Motion for Writ in Webfund Llc v. Positive Behavior Steps Corporation D/B/A POSTIVE BEHAVIOR STEPS, David A Sandoval| Trellis.Law

On June 29, 2023 a Motion-Secondary was filed involving a dispute between Webfund Llc, and David A Sandoval, Positive Behavior Steps Corporation D B A Postive Behavior Steps, for Commercial - Contract in the District Court of Nassau County.

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FILED: NASSAU COUNTY CLERK 09/22/2023 12:45 PM INDEX NO. 610328/2023
NYSCEF DOC. NO. 15 RECEIVED NYSCEF: 09/22/2023

SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NASSAU

WEBFUND LLC, INDEX NO.: 610328/2023

Plaintiff,
vs.

POSITIVE BEHAVIOR STEPS CORPORATION
D/B/A POSTIVE BEHAVIOR STEPS AND DAVID A
SANDOVAL,
MEMORANDUM OF LAW IN
Defendants. OPPOSITION TO PRE-ANSWER
MOTION TO DISMISS

Yosef C. Feldman, Esq.
Lieberman and Klestzick, LLP
Attorneys for Plaintiff
71 S Central Avenue
Valley Stream NY 11580
P: 516-900-6720
Email: yosef@landklegal.com

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TABLE OF CONTENTS
PRELIMINARY STATEMENT ...............................................................................4
PROCEDURAL ARGUMENTS ...............................................................................5
DEFENDANTS’ ARGUMENT AGAINST THE FORUM SELECTION CLAUSE LACKS A

BASIS IN LAW .......................................................................................................................... 7

FORUM NON CONVENIENS UNDER GOL 5-1402 IS DISCRETIONARY AND
INAPPLICABLE TO THIS CASE............................................................................9
FEES ARE NOT EXCESSIVE AND THUS NOT DEEMED A PENALTY ........12
DEFENDANTS BREACH OF CONTRACT HAS BEEN DEMONSTRATED ...13
THE TRANSACTION WAS NOT USURIOUS ACCORDING TO THE K9
BYTES STANDARD FOR CASH ADVANCES ...................................................15
(i) AGREEMENT CONTAINED A MANDATORY RECONCILIATION PROVISION 16

(ii) AGREEMENT HAS NO FINITE TERM ...................................................................... 17

(iii) NO RECOURSE TO PLAINTIFF IF DEFENDANTS FILE BANKRUPTCY............ 18

CONCLUSION ........................................................................................................18

TABLE OF AUTHORITIES

Cases

Bell Constructors v Evergreen Caissons, Inc., 236 A.D.2d 859, 860 (4th Dept 1997)

.......................................................................................................................... 8, 11

Brooke Group v JCH Syndicate 488, 87 NY2d 530 (1996) ....................................10

Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 n. 14 (1985)...........................7

Georgia Malone & Co., Inc. v. Rieder, 19 NY3d 511 (2012) ...................................6

Goldman v. Metropolitan Life Ins. Co. 5 NY3d 561 (2005) .....................................6

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IBIS Capital Group, LLC v Four Paws Orlando LLC, 2017 NY Slip Op 30477[U]

(Sup Ct, Nassau County 2017). ............................................................................17

Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 703,

(1982) ......................................................................................................................7

K9 Bytes, Inc. v Arch Capital Funding, LLC, 56 Misc 3d 807 (Sup Ct, Westchester

County 2017). ................................................................................................ 15, 17

Miller v. Schloss, 218 NY 400 (1916) .......................................................................7

Paramount Film Distrib. Corp. v. State of New York, 30 N.Y.2d 415 (1972)..........7

Shin-Etsu Chem. Co. v ICICI Bank Ltd., 9 AD3d 171 (1st Dept 2004). ................11

The Bremen v. Zapata Off–Shore Co., 407 U.S. 1, 15 (1972) ..................................8

Statutes

CPLR § 327 (b) .......................................................................................................10

GOL § 5-1402 ..........................................................................................................10

N.Y. C.P.L.R. § 302 (McKinney 2006) .....................................................................8

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Plaintiff, WEBFUND LLC, respectfully submits this Memorandum of Law in Opposition

of Defendants’ pre-Answer Motion to Dismiss pursuant to Civil Practice Law and Rules (“CPLR”)

§ 3211(a)(7) and (a)(8).

