Motion-Secondary: James Davis Ii, Medisale, Inc v. Richmond Capital Group, Llc, Influx Capital Group, Llc a/k/a INFLUX CAPITAL, LLC, Gtr Source, Llc, Addy Source, Llc, Yes Capital Funding Group, Llc d/b/a YES FUNDING SERVICES, LLC, Jonathan Braun, Michelle Gregg, Tzvi Reich a/k/a STEVE REICH, Robert Giardina, Bryan Baker d/b/a BAKER CAP FUNDING, d/b/a BAKER CAPITAL FUNDING, Rebar Capital, Llc, Azriel Inzelbuch a/k/a DAVID B. FRANK, Tsvi Davis a/k/a STEVEN DAVIS, Spg Advance, Llc

On December 20, 2018 a Motion-Secondary was filed involving a dispute between James Davis Ii, Medisale, Inc, and Addy Source, Llc, Azriel Inzelbuch A K A David B. Frank, Bryan Baker D B A Baker Cap Funding, D B A Baker Capital Funding, Gtr Source, Llc, Influx Capital Group, Llc A K A Influx Capital, Llc, Jonathan Braun, Michelle Gregg, Rebar Capital, Llc, Richmond Capital Group, Llc, Robert Giardina, Spg Advance, Llc, Tsvi Davis A K A Steven Davis, Tzvi Reich A K A Steve Reich, Yes Capital Funding Group, Llc D B A Yes Funding Services, Llc, for Commercial - Other (Vacate Judgment) in the District Court of New York County.

Preview
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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
----------------------------------------------------------------------x
JAMES DAVIS II and MEDISALE, INC.,

Plaintiffs, Index No. 656346/2018

- against -

RICHMOND CAPITAL GROUP, LLC; INFLUX
CAPITAL GROUP, LLC, a/k/a INFLUX CAPITAL,
LLC; GTR SOURCE, LLC; ADDY SOURCE, LLC;
YES CAPITAL FUNDING GROUP, LLC, d/b/a YES
FUNDING SERVICES, LLC; JONATHAN BRAUN;
MICHELLE GREGG; TSVI REICH a/k/a STEVE
REICH; ROBERT GIARDINA; BRYAN BAKER d/b/a
BAKER CAP FUNDING d/b/a BAKER CAPITAL
FUNDING; REBAR CAPITAL, LLC;
AZRIEL INZELBUCH a/k/a DAVID B FRANK;
and TZVI DAVIS a/k/a STEVEN DAVIS,

Defendants.
----------------------------------------------------------------------x

MEMORANDUM OF LAW IN OPPOSITION TO
PLAINTIFFS’ ORDER TO SHOW CAUSE SEEKING A TEMPORARY
RESTRAINING ORDER AND A PRELIMINARY INJUNCTION

JACOBOWITZ NEWMAN TVERSKY LLP
Evan M. Newman
Abraham S. Beinhorn
Attorneys for Defendants INFLUX CAPITAL, LLC,
GTR SOURCE LLC, ADDY SOURCE LLC,
STEVE REICH, and TSVI DAVIS
377 Pearsall Avenue, Suite C
Cedarhurst, New York 11516
Tel: (516) 545-0343
Fax: (212) 671-1883
Email: abeinhorn@jntllp.com

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TABLE OF CONTENTS
PRELIMINARY STATEMENT .................................................................................................... 1
FACTS ............................................................................................................................................ 4
ARGUMENT .................................................................................................................................. 8
POINT I. PLAINTIFFS FAIL TO ESTABLISH THEIR RIGHT TO A PRELIMINARY
INJUNCTION ............................................................................................................................. 8

A. Plaintiffs Cannot Show a Likelihood of Success on the Merits, As The Complaint
Failed to State a Basis for Relief ............................................................................................. 9

1. The Agreements Cannot be Held Void......................................................................... 9

a. The Agreements Are Not Usurious Because They Are Not Loans ........................ 10

b. Plaintiffs May Not invoke Usury to Void or Nullify the Agreements .................... 11

c. No Other Basis for Voiding Agreement ................................................................. 12

2. Plaintiffs’ Claim for a Constructive Trust is Baseless ................................................ 13

3. Plaintiff Cannot Even Set Forth a Semblance of a RICO Claim, Let Alone a
Likelihood of Success on Its Merits................................................................................... 15

a. RICO Standard ........................................................................................................ 15

b. Plaintiffs Do Not Allege That the Affairs of a RICO “Enterprise” Were
“Conducted” Through the Alleged Racketeering Activity ............................................ 16

c. Plaintiffs Do Not Allege a “Pattern of Racketeering Activity” .............................. 17

