Legal Document: Pearl Delta Funding, Llc v. Bevel Construction Llc, Frank Smalls

On July 19, 2023 a MEMORANDUM OF LAW IN REPLY was filed involving a dispute between Pearl Delta Funding, Llc, and Bevel Construction Llc, Frank Smalls, for Commercial - Contract in the District Court of Nassau County.

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FILED: NASSAU COUNTY CLERK 11/21/2023 11:28 PM INDEX NO. 611385/2023
NYSCEF DOC. NO. 26 RECEIVED NYSCEF: 11/21/2023

SUPREME COURT OF THE STATE OF NEW YORK Index No.: 611385/2023
COUNTY OF NASSAU
PEARL DELTA FUNDING, LLC,
Plaintiff,
-against- Returnable: 11/24/23
BEVEL CONSTRUCTION LLC and
FRANK SMALLS ,
Defendants.

PLAINTIFF’S REPLY MEMORANDUM OF LAW IN SUPPORT OF ITS
MOTION TO DISMISS DEFENDANTS’ AFFIRMATIVE DEFENSES

Dianne Rhonda Ramdeen, Esq.
Attorney for Plaintiff
Office, Post Office Address, E-mail address, Telephone
Office of Theodore Jon Cohen, Esq.
410 Jericho Tpke., Ste. 220
Jericho, New York 11753
Phone: (347) 899-4186
Email: Dianne.Ramdeen.Attorney@gmail.com

Pursuant to 22 NYCRR 130-1.1, the undersigned, an attorney admitted to practice in the courts of
New York State, certifies that, upon information and belief and reasonable inquiry, the contentions
contained in the annexed document are not frivolous.

Dated: 11/21/23

Dianne Rhonda Ramdeen, Esq.

VIA NYSCEF TO:
Marshall Evan Garson, Esq.
Attorney for Defendants
email: mgarson@fritzsonlaw.com

Service of a copy of the within is hereby admitted.

Dated:

Attorney(s) for

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TABLE OF CONTENTS
Page
TABLE OF CONTENTS……………………………………………………………………..…… 2
TABLE OF AUTHORITIES…..………………………………………………………………….. 2
PRELIMINARY STATEMENTS.………………………………………………………………… 3
ARGUMENTS……………………………………………………………………………..……… 4
I. ANY DEFENSE BASED ON USURY FAILS AS A MATTER OF LAW
AND SHOULD BE DISMISSED………………………….…………..………............... 4
II DEFENDANTS’ AFFIRMATIVE DEFENSES MUST BE DISMISSED FOR
FAILURE TO PLEAD WITH FACTSANY DEFENSE BASED ON USURY
FAILS AS A MATTER OF LAW……………………..…...……………………….....… 7
CONCLUSION……………………………………………………………………………….…… 9
CERTIFICATION OF WORD LIMIT ………………………………………………………..….. 10

TABLE OF AUTHORITIES
Cases Page
AKF, Inc. v. W. Foot & Ankle Ctr.
2022 U.S. Dist. Lexis 176467 (E.D.N.Y. 2022)…….…………………..………………… 7
Alami v. 215 E. 68th St., L.P.
88 A.D.3d 924, 926 (2d Dept. 2011) …………………..…………………………………. 4
Brad H. v. City of N.Y.
928 N.Y.S.2d 221, 224 (2011)…..………………..……………………………………….. 6
Champion Auto Sales, LLC v. Pearl Beta Funding, LLC
159 A.D.3d 507, 507 (1st Dept. 2018)…………………….…………………………….… 3
Commrs. of the State Ins. Fund v. Ramos
63 A.D.3d 453 (1st Dept. 2009)…………………..……………………………………….. 9
Fleetwood Services, LLC v. Richmond Capital Group LLC
2023 U.S. App. LEXIS 14241…………………..…………………………………………. 7
Katz v. Miller
120 A.D.3d 768, 769-770 (2d Dept. 2014)…………………………………….………….. 9
LG Funding, LLC v. United Senior Props. of Olathe, LLC
181 A.D.3d 664 (2d Dept. 2020)…………………….………………………………..…… 5
N.Y.C. Off-Track Betting Corp. v. Safe Factory Outlet, Inc.
28 A.D.3d 175, 177 (1st Dept. 2006).……………….………………………………..…… 6
Pearl Delta Funding, LLC v. v. Superior Contr. & Restoration, Inc.
2022 N.Y. Misc. LEXIS 6038 (Sup. Ct. Nassau Cty. Sep. 13, 2022)……….……...…….. 3
Principis Cap., LLC v. I Do, Inc.
201 A.D.3d 752, 754 (2d Dept. 2022)……………….………………..…………..………. 3
Samson MCA LLC v Joseph A. Russo
2023 N.Y. App. Div. LEXIS 4295……………….………………..…………..………….. 7
Yellowstone Capital LLC v. Cent. USA Wireless LLC
60 Misc. 3d 1220(A) (Sup. Ct. Erie Cty. 2018).……………….………………..………… 5

