami), Florida.
Under Section 9-102(a)(75) of the Uniform Commercial Code (UCC),
“Software” is a computer program that includes related supporting information.
However, software embedded in
goods
(“that consist solely of the medium in which
the program is embedded”) is not software. In other words, software that is customarily viewed as a part of the goods will be
deemed a part of the goods rather than software under the UCC. For example,
equipment,
which is a subcategory of goods, often contains programming in the nature of
software for brakes in a truck or built-in controller software for production
equipment. Many different types of software rights exist, but from a business viewpoint, lessors and lenders should understand that software can increase residual or collateral value if functioning properly and licensed to, or owned by, a lessee or borrower. Stand-alone or even embedded software may have a life longer than the equipment in which it is used, possibly giving the software rights independent value. But equipment with installed or embedded software may have little or no value without the software remaining in place and functional. For example, if a lessee removes all operating or enterprise software before returning a computer system at the end of a lease term, that system will undoubtedly have a lower residual value when returned to the lessor than comparable equipment with software installed and working. See: As Technology Investment Grows, Lessors and Lenders Focus on Software Rights, by David G. Mayer, Business Leasing News (Oct. 2003). *Tip: To obtain rights in a software license or
in software, vendors often require that you obtain their consent and possibly
pay fees for the privilege. Don’t be surprised if a vendor refuses to consent
because they may lose a sale if you get free rights to their software or
continued software licensing rights for a nominal cost. Lessors and lenders can and should perfect their respective
interests in software or software licensing rights to protect their interests
under their leases and loan agreements. It is feasible to obtain a collateral
security interest in software rights. These rights arise in part through a
proper grant of a security interest. In addition, Section
9-408
of the UCC renders ineffective any restriction on or prohibitions of the
creation, attachment and perfection of a security interest in rights to a
software license. *Warning: Consider whether the grant of a security
interest (allowed by the UCC) will nonetheless cause a lessee or borrower, as
licensee, to violate its agreement with the licensor and trigger defaults in
the software, leasing and loan agreements. Equipment leases typically contain
precautionary grants of a security interest in the equipment. Such a grant may
not suffice to grant a security interest in software rights. Consider drafting a
present (not precautionary) grant of a security interest in any lease to
software rights and ask counsel how to properly perfect your interests. You may
have to file under the UCC or at the United States Copyright Office to perfect
your security interest in software. Generally, if you get a security interest in an unregistered copyright of software,
you should perfect your security interest by filing a financing statement as
required under the UCC. However, to gain a security interest in a copyright
registered at the US Copyright Office, you must properly record notice of the
security interest with the US Copyright Office. It is crucial to file evidence
of a security interest in the proper place to properly perfect your security
interest in software. See:
In re Aerocon
Engineering Inc. v. Silicon Valley Bank, 244 B.R. 149 (Bankr. N.D.
CA 1999), affirmed on appeal (9th Cir. 2002).
Courts have not clearly determined whether you can enter into a true lease of software. As a result, obtaining a grant of a security interest in software is an important aspect of any asset-based transaction involving software as an asset of the borrower or lessee. See: BLN Case & Comment: Software Lease Fails - In Re CNB International, Inc., by David G. Mayer, Business Leasing News (June 2004). Thanks to Tom Kulik in our Intellectual Property Practice Group for commenting on this article.