PRELIMINARY STATEMENT

Plaintiff respectfully submits this memorandum of law in opposition to Defendants’

Motion to Dismiss pursuant to CPLR § 3211(a)(7) and (a)(8). Defendants raise CPLR § 3014 and

3017(a) defenses due to multiple causes of action as grounds for pre-answer dismissal although

this would require a ruling on the validity of the agreement. Defendants also raise General

Obligations Law § 5-1402 as grounds for a pre-answer dismissal. Defendants further raises

enforceability of the default fee under presumably CPLR 3211 § (a)(1) and is similarly meritless

because there is nothing shockingly unconscionable about a clause for calculating liquidated

damages that assess a sum certain in the event of default. Finally, Defendants argue for a premature

dismissal on the merits based upon failing to allege a breach of contract despite the agreement

being attached to the complaint. Their burden to overcome for these long shot arguments is

governed by CPLR § 3211(a)(1).

Defendants’ strongest argument in favor of their Motion is that this Court lacks personal

jurisdiction under (a)(8), and that GOL 5-1402, the statutory forum non conveniens bar, is

applicable to this case. It will be shown that Defendants’ pre-answer Motion to Dismiss is just an

attempt at forum shopping. The jurisdiction and venue of this New York Supreme Court Court,

and the choice of New York law to govern the transaction are clearly settled by the parties’

Agreement, on a page signed by the Defendants. Their premature argument about the merits of the

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case indicates that their defense is entirely based upon interpretations of New York law, which this

Court is the most suited to adjudge as routinely upheld. 1

PROCEDURAL ARGUMENTS

PLAINTIFF HAS PROPELY PLED MULTIPLE CAUSES OF ACTION

CPLR Sec. 3014 clearly states “Separate causes of action or defenses shall be
separately stated and numbered and may be stated regardless of consistency. Causes
of action or defenses may be stated alternatively or hypothetically.”

CPLR Sec. 3017 (a) clearly states that “every complaint, counterclaim, cross-claim,
interpleader complaint, and third-party complaint shall contain a demand for the
relief to which the pleader deems himself entitled. Relief in the alternative or of
several different types may be demanded.”

Given this basic rule of civil procedure, it is clear that Defendant only wants to delay

recourse to Plaintiff and does not have any valid defense to Plaintiff’s breach of contract claim.

Plaintiff’s unjust enrichment claim is properly pled under CPLR 3014 and CPLR 3017(a) as an

alternative theory of recovery not yet duplicative of the breach of contract also included in the

verified Complaint. In fact, Defendant seems to be admitting to the enforceability of the contract

as well as Defendants breach considering that Defendant believes the unjust enrichment cause of

action should be dismissed. Until this court rules on the enforceability of the contract, the cause

of action for unjust enrichment is properly pled as an alternate theory of recovery.

The only potentially meritorious argument in the Defendants’ motion is their claim that

the Plaintiff’s causes of action for breach of contract and unjust enrichment are duplicative. This

is true only where there is an enforceable contract:

"To state a claim for unjust enrichment, a plaintiff must allege that: (1) the
[defendant] was enriched, (2) at [plaintiff's] expense, and (3) that it is against equity
and good conscience to permit the [defendant] to retain what is sought to be
recovered. An unjust enrichment claim is not available where it simply duplicates,

Exhibit A Fox v JW Trucking, NYSCEF# 603494/2022, Motion seq. 2, Hon. Diccia T. Pineda-Kirwan; Exhibit C
1

Fox Cap. Grp., Inc. v. Superior Caregivers, LLCs, 2022 N.Y. Misc. LEXIS 3225.

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or replaces, a conventional contract or tort claim. Such a claim is duplicative of a
breach of contract claim where "both causes of action seek damages for events
arising from the same subject matter that is governed by an enforceable contract."
See Attentive Home Care Agency, Inc. v Galinkin, 2022 NY Slip Op 30110[U],
*3-4 [Sup Ct, Kings County 2022].

