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FILED: NEW YORK COUNTY CLERK 01/23/2024 09:57 AM INDEX NO. 451368/2020
NYSCEF DOC. NO. 865 RECEIVED NYSCEF: 01/23/2024
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - -X
PEOPLE OF THE STATE OF NEW YORK,
INDEX NO.: 451368/2020
Petitioner,
-against-
RICHMOND CAPITAL GROUP LLC,
RAM CAPITAL FUNDING LLC,
VICEROY CAPITAL FUNDING INC.,
ROBERT GIARDINA,
JONATHAN BRAUN,
TZVI REICH, and
MICHELLE GREGG.,
Respondents.
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MEMORANDUM OF LAW IN OPPOSITION TO ORDER TO SHOW CAUSE
FOR ENTRY OF MONETARY JUDGMENT AND CRIMINAL CONTEMPT
TERENZI & CONFUSIONE, P.C.
Co-Counsel for Respondents, Ram Capital Funding LLC
and Tzvi Reich a/k/a Steve Reich
401 Franklin Avenue, Suite 304
Garden City, NY 11530
(516)812-0800
RTERENZI@TCPCLAW.COM
-AND-
LAW OFFICES OF THOMAS A. HARVEY PLLC
Co-Counsel for Respondents, Ram Capital Funding LLC
and Tzvi Reich a/k/a Steve Reich
9 Pheasant Rd West
Pound Ridge, NY 10576
New York, NY 10170
(212) 972-8935
TOMHARVEYLAW@GMAIL.COM
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TABLE OF CONTENTS
TABLE OF AUTHORITIES............................................................................................................i
INTRODUCTION...........................................................................................................................1
BACKGROUND AND PRELIMINARY STATEMENT…...........................................................1
Compliance with the Order………………………………………………………………..4
ARGUMENTS.................................................................................................................................5
POINT I RESPONDENTS DID NOT ENGAGE IN WILLFUL
DISOBEDIENCE........................................................................................5
POINT II EXECUTION AND SERVICE OF ORDER TO SHOW CAUSE……….8
CONCLUSION................................................................................................................................9
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TABLE OF AUTHORITIES
Cases
Bauman v. Bauman,
208 A.D.3d 624, 626 (2nd Dept 2022)...................................................................................6
City of Poughkeepsie v Hetey,
121 AD2d 496, 497 (1986)...................................................................................................6
Dreher v. Martinez,
155 AD3d 688 (2d Dep’t 2017)...........................................................................................6
El-Dehdan v. El-Dehdan,
26 N.Y.3d 19, 36 (2015)......................................................................................................6
Kozel v Kozel,
161 A.D. 3d. 700, 701 (1st Dept. 2018)…………………………………………………....9
Lu v Betancourt,
116 A.D.2d. 492,494 (1st Dept 1986)………………………………………………………9
Lueker v. Lueker,
166 A.D.3d 603, 604 (2nd Dept. 2018)..............................................................................6-7
Matter of Holtzman v Beatty,
97 AD2d 79, 82 (2d Dep’t 1983).........................................................................................6
Simens v. Darwish,
100 A.D.3d 527 (1st Dep’t 2012)..........................................................................................8
State by Abrams v. East Coast Auto Consultants Corp.,
123 Misc.2d 209, 472 N.Y.S.2d 1010 (Sup. Ct. 1984)........................................................6
Usina Costa Pinto, S.A. v. Sanco Sav. Co.,
174 A.D.2d 487, 571 NYS2d 264 (1st Dept. 1991)..............................................................8
Wheels Am. N.Y., Ltd v Montalvo,
50 AD3d 1130, 1130-1131 (2d Dep’t 2008)........................................................................6
Statutes
Executive Law § 63(12)................................................................................................................1, 3
Judiciary Law § 750(A)(3)...........................................................................................................6, 8
Judiciary Law §751(4)..............................................................................................................3, 5-6
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INTRODUCTION
Respondents Ram Capital Funding LLC (“RAM LLC”) and Tzvi Reich a/k/a Steve Reich,
(“Reich” and collectively with RAM LLC, the “Respondents”), by and through their attorneys,
Terenzi & Confusione, P.C. and the Law Offices of Thomas A. Harvey PLLC, respectfully submit
this memorandum of law (“Memo of Law”) in support of their opposition (the “Opposition”) to
the Affirmation filed on behalf of the People of the State of New York (the “NYAG” or the
“Petitioner”) in support of Petitioner’s Order to Show Cause for Entry of Monetary Judgment and
Criminal Contempt due to Respondents’ failure to comply with the Court’s September 15, 2023
order (the “OSC”) and in support thereof, respectfully sets forth as follows:
BACKGROUND AND PRELIMINARY STATMENT
A complete statement of the factual background of this matter is set forth in the Opposition
to Order to Show Cause for Entry of Monetary Judgment and Criminal Contempt, and the
accompanying affidavit of Tzvi Reich, along with exhibits thereto, all of which are incorporated
herein by reference.