4. Plaintiffs Do Not Allege A Fiduciary Relationship Warranting Relief of
Accounting……………………………………………………………………………….18

5. Plaintiffs Similarly Cannot Demonstrate a Substantial Likelihood of Success on the
Merits as to Their Remaining Claims ................................................................................ 19

a. “Disclosure of Confidential Information” .............................................................. 19

b. “Fictitious Names” .................................................................................................. 20

c. “Deceptive Business Practices” .............................................................................. 21

B. Plaintiffs Fails to Show Irreparable Harm...................................................................... 22

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C. The Balance of the Equites Favors the Defendants ......................................................... 23

POINT II. AN UNDERTAKING IN THE AMOUNT OF THE JUDGMENT PLUS
INTERESTS AND FEES IS REQUIRED FOR ANY PRELIMINARY INJUNCIVE RELIEF24

POINT III. THE COURT SHOULD SANCTION PLAINTIFFS AND THEIR COUNSEL FOR
FRIVILOUSLY FILING THIS MOTION ................................................................................ 24
CONCLUSION ............................................................................................................................. 25

iii

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Table of Authorities
Cases

Allard v Allard,
145 AD3d 1254, 1255-56, 145 A.D 3d 1254 [3d Dept 2016] .................................................. 13

Beatty v Guggenheim Expl. Co.,
225 NY 380, 386, 225 N.Y. 380 [1919] ................................................................................... 14

Bell v. Hubbert,
05-CV-10456, *12 (S.D.N.Y. 2006) ......................................................................................... 15

Bertoni v. Catucci,
117 A.D.2d 892, 498 N.Y.S.2d 902 [3d Dep't 1986]................................................................ 14

Champion Auto Sales, LLC v Pearl Beta Funding, LLC,
159 AD3d 507, 69 N.Y.S. 3d 507, 2018 N.Y. Slip Op. 01645 [1st Dept 2018], lv to appeal
denied, 31 NY3d 910 [2018] .................................................................................................... 11

Copart of Connecticut, Inc. v Long Is. Auto Realty, LLC,
42 AD3d 420, 421, 839 N.Y.S. 2d 791 [2d Dept 2007] ..................................................... 22, 23

Counihan v. Allstate Ins. Co.,
194 F.3d 357, 362 [2d Cir.1999]............................................................................................... 14

Cullen v. Margiotta,
811 F.2d 698, 712–13 (2d Cir.)................................................................................................. 15

Dee v Rakower,
112 AD3d 204, 212, 976 N.Y.S. 2d 470 [2d Dept 2013] ......................................................... 14

DiFabio v Omnipoint Communications, Inc.,
66 AD3d 635, 637, 887 N.Y.S. 2d 168 [2d Dept 2009] ........................................................... 22

DLJ Mortg. Capital Inc. v. Kontogiannis,
726 F. Supp.2d 225, 236, n.8 (E.D.N.Y. 2010) ........................................................................ 15

Elghanian v Elghanian,
277 AD2d 162, 717 N.Y.S. 2d 54 [1st Dept 2000] ................................................................... 18

Elsevier Inc. v. W.H.P.R., Inc.,
692 F. Supp. 2d 297, 308 (S.D.N.Y. 2010)............................................................................... 16

First Asset Capital Management v. Satinwood, Inc.
385 F.3d 159 (2d Cir. 2004)...................................................................................................... 17

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GICC Capital Corp. v, Technology Insurance Group, Inc.
67 F.3d 463 (2d Cir. 1995)........................................................................................................ 18

H.J. Inc. v. Northwestern Bell telephone Co.,
492 U.S. 229, 109 S. Ct. 2893 (1989) ....................................................................................... 17

Hochman v. Larea,
14 A.D.3d 653, 654, 789 N.Y.S.2d 300 (2d Dept. 2005) ......................................................... 10

K9 Bytes, Inc. v Arch Capital Funding, LLC,
56 Misc 3d 807, 57 N.Y.S. 3d 625, 2017 N.Y. Slip Op. 27166 [Sup Ct Westchester Co. 2017]
....................................................................................................................................... 11, 12, 18