Until this court rules on the enforceability of this agreement, the cause of action for

unjust enrichment is not yet duplicative.

“On a motion to dismiss pursuant to CPLR 3211 (a)(7), the pleading must be afforded

a liberal construction and the court must "accept the facts as alleged in the complaint as true,

accord plaintiffs the benefit of every possible favorable inference, and determine only whether

the facts as alleged fit within any cognizable legal theory. The essential elements for pleading a

cause of action to recover damages for breach of contract are the existence of a contract, the

plaintiff's performance pursuant to the contract, the defendant's breach of his or her contractual

obligations, and damages resulting from the breach" (Dee v Rakower, 112 AD3d 204, 208-209,

976 N.Y.S.2d 470 [2d Dept 2013]).

“An unjust enrichment claim is rooted in the equitable principle that a person shall not

be allowed to enrich himself unjustly at the expense of another.” Georgia Malone & Co., Inc. v.

Rieder, 19 NY3d. 511 (2012) quoting Miller v. Schloss, 218 NY 400 (1916).

The Plaintiff’s Exhibits attached to its complaint demonstrates that the Plaintiff

advanced Company Defendant a sum of money in exchange for a future interest in its receivables,

that was secured by and reduced by an interest in its present receipts. This performance of

funding and Company Defendant’s failure to tender to the Plaintiff its portion of the daily

receipts, resulted in a continuing unlawful conversion of the Plaintiff’s security interest at the

Plaintiff’s expense. It would be against equity and good conscience to permit the defendant to

retain the value of the withheld receipts.

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DEFENDANTS’ ARGUMENT AGAINST THE FORUM SELECTION CLAUSE LACKS

A BASIS IN LAW

The case law presented by the Defendants’ moving papers cite to the standard of review

for Choice of Law provisions which making them immaterial in demonstrating their burden on

overcoming the Plaintiff’s Choice of Forum. “[T]he personal jurisdiction requirement is a

waivable right,” however, and there are a “variety of legal arrangements’ by which a litigant may

give “express or implied consent to the personal jurisdiction of the court.” Burger King Corp. v.

Rudzewicz, 471 U.S. 462, 472 n. 14 (1985) (quoting Insurance Corp. of Ireland v. Compagnie des

Bauxites de Guinee, 456 U.S. 694, 703, (1982)). The same is true of venue. CPLR § 501, entitled

"Contractual provisions fixing venue," states, "[s]ubject to the provisions of section 510,

written agreement fixing place of trial, made before an action is commenced, shall be enforced

upon a motion for change of place of trial."

Likewise, a forum-selection clause, like the one contained in the Agreement in the present

case, is sufficient to vest New York courts with personal jurisdiction over a nonresident defendant

without regard to whether another independent ground for personal jurisdiction exists under the

New York long-arm statute N.Y. C.P.L.R. § 302 (McKinney 2006). “Where such forum-selection

provisions have been obtained through ‘freely negotiated’ agreements and are not ‘unreasonable

and unjust,’ ... their enforcement does not offend due process.” Id. at note 14 (quoting The Bremen

v. Zapata Off–Shore Co., 407 U.S. 1, 15 (1972)).

“Forum selection clauses, like the one contained in the subject Agreement, are

primafacie valid and should be enforced unless the resisting party clearly proves that

enforcement would be unreasonable and unjust, or that the clause arises from fraud or

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overreaching, or that enforcement would contravene strong public policy of the forum where

the suit is brought. Trump v. Deutsche Bank Trust Co. Americas, 65 A.D.3d 1329, 887

N.Y.S.2d 121 (2d Dept. 2009). Any alleged overreaching, which is an exception to the general

rule that forum selection clauses are prima facie valid, must be based on something more than

the mere fact that the clause was a boilerplate provision printed on the back of a form contract.

Under the fraud exception, a forum selection clause in a contract is not enforceable if the

inclusion of that clause in the contract was the product of fraud or coercion. Contractual forum

selection clauses are prima facie valid and should be enforced absent some compelling reason

to the contrary.” See Emerald Group Holdings v. NHTP LLC, Index No. 612182/2021,

NYSCEF Docket No. 47 (quoting Bernstain v. Wysoki, 77 A.D.3d 241,907 N.Y.S.2d 49

(2d Dept. 2010)).