Briefly, on June 10, 2020, Petitioner filed a Verified Petition, amended on January 9, 2021,
initiating a summary proceeding pursuant to Executive Law § 63(12) and Article 4 of the CPLR
against RAM LLC and Reich, along with Richmond Capital Group (“Richmond”), RCG Advances
LLC (“ RCG”) Ram Capital Funding (“RAM DBA”) Viceroy Capital Funding Inc (“Viceroy”),
Richard Giardina (“Giardina”), Jonathan Braun (“Braun”), Michelle Gregg (“Gregg”) ( Richmond,
RCG, RAM DBA, Viceroy, Giardina, Braun, and Gregg, all collectively referred to herein as the
“RCG Defendants”) for allegedly engaging in repeated and persistent predatory practices in the
merchant cash advance industry.
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In response to the NYAG’s Petition, the Respondents filed a motion to dismiss dated
August 10, 2020 (the “Motion to Dismiss”) with an amended Memo of Law dated October 6, 2020,
in which they asserted that the MCAs are clearly not loans, as dozens of New York decisions have
explicitly held, and that, with regard to Petitioner’s allegations relating to misdeeds relating to the
servicing and funding of these Agreements, Reich and RAM LLC did not participate and had no
authority as to those acts as Respondents merely acted in the role of broker on the MCAs and that
the Petition wrongfully conflates the actions of the Respondents with those of the RCG
Defendants. The motion was denied by order dated June 2, 2021, and the Court granted limited
discovery in the matter.
On January 3, 2022, the Petitioner moved for summary determination by way of Re-Notice
of Petition based on an Amended Petition for a determination of the Petition. Respondents filed
opposition to the Petition and cross moved for summary determination in their favor.
After seven (7) days of hearings on the Petition, on September 15, 2023, the Court issued
a Decision and Order granting Petitioner’s application for summary determination of the Petition
(the “Order”).
The Order required, inter alia, that all Respondents do the following within sixty days:
• Apply for vacatur of all confessions of judgment filed by Respondents and all
judgment[s] issued in their favor based on such filings by all New York courts that have
issued such judgments,” and “provide evidence of the same to the NYAG at Respondents’
sole cost and expense;
• File all papers sufficient to terminate all liens or security interests related to the
MCAs;
• Provide an accounting to the NYAG of the names and addresses of each merchant
from whom the Predatory Lenders collected or received monies since June 10, 2014 in
connection with the MCAs and a complete history of all monies collected or received by
the Predatory Lenders from such merchants and all monies provided by the Predatory
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Lenders to such merchants, including principal amounts actually funded together with
appropriate backup;
• Pay full restitution and damages to the NYAG as to all merchants Borrowers that
had entered into MCAs with the Predatory Lenders, including those not identified at the
time of [the] order, and such restitution and damages shall include i) the refund of all
amounts taken by the Predatory Lenders from merchants or their guarantors in connection
with the MCAs, minus the principal amounts actually funded to the Borrowers; and ii)
damages for losses as set forth above.
On December 7, 2023, the NYAG moved by Order to Show Cause (the “OSC”) seeking
entry of a judgment as the remedy for the Respondents’ failure to comply with the Court’s Order.
The NYAG asserts that because respondents have failed to provide any records demonstrating that
any portion of the amount collected from merchants rightfully belongs to them as principal, the
Court should therefore enter judgment for $77,298,631, which they allege represents the amounts
collected by respondents between August 2016 and December 2018. In addition, the Petitioner
alleges that the respondents’ willful disobedience of this Court’s Order, which was issued pursuant
to Executive Law §63(12), constitutes criminal contempt of court by the Respondents pursuant to
Judiciary Law §751(4) and accordingly, the NYAG should be awarded a fine of $5,000 per day
pursuant to Judiciary Law §751(4) against each respondent, with the exception of Viceroy, for
respondents’ willful disobedience of the Order.
As set forth below, Respondents have maintained throughout this proceeding that their role
in the transactions at issue was limited to their role as broker. As such, Respondents do not have
the capacity or ability to comply with several mandates of the Court’s Order. As such, the
Petitioner has failed to make a showing that Respondents acted willful with respect to providing
an accounting, which is required for a determination that Respondents are guilty of contempt.
Rather, Respondents have made every attempt to comply with the Order and have substantially
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complied with all other aspects of the order.
Compliance with the Order
Respondents acted only as brokers in the transactions at issue in these proceedings and did
not take part in the collection, administration, or enforcement of the MCA agreements after
funding and had no access or authority to the ACH system utilized by the RCG Defendants to
collect from the merchants. Consistent with that position, Riech did not sign, file, or pursue
confessions of judgments or legal proceedings against the merchants. This has been detailed in the
sworn affidavits submitted in these proceedings by Reich [Doc. 628], including in connection with
this motion, stating as much. The factual statements submitted in the sworn affidavits of Reich
have not been directly contradicted by any evidence or testimony submitted in these proceedings.