Statutes
CPLR §3211(b)….……………………………………… …….………………………………. 4, 9

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PRELIMINARY STATEMENTS

1. This is an action in which the Plaintiff, Revenued LLC, seeks to recover from the Defendants

based upon the Defendants’ breach of a purchase and sale of future receivables agreement (the

“Agreement,” NYSCEF Doc. 10). The Summons and Verified Complaint (NYSCEF Doc. 1) set forth

well-plead allegations for breach of contract and breach of the guaranty by the Defendants, in response

to which Defendants filed an Answer (the “Answer”) (NYSCEF Doc. 5). The Answer contained 13

“affirmative defenses” plead as pure legal conclusions, without any supporting facts whatsoever. The

Plaintiff filed a Motion to Dismiss Defendants’ Affirmative Defenses. See NYSCEF Doc. No. 7 (the

“Motion”). In response, the Defendants have filed: (A) an affirmation in opposition (NYSCEF Doc.

No. 19, the “Opposition Affirmation”) that merely states that Plaintiff hasn’t provided documentary

that resolves all factual issues; and (B) a memorandum of law in opposition (NYSCEF Doc. No. 209,

the “Opposing Memo of Law”) that is long on repetitive, generalized and conclusory statements,

arguing that there are facts in dispute and that discovery is needed – without any identification of what,

exactly, those facts are, how they affect the claims or defenses in the case, and why discovery might be

needed to investigate them – and strangely silent on the fact that Defendants have never served any

discovery requests.

2. Defendants then baldly misstate the terms of the Agreement – without, of course, citation to

any actual language or terms of the Agreement in an attempt to now plead criminal and usury defenses

in their unsworn opposition papers. But settled law in New York has repeatedly held that contracts

identical to the one at issue here are not loans as a matter of law. Champion Auto Sales, LLC v. Pearl

Beta Funding, LLC, 159 A.D.3d 507, 507 (1st Dept. 2018); Principis Cap., LLC v. I Do, Inc., 201

A.D.3d 752, 754 (2d Dept. 2022); Pearl Delta Funding, LLC v. Superior Contr. & Restoration, Inc.,

2022 N.Y. Misc. LEXIS 6038 (Sup. Ct. Nassau Cty. Sep. 13, 2022).

3. As for the rest of Defendants conclusory affirmative defenses, Defendants cite to the correct

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standards under the CPLR for sufficiency of pleading such defenses, and then blithely argue, without

any support in fact or law, that the Answer meets these standards and provides enough information to

give notice of what facts Defendants intend to prove to substantiate them. The simple fact is that

Defendants have not pled any facts upon which they can allege any affirmative defenses. As explained

below, with specific reference to particular defenses plead, Defendants argument is meritless.

4. In short, Defendants’ Answer is fatally deficient on every front. Consequently, the Court

should dismiss all of the Defendants’ affirmative defenses for failure to plead facts sufficient to allege

a defense pursuant to CPLR §3211(b). Indeed, a motion to dismiss affirmative defenses 3211(b) may

be made for any reason at any time.