In the instant matter, the subject Agreement contains a forum selection clause that

defendants were aware of when they executed said agreement. The Agreement, which was

signed by Defendant, dated May 16, 2023, states in pertinent part:

“This Agreement shall be governed by and construed in accordance with the laws
of New York, without regards to any applicable principles of conflicts of law. Any
litigation related to this Agreement must be commence and maintained in any
court located in the state of New York (the Acceptable Forum) … The parties
agree that the Acceptable forums are convenient, submit to the jurisdiction of the
acceptable forums and waive any and all objections to the Jurisdiction or venue
of the acceptable forums…, ADDITIONALLY, MERCHANT. EACH OWNERAND
EACH GUARANTOR WA1VE PERSONAL SERVICE OF ANY SUMMONS
AND/OR COMPLAINT OR OTHER PROCESS TO COMMENCE ANY
LITIGATION AND AGREE THAT SERVICE OF SUCH DOCUMENT SHALL BE
EFFECTIVE AND COMPLETE IF SENT BY PRI0RITY MAIL OR FIRST CLASS
MAIL”. 2

2
See NYSCEF document number 2, “Agreement”, page 6, paragraph 6.5.

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The Defendants have not made the requisite strong showing that the subject clause was

the product of overreaching or was unreasonable, or that its enforcement would be unjust.

Defendants have agreed that New York is an acceptable forum and have waived in advance any

and all objections to the forum. The permissive rule CPLR § 325 is at the discretion of this court

and considering that the parties have freely stipulated to the jurisdiction of any New York

Supreme Court due to the courts familiarity with the current subject matter, this courts

jurisdiction is proper.

FORUM NON CONVENIENS UNDER GOL 5-1402 IS DISCRETIONARY AND
INAPPLICABLE TO THIS CASE

The application of forum non-conveniens can be made with a Court sitting in equity

pursuant to CPLR § 327 (a), “When the court finds that in the interest of substantial justice, the

action should be heard in another forum, the court, on the motion of any party, may stay or dismiss

the action in whole or in part on any conditions that may be just”. CPLR § 327 (b) qualifies CPLR

§ 327 (a) and reads: “However, notwithstanding the provisions of subdivision (a) of this rule, the

court shall not stay or dismiss any action on the ground of inconvenient forum, where the action

arises out of or relates to a contract, agreement or undertaking to which section 5-1402 of the

general obligations law applies, and the parties to the contract have agreed that the law of this state

shall govern their rights or duties in whole or in part.”

The application of forum non-conveniens is prohibited if, the action relates to a transaction

in excess of $1,000,000, and the underlying contract contains a New York forum selection clause

and a New York choice of law provision. See CPLR § 327(b) and GOL § 5-1402 merely restrict

the court’s equitable authority to remove the case. CPLR § 327 (a) does not stand for the

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proposition that any case not in excess of $1,000,000 in any Agreement with a New York forum

selection clause is invalid. Moreover, if a contract contains a mandatory forum selection clause

requiring that an action be brought in New York it will generally be enforced even where the

criteria under CPLR § 327(b) are not met. Brooke Group v JCH Syndicate 488, 87 NY2d 530

(1996).

In the case at bar, Plaintiff and Defendants have consented, that, “Any suit, action or

proceeding arising hereunder, or the interpretation, performance, or default of this Agreement,

shall, if Purchaser so elects, be instituted in any court sitting in New York, (the “Acceptable

Forums”). Merchant agrees that the Acceptable Forums are convenient to it and submits to the

jurisdiction of the Acceptable Forums and waives any and all objections to jurisdiction or venue. 3

In addition, Plaintiff and Defendants have agreed that the Agreement “shall be governed by and

construed in accordance with the laws of New York without regard to any applicable principles of

conflict of law”. 4 The word “shall” has been upheld to be mandatory in many forum selection

clauses. Bell Constructors v Evergreen Caissons, Inc., 236 AD2d 859 (4th Dept 1997); Hirschman

v Natl. Textbook Co., 184 AD2d 494 (2d Dept 1992). Thus, as the Agreement contained a

mandatory forum selection clause, the Defendants are barred from applying for relief under CPLR

327 (a).