Lehman v Roseanne Inv'rs Corp.,
106 AD2d 617, 618, 483 N.Y.S. 106 [2d Dept 1984] .............................................................. 10

Massaro v. United States,
2004 U.S. Dist. LEXIS 20084, *13 (S.D.N.Y. 2004) ............................................................... 17

Merchants Advance, LLC v. Tera K, LLC T/A Tribeca Frank Crabetta,
2008 NY Misc. LEXIS 10889, *4 [Sup. Ct. NY Co. 2008] ..................................................... 11

Schneider v. Phelps,
41 N.Y.2d 238, 242, 391 N.Y.S.2d 568, 571 (1977) ................................................................ 12

Sedima, S.P.R.L. v. Imrex Co.,
473 U.S. 479, 497, 105 S.Ct. 3275, 3285, 87 L.Ed.2d 346 (1985)), cert. denied, 483 U.S. 1021,
107 S.Ct. 3266, 97 L.Ed.2d 764 (1987) .............................................................................. 15, 17

Seidel v 18 E. 17th St. Owners, Inc.,
79 NY2d 735, 744 [1992] ......................................................................................................... 10

Sharp v Kosmalski,
40 NY2d 119, 351 N.E.2d 721 [1976] ...................................................................................... 14

Sherman v Mulerman,
45 Misc 3d 1220(A), 2014 WL 6673912 [NY Sup 2014] ........................................................ 22

Storper v WL Ross & Co., LLC,
2018 N.Y. Slip Op. 32235[U], 2018 WL 4334218, *4 [Sup Ct, NY County 2018] ................ 18

Teller v Bill Hayes, Ltd.,
213 AD2d 141, 149, 630 N.Y.S. 2d 769 [2d Dept 1995] ......................................................... 21

Transmedia Rest. Co., Inc. v. 33 E. 61 Street Rest. Corp.,
184 Misc.2d 706, 710, 710 N.Y.S.2d 756 (Sup. Ct. N.Y. Co. 2000) ....................................... 10

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Trump on the Ocean, LLC v Ash,
81 AD3d 713, 715, 916 N.Y.S. 2d 177 [2d Dept 2011] ............................................................. 9

Unitel Telecard Distrib. Corp. v Nunez,
90 AD3d 568, 569, 936 N.Y.S. 2d 117 [1st Dept 2011]........................................................... 18

Wal-Mart Stores Inc. v Campbell,
238 AD2d 831, 833, 656 N.Y.S. 2d 536 [3d Dept 1997] ......................................................... 13

Wheaton/TMW Fourth Ave., LP v New York City Dept. of Bldgs.,
65 AD3d 1051, 1052, 886 N.Y.S. 2d 41 [2d Dept 2009] ........................................................... 9

Wilkinson Floor Covering, Inc. v Cap Call, LLC,
59 Misc 3d 1226(A) [Sup Ct New York Co. 2018] .................................................................. 11

Wilson Impex PTE Ltd. v. American Polymer Group, Inc.,
97 Civ. 4157, 1999 U.S. Dist. LEXIS 17013, *8-9 (S.D.N.Y. 1999) ....................................... 17

Yellowstone Capital LLC v Cent. USA Wireless LLC,
60 Misc 3d 1220(A), 2018 WL 3765121 [Sup Ct Erie Co. 2018] ............................................ 11

Zoo Holdings, LLC v Clinton,
11 Misc 3d 1051(A), 814 N.Y.S. 2d 893 [Sup Ct NY Co. 2006] ....................................... 10, 11

Statutes

CPLR § 6312(b) ...................................................................................................................... 24, 25

Gen. Oblig. L. § 5-501 .................................................................................................................. 10

General Business Law § 349................................................................................................... 21, 22

Limited Liability Company Law § 808 ........................................................................................ 21

Penal Law § 190.40....................................................................................................................... 10

Rules

NY Ct R 130-1.1 ........................................................................................................................... 24

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PRELIMINARY STATEMENT

Defendants INFLUX CAPITAL GROUP LLC a/k/a Influx Capital LLC (“Influx Capital”),

GTR SOURCE LLC (“GTR”), ADDY SOURCE LLC (“Addy”), STEVE REICH (“Reich”), and

TSVI DAVIS1 (“Defendant Davis”) (hereinafter, Influx Capital, GTR, Addy, Reich and Defendant

Davis are collectively referred to as, the “Influx Defendants”) by and through their attorneys,

Jacobowitz Newman Tversky LLP, submit the following memorandum of law in opposition to

plaintiffs James Davis, II (“Plaintiff Davis”) and Medisales, Inc.’s (“Medisales”2, and collectively

with Plaintiff Davis, “Plaintiffs”) order to show cause seeking to enjoin and restrain the defendants

(“Order to Show Cause”).