In addition, the affidavit from Reich in opposition to this motion sets forth his inability to comply
with the Court Order with respect to the accounting called for in the Order.
Accordingly, despite the fact that the Order found that all respondents were jointly and
severally liable, Reich maintained no records relating to the transactions at issue sufficient to
provide the accounting that was required by the Order and there are no findings of fact made by
the Court or evidence presented to the contrary.
As to the aspect of the Order prohibiting any collections, as described in the Reich affidavit,
under the settlement with the Federal Trade Commission, Riech had already agreed to take no
action with respect to collection or to further participate in any MCA transactions. Accordingly,
he is in compliance with that aspect of the Order.
With respect to the mandate I of the Order to vacate any judgments, Reich took no actions
on collections and confessions of judgment that were submitted in this matter were all signed and
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submitted by RCG, through affidavits signed by Giardina or Michelle Gregg and submitted by
RCG’s attorney. As such, the Respondents expected that RCG, being the entity that actually filed
the judgments, would take the steps necessary to vacate them. However, as set forth in the
Opposition, Respondents found out, through RCG’s submissions and subsequent discussion with
RCG’s counsel, that they did not take steps with respect to judgments except with respect to those
that were filed under the name of RCG. Respondents then, through counsel, did a search and
determined what judgments had been entered under the name of Ram LLC, and, as detailed in the
opposition filed on this motion, has since taken the necessary steps to vacate each of those
judgments. Furthermore, with respect to liens and security interests, Respondents believe that no
such filings were ever made.
As to the funds to be paid to the Attorney General, those payments have been made on
behalf of Reich and RAM LLC, as also demonstrated in the Opposition.
Based on the foregoing, the relief sought in Petitioner’s OSC must be denied in its entirety.
ARGUMENTS
POINT I
RESPONDENTS DID NOT ENGAGE IN WILLFUL DISOBEDIENCE
At the outset, Petitioner’s request for a finding of criminal contempt of court based on
Respondents’ willful disobedience of the Court’s Order, must be denied in its entirety since
Reich did not willfully violate the Court Order and can establish good cause for his
noncompliance with the Order.
Judiciary Law § 751(4) provides that:
Where any person willfully disobeys a lawful mandate of the supreme court issued
pursuant to subdivision twelve of section sixty-three of the executive law, the punishment
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for each day that such contempt persists may be by a fine fixed in the discretion of the
court, but not to exceed five thousand dollars per day. In fixing the amount of the fine,
the court shall consider all the facts and circumstances directly related to the contempt,
including, but not limited to: (i) the extent of the willful defiance of or resistance to the
court's mandate, (ii) the amount of gain obtained by the willful disobedience of the
mandate, and (iii) the effect upon the public of the willful disobedience.
In assessing the fine, the court "shall consider all the facts and circumstances [relating] to
the contempt, including, but not limited to: (i) the extent of the willful defiance of or resistance to
the court's mandate, (ii) the amount of gain obtained by the willful disobedience of the mandate,
and (iii) the effect upon the public of the willful disobedience." (Judiciary Law, § 751, subd 4, pars
[i], [ii], [iii]) State by Abrams v. East Coast Auto Consultants Corp., 123 Misc.2d 209, 472
N.Y.S.2d 1010 (Sup. Ct. 1984).
The imposition of punishment for criminal contempt requires a showing that the alleged
contemnor knowingly, willfully, and contumaciously violated a clear and unequivocal court
mandate (see Judiciary Law § 750(A)(3); Wheels Am. N.Y., Ltd v Montalvo, 50 AD3d 1130,
1130-1131 (2d Dep’t 2008); City of Poughkeepsie v Hetey, 121 AD2d 496, 497 (2d Dep’t
1986); Matter of Holtzman v Beatty, 97 AD2d 79, 82 (2d Dep’t 1983); see also, Dreher v.
Martinez, 155 AD3d 688 (2d Dep’t 2017) where the Appellate Division Second Department found
that the defendants failed to meet their burden of showing that plaintiff had knowingly, willfully,
and contumaciously violated a clear and unequivocal mandate in a stipulation of settlement which
was agreed to by the parties and so-ordered by the Supreme Court.
In addition, the inability of a party to comply with a court order constitutes a defense to a
motion for contempt of court. See El-Dehdan v. El-Dehdan, 26 N.Y,S,3d 19, 36 (2015) (citing
cases): Bauman v. Bauman, 208 A.D.3d 624, 626 (2nd Dept 2022) (‘Party alleged to be in contempt
may offer evidence of his or her inability to comply with the order or judgment”)’ Lueker v.
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Lueker, 166 A.D.3d 603, 604 (2nd Dept. 2018) (“Inability to comply with an order is a defense to
both civil and criminal contempt”).