The standard of review applied to forum non-conveniens, requires the Court to consider

the following factors: (1) the burden on the New York courts; (2) the potential hardship to the

defendant; (3) the unavailability of an alternative forum in which plaintiff may bring suit; and (4)

that the transaction bear a substantial nexus with New York. Shin-Etsu Chem. Co. v ICICI Bank

3
See NYSCEF doc no 2, “Agreement”, page 7, paragraph 27.
4
Id.

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Ltd., 9 AD3d 171 (1st Dept 2004).

In arguing forum non-conveniens, Defendants have failed to meet their burden. Defendants

have not shown that maintaining the action in New York would be a burden to the New York

courts. This court routinely adjudicates complex commercial cases involving domestic disputes.

Furthermore, defendants must establish that New York possesses no substantial nexus to the

challenged transaction, or that litigation would best adjudicate elsewhere.

Their Welsback argument clearly does not apply here. As previously cited, the Choice of

Law clause in the Agreement clearly lays out how the material facts of this case are connected to

New York:

1) Plaintiff maintains an office and is registered to do business in the State of New York. 5
2) Plaintiff’s Banks in the State of New York. 6
3) Plaintiff’s contracts are drafted in the State of New York. 7
4) and Plaintiff’s personnel are located in the State of New York. 8
5) Plaintiff contracted with Defendants that any dispute would be adjudicated in the State of New
York. 9
This court would chill the commercial interest of every business conducting interstate

commerce in New York by adopting a policy of casually removing cases to another forum just to

accommodate the corporate Defendant’s state of residency.

Defendants argue that California, as the state of Defendants’ residency and location of their

business, is the only location relevant to the facts of the case. According to Defendants litigation

of this case in the alternative forum would be consistent with fundamental principles of justice,

citing to Welsback. They have offered no case law to explain why Florida would fail to honor the

5
See Plaintiff affidavit attached to Plaintiff opposition papers.
6
Id.
7
Id.
8
Id.
9
See NYSCEF doc. no 2, “Agreement”.

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parties Choice of Law or Choice of Forum clauses. Conceivably, removal in this case could place

the Plaintiff in the position of arguing New York law in California. It is hard to understand how

this would be consistent with the fundamental principles of justice.

Defendants knowingly and willingly waived their right to argue this Court is an

inappropriate forum for litigation, and in the interests of justice, their arguments must be denied.

Plaintiff is entitled to deference in its choice of forum. This court absolutely has personal

jurisdiction over this case, and pursuant to the valid forum selection clause in the parties’

agreement, there are no just grounds for removal to an alternate forum. 10 Defendant’s points of

law are meritless.

FEES ARE NOT EXCESSIVE AND THUS NOT DEEMED A PENALTY

Parties are free to agree to a liquidated damages clause “provided that the clause is neither

unconscionable nor contrary to public policy”. 11In the instant matter, Plaintiff’s “fee” amounts to

$5,000.00 which is less than five (4.72%) percent of the amount of the damages due to Defendant’s

breach of $105,718.75. See Agreement. Perseus provides a guide for when excessive fees should

not be sustained. 12 In Perseus, the court rejected the liquidated damages since the “liquidated

damages amount is more than seven times that of Perseus's actual damages.” 13 Courts have

routinely held that such fees are not excessive or a penalty. In fact, the nominal fees in matters

similar to the case at bar have also been allowed and ruled not excessive or a penalty under the

above reasoning. 14 As such, Plaintiff’s fees are not a “penalty” and Defendants are merely

attempting to delay what rightfully belongs Plaintiff.

10
See NYSCEF doc no 2, “Agreement”.
11
Truck Rent-A-Center, Inc. v Puritan Farms 2nd, Inc., 41 NY2d 420 (1977).
12
Perseus Telecorn, LTD. v Indy Research Labs, LLC, 2018 NY Slip Op 33083[U] (Sup Ct, NY County 2018).
13
Id.
14
See attached Exhibit C “Vox Funding v Lifepointe Hospice Dallas Metroplex LLC”; Exhibit D Union Funding Source v Sunshine Halal

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DEFENDANTS BREACH OF CONTRACT HAS BEEN DEMONSTRATED

There are four elements to establish a cause of action for a breach of contract. The elements

to proof a breach of contract are: (1) formation of a contract between plaintiff and defendant, (2)

performance by plaintiff, (3) defendant's failure to perform, (4) resulting damage. [ Palmetto

Partners, L.P. v. AJW Qualified Partners, LLC, 83 A.D.3d 804 (2011).