5. Case & Comment: The Fed Rules in Preemption Cases: Wells Fargo Bank v. Boutris Federal law preempts California investigative and licensing authority over “operating subsidiaries” of national banks under the National Bank Act, 12 U.S.C. §21 according to Wells Fargo Bank, N.A. v. Boutris, No. 03-16194, 05 C.D.O.S. 7154 (9th Cir., Aug. 12, 2005). BACKGROUND: Wells Fargo Bank (Wells) and National
City Bank of Indiana (National City) engage in the mortgage lending business
through their respective subsidiaries, Wells Fargo Home Mortgage Co. and
National City Mortgage Co. This case arose when California regulators required
these subsidiaries to audit their records to determine if they had
underestimated settlement fees and improperly calculated per diem interest for
their customers in violation of California law. Wells Fargo argued that the
National Bank Act, Section 501 of the Depository Institutions Deregulation and
Monetary Control Act of 1980,
12
U.S.C. §1735f-7a (DIDMCA)
and the Office of the Comptroller of the Currency (OCC) regulations preempted
state law. ISSUE: Does federal law preempt state licensing
law under the Bank Act, DIDMCA and OCC regulations within the facts of this
case? OUTCOME: Yes under the National Bank Act, but the
per diem loan-interest statute is not preempted under the DIDMCA. DISCUSSION: Although the Bank Act is silent on bank
operating subsidiaries, the law still gives the OCC “incidental powers” needed
to carry on business, including the operating of banking functions through
subsidiaries. The court held that “… the
Commissioner is preempted from ordering regulatory audits of national bank
operating subsidiaries such as WFHMI …, and that the injunction issued by the
district court is valid insofar as it precludes the Commissioner from doing
so.” (Opinion at p. 10478). Consequently, Well Fargo Mortgage Co. did not need
a license under the California Residential Mortgage Lender Act (Cal. Fin. Code
§50000 et seq.) or under the
California Finance Lenders Law (Cal. Fin. Code §22000 et seq.). LAW: The court in Boutris
afforded “deference” to the OCC’s
2001 “operating subsidiary” regulation, which states: “Unless otherwise
provided by Federal law or OCCD regulation, State laws apply to national bank
operating subsidiaries to the same extent that those laws apply to the parent
national bank.” (12 C.F.R. §7.4006). Consistent with the holding of the Second
Circuit’s recent preemption decision in Wachovia
Bank, N.A. v. Burke, No. 04-3770-CV (2d Cir., July 11, 2005), the Boutris court held: Allowing national banks to conduct business through
operating subsidiaries is therefore a permissible construction [by the OCC] of
those banks’ incidental powers under the Bank Act. We hold that the OCC’s
interpretation of 12 U.S.C. §24 (Seventh) as authorizing it to allow national
banks to conduct business through operating subsidiaries is a permissible one.
(Opinion at p. 10471). *Comment: The question of whether a lessor or equipment lender needs
a lender’s license in California and in other states often creates
time-consuming and expensive efforts on the part of leasing companies. Although
non-national bank leasing subsidiaries don’t have a basis to rely on Boutris, the Boutris and Burke cases
raise the question of whether national bank leasing companies can avoid
lender’s licensing in California and other states due to licensing preemption
under the OCC or other federal banking law to the extent laws exist under the
National Bank Act on the same licensing issues. At least in the Boutris
case preemption worked for Wells and National City to push back the persistent
California state regulators who will, in regard to the subject of that case, have
to stick to state regulated financial institutions in the mortgage business.
6. About Patton Boggs LLP and Our Law Practice; Publications; October 21st Aviation Briefing
Patton
Boggs LLP is a law firm of more than 400 lawyers located in five offices in the
United States and internationally in Doha, Qatar. The firm has extensive
capabilities in four major practice areas: Business Transactions, Intellectual
Property, Public Policy and Litigation. I am a member of the Business
Transactions Group. This group includes over 100 lawyers with a broad array of
skills in equipment leasing and finance, corporate finance, secured
transactions, syndications, wind power and other project finance, oil and gas
transactions, mezzanine financing, hedge fund work and related creditors
rights/bankruptcy, real estate and technology law. We regularly work in
cost-effective teams to meet our clients’ needs. Our
leasing, secured transactions and equipment finance practice entails a full
range of transactions relating to aviation/transportation assets, energy/wind
power, technology/software/hardware and project development and finance. We
engage in corporate finance matters with a full range of companies. We have
specific teams for aviation, infrastructure/power, health care, federal
leasing/finance/marketing, municipal leasing/finance and more. We
work with our clients from the “front-end” to the “back-end” of a variety of
transactions. For example, we can assist in the development, construction and
financing of infrastructure and power projects, structure and close
securitizations, syndications and asset sales, and complete large asset-based