Plaintiffs’ Order to Show Cause must be denied in its entirety, as Plaintiffs cannot

demonstrate their right to a preliminary injunction. As is well-established, a movant seeking a

preliminary injunction must show: (a) a likelihood of its success on the merits; (b) that absent the

injunctive relief it would be irreparably harmed; and (c) that a balance of the equities is in its favor.

Plaintiffs have not and cannot establish any of these three elements.

Plaintiffs cannot establish a likelihood of success on the merits, because they do not have

a legitimate claim. Despite, Plaintiffs’ attempt to obfuscate the matter with a self-serving and

long-winded sermon on the merchant cash advance industry, the actual facts here are simple.

Medisales entered into various merchant agreements, guaranteed by Plaintiff Davis,

whereby Medisales received a specific amount of working capital from various defendants and in

exchange granted the contracting defendants shares in its future account receivables. Each

1
Incorrectly sued here as Tzvi Davis.
2
Plaintiffs themselves appear to be unsure if they are “Medisale, Inc.” or “Medisales, Inc.”. The Complaint
is initiated by Medisale, but repeatedly references Medisales, while the agreements alternate between the
two. For the sake of being consistent, we refer only to “Medisales”.
1

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agreement provided for the purchase of a specified amount of account receivables for a set price.

Each agreement was signed by the Plaintiffs (who admit to a long history of selling receivables)

and in each instance Plaintiffs received money from the contracting defendants.

Plaintiffs’ allegations are entirely without merit and cannot validate their claim for

injunctive relief. Specifically, Plaintiffs seek to insert a defense to what they assume will be a

future action brought by defendants on Plaintiffs’ default, by arguing that defendants formed a

mysterious “enterprise” to charge Plaintiffs extra fees. Worse, these claims do not amount to

claims as a matter of law for the following reasons:

First, because Plaintiffs’ repayment on the merchant agreements is contingent upon

Plaintiffs’ receipt of account receivables, the agreements are not loans. New York Courts have

repeatedly confirmed that merchant agreements are purchases of account receivables not loans and

are thus not subject to usury laws. Additionally, Plaintiffs, as a matter of law, cannot assert usury

as a basis for the affirmative relief sought here.

Second, Plaintiffs fail to allege any of the elements of a constructive claim as it pertains to

the Influx Defendants. Plaintiffs do not even demonstrate that Braun has their money, nor do they

show how the Influx Defendants have Braun’s money. Moreover, Plaintiffs’ bad faith invocation

of defendant Johnathan Braun’s (“Braun”) unrelated criminal issue aside, Plaintiff’s nonsensical

allegations do not show how without the imposition of a constructive trust the Influx Defendants

would be unjustly enriched through Braun.

Third, Plaintiffs similarly fail to show any of the required elements for their RICO claim.

Plaintiffs do not demonstrate the existence of a criminal enterprise, nor can Plaintiffs show a

pattern of racketeering activity. Defendants are distinct funding companies who operate and

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transact legal businesses. Furthermore, Plaintiffs fail to allege even a single criminal action taken

by any defendant, let along a criminal enterprise with a pattern of illegal actions.

Fourth, there is no basis for Plaintiffs’ claim for Accounting, as Plaintiffs do not

demonstrate the existence of a confidential or fiduciary relationship, nor do Plaintiffs show that

they lack an adequate remedy at law.

Fifth, Plaintiffs’ claim regarding disclosure of confidential information is also meritless.

Plaintiffs concede that as part of the funding process their information was given to various

funders. Additionally, evidence in the record contradicts the vague allegations. Furthermore,

Plaintiffs repeatedly sought these applications and agreements for which their information was

allegedly given.

Sixth, Plaintiffs’ claim pertaining to fictitious business names is flatly untrue. Addy and

Influx Capital are duly registered businesses, and Plaintiffs fails to allege any other cognizable

claim that they violated general business law.