The Agreement in the pertinent part in PAGE ONE states:

“Merchant is selling a portion of a future revenue stream to WF at a discount, not
borrowing money from WF.... So long as Merchant is generating Receipts and has
not requested a reconciliation, WF will debit the Daily Remittance each business
day from one depositing bank account…” 15
As clearly shown on the very first page of the agreement, Merchant is responsible for the

daily remittance of the Purchased Receivables. Furthermore, it is Merchant's responsibility to

request a reconciliation if the daily receivables go above or below the good faith approximation.

It is a condition precedent that Defendant must show their receivables in order to affect a

reconciliation and Defendant has failed to do so. Plaintiff’s proof of Defendant’s breach is the pay

run 16 which shows lack of remittance. As Defendant failed to keep their end of the Agreement by

stopping all payments without requesting a reconciliation, Defendant is in breach of the

Agreement.

The complaint is sufficiently pleaded as it must "set forth the terms of the agreement upon

which liability is predicated, either by express reference or by attaching a copy of the contract"

Chrysler Capital Corp. v Hilltop Egg Farms, 129 AD2d 927, 928. 17 In the instant matter, Plaintiff

15
See NYSCEF doc no 2, page 1.
16
See NYSCEF doc no 3.
17
Valley Cadillac Corp. v. Dick, 238 A.D.2d 894 (1997).

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attached the agreement as an exhibit with the Summons and Complaint. 18 Plaintiff’s affidavit

references the pay run as well as the exact term of the Agreement that was breached. 19

The complaint alleges that Plaintiff paid Company Defendant for the future receivables,

Company Defendant initially made payments, but “Company Defendants, however, intentionally

stopped remitting the purchased receivables to Plaintiff from the Bank Account without proper

notice and failed to provide Plaintiffs proper financial disclosures or a written request for

reconciliation, thereby breaching the agreement.” 20 The Agreement states “3.1. Events of Default.

The occurrence of any of the following events shall constitute an “Event of Default”: 5) On five

or more occasions, Merchant fails to give WF advance notice that there will be insufficient funds

in the Account such that the ACH of the Daily Amount will not be honored by Merchant's bank

and does not notify WF within two days of Merchant's bank sending notice to Merchant of the

rejected debit.” 21

Exhibit C, the payrun, attached to the complaint, indicates that Defendants account

repeatedly turned up NSF codes as evidenced by the ‘ACH Status’ on the right side of the Pay

Run. 22 As to the Guaranty, the Complaint alleges that the under the Agreement between the parties

Guarantor guaranteed performance if Company Defendant breached and has failed to perform in

lieu of Company Defendant’s breach, thereby causing damage to Plaintiff for a sum certain. 23

Specifically, the Guaranty states on page 9 of the Agreement:

18
See NYSCEF document number 1 Summons and Complaint; and NYSCEF document number 2 “Agreement”.
19
See Plaintiff affidavit attached.
20
See NYSCEF Document number 1, Complaint page 4 paragraph 9.
21
See NYSCEF doc 2, “Exhibit A” Agreement, page 5, section 3.1 “Events of Default”.
22
See NYSCEF doc no 4, “Pay Run”.
23
See the Complaint page 4 and 5, NYSCEF Document number 1.