In the instant case, as demonstrated in the submissions in opposition to this motion,
Respondents have complied with all aspect of the Order with the exception of suppling the
accounting required under the Order. However, there can be no finding of willful disobedience on
the part of the Respondents. Willful contempt means that the contemnor was aware of the court
order, had the ability to follow the specifics of the order and chose not to without any mitigating
circumstances. Non-willful contempt is just the opposite. Non-willful disobedience most
commonly happens when someone is unable to follow the specifics of a court order due to
circumstances out of their control.
As demonstrated through all the submissions by Mr. Reich, including the affidavit in
opposition to this motion, the Respondents only acted as a broker in these matters and, as
established through the Reich Affidavits, did not take part in the collection, administration, or
enforcement of the MCA agreements. As such, they have never had access to the records regarding
the funding and/or collection of the MCA transactions at issue here. Rather, those records were
kept by the RCG Defendants relating to the funding and collection of the MCA agreements and
Respondents had no access or authority with respect to the ACH system utilized by the RCG
Defendants to collect from the merchants. Neither did Respondents file liens or judgments with
respect to the MCA transactions at issue in this case. Rather, these actions were all handled by the
RCG Defendants.
Accordingly, Respondents simply lack the ability to comply with the mandates of the Court
Order with respect to the accounting mandated. As a result, the Respondents are not willfully
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disobeying the Order since the circumstances are out of their control as they simply did not now,
or at any time, have access to the documents containing the information required to provide an
accounting to the NYAG in accordance with the Order.
At the very least, in accordance with the relevant case law, the Court should hold a hearing
to determine whether the Respondents’ disobedience of the Order was willful. See Simens v.
Darwish, 100 A.D.3d 527 (2st Dep’t 2012) (“The fact that a party does not comply with a court
order does not, in and of itself, constitute criminal contempt” and the court must hold a hearing to
determine whether the disobedience was willful” citing Usina Costa Pinto, S.A. v. Sanco Sav. Co.,
174 A.D.2d 487, 571 NYS2d 264 (1st Dept. 1991) (Court held that where there are factual disputes
regarding the alleged contemnor’s willfulness in disobeying the court order, which cannot be
resolved on the papers, a hearing must be held).
Based on the fact that the Respondents neither had nor currently have any access to the
ACH system, the confession of judgments or the lien documents, their inability to comply with the
Court’s Order cannot in any way be characterized as willful and therefore, a finding of contempt
is unwarranted.
POINT II
EXECUTION AND SERVICE OF ORDER TO SHOW CAUSE
The OSC by which the NYAG has brought this motion was never signed by the Court. As
such, it has no force of law and is a nullity. Additionally, if the Court were to somehow find that
the unsigned OSC is valid and enforceable, the service of the OSC was not in compliance with the
provisions therein. The OSC provides that service was to be made through counsel within 7 days.
However, under the Criminal Contempt proceeding under Judiciary Law Section 750(a)(3)
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personal service of an order to show cause for criminal contempt it required. See Lu v Betancourt,
116 A.D.2d. 492, 494 (1st Dept 1986); Kozel v Kozel, 161 A.D. 3d. 700, 701 (1st Dept. 2018).
Failure to comply renders the motion jurisdictionally defective.
CONCLUSION
Based on the foregoing, the Respondents submit that sufficient cause has been shown why
the judgement requested by the Petitioners should not be granted against Reich and RAM LLC.
Dated: Garden City, New York
January 23, 2024
Respectfully Submitted,
TERENZI & CONFUSIONE, P.C.
Co-Counsel for Respondents, Ram Capital Funding LLC
and Tzvi Reich a/k/a Steve Reich
By: ____________________________
Ronald M. Terenzi, Esq.