Lastly, Plaintiffs also cannot establish a likelihood of success on the merits from their final

claim of “deceptive business practices”, as General Business Law § 349 pertains solely to

fraudulent actions that impact consumers at large. Here, Plaintiffs’ allegations concern allegedly

fraudulently statements made by “defendants” to the Plaintiffs concerning their personal arm’s

length negotiations. Additionally, the allegation that defendants misrepresented the amounts to be

funded is directly contradicted by the executed agreements which specifically authorize the

deductions and payoffs.

Next, Plaintiffs cannot establish irreparable harm. To the contrary, this entire action is

brought for theoretical relief from a prospective judgment a defendant may file which Plaintiffs

fear may be based on incorrect calculations. Furthermore, the potential harm that would be caused

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by a theoretical judgment would be remediable by economic damages. Therefore, as a matter of

law, Plaintiffs’ unsubstantiated and speculative claims do not constitute irreparable harm.

Finally, Plaintiffs cannot show that the balance of equities are in their favor. Plaintiffs do

not deny that they accepted the benefits of their agreements with defendants. Nor do Plaintiffs

deny that they are the ones who owe defendants money, not the other way around. Nevertheless,

out of an alleged fear that defendants may seek judgments on inaccurately stated balances,

Plaintiffs are seeking relief which would enjoin defendants from exercising their contractual rights

and remedies. Plaintiffs’ transparent attempt to seek relief based on a perceived potential harm to

circumvent their contractual obligations should be denied.

Alternatively, should the Court anyways determine that Plaintiffs are entitled to injunctive

relief, the Influx Defendants respectfully request that the Court demand Plaintiffs provide an

undertaking in the total amount they would owe the defendants upon default, plus interests and

fees.

Lastly, the Influx Defendants request that the Court grant them sanctions against Plaintiffs

and their Counsel for frivolously filing and pursuing this action and Order to Show Cause, with

full knowledge of the baselessness of Plaintiffs’ claims.

FACTS

As a general rule, merchants, such as Medisales, interested in commercial funding with a

merchant cash advance company (“MCA”) are sourced by an individual broker or an Independent

Sales Organization (“ISO”). See, the Affirmation in Opposition of Steve Reich annexed hereto

(“Reich Affirmation”), at ¶ 3. As part of the MCA process, a merchant will engage an ISO or

broker to locate an MCA funder that will provide the best deal for the merchant. Id. at ¶ 4.

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Accordingly, the merchant often grants the ISO or broker the right to share its information with

prospective funders and to solicit various funders. Ibid.

A Merchant Agreement commonly sets forth: (1) a specified purchase price – i.e.,the

amount of working capital to be provided to the merchant; (2) a specified percentage of the

merchant’s account receivables to be paid incrementally to the funding company; (3) a specified

or daily amount, which is the estimated incremental payment representing the specified

percentage; and (4) the purchased amount, which is the sum total of account receivables to be paid

to the funding company contingent upon the merchant’s receipt of same. Id. at ¶ 6. The transaction

is typically structured with a merchant being funded a specific amount of working capital, and the

funding company receiving a right in the merchant’s future account receivables, up to the specific

purchase amount. Id. at ¶ 7.

Here, after Plaintiffs had been previously been through Yellowstone Capital LLC, with the

help of Defendant Davis, Plaintiffs came to Defendant Davis looking for additional funding. See,

the Affirmation in Opposition of Tsvi Davis annexed hereto (“Defendant Davis Affirmation”), at

¶ 3. Though he no longer worked with Yellowstone Capital LLC, at Plaintiffs’ Request,

Defendant Davis agreed to provide Plaintiffs with funding through Influx Capital, and, on or about

October 4, 2018, the Plaintiffs and Influx Capital entered into a Secured Merchant Agreement (the

“Influx Agreement”). Id. at ¶ 4; See also, Exhibit B to Exhibit A of Plaintiffs’ Order to Show

Cause for a copy of the Influx Agreement.

Pursuant to the Influx Agreement, Medisales sold Influx Capital rights in Medisales’ future

account receivables for a purchase price of $250,000.00. Ibid. As explicitly set forth in the Influx

Agreement - and spelled out in the executed payment authorization therein - some of the purchase

price went to payoff a balance owed to Capital Merchant Services, LLC, a company that had

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previously funded Medisales. See, Defendant Davis Affirmation, at ¶ 5; See also, Exhibit B to

Exhibit A of Plaintiffs’ Motion.

