Preview
FILED: NASSAU COUNTY CLERK 09/13/2023 05:26 PM INDEX NO. 614887/2023
NYSCEF DOC. NO. 5 RECEIVED NYSCEF: 09/13/2023
NARRATIVE STATEMENT
From: Robert Kleiber
To: Mediation and Civil Arbitration, Inc.
Re: Claim of The LCF Group, Inc. against Redmond Residential And Commerical Coatings LLC
DBA Redmond Residential And Commerical Coatings, Joseph Redmond and Megan Redmond
Dated: August 07, 2023
---------------------------------------------------------------------------------------------------------------------
State of New York }
} ss.
County of Nassau }
Robert Kleiber, being duly sworn, deposes and says the following under the penalties of perjury:
1. I am the Chief Financial Officer for The LCF Group, Inc. (“LCF”), claimant
in this proceeding, and, as such, I have personal knowledge of the facts and circumstances
surrounding this matter, except those stated “upon information and belief” and as to those, I
believe them to be true based upon a review of my office records.
2. I offer the instant sworn statement in support of LCF’s claims in this
arbitration proceeding.
3. This matter concerns a merchant cash advance transaction entered into by
and between LCF and Redmond Residential And Commerical Coatings LLC DBA
Redmond Residential And Commerical Coatings (“Merchant”) via a written purchase and
sale of future receivables agreement dated July 18, 2023, which is annexed hereto as Exhibit
“1” (the “Agreement”).
4. On or about July 18, 2023, Merchant and LCF entered into the Agreement
for the purchase and sale of future receivables, whereby LCF agreed to purchase a certain
percentage of Merchant’s future receivables and sales proceeds having a face value of
$7,450.00 (the “Purchased Amount”). The purchase price for these receivables was
$5,000.00 (the “Purchase Price”), which was remitted to Merchant (less origination fees as
FILED: NASSAU COUNTY CLERK 09/13/2023 05:26 PM INDEX NO. 614887/2023
NYSCEF DOC. NO. 5 RECEIVED NYSCEF: 09/13/2023
provided within the Agreement) on or about July 18, 2023 (Exhibit “2” – Proof of Funding).
Joseph Redmond and Megan Redmond (“Guarantors”) signed the agreement as authorized
representatives of Merchant.
5. The Agreement provided, among other things, that Merchant was obligated
to deposit all of Merchant’s daily sales proceeds into a designated business account and that
LCF would obtain its specified percentage of Merchant’s daily sales proceeds (the
“Specified Percentage”) until such time that LCF received the full Purchased Amount.
6. The Merchant Cash Advance industry – part of the larger “Fintech” sector is
an important source of funds for small businesses throughout the United States1. Fintech
leverages technological advancements to expand the availability of capital to businesses
previously shut out of the conventional banking products after the financial crisis of 2008.
Accordingly, businesses that might be unable to obtain traditional sources of capital have
increasingly sought a merchant cash advance (“MCA”) as a means to expand and support
their businesses.
7. An MCA is not a recourse product – rather, a business sells a percentage of
its future receivables at a discounted present value. MCA financing entities typically
recover the purchased amount of a business’ receivables through regular ACH debits which,
initially, are estimated as a percentage of average revenues prior to funding. The dollar
amount tied to such percentage is adjustable upon a business’ request and a reduction in a
business’ revenues directly correlate to a reduction in remittances. As a result, the length of
time for an MCA funder to receive its percentage of future sales is indefinite. For example,
assuming a purchased percentage of 15% of daily sales, if a business’ daily revenues were
1
See Generally https://www.commercialfinancecoalition.com/our-mission/ and
https://www.tgdaily.com/what-is-a-merchant-cash-advance-and-is-it-a-good-choice-for-your-business
FILED: NASSAU COUNTY CLERK 09/13/2023 05:26 PM INDEX NO. 614887/2023
NYSCEF DOC. NO. 5 RECEIVED NYSCEF: 09/13/2023
averaging $100.00, the MCA funder would be entitled to receive $15.00 ($100.00 x 0.15 =
$15.00). If those revenues were to drop to $10.00. the MCA funder would be entitled to
receive $1.50 ($10.00 x 0.15 = $1.50).
8. To safeguard against remittances in excess of the agreed upon percentage of
daily sales, the subject purchase and sale of future receivables agreement (“PSFRA”)
contains a reconciliation provision which invites a business to document its monthly sales in
order to ensure that monthly remittances to the MCA funder do not exceed the specified
percentage of revenues and remittances, and that any excess is returned to the business.
Moreover, a cessation of business operations, bankruptcy, or other insolvency does not
constitute an event of default. The PSFRA between the parties clearly provides that so long
as a business complies with the contract’s notification requirements, recovery of the
business’ purchased receivables can extend indefinitely and, indeed, in the event of a
cessation of business operations, may never occur.