ARGUMENTS

I. ANY DEFENSE BASED ON USURY FAILS AS A
MATTER OF LAW AND MUST BE DISMISSED

5. Where a pleading is wholly devoid of facts, the pleading cannot be saved even with a sworn

statement. Alami v. 215 E. 68th St., L.P., 88 A.D.3d 924, 926 (2d Dept. 2011). In the instant matter, not

only were all of Defendants’ affirmative defenses pled without fact. Where a pleading is wholly devoid

of facts, it pleading cannot be saved even with a sworn statement. Alami. In the instant action, there

was no sworn statement by a party with actual knowledge of the facts.

6. Defendants’ 12th and 13th usury defenses (see Answer, pages 3-4) fail as a matter of law

because New York courts have repeatedly held that agreements that are materially identical to that at

issue here are not usurious as a matter of law. Thus, there are no factual issues to resolve (Opposing

Memo of Law, Point II); there are no “disputes surrounding the evidence” Opposing Memo of Law,

¶10); there are no “documentary evidence defense issues” (id.). Put simply, no “discovery concerning

the [ ] Agreement” (Opposing Memo of Law, ¶11) is needed because all that is needed to “refute

[and] dispose” (Opposing Memo of Law, ¶53) of any usury defense is the terms of the Agreement

itself.

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7. Defendants present the Court with the Agreement and then say, “The Loan Agreement 1 is

in Fact a Loan and Not a Revenue Purchase Agreement” (Opposing Memo of Law, page 20).

Defendants are wrong as a matter of law.

8. Where a party argues that a purchase and sale of future receivables contract should be

considered a usurious loan, New York Courts consider three factors when determining whether an

agreement is a purchase of future receivables as a matter of law, namely, whether the agreement: (A)

contains a reconciliation provision; (B) has a finite term; and (C) whether bankruptcy is an event of

default. See e.g., LG Funding, LLC v. United Senior Props. of Olathe, LLC, 181 A.D.3d 664, 666 (2nd

Dept. 2020); Yellowstone Capital LLC v. Cent. USA Wireless LLC, 60 Misc. 3d 1220(A) (Sup. Ct. Erie

Cty. 2018). Defendants’ Opposition attempts to defeat the clear and fatal import of the unambiguous

terms of the Agreement with spurious arguments about each factor.

9. Regarding the first factor, whether the Agreement contains a reconciliation provision,

Defendants merely claim the Agreement does not “include a true reconciliation provision” and then

include the actual provision (Opposing Memo of Law, ¶27). A plain reading thereof shows

Defendants are wrong in that: “If an Event of Default has not occurred, every two calendar weeks after

the funding of the Purchase Price to Merchant, Merchant may give notice (hereinafter, the

"Remittance Adjustment Notice"), via email to TrueUp@pearicash.com or via fax to (347) 899-4044,

to request a change in the Remittance (hereinafter, a "True-Up") … Within three business days (the

"Three-Day Period") of receipt of the Remittance Adjustment Notice with the Required Bank

Statements, Purchaser shall so adjust the next Remittance to be ACHed (hereinafter, the "Adjusted

Remittance"). During the Three-Day Period, any ACH payment returned by Merchant's bank with a

return code of either R01 (insufficient funds) or R09 (uncollected funds) shall not be included for

1
There is no “Loan Agreement” anywhere in the record. Instead, this is a clumsy label provided by Defendants’ counsel to
bolster an obviously frivolous argument challenging the nature of the transaction. The actual agreement is entitled
“Revenue Purchase Agreement.” NYSCEF Doc. 10.

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purposes of determining whether or not an Event of Default has occurred…” Thus, the Agreement

provides no leeway for Plaintiff, it is a mandatory, “… Purchaser shall so adjust the next

Remittance…” Bare conclusory statements otherwise cannot save Defendants from the import of the

plain terms of the Agreement. N.Y.C. Off-Track Betting Corp. v. Safe Factory Outlet, Inc., 28 A.D.3d

175, 177 (1st Dept. 2006) (“mere assertion by a party that contract language means something other

than what is clear when read in conjunction with the whole contract is not enough to create an

ambiguity . . .”) 2. Defendants’ defective, misleading reading of the reconciliation provision is of a

piece with their next contention (see the following paragraph) that the Agreement “has a finite term.”