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“WF as an additional inducement for WF to enter into this Agreement, the undersigned

Guarantor(s) hereby provides WF with this Guaranty. Guarantor(s) will not be personally liable

for any amount due under this Agreement unless Merchant commits an Event of Default pursuant

to Paragraph 3.1 of this Agreement. Each Guarantor shall be jointly and severally liable for all

amounts owed to WF in the Event of Default. Guarantor(s) guarantee Merchant’s good faith,

truthfulness and performance of all of the representations, warranties, covenants made by

Merchant in this Agreement as each may be renewed, amended, extended or otherwise modified

(the “Guaranteed Obligations”). Guarantor’s obligations are due at the time of any breach by

Merchant of any representation, warranty, or covenant made by Merchant in the Agreement.” 24

Therefore, the complaint should not be dismissed because Plaintiff has satisfied its

obligation for specificity in both having attached the contract to its complaint and by having

specified that Defendants’ failure to remit the Purchased Percentage and closure of the Bank

Account without proper notice to Plaintiff was the cause of the Defendants breach.

THE TRANSACTION WAS NOT USURIOUS ACCORDING TO THE K9 BYTES

STANDARD FOR CASH ADVANCES

The type of transaction at issue is a cash advance, and the Court has consistently ruled on

the validity of this specific type of agreement in the context of the usury laws. Courts have

repeatedly held that agreements similar to the case at bar to be one of a purchase and sale; and not

of a loan. 25

According to Funding Group Inc. v Water Chef, Inc., 19 Misc. 3d 483, “If the transaction

is not a loan, there can be usury, however unconscionable the contract may be.” Transmedia Rest.

24
See NYSCEF doc no 2, “Agreement” page 9, paragraph 33.
25
K9 Bytes Inc., et al. v. Arch Capital Funding, LLC, et al., Index No. 54755/2016 (Sup. Ct. Westchester Co. 5/8/17).

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Co. v 33 E. 61st St Rest. Corp, 184 Misc. 2d. at 711 “there can be no usury unless the principal

sum advanced is repayable absolutely” and Professional Merchant Advance Capital, LLC v Your

Trading Room, LLC. In this type of agreement, the issue before the Court in determining whether

the Agreement is usurious is not what the percentage differential is between the Purchase Price

and the Receivables Purchased Amount, but whether repayment was absolute.

In determining whether a transaction is a loan, the court must examine whether or not

Defendant is absolutely entitled to repayment under all circumstances. 26 “Usually, courts weigh

three factors when determining whether repayment is absolute or contingent: (1) whether there is

a reconciliation provision in the agreement; (2) whether the agreement has a finite term; and (3)

whether there is any recourse should the merchant declare bankruptcy. 27

(i) AGREEMENT CONTAINED A MANDATORY RECONCILIATION

PROVISION

The Court has already held that a transaction would not constitute a loan when "(t)he

agreement provided a reconciliation on demand provision whereby the parties permitted to demand

the monthly reconciliation of funds from the other to ensure that neither entity collected more or

less of the sales proceeds than they were contractually entitled to collect from the designated bank

account”. 28

In the case at bar, the Agreement signed by the parties has a mandatory reconciliation

obligation on Plaintiff to reduce the payments upon a reduction in revenue which could be utilized

by Company Defendants at any time. The Agreement states one page two:

26
K9 Bytes, Inc. v Arch Capital Funding, LLC, 57 N.Y.S.3d 625 (Sup Ct., Westchester County 2017).
27
Id.
28
Retail Capital, LLC v Spice Intentions Inc., 2016 NY Slip Op 32614[U] (Sup Ct., Queens County 2016).

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““If an Event of Default has not occurred, every two (2) calendar weeks after the funding
of the Purchase Price to Merchant, Merchant may give notice to WF to request a decrease
in the Remittance…The Remittance shall be modified to more closely reflect the
Merchant’s actual receipts by multiplying the Merchant’s actual receipts by the Purchased
Percentage divided by the number of business days in the previous (2) calendar
weeks.” 29(emphasis added)
As is self-evident from the language of the Agreement, upon a reconciliation request by

Defendant, Plaintiff was required to provide a reconciliation. There is a mandatory reconciliation

provision in the Agreement which allowed Defendants to request a reduction in the daily

remittance had Defendant’s receivables been reduced.

Defendants have not requested a reconciliation, remitted financial statements to Plaintiff

or requested a reduction. The fact of the matter is that the evidence shows they made no attempt

to comply with their obligations in the Agreement’s reconciliation provisions, as explained in the

next section.