401 Franklin Avenue, Suite 304
Garden City, NY 11530
(516)812-0800
-AND-
LAW OFFICES OF THOMAS A. HARVEY PLLC
Co-Counsel for Respondents, Ram Capital Funding LLC
and Tzvi Reich a/k/a Steve Reich
Thomas A. Harvey (TAH 8855)
9 Pheasant Rd West
Pound Ridge, NY 10576
New York, NY 10170
(212) 972-8935
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FILED: NEW YORK COUNTY CLERK 01/23/2024 09:57 AM INDEX NO. 451368/2020 NYSCEF DOC. NO. 865 RECEIVED NYSCEF: 01/23/2024 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - -X PEOPLE OF THE STATE OF NEW YORK, INDEX NO.: 451368/2020 Petitioner, -against- RICHMOND CAPITAL GROUP LLC, RAM CAPITAL FUNDING LLC, VICEROY CAPITAL FUNDING INC., ROBERT GIARDINA, JONATHAN BRAUN, TZVI REICH, and MICHELLE GREGG., Respondents. --------------------------------------------X MEMORANDUM OF LAW IN OPPOSITION TO ORDER TO SHOW CAUSE FOR ENTRY OF MONETARY JUDGMENT AND CRIMINAL CONTEMPT TERENZI & CONFUSIONE, P.C. Co-Counsel for Respondents, Ram Capital Funding LLC and Tzvi Reich a/k/a Steve Reich 401 Franklin Avenue, Suite 304 Garden City, NY 11530 (516)812-0800 RTERENZI@TCPCLAW.COM -AND- LAW OFFICES OF THOMAS A. HARVEY PLLC Co-Counsel for Respondents, Ram Capital Funding LLC and Tzvi Reich a/k/a Steve Reich 9 Pheasant Rd West Pound Ridge, NY 10576 New York, NY 10170 (212) 972-8935 TOMHARVEYLAW@GMAIL.COM 1 of 12 FILED: NEW YORK COUNTY CLERK 01/23/2024 09:57 AM INDEX NO. 451368/2020 NYSCEF DOC. NO. 865 RECEIVED NYSCEF: 01/23/2024 TABLE OF CONTENTS TABLE OF AUTHORITIES............................................................................................................i INTRODUCTION...........................................................................................................................1 BACKGROUND AND PRELIMINARY STATEMENT…...........................................................1 Compliance with the Order………………………………………………………………..4 ARGUMENTS.................................................................................................................................5 POINT I RESPONDENTS DID NOT ENGAGE IN WILLFUL DISOBEDIENCE........................................................................................5 POINT II EXECUTION AND SERVICE OF ORDER TO SHOW CAUSE……….8 CONCLUSION................................................................................................................................9 2 of 12 FILED: NEW YORK COUNTY CLERK 01/23/2024 09:57 AM INDEX NO. 451368/2020 NYSCEF DOC. NO. 865 RECEIVED NYSCEF: 01/23/2024 TABLE OF AUTHORITIES Cases Bauman v. Bauman, 208 A.D.3d 624, 626 (2nd Dept 2022)...................................................................................6 City of Poughkeepsie v Hetey, 121 AD2d 496, 497 (1986)...................................................................................................6 Dreher v. Martinez, 155 AD3d 688 (2d Dep’t 2017)...........................................................................................6 El-Dehdan v. El-Dehdan, 26 N.Y.3d 19, 36 (2015)......................................................................................................6 Kozel v Kozel, 161 A.D. 3d. 700, 701 (1st Dept. 2018)…………………………………………………....9 Lu v Betancourt, 116 A.D.2d. 492,494 (1st Dept 1986)………………………………………………………9 Lueker v. Lueker, 166 A.D.3d 603, 604 (2nd Dept. 2018)..............................................................................6-7 Matter of Holtzman v Beatty, 97 AD2d 79, 82 (2d Dep’t 1983).........................................................................................6 Simens v. Darwish, 100 A.D.3d 527 (1st Dep’t 2012)..........................................................................................8 State by Abrams v. East Coast Auto Consultants Corp., 123 Misc.2d 209, 472 N.Y.S.2d 1010 (Sup. Ct. 1984)........................................................6 Usina Costa Pinto, S.A. v. Sanco Sav. Co., 174 A.D.2d 487, 571 NYS2d 264 (1st Dept. 1991)..............................................................8 Wheels Am. N.Y., Ltd v Montalvo, 50 AD3d 1130, 1130-1131 (2d Dep’t 2008)........................................................................6 Statutes Executive Law § 63(12)................................................................................................................1, 3 Judiciary Law § 750(A)(3)...........................................................................................................6, 8 Judiciary Law §751(4)..............................................................................................................3, 5-6 i 3 of 12 FILED: NEW YORK COUNTY CLERK 01/23/2024 09:57 AM INDEX NO. 451368/2020 NYSCEF DOC. NO. 865 RECEIVED NYSCEF: 01/23/2024 INTRODUCTION Respondents Ram Capital Funding LLC (“RAM LLC”) and Tzvi Reich a/k/a Steve Reich, (“Reich” and collectively with RAM LLC, the “Respondents”), by and through their attorneys, Terenzi & Confusione, P.C. and the Law Offices of Thomas A. Harvey PLLC, respectfully submit this memorandum of law (“Memo of Law”) in support of their opposition (the “Opposition”) to the Affirmation filed on behalf of the People of the State of New York (the “NYAG” or the “Petitioner”) in support of Petitioner’s Order to Show Cause for Entry of Monetary Judgment and Criminal Contempt due to Respondents’ failure to comply with the Court’s September 15, 2023 order (the “OSC”) and in support thereof, respectfully sets forth as follows: BACKGROUND AND PRELIMINARY STATMENT A complete statement of