10. Regarding the second factor, whether the Agreement has a finite term, Defendants merely

state that the “… Loan Agreement i has a finite term although it does not state an explicitly or definite

term.” (Opposing Memo of Law, ¶31). The Agreement does not have or state a finite term precisely

because of the existence of a mandatory reconciliation provision that provides for the adjustment of the

amount remitted to Revenued, e.g., if a reconciliation request results in lower remittances – because

the merchant is generating and collecting fewer receivables than expected – then, the term would

consequently be lengthened.

11. Regarding the third factor, whether bankruptcy is an event of default, Defendants make a last-

ditch attempt to save their usury defense by ignoring the plain terms of the bankruptcy provision and

arguing that Plaintiff’s position as a secured creditor somehow eliminates obviates the plain language

of the Agreement, to wit, “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

2
Relatedly, the Court of Appeals has stated:
Ambiguity is determined within the four corners of the document; it cannot be created by extrinsic
evidence that the parties intended a meaning different than that expressed in the agreement and, therefore,
extrinsic evidence "may be considered only if the agreement is ambiguous."
Brad H. v. City of N.Y., 928 N.Y.S.2d 221, 224 (2011). Which is to say: if the language of a contract provision is not
ambiguous – as is the case here – there is no need for extrinsic evidence, which is precisely what Defendants purportedly
seek with their meritless contention that discovery is necessary

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breach of this Agreement. Purchaser is entering this Agreement knowing the risks that Merchant's

business may slow down or fail, and Purchaser assumes these risks based on Merchant's

representations, warranties and covenants in this Agreement, which are designed to give Revenued a

reasonable and fair opportunity to receive the benefit of its bargain. Merchant and the Guarantor(s)

are only guaranteeing their performance of the terms of this Revenue Purchase Agreement, and are

not guaranteeing the payment of any Purchased Amount” (see Agreement, page 1, second full

paragraph) and completely eliminates Plaintiff’s financial risk in that the Agreement protects Plaintiff

in the event Defendants declared bankruptcy (Opposing Memo of Law, ¶33). Simply put, this

argument is mere ipse dixit, and relies heavily on an outlier case , AKF, Inc. v. W. Foot & Ankle Ctr.,

2022 U.S. Dist. Lexis 176467 (E.D.N.Y. 2022), in an attempt to raise an issue of law. Indeed, there

have been many recent developments by the federal courts, but they seem to be coalescing around the

Second Department’s standard of review. The Second Circuit in affirming Fleetwood Services, LLC v.

Richmond Capital Group LLC, 2023 U.S. App. LEXIS 14241. completely ignored AKF and reached

its conclusion solely using the Second Department’s test. The Fourth Department as well most recently

used the same test used by the Second Department in Samson MCA LLC v Joseph A. Russo, 2023 N.Y.

App. Div. LEXIS 4295.

II. DEFENDANTS’ AFFIRMATIVE DEFENSES MUST BE
DISMISSED FOR FAILURE TO PLEAD WITH FACTS

12. Defendants concede the relevant standards for analysis of their Opposition:

Under CPLR, the sufficiency of a pleading to state a cause of action or defense will
generally depend upon whether or not there was substantial compliance with Section
3013 providing that ‘Statements in a pleading shall be sufficiently particular to give the
court and parties notice of the transactions, occurrences, or series of transactions or
occurrences, intended to be proved and the material elements of each cause of action or
defense.’ . . . By virtue of the provisions, the emphasis with respect to pleading is placed,
where it should be, upon the primary function of pleadings, namely, that of adequately
advising the adverse party of the pleader's claim or defense (Opposing Memo of Law,
¶60).

13. Incredibly, Defendants then argue that the Answer has provided enough information to give

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the Plaintiff notice of the “transactions and occurrences intended to be proved” (Opposing Memo of

Law, ¶20) in connection with each of their affirmative defenses, that they have “pled their affirmative

defense with enough facts and information to inform Plaintiff of the allegations.” (Opposing Memo of

Law, ¶61). As initially addressed in Plaintiff’s motion papers, the Defendants are wildly wrong. Take,

for instance, Defendants’ third Affirmative Defense – that “Plaintiff has failed to acquire jurisdiction

over the Defendants as service was improper” – have Defendants, anywhere else in the Answer or

Opposition, even mentioned service of process? Unsurprisingly, no, they have not. Defendants’ Second