(ii) AGREEMENT HAS NO FINITE TERM

In addition, to determine if a transaction is a loan, the Court will review the Agreement to

ascertain if the Agreement has a finite term or not. 30 Here, the Agreement has no end date or sunset

provision but relies solely on the Defendants receivables, as such, the term “interest rate” has no

application here. Rather, the Agreement solely relies on the Defendants receivables.

Defendants cannot argue that the terms of repayment are not based upon their receipts

because they possessed a contractual right to demand a reconciliation according to their receipts.

If Defendants wanted their receipts to be adjusted on a continual basis, the contract allowed for

them to demand this from Plaintiff by providing documentation. Defendants chose not to do this.

29
See NYSCEF doc no. 2, “Agreement”, page 3, section 2.
30
IBIS Capital Group, LLC v Four Paws Orlando LLC, 2017 NY Slip Op 30477[U] (Sup. Ct., Nassau County 2017).

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(iii) NO RECOURSE TO PLAINTIFF IF DEFENDANTS FILE BANKRUPTCY

The final factor in the usury analysis is “whether the defendant has any recourse should the

merchant declare bankruptcy”. K9 Bytes, Inc. v Arch Capital Funding, LLC, 56 Misc. 3d 807 (Sup

Ct., Westchester County 2017).

Here, because PAGE ONE of the Agreement states that:

“Merchant going bankrupt or going out of business, or experiencing a slowdown in
business, or a delay in collecting its receivables, in and of itself, does not constitute a breach
of the Agreement.” 31
The Agreement is crystal clear that bankruptcy would not be deemed a default, that the

merchant would be entitled to liquidate its assets and that Plaintiff would not have any recourse.

Defendants have not requested a reconciliation, remitted financial statements to Plaintiff or

requested a reduction in payments.

The Agreement in this case therefore satisfies all of the factors laid out in K9 Bytes for a

cash advance to not be deemed usurious as a matter of law.

CONCLUSION

For all the foregoing reasons, the Defendants’ pre-answer motion to dismiss should be

denied, the Court should find 1) it has personal jurisdiction over the Defendants; 2) that as a matter

of law the documentary evidence supports the Plaintiff’s allegation that the agreement was for the

purchase of receivables; 3) that until the Court rules on the enforceability of the Agreement the

Plaintiff’s claims are not duplicative as a matter of law; 4) the agreement is for a cash advance for

future receivables 4) and that the Defendants be ordered to enter a response to Plaintiff’s complaint

within 30 days.

31
See NYSCEF document number 2, page 5 paragraph 13.

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For purposes of this application only, the Plaintiff’s attorney hereby waives its

entitlement to attorney’s fees and retains the right to renew the application for attorney fees for

future applications to the Court.

Nassau County, New York Respectfully submitted,
September 22, 2023
By:
___________________
Yosef C. Feldman, Esq.
Lieberman and Klestzick, LLP
Attorneys for Plaintiff
71 S Central Avenue
Valley Stream NY 11580
P: 516-900-6720
Email: yosef@landklegal.com

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NYSCEF DOC. NO. 15 RECEIVED NYSCEF: 09/22/2023

WORD COUNT CERTIFICATION

I hereby certify pursuant to part 202.8-b of the Uniform Civil Rules for the Supreme Court

& the County Court that this document according to the word count tool on Microsoft Word, the

total number of words in this document is 4189, consistent with the rule that (i) affidavits,

affirmations, briefs and memoranda of law in chief be limited to 7,000 words each; (ii) reply

affidavits, affirmations, and memoranda be no more than 4,200 words, and do not contain any

arguments that do not respond or relate to those made in the memoranda in chief.

By:
___________________
Yosef C. Feldman, Esq.
Lieberman and Klestzick, LLP
Attorneys for Plaintiff
71 S Central Avenue
Valley Stream NY 11580
P: 516-900-6720
Email: yosef@landklegal.com

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FILED: NASSAU COUNTY CLERK 09/22/2023 12:45 PM

Case Info

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Felice Muraca Track Judge’s New Case

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Document Filed Date

September 22, 2023

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June 29, 2023

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Motion-Secondary: Webfund Llc v. Positive Behavior Steps Corporation D/B/A POSTIVE BEHAVIOR STEPS, David A Sandoval

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