No. 21-3416 ___________________________

Prospect ECHN, Inc.

lllllllllllllllllllllPlaintiff - Appellant

v.

Winthrop Resources Corporation

lllllllllllllllllllllDefendant - Appellee ____________

Appeal from United States District Court for the District of Minnesota ____________

Submitted: October 20, 2022 Filed: July 28, 2023 ____________ Before KELLY, WOLLMAN, and KOBES, Circuit Judges. ____________ WOLLMAN, Circuit Judge.

Certain healthcare entities entered into a lease agreement and related lease schedules with Winthrop Resources Corporation (Winthrop). Prospect ECHN, Inc. (Prospect) purchased the healthcare entities’ assets and later sought to be released from their obligations to Winthrop. After negotiations failed, Prospect filed suit against Winthrop, alleging that the schedules must be recharacterized as security interests under the Uniform Commercial Code (U.C.C.), as adopted by Minnesota. See Minn. Stat. § 336.1-203 (lease distinguished from security interest). If recharacterized as security interests, Prospect owns the equipment that Winthrop had leased to it and can argue that Winthrop must return any security deposits and excess payments. If the schedules are true leases, however, Prospect owes Winthrop the amounts due under the contracts.

The district court1 granted summary judgment in favor of Winthrop, concluding that the agreement and schedules constitute true leases and that Prospect had breached them. The court awarded damages to Winthrop and determined that it was entitled to attorneys’ fees and costs. We affirm.

I. Background

Winthrop is a financial services company that leases computer and other equipment to corporate customers. Prospect purchased the following entities’ assets in 2016: Eastern Connecticut Health Network, Inc.; Manchester Memorial Hospital; and The Rockville General Hospital, Incorporated (collectively, ECHN).

Winthrop and ECHN had entered into Lease Agreement No. EA112107, which is dated November 21, 2007, and is governed by Minnesota law. The agreement deemed itself a “‘FINANCE LEASE’ AS THAT TERM IS DEFINED AND USED IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE.” Under a finance lease, the lessee selects equipment and suppliers, and the lessor provides funds to purchase the equipment. See Minn. Stat. § 336.2A-103(1)(g) (defining “finance lease,” as relevant here, as a lease in which “the lessor does not select, manufacture or supply the goods,” but acquires “the goods or the right to possess[] and use the

1 The Honorable Susan Richard Nelson, United States District Court for the District of Minnesota.

-2- goods in connection with the lease”); E. Carolyn Hochstadter Dicker & John P. Campo, FF&E and the True Lease Question: Article 2A and Accompanying Amendments to UCC Section 1-201(37), 7 Am. Bankr. Inst. L. Rev. 517, 524 (1999) (“A finance lease is the product of a transaction among three parties: (i) the supplier of the equipment; (ii) the lessee, who selects the supplier and the equipment; and (iii) the lessor, who supplies the money necessary to purchase the equipment.”).

The agreement provided that Winthrop leased to ECHN the right to use the equipment, software, and services set forth in lease schedules agreed to by the parties. The term of each schedule began on the equipment’s installation date and continued for the schedule’s initial period, during which neither party could terminate and ECHN had an “absolute and unconditional” obli