Thereafter, the Plaintiffs were brought by an ISO to Reich seeking additional working

capital. See, Reich Affirmation, at ¶ 9. On or about October 16, 2018, Addy and Plaintiffs entered

into a Secured Merchant Agreement whereby Medisales was given $200,000.00 in working capital

in exchange for up to $299,800.00 in rights to Medisales’ future account receivable, as further set

forth in the agreement (“First Addy Agreement”). See, Reich Affirmation, at ¶ 10, and Exhibit A

thereto for a copy of the First Addy Agreement.

Shortly thereafter, Plaintiffs again came to Reich seeking additional financing. See, Reich

Affirmation, at ¶ 11. Not wanting to personal provide the funding at the time, Reich, at Plaintiffs’

explicit request, brokered a deal with SPG Advance, LLC (“SPG”), an unrelated funder. Ibid. As

set forth in the Complaint, on or about October 19, 2018, SPG and Medisales entered into a

Merchant Agreement. See, Exhibit D to Exhibit A of Plaintiffs’ Order to Show Cause.

Plaintiffs again contacted Reich seeking additional financing and, on or about November

1, 2018, Plaintiffs and Addy entered into a second agreement pursuant to which Addy provided

Medisales with $320,000.00 in exchange for $479,680.00 in rights to Medisales’ future account

receivables, as further set forth therein (“Second Addy Agreement”). See, Reich Affirmation, at ¶

12, and Exhibit B thereto for a copy of the First Addy Agreement. As Plaintiffs were well aware

at the time, part of the purchase price from the Second Addy Agreement went to payoff the balance

owed on the First Addy Agreement. Id. at ¶ 13. In fact, this “deduction” was expressly provided

for in the Second Addy Agreement with the amount and receipt explicitly set forth in the payment

authorization form executed by Plaintiff Davis. Ibid. Furthermore, Reich discussed this very

“deduction” with Plaintiff Davis on the phone. Ibid.

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On or about November 7, 2018, the Plaintiffs again sought additional working capital from

Reich. See, Reich Affirmation, at ¶ 14. With an outstanding balance still owed to Addy, Reich

agreed to fund Plaintiffs $375,000.00 through GTR (the “GTR” Agreement”). See, Id. at ¶ 14, and

Exhibit C thereto for a copy of the GTR Agreement.

As part of the GTR Agreement, some of the purchase price went to payoff the outstanding

balance from the Influx Agreement. See, Reich Affirmation, at ¶ 14. Plaintiffs were aware of this

“deduction” at the time. Ibid.

Additionally, at Plaintiffs’ request, Reich brokered a deal for Plaintiffs with Richmond

Capital Group LLC (“RCG”). Id. at ¶ 15. RCG and Medisales entered into a Merchant Agreement

on or about November 7, 2018. Ibid.

The aforementioned merchant agreements each explicitly provide for: (a) how and what

deductions and fees would be taken off the purchase price; (b) a reconciliation process and other

methods for how the specified payments, or daily amounts, could be adjusted if the funding

company determines a change is needed to more accurately reflect the specified percentage; and

conditioned on Medisales’ receipt of same, and not loans. Id. at ¶ 16. Additionally, Plaintiff

Davis guaranteed each merchant agreement with Medisales. Id. at ¶ 17.

Though at times different funding companies where used, it is common practice in the

industry for funders to use multiple funding platforms on deals for a variety of business purposes,

as Reich did here. See, Reich Affirmation, at ¶¶ 5, 19. Moreover, at no time during the relevant

time period were different entities or names used to confuse Plaintiffs, who were always aware of

the terms of the agreements. Id. at ¶ 18. Additionally, contrary to their Complaint, Plaintiffs’

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confidential information was never sold or otherwise illegally disseminated. See, Defendant Davis

Affirmation, at ¶ 6.

Plaintiffs dishonestly pretend to be ignorant of the standard procedures of the MCA world

and the agreements therein, however they repeatedly sought additional working capital by willfully

entering into a series of merchant agreements, and happily accepting the financial benefits thereof.

Id. at ¶ 20. Moreover, Plaintiff Davis, who is particularly well versed in the industry having

worked at a large MCA company himself, would continuously contact Reich to procure additional

financing from whichever funding platform was willing and able. Ibid. Contrary to their papers

herein, as set forth in the Reich Affirmation, Plaintiffs were never confused about the terms of the

agreements, the entities they were dealing with, or the payoffs they were required to make. Id. at

¶ 21. See also Defendant Davis Affirmation, at ¶ 7.