the factual background of this matter is set forth in the Opposition to Order to Show Cause for Entry of Monetary Judgment and Criminal Contempt, and the accompanying affidavit of Tzvi Reich, along with exhibits thereto, all of which are incorporated herein by reference. Briefly, on June 10, 2020, Petitioner filed a Verified Petition, amended on January 9, 2021, initiating a summary proceeding pursuant to Executive Law § 63(12) and Article 4 of the CPLR against RAM LLC and Reich, along with Richmond Capital Group (“Richmond”), RCG Advances LLC (“ RCG”) Ram Capital Funding (“RAM DBA”) Viceroy Capital Funding Inc (“Viceroy”), Richard Giardina (“Giardina”), Jonathan Braun (“Braun”), Michelle Gregg (“Gregg”) ( Richmond, RCG, RAM DBA, Viceroy, Giardina, Braun, and Gregg, all collectively referred to herein as the “RCG Defendants”) for allegedly engaging in repeated and persistent predatory practices in the merchant cash advance industry. 1 4 of 12 FILED: NEW YORK COUNTY CLERK 01/23/2024 09:57 AM INDEX NO. 451368/2020 NYSCEF DOC. NO. 865 RECEIVED NYSCEF: 01/23/2024 In response to the NYAG’s Petition, the Respondents filed a motion to dismiss dated August 10, 2020 (the “Motion to Dismiss”) with an amended Memo of Law dated October 6, 2020, in which they asserted that the MCAs are clearly not loans, as dozens of New York decisions have explicitly held, and that, with regard to Petitioner’s allegations relating to misdeeds relating to the servicing and funding of these Agreements, Reich and RAM LLC did not participate and had no authority as to those acts as Respondents merely acted in the role of broker on the MCAs and that the Petition wrongfully conflates the actions of the Respondents with those of the RCG Defendants. The motion was denied by order dated June 2, 2021, and the Court granted limited discovery in the matter. On January 3, 2022, the Petitioner moved for summary determination by way of Re-Notice of Petition based on an Amended Petition for a determination of the Petition. Respondents filed opposition to the Petition and cross moved for summary determination in their favor. After seven (7) days of hearings on the Petition, on September 15, 2023, the Court issued a Decision and Order granting Petitioner’s application for summary determination of the Petition (the “Order”). The Order required, inter alia, that all Respondents do the following within sixty days: • Apply for vacatur of all confessions of judgment filed by Respondents and all judgment[s] issued in their favor based on such filings by all New York courts that have issued such judgments,” and “provide evidence of the same to the NYAG at Respondents’ sole cost and expense; • File all papers sufficient to terminate all liens or security interests related to the MCAs; • Provide an accounting to the NYAG of the names and addresses of each merchant from whom the Predatory Lenders collected or received monies since June 10, 2014 in connection with the MCAs and a complete history of all monies collected or received by the Predatory Lenders from such merchants and all monies provided by the Predatory 2 5 of 12 FILED: NEW YORK COUNTY CLERK 01/23/2024 09:57 AM INDEX NO. 451368/2020 NYSCEF DOC. NO. 865 RECEIVED NYSCEF: 01/23/2024 Lenders to such merchants, including principal amounts actually funded together with appropriate backup; • Pay full restitution and damages to the NYAG as to all merchants Borrowers that had entered into MCAs with the Predatory Lenders, including those not identified at the time of [the] order, and such restitution and damages shall include i) the refund of all amounts taken by the Predatory Lenders from merchants or their guarantors in connection with the MCAs, minus the principal amounts actually funded to the Borrowers; and ii) damages for losses as set forth above. On December 7, 2023, the NYAG moved by Order to Show Cause (the “OSC”) seeking entry of a judgment as the remedy for the Respondents’ failure to comply with the Court’s Order. The NYAG asserts that because respondents have failed to provide any records demonstrating that any portion of the amount collected from merchants rightfully belongs to them as principal, the Court should therefore enter judgment for $77,298,631, which they allege represents the amounts collected by respondents between August 2016 and December 2018. In addition, the Petitioner alleges that the respondents’ willful disobedience of this Court’s Order, which was issued pursuant to Executive Law §63(12), constitutes criminal contempt of court by the Respondents pursuant to Judiciary Law §751(4) and accordingly, the NYAG should be awarded a fine of $5,000 per day pursuant to Judiciary Law §751(4) against each respondent, with the exception of Viceroy, for respondents’ willful disobedience of the Order. As set forth below, Respondents have maintained throughout this proceeding that their role in the transactions at issue was limited to their role as broker. As such, Respondents do not have the capacity or ability to comply with several mandates of the Court’s Order. As such, the Petitioner has failed to make a showing that Respondents acted willful with respect to providing an accounting, which is required for a determination that Respondents are guilty of contempt. Rather, Respondents have made every attempt to comply with the Order and have substantially 3 6 of 12 FILED: NEW YORK COUNTY CLERK 01/23/2024 09:57 AM INDEX NO. 451368/2020 NYSCEF DOC. NO. 865 RECEIVED NYSCEF: 01/23/2024 complied with all