company financings. We also restructure troubled credits, handle large
bankruptcy cases and act for our clients in such routine matters as
repossessions, lift stay actions, true lease contests, workouts and forbearance
arrangements. We provide extensive litigation resources with a record of proven
success. You are welcome to call me at 214.758.1545 or e-mail me at
dmayer@pattonboggs.com. We value your
contact with us on any topic, including questions arising from BLN articles or
about our law practice. Publications; Aviation Briefing October
21st Here
are two recent publications covering the U.S. and Canada:
Aviation Briefing - October 21, 2005 On
Friday, October 21, 2005, from 8:00 a.m. - 6:00 p.m., Patton Boggs LLP will
present a complimentary briefing called
The New Era of Business
Aviation II at our Washington, D.C. office. Our unique line up of speakers will provide an
insightful, succinct and interactive discussion of the hottest issues in
business aviation. The discussion will include how to use Cape Town Convention
in real deals, when you can lawfully use LLCs as special purpose owners of
business aircraft, what are the newest developments under the new fractional
shares rules, how to manage the IRS/SEC challenges to personal use of corporate
aircraft, and much more. This is a second in a series of free briefings. Our Aviation Team consists of:
Additional speakers from the firm include:
We
will also have a special guest speaker,
Barry Justice, a dean of the
general aviation industry and Chairman and CEO of Leading Edge Aviation
Solutions. For more details, call Kathryn Meyer at (214) 758-1531, or e-mail her at kmeyer@pattonboggs.com. If you would like to attend, please request registration/invitation by contacting Kathryn. Limited space is available. Clients of the firm and BLN subscribers will be given preference to this invitation-only event. Look for your invitation soon. Hotel space is tight in DC on October 20-22; so respond quickly if you get an invitation as we have a limited block of rooms reserved until September 26. More information is available at http://www.pattonboggs.com/aviation2/.
7. A Message from the Founder, David G. Mayer “One Country to Go to Cape Town” Some very important events occur quietly. Such is the case with the approval by Ireland on July 9, 2005 of the Cape Town Convention on International Interests in Mobile Equipment (Cape Town) and the related Aircraft Protocol (Protocol). This approval is particularly significant because Ireland is the location of the International Registry where the administration of the International Registry exists for registration of international interests in certain aircraft, engines and helicopters. The Government of Ireland deposited its instrument of accession to the Cape Town on July 29, 2005, and its instrument of accession to the Protocol on August 23, 2005. Ireland became the seventh Contracting State to the Protocol. See Unidroit News Release. When
one more country properly deposits its instrument of ratification, acceptance,
approval or accession to the Protocol (Ratification), the clock will start
ticking for subjecting virtually every new U.S. aircraft financing or leasing
transaction to compliance with Cape Town and the Protocol (collectively, the
Treaty). As
BLN stated last month in the lead article,
Will Legal Opinions or Title Insurance
Mitigate Risk Under the Cape Town Convention?, by David G. Mayer and
Frank Polk, BLN (Aug. 2005),
the effective date for the Protocol will be the first day of the month that
occurs three months after Ratification by the eighth country. For example, if
the eighth country ratifies on October 15, 2005, the Treaty will enter into
force and apply to all U.S. transactions as of February 1, 2006. Are
you breathing a sigh of relief? Have we avoided a scramble at year-end to cope
with the Treaty just as we wrap up 2005? It appears so because the Treaty will
not take effect until at least January 1, 2006. Does that timing mean you can
relax? Absolutely not. The time period from now until the effective date
provides you the opportunity to prepare to compete under this new international
framework; so use this time wisely because the United States produces about 70
percent of all business aviation transactions, not to mention commercial
aviation! To
help you prepare, note that Patton Boggs
LLP will be presenting a briefing on Cape Town and other hot topics in business
aviation on October 21st (described above). Have
a great month of September and thanks for reading Business Leasing News.
Thanks to the BLN Team I
would like to thank BLN’s editors at Patton Boggs LLP, including
J.
Atwood Jeter, a senior associate in the firm’s real estate and wind energy
groups, and Patton Boggs staff editors Margaret Anderson and Adrian Nicole
McCoy, as well as our lead designer, Winston Jackson. Claire Campbell, our
Chief Librarian in Dallas, keeps BLN going with much appreciated research
assistance. Thanks also to
Douglas C. Boggs,
a Business Transactions/Securities partner and website reviewer for BLN and our
Marketing Director Mary Kimber, for assisting BLN through our firm’s editing,
design and posting process. All the best, David
David G. Mayer The "For Dummies" part of my book, Business Leasing For Dummies (BLFD)®, is a registered trademark of Wiley Publishing, Inc.
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