Though Plaintiffs now attempt to avoid paying their contractual obligations, as set forth in

the Reich Affirmation, Plaintiff Davis admitted to Reich that Plaintiffs only instituted this action

on the direction of an MCA competitor with animus towards the defendants. Id. at ¶ 22. In fact,

as set forth in the Reich Affirmation, Plaintiff Davis tried to settle this matter with Reich and told

his Counsel to not push forward with Plaintiffs’ meritless claims, and instead focus on settling and

resolving their outstanding balance. Id. at ¶ 23. Nevertheless, Plaintiffs’ Counsel continues to

pursue this frivolous litigation against their client’s apparent wishes. Id. at ¶ 24.

ARGUMENT

POINT I.

PLAINTIFFS FAIL TO ESTABLISH THEIR RIGHT TO A PRELIMINARY
INJUNCTION

It is well-settled that a party seeking a preliminary injunction must demonstrate: (1) a

likelihood of success on the merits; (2) irreparable injury absent the granting of the preliminary

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injunction; and a balance of the equities in the movant’s favor. Wheaton/TMW Fourth Ave., LP v

New York City Dept. of Bldgs., 65 AD3d 1051, 1052, 886 N.Y.S. 2d 41 [2d Dept 2009] (holding

plaintiff failed to establish its right to preliminary injunctive relief where issues of fact were in

dispute, and because plaintiff sought ultimate relief). The purpose of the relief is to maintain the

status quo, not to determine the ultimate rights of the parties. Ibid. A preliminary injunction is a

drastic remedy to be used sparingly. Trump on the Ocean, LLC v Ash, 81 AD3d 713, 715, 916

N.Y.S. 2d 177 [2d Dept 2011].

As a threshold matter, Plaintiffs’ Order to Show Cause must be denied as it fails to even

mount an argument that injunctive relief is warranted. Moreover, as further set forth below,

Plaintiffs cannot demonstrate a substantial likelihood of success on the merits, as the

overwhelming amount of case law demonstrates that the agreements in question are valid and

enforceable purchase-and-sale agreements of future account receivables.

Furthermore, Plaintiffs have not and cannot show that there is danger of irreparable harm

absent the granting of this injunctive relief. Nor are the balance of the equities in Plaintiffs favor.

Plaintiffs’ are simply trying to avoid their contractual obligations, under agreements for which

they have accepted the financial benefits of, by seeking injunctive relief to prevent against an

imagined judgment which a defendant may file against Plaintiffs wherein the defendant may seek

to collect on an incorrectly calculated outstanding balance.

A. Plaintiffs Cannot Show a Likelihood of Success on the Merits, As
The Complaint Failed to State a Basis for Relief

1. The Agreements Cannot be Held Void

Plaintiffs’ First Cause of Action seeks a declaratory judgment that the agreements are null,

void and unenforceable, because they violate usury laws, and contends that a declaratory judgment

is warranted because “defendants” violated the “MCA Agreements and Plaintiffs are thereby

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relieved of any duty to perform….”. See, Plaintiffs’ Complaint attached to their Order to Show

Cause as Exhibit A, at ¶ 260.

a. The Agreements Are Not Usurious Because They Are Not Loans

Plaintiffs’ haphazard attempt to convert the agreements wherein it sold rights in its future

receivables into loans is unconvincing as the overwhelming amount of case law suggests

otherwise.

As is well-settled there is a strong presumption against the finding of usury. See,

Transmedia Rest. Co., Inc. v. 33 E. 61 Street Rest. Corp., 184 Misc.2d 706, 710, 710 N.Y.S.2d

756 (Sup. Ct. N.Y. Co. 2000). Usury is an affirmative defense, and a heavy burden rests upon the

party seeking to impeach a transaction based upon usury. See, Hochman v. Larea, 14 A.D.3d 653,

654, 789 N.Y.S.2d 300 (2d Dept. 2005) (internal citations omitted).

For there to be usury, civil or criminal, there must be a loan. See, Seidel v 18 E. 17th St.

Owners, Inc., 79 NY2d 735, 744 [1992] (noting that if the transaction is not a loan there can be no

usury, however unconscionable the contract may be). For criminal usury, the statute requires a

loan and the payment of interest. See, Penal Law § 190.40. Similarly, civil usury applies to

“interest on the loan or forbearance of any money, goods, or things in action at a rate exceeding

the rate above prescribed.” See, Gen. Oblig. L. § 5-501.