9. LCF materially relied upon Merchant’s covenants, representations, and
warranties set forth in the Agreement, and the guaranty of performance thereon, as
consideration of its entering into the Agreements with Merchant. The Agreements provide
that a breach of any such covenants, representations, or warranties set forth in the
Agreements constitutes a default thereunder.
10. In addition, Guarantors executed a guaranty of Merchant’s performance
under the Agreements, which provides, inter alia, that Guarantors would be liable in the
event that Merchant interfered or otherwise breached its performance obligations and
frustrated LCF’s collection of its specified percentage of Merchant’s daily sales proceeds.
11. On or about July 20, 2023, Merchant breached its obligations under the
Agreement by frustrating LCF’s access to draw upon its Specified Percentage of receivables
FILED: NASSAU COUNTY CLERK 09/13/2023 05:26 PM INDEX NO. 614887/2023
NYSCEF DOC. NO. 5 RECEIVED NYSCEF: 09/13/2023
by stopping ACH debits to be drawn from a predesignated bank account (R08)2.
Additionally, Merchant failed to meet its obligations under Section III of the Agreement.
12. As of July 20, 2023 (see Exhibit “3” – Payment History) Merchant has
continuously failed to meet its obligations under the Agreement and Guarantors has failed
to meet their obligations under their guaranty. There remains a balance of purchased
receivables due and owing to LCF in the amount of $7,201.67, exclusive of attorneys’ fees,
default Fees, and costs.
13. Given the various liquidated default provisions contained within the
Agreement, Merchant presently owes LCF the sum of $7,201.67 together with default fees
of $5,070.00, and attorneys’ fees of 33% of the outstanding Purchased Amount in the sum
of $2,483.09. Altogether, Merchant and Guarantor presently owe LCF the sum of
$14,754.76.
WHEREFORE, LCF respectfully prays for an award of $14,754.76 against Redmond
Residential And Commerical Coatings LLC DBA Redmond Residential And Commerical
Coatings, Joseph Redmond and Megan Redmond as set forth herein, plus interest from July 20,
2023, together with such other and further relief as this honorable tribunal deems just and
proper.
So sworn before me on Respectfully Submitted,
August 7, 2023
_________________________
Notary Public
Robert Kleiber
Adam Jason Feldman, Notary Public Chief Financial Officer
State of New York The LCF Group, Inc.
No. 02FE6001199 rkleiber@thelcfgroup.com
Qualified in Nassau County
Commission Expires 01/05/2026
2
See Generally https://www.actumprocessing.com/understanding-ach-return-codes/
Preview
FILED: NASSAU COUNTY CLERK 09/13/2023 05:26 PM INDEX NO. 614887/2023 NYSCEF DOC. NO. 5 RECEIVED NYSCEF: 09/13/2023 NARRATIVE STATEMENT From: Robert Kleiber To: Mediation and Civil Arbitration, Inc. Re: Claim of The LCF Group, Inc. against Redmond Residential And Commerical Coatings LLC DBA Redmond Residential And Commerical Coatings, Joseph Redmond and Megan Redmond Dated: August 07, 2023 --------------------------------------------------------------------------------------------------------------------- State of New York } } ss. County of Nassau } Robert Kleiber, being duly sworn, deposes and says the following under the penalties of perjury: 1. I am the Chief Financial Officer for The LCF Group, Inc. (“LCF”), claimant in this proceeding, and, as such, I have personal knowledge of the facts and circumstances surrounding this matter, except those stated “upon information and belief” and as to those, I believe them to be true based upon a review of my office records. 2. I offer the instant sworn statement in support of LCF’s claims in this arbitration proceeding. 3. This matter concerns a merchant cash advance transaction entered into by and between LCF and Redmond Residential And Commerical Coatings LLC DBA Redmond Residential And Commerical Coatings (“Merchant”) via a written purchase and sale of future receivables agreement dated July 18, 2023, which is annexed hereto as Exhibit “1” (the “Agreement”). 4. On or about July 18, 2023, Merchant and LCF entered into the Agreement for the purchase and sale of future receivables, whereby LCF agreed to purchase a certain percentage of Merchant’s future receivables and sales proceeds having a face value of $7,450.00 (the “Purchased Amount”). The purchase price for these receivables was $5,000.00 (the “Purchase Price”), which was remitted to Merchant (less origination fees as FILED: NASSAU COUNTY CLERK 09/13/2023 05:26 PM INDEX NO. 614887/2023 NYSCEF DOC. NO. 5 RECEIVED NYSCEF: 09/13/2023 provided within the Agreement) on or about July 18, 2023 (Exhibit “2” – Proof of Funding). Joseph Redmond and Megan Redmond (“Guarantors”) signed the agreement as authorized representatives of Merchant. 5. The Agreement provided, among other things, that Merchant was obligated to deposit all of Merchant’s daily sales proceeds into a designated business account and that LCF would obtain its specified percentage of Merchant’s daily sales proceeds (the “Specified Percentage”) until such time that LCF received the full Purchased Amount. 