other aspects of the order. Compliance with the Order Respondents acted only as brokers in the transactions at issue in these proceedings and did not take part in the collection, administration, or enforcement of the MCA agreements after funding and had no access or authority to the ACH system utilized by the RCG Defendants to collect from the merchants. Consistent with that position, Riech did not sign, file, or pursue confessions of judgments or legal proceedings against the merchants. This has been detailed in the sworn affidavits submitted in these proceedings by Reich [Doc. 628], including in connection with this motion, stating as much. The factual statements submitted in the sworn affidavits of Reich have not been directly contradicted by any evidence or testimony submitted in these proceedings. In addition, the affidavit from Reich in opposition to this motion sets forth his inability to comply with the Court Order with respect to the accounting called for in the Order. Accordingly, despite the fact that the Order found that all respondents were jointly and severally liable, Reich maintained no records relating to the transactions at issue sufficient to provide the accounting that was required by the Order and there are no findings of fact made by the Court or evidence presented to the contrary. As to the aspect of the Order prohibiting any collections, as described in the Reich affidavit, under the settlement with the Federal Trade Commission, Riech had already agreed to take no action with respect to collection or to further participate in any MCA transactions. Accordingly, he is in compliance with that aspect of the Order. With respect to the mandate I of the Order to vacate any judgments, Reich took no actions on collections and confessions of judgment that were submitted in this matter were all signed and 4 7 of 12 FILED: NEW YORK COUNTY CLERK 01/23/2024 09:57 AM INDEX NO. 451368/2020 NYSCEF DOC. NO. 865 RECEIVED NYSCEF: 01/23/2024 submitted by RCG, through affidavits signed by Giardina or Michelle Gregg and submitted by RCG’s attorney. As such, the Respondents expected that RCG, being the entity that actually filed the judgments, would take the steps necessary to vacate them. However, as set forth in the Opposition, Respondents found out, through RCG’s submissions and subsequent discussion with RCG’s counsel, that they did not take steps with respect to judgments except with respect to those that were filed under the name of RCG. Respondents then, through counsel, did a search and determined what judgments had been entered under the name of Ram LLC, and, as detailed in the opposition filed on this motion, has since taken the necessary steps to vacate each of those judgments. Furthermore, with respect to liens and security interests, Respondents believe that no such filings were ever made. As to the funds to be paid to the Attorney General, those payments have been made on behalf of Reich and RAM LLC, as also demonstrated in the Opposition. Based on the foregoing, the relief sought in Petitioner’s OSC must be denied in its entirety. ARGUMENTS POINT I RESPONDENTS DID NOT ENGAGE IN WILLFUL DISOBEDIENCE At the outset, Petitioner’s request for a finding of criminal contempt of court based on Respondents’ willful disobedience of the Court’s Order, must be denied in its entirety since Reich did not willfully violate the Court Order and can establish good cause for his noncompliance with the Order. Judiciary Law § 751(4) provides that: Where any person willfully disobeys a lawful mandate of the supreme court issued pursuant to subdivision twelve of section sixty-three of the executive law, the punishment 5 8 of 12 FILED: NEW YORK COUNTY CLERK 01/23/2024 09:57 AM INDEX NO. 451368/2020 NYSCEF DOC. NO. 865 RECEIVED NYSCEF: 01/23/2024 for each day that such contempt persists may be by a fine fixed in the discretion of the court, but not to exceed five thousand dollars per day. In fixing the amount of the fine, the court shall consider all the facts and circumstances directly related to the contempt, including, but not limited to: (i) the extent of the willful defiance of or resistance to the court's mandate, (ii) the amount of gain obtained by the willful disobedience of the mandate, and (iii) the effect upon the public of the willful disobedience. In assessing the fine, the court "shall consider all the facts and circumstances [relating] to the contempt, including, but not limited to: (i) the extent of the willful defiance of or resistance to the court's mandate, (ii) the amount of gain obtained by the willful disobedience of the mandate, and (iii) the effect upon the public of the willful disobedience." (Judiciary Law, § 751, subd 4, pars [i], [ii], [iii]) State by Abrams v. East Coast Auto Consultants Corp., 123 Misc.2d 209, 472 N.Y.S.2d 1010 (Sup. Ct. 1984). The imposition of punishment for criminal contempt requires a showing that the alleged contemnor knowingly, willfully, and contumaciously violated a clear and unequivocal court mandate (see Judiciary Law § 750(A)(3); Wheels Am. N.Y., Ltd v Montalvo, 50 AD3d 1130, 1130-1131 (2d Dep’t 2008); City of Poughkeepsie v Hetey, 121 AD2d 496, 497 (2d Dep’t 1986); Matter of Holtzman v Beatty, 97 AD2d 79, 82 (2d Dep’t 1983); see also, Dreher v. Martinez, 155 AD3d 688 (2d Dep’t 2017) where the Appellate Division Second Department found that the defendants failed to meet their burden of showing that plaintiff had knowingly, willfully, and contumaciously violated a clear