A loan is not usurious merely because there is a possibility that the lender will receive more

than the legal rate of interest. Lehman v Roseanne Inv'rs Corp., 106 AD2d 617, 618, 483 N.Y.S.

106 [2d Dept 1984]. Rather, an indispensable element of a loan is the lender’s absolute right to

repayment of the principal sum. See, Zoo Holdings, LLC v Clinton, 11 Misc 3d 1051(A), 814

N.Y.S. 2d 893 [Sup Ct NY Co. 2006]. “Where payment of enforcement rests upon a contingency

the agreement is valid even though it provides for a return in excess of the legal rate of interest.”

16 of 31
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Yellowstone Capital LLC v Cent. USA Wireless LLC, 60 Misc 3d 1220(A), 2018 WL 3765121

[Sup Ct Erie Co. 2018], quoting, Merchants Advance, LLC v. Tera K, LLC T/A

Tribeca Frank Crabetta, 2008 NY Misc. LEXIS 10889, *4 [Sup. Ct. NY Co. 2008].

Clearly, the agreements between Plaintiffs and defendants are not loans. As Plaintiffs

readily concede, the right to repayment in each agreement was conditioned on whether Medisales

Case Info

Judge

Arthur F. Engoron Track Judge’s New Case

Case No.

(Subscribe to View)

Document Filed Date

January 03, 2019

Case Filing Date

December 20, 2018

County

Parties

ADDY SOURCE, LLC Defendant
Azriel Inzelbuch a/k/a DAVID B. FRANK Defendant
BEINHORN, ABRAHAM S. Attorney for the Defendant
BEINHORN, ABRAHAM S. Attorney for the Defendants
BOUSKILA, ARIEL Attorney for the Defendant
BOUSKILA, ARIEL Attorney for the Defendants
Bryan Baker d/b/a BAKER CAP FUNDING, d/b/a BAKER CAPITAL FUNDING Defendant
COHEN, NATHAN Attorney for the Defendant
COHEN, NATHAN Attorney for the Defendants
COLONNA COHEN, ASHLEE VICTORIA Attorney for the Plaintiff
CUMMINGS, RYAN K Attorney for the Defendants
ERSHOWSKY, MICHAEL BRIAN Attorney
FLEISCHMANN, JEFFREY Attorney for the Defendant
GRIMBLE, ROBERT Attorney for the Plaintiff
GTR SOURCE, LLC Defendant
IANDOLO, JEREMY M. Attorney for the Defendant
INFLUX CAPITAL GROUP, LLC a/k/a INFLUX CAPITAL, LLC Defendant
James Davis II Plaintiff
Jonathan Braun Defendant
MEDISALE, INC Plaintiff
Michelle Gregg Defendant
NEWMAN, EVAN M Attorney for the Defendant
NEWMAN, EVAN M Attorney for the Defendants
REBAR CAPITAL, LLC Defendant
RICHMOND CAPITAL GROUP, LLC Defendant
Robert Giardina Defendant
SPG Advance LLC Non Party
SPG Advance, LLC Defendant
Tsvi Davis a/k/a STEVEN DAVIS Defendant
Tzvi Reich a/k/a STEVE REICH Defendant
USHKOW, MICHAEL JASON Attorney for the Defendants
WELLS, STEVEN WILLIAM Attorney for the Defendant
WELLS, STEVEN WILLIAM Attorney for the Defendants
YES CAPITAL FUNDING GROUP, LLC d/b/a YES FUNDING SERVICES, LLC Defendant
ZAWODZINSKI, JAMES JUDE Attorney for the Defendant
ZAWODZINSKI, JAMES JUDE Attorney for the Defendants
SHAINA WEISSMAN Attorney
ISAAC GREENFIELD Attorney
ROBIN LOGUIDICE Attorney
RICHARD GUIDICE Attorneys for Plaintiffs
David Fein Attorneys for Defendants
STEPHEN LEMMON Attorney
ANTHONY VARBERO Attorneys for Defendants
MATTHEW PARKER Attorneys for Defendants
ALLEN SCHWARTZ Attorneys for Defendants
ROBERT LEE Attorney
JEFFREY LEHMAN Attorneys for Defendants
GARY HELLER Attorneys for Defendants
ROBERT BOGLE Attorney
JEROME GOLDMAN Attorneys for Plaintiffs

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