Affirmative Defense is that “Plaintiff has failed to accurately account for payments from Defendants,”

but where have Defendants offered a single fact or allegation to substantiate that defense? What

payment or payments weren’t accurately accounted for? Which is to say, what are the “transactions

[or] occurrences” that support this defense? Neither Plaintiff nor the Court can know, because the

pleading is not “sufficiently particular,” and thus defective. 3

14. The fact of the matter is that the affirmative defenses are pure legal conclusions and the law is

clear that the Plaintiff should not have to guess the underlying facts (e.g., how has the Plaintiff failed to

mitigate damages, as alleged in the Seventh Affirmative Defense? Who are the necessary parties that

Plaintiff did not join in this action, as alleged by the Tenth Affirmative Defense? And then, perhaps

worst of all, there is the nonsensical, utterly frivolous fifth affirmative defense that “[t]he Complaint

should be dismissed for failure to prosecute the action in a timely manner as statute of limitations has

expired.” This case is based on a contract entered in on 05/24/23, and the Complaint was filed on

07/19/23, mere days after Plaintiff learned that Defendants had breached the agreement by closing the

corporate defendant’s bank account. How can a matter of days between breach and filing suit

constitute a “failure to prosecute the action in a timely manner [such that the] statute of limitations has

3
This same logic applies with equal force to Defendants’ Sixth Affirmative Defense, that the “amounts allegedly owed to
the Plaintiff by the Defendants are in dispute.”

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expired”? That, of course, is not explained, nor supported by facts or law, which is obviously because

there is not even colorable support – in fact, law, or logic – for that argument. At best, defense counsel

is unaware of the law or has willfully ignored the relevance of the law to the facts of this case. Either

way, advancing a statute of limitations argument here is either a dereliction of counsel’s duty to

research the law, or a knowingly frivolous assertion. 4 Either way, it is unacceptable.

15. To not belabor the point: every single one of the affirmative defenses suffers from these same

infirmity that Defendant had pled only bare assertions and legal conclusions. In sum, where affirmative defenses

in a pleading are not substantiated with factual allegations, as is the case here, New York Courts consistently hold

that the affirmative defenses must be dismissed. Katz v. Miller, 120 A.D.3d 768, 769-770 (2d Dept. 2014);

Commrs. Of the State Ins. Fund v. Ramos, 63 A.D.3d 453 (1st Dept. 2009). That result should follow here, and

the Court should dismiss the Defendants’ affirmative defenses pursuant to CPLR §3211(b).

16. As regards those affirmative defenses not discussed herein, Plaintiff relies on the its initial

Memorandum of Law in Support (NYSCEF Doc. No. 14).

CONCLUSION

For the foregoing reasons, this Court should dismiss all of Defendants’ Affirmative Defenses

pursuant to CPLR §3211(b).

WHEREFORE, Plaintiff respectfully requests that the Court issue an Order: (i) pursuant to CPLR

§3211 (b), dismissing the Defendants’ affirmative defenses; and (ii) granting Plaintiff such other and

further relief as the Court deems just and proper.

CERTIICATION OF WORD LIMIT: Pursuant to Rule 202.8-b of this Court, the undersigned

hereby certifies this Affidavit, exclusive of this paragraph, the caption and the signature block,

contains 2,719 words. This certification was prepared in reliance on the word-count.

Dated: 11/21/23 /s/ Dianne Rhonda Ramdeen
Dianne Rhonda Ramdeen, Esq., Attorney for Plaintiff

4
For the same reasons, the eleventh affirmative defense which, in part, argues that Plaintiff’s claims are barred by the
doctrine of laches is similarly frivolous.

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Office of Theodore Jon Cohen, Esq.
VIA NYSCEF TO: 410 Jericho Tpke., Ste. 220, Jericho, New York 11753
Marshall Evan Garson, Esq. (347) 899-4186 Dianne.Ramdeen.Attorney@gmail.com
Attorney for Defendants

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email: mgarson@fritzsonlaw.com

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Eileen C Daly-Sapraicone Track Judge’s New Case

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Document Filed Date

November 21, 2023

Case Filing Date

July 19, 2023

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