and unequivocal mandate in a stipulation of settlement which was agreed to by the parties and so-ordered by the Supreme Court. In addition, the inability of a party to comply with a court order constitutes a defense to a motion for contempt of court. See El-Dehdan v. El-Dehdan, 26 N.Y,S,3d 19, 36 (2015) (citing cases): Bauman v. Bauman, 208 A.D.3d 624, 626 (2nd Dept 2022) (‘Party alleged to be in contempt may offer evidence of his or her inability to comply with the order or judgment”)’ Lueker v. 6 9 of 12 FILED: NEW YORK COUNTY CLERK 01/23/2024 09:57 AM INDEX NO. 451368/2020 NYSCEF DOC. NO. 865 RECEIVED NYSCEF: 01/23/2024 Lueker, 166 A.D.3d 603, 604 (2nd Dept. 2018) (“Inability to comply with an order is a defense to both civil and criminal contempt”). In the instant case, as demonstrated in the submissions in opposition to this motion, Respondents have complied with all aspect of the Order with the exception of suppling the accounting required under the Order. However, there can be no finding of willful disobedience on the part of the Respondents. Willful contempt means that the contemnor was aware of the court order, had the ability to follow the specifics of the order and chose not to without any mitigating circumstances. Non-willful contempt is just the opposite. Non-willful disobedience most commonly happens when someone is unable to follow the specifics of a court order due to circumstances out of their control. As demonstrated through all the submissions by Mr. Reich, including the affidavit in opposition to this motion, the Respondents only acted as a broker in these matters and, as established through the Reich Affidavits, did not take part in the collection, administration, or enforcement of the MCA agreements. As such, they have never had access to the records regarding the funding and/or collection of the MCA transactions at issue here. Rather, those records were kept by the RCG Defendants relating to the funding and collection of the MCA agreements and Respondents had no access or authority with respect to the ACH system utilized by the RCG Defendants to collect from the merchants. Neither did Respondents file liens or judgments with respect to the MCA transactions at issue in this case. Rather, these actions were all handled by the RCG Defendants. Accordingly, Respondents simply lack the ability to comply with the mandates of the Court Order with respect to the accounting mandated. As a result, the Respondents are not willfully 7 10 of 12 FILED: NEW YORK COUNTY CLERK 01/23/2024 09:57 AM INDEX NO. 451368/2020 NYSCEF DOC. NO. 865 RECEIVED NYSCEF: 01/23/2024 disobeying the Order since the circumstances are out of their control as they simply did not now, or at any time, have access to the documents containing the information required to provide an accounting to the NYAG in accordance with the Order. At the very least, in accordance with the relevant case law, the Court should hold a hearing to determine whether the Respondents’ disobedience of the Order was willful. See Simens v. Darwish, 100 A.D.3d 527 (2st Dep’t 2012) (“The fact that a party does not comply with a court order does not, in and of itself, constitute criminal contempt” and the court must hold a hearing to determine whether the disobedience was willful” citing Usina Costa Pinto, S.A. v. Sanco Sav. Co., 174 A.D.2d 487, 571 NYS2d 264 (1st Dept. 1991) (Court held that where there are factual disputes regarding the alleged contemnor’s willfulness in disobeying the court order, which cannot be resolved on the papers, a hearing must be held). Based on the fact that the Respondents neither had nor currently have any access to the ACH system, the confession of judgments or the lien documents, their inability to comply with the Court’s Order cannot in any way be characterized as willful and therefore, a finding of contempt is unwarranted. POINT II EXECUTION AND SERVICE OF ORDER TO SHOW CAUSE The OSC by which the NYAG has brought this motion was never signed by the Court. As such, it has no force of law and is a nullity. Additionally, if the Court were to somehow find that the unsigned OSC is valid and enforceable, the service of the OSC was not in compliance with the provisions therein. The OSC provides that service was to be made through counsel within 7 days. However, under the Criminal Contempt proceeding under Judiciary Law Section 750(a)(3) 8 11 of 12 FILED: NEW YORK COUNTY CLERK 01/23/2024 09:57 AM INDEX NO. 451368/2020 NYSCEF DOC. NO. 865 RECEIVED NYSCEF: 01/23/2024 personal service of an order to show cause for criminal contempt it required. See Lu v Betancourt, 116 A.D.2d. 492, 494 (1st Dept 1986); Kozel v Kozel, 161 A.D. 3d. 700, 701 (1st Dept. 2018). Failure to comply renders the motion jurisdictionally defective. CONCLUSION Based on the foregoing, the Respondents submit that sufficient cause has been shown why the judgement requested by the Petitioners should not be granted against Reich and RAM LLC. Dated: Garden City, New York January 23, 2024 Respectfully Submitted, TERENZI & CONFUSIONE, P.C. Co-Counsel for Respondents, Ram Capital Funding LLC and Tzvi Reich a/k/a Steve Reich By: ____________________________ Ronald M. Terenzi, Esq. 401 Franklin Avenue, Suite 304 Garden City, NY 11530 (516)812-0800 -AND- LAW OFFICES OF THOMAS A. HARVEY PLLC Co-Counsel for Respondents, Ram Capital Funding LLC and Tzvi Reich a/k/a Steve Reich Thomas A. Harvey (TAH 8855) 9 Pheasant Rd West Pound Ridge, NY 10576 New York, NY 10170 (212) 972-8935 9 12 of 12