6. The Merchant Cash Advance industry – part of the larger “Fintech” sector is an important source of funds for small businesses throughout the United States1. Fintech leverages technological advancements to expand the availability of capital to businesses previously shut out of the conventional banking products after the financial crisis of 2008. Accordingly, businesses that might be unable to obtain traditional sources of capital have increasingly sought a merchant cash advance (“MCA”) as a means to expand and support their businesses. 7. An MCA is not a recourse product – rather, a business sells a percentage of its future receivables at a discounted present value. MCA financing entities typically recover the purchased amount of a business’ receivables through regular ACH debits which, initially, are estimated as a percentage of average revenues prior to funding. The dollar amount tied to such percentage is adjustable upon a business’ request and a reduction in a business’ revenues directly correlate to a reduction in remittances. As a result, the length of time for an MCA funder to receive its percentage of future sales is indefinite. For example, assuming a purchased percentage of 15% of daily sales, if a business’ daily revenues were 1 See Generally https://www.commercialfinancecoalition.com/our-mission/ and https://www.tgdaily.com/what-is-a-merchant-cash-advance-and-is-it-a-good-choice-for-your-business FILED: NASSAU COUNTY CLERK 09/13/2023 05:26 PM INDEX NO. 614887/2023 NYSCEF DOC. NO. 5 RECEIVED NYSCEF: 09/13/2023 averaging $100.00, the MCA funder would be entitled to receive $15.00 ($100.00 x 0.15 = $15.00). If those revenues were to drop to $10.00. the MCA funder would be entitled to receive $1.50 ($10.00 x 0.15 = $1.50). 8. To safeguard against remittances in excess of the agreed upon percentage of daily sales, the subject purchase and sale of future receivables agreement (“PSFRA”) contains a reconciliation provision which invites a business to document its monthly sales in order to ensure that monthly remittances to the MCA funder do not exceed the specified percentage of revenues and remittances, and that any excess is returned to the business. Moreover, a cessation of business operations, bankruptcy, or other insolvency does not constitute an event of default. The PSFRA between the parties clearly provides that so long as a business complies with the contract’s notification requirements, recovery of the business’ purchased receivables can extend indefinitely and, indeed, in the event of a cessation of business operations, may never occur. 9. LCF materially relied upon Merchant’s covenants, representations, and warranties set forth in the Agreement, and the guaranty of performance thereon, as consideration of its entering into the Agreements with Merchant. The Agreements provide that a breach of any such covenants, representations, or warranties set forth in the Agreements constitutes a default thereunder. 10. In addition, Guarantors executed a guaranty of Merchant’s performance under the Agreements, which provides, inter alia, that Guarantors would be liable in the event that Merchant interfered or otherwise breached its performance obligations and frustrated LCF’s collection of its specified percentage of Merchant’s daily sales proceeds. 11. On or about July 20, 2023, Merchant breached its obligations under the Agreement by frustrating LCF’s access to draw upon its Specified Percentage of receivables FILED: NASSAU COUNTY CLERK 09/13/2023 05:26 PM INDEX NO. 614887/2023 NYSCEF DOC. NO. 5 RECEIVED NYSCEF: 09/13/2023 by stopping ACH debits to be drawn from a predesignated bank account (R08)2. Additionally, Merchant failed to meet its obligations under Section III of the Agreement. 12. As of July 20, 2023 (see Exhibit “3” – Payment History) Merchant has continuously failed to meet its obligations under the Agreement and Guarantors has failed to meet their obligations under their guaranty. There remains a balance of purchased receivables due and owing to LCF in the amount of $7,201.67, exclusive of attorneys’ fees, default Fees, and costs. 13. Given the various liquidated default provisions contained within the Agreement, Merchant presently owes LCF the sum of $7,201.67 together with default fees of $5,070.00, and attorneys’ fees of 33% of the outstanding Purchased Amount in the sum of $2,483.09. Altogether, Merchant and Guarantor presently owe LCF the sum of $14,754.76. WHEREFORE, LCF respectfully prays for an award of $14,754.76 against Redmond Residential And Commerical Coatings LLC DBA Redmond Residential And Commerical Coatings, Joseph Redmond and Megan Redmond as set forth herein, plus interest from July 20, 2023, together with such other and further relief as this honorable tribunal deems just and proper. So sworn before me on Respectfully Submitted, August 7, 2023 _________________________ Notary Public Robert Kleiber Adam Jason Feldman, Notary Public Chief Financial Officer State of New York The LCF Group, Inc. No. 02FE6001199 rkleiber@thelcfgroup.com Qualified in Nassau County Commission Expires 01/05/2026 2 See Generally https://www.actumprocessing.com/understanding-ach-return-codes/