The following electronically filed documents for Motion Sequences 001 and 002, listed by NYSCEF document numbers "10," through "28," and attachments and exhibits have been considered on these motions.

Plaintiff, Monday Funding, moves for an Order pursuant to CPLR §3211(a)(7) and (a)(1) dismissing Defendants' counterclaims based upon documentary evidence and for failure to state a cause of action upon which relief may be granted. (Motion Seq. No. 001). Plaintiff further moves for an Order granting summary judgment in favor of Plaintiff and against Defendants, severally, in the amount of $66,429.01, plus prejudgment interest at nine percent (9%) from the date of Defendants' breach to the date of entry of judgment, post-judgment interest from the date of entry until paid, and costs and disbursements. (Motion Seq. No. 002).

Is this contract a "Merchant Cash Agreement" or a "Predatory Loan Scheme" with built in excessive fees and extremely high interest rates?

This action is predicated upon a breach of contract and breach of a guaranty. Plaintiff contends that on or about September 30, 2024, Plaintiff entered into an agreement (the "Agreement") with Defendant Black Friday Deals AZ Inc. (hereinafter "Company Defendant") whereby Plaintiff purchased $52,500.00 of Company Defendant's future receivables (the "Purchased Amount") for the sum of $35,000.00 (the "Purchase Price"). Pursuant to the Agreement, Company Defendant was to remit the Purchased Amount to Plaintiff at a rate of twenty percent (20%) of Company Defendant's daily collected receipts. Additionally, the Agreement provided that Defendant Wael Sulieman would guaranty Company Defendant's performance under the Agreement and would be responsible to Plaintiff for the full unremitted [*2]Purchased Amount, plus all fees, in the event of Company Defendant's breach.

Plaintiff contends that it performed its obligations pursuant to the Agreement by remitting the Purchase Price, less disbursements. Plaintiff further contends that Company Defendant has remitted $2,169.99 of the Purchased Amount pursuant to the Agreement, but has halted payments, leaving a balance of $50,330.01. Plaintiff additionally contends that pursuant to the Agreement, in the event of Company Defendant's default, Company Defendant would be responsible for a Default Fee of $16,099.00, and that because of this, Plaintiff is entitled to a total sum of $66,429.01, in addition to pre- and post-judgment interest and costs and disbursements.

CPLR §3211(a)(1) and (a)(7) provide that a party may move to dismiss a cause of action if "a defense is founded upon documentary evidence" (CPLR §3211[a][1]) or where "the pleading fails to state a cause of action." (CPLR §3211[a][7]). In the instant motion, Defendants' sole counterclaim is predicated on Plaintiff's breach of the implied duty of good faith and fair dealing, citing to Plaintiff's deceitful conduct, bad faith negotiations, and unconscionable debt collection practices. Plaintiff argues that Defendants' counterclaim is without merit as they fail to allege specific facts that would support this. However, Defendants' Answer with Counterclaim discusses Plaintiff's specific conduct, including, but not limited to, the non-disclosure of the true interest rate of the Agreement, advertisements made by Plaintiff, and non-disclosure of the impact of "extraordinary default fees" included in the Agreement.

"On a motion to dismiss a counterclaim pursuant to CPLR §3211(a)(7), a court 'must accept as true the facts as alleged' in the counterclaim, accord the defendant, 'the benefit of every possible inference and determine only whether the facts as alleged fit within any cognizable legal theory.'" (Twitchell Tech. Prods., LLC v. Mechoshade Sys., LLC, 227 AD3d 45, 51, 208 N.Y.S.3d 657, 665 [2d Dept. 2024] quoting Whitebox Concentrated Convertible Arbitrage Partners, L.P. v. Superior Well Servs., Inc., 20 NY3d at 63).

Furthermore,

Where evidentiary material is submitted and considered on a motion pursuant to CPLR 3211(a)(7), and the motion is not converted into on for summary judgment, the question becomes whether the [pleader] has a cause of action, not whether the [pleader] has stated one, and unless it has been shown that a material fact claimed by the [pleader] to be one is not a fact at all, and unless it can be said that no significant dispute exists regarding it, dismissal should not eventuate.

(Id. quoting Bonavita v. Government Empls. Ins. Co., 185 AD3d at 893).

Here, it is not the function of the Court to determine whether Defendants have stated a cause of action, but whether "the facts as alleged fit within any cognizable legal theory." (Id.). Furthermore, in the instant matter, questions of fact exist regarding Plaintiff's conduct, and while Plaintiff argues that Defendants' counterclaim is unsupported by fact, Plaintiff has not definitively proven that this is the case. Accordingly, Plaintiff's motion to dismiss Defendants' counterclaim (Motion Seq. No. 001) is DENIED.

The Court now turns to Plaintiff's motion for summary judgment (Motion Seq. No. 002). "The proponent of a summary judgment motion must make a prima facie showing of entitlement [*3]to judgment, as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact." (Alvarez v. Prospect Hosp., 68 NY2d 320, 324, 501 N.E.2d 572, 508 N.Y.S.2d 923 [1986] citing Winegrad v. NY Univ. Med. Ctr., 64 NY2d 851, 476 N.E.2d 642, 487 N.Y.S.2d 316, [1985]; Zuckerman v. City of New York, 49 NY2d 557 [1980]; Sillman v. Twentieth Century-Fox Film Corp., 3 NY2d 395 [1957]).

Plaintiff claims that it performed all its obligations pursuant to the Agreement and that the Defendants materially breached the Agreement and Guaranty in failing to make payment in accordance with its terms and in failing to oppose this motion.

This Court must be satisfied that this "Merchant Cash Advance Agreement" advanced by the Plaintiff is not a "Predatory Lending Scheme" that is used to target vulnerable small businesses and their owners by issuing loans with excessive fees and high interest rates. In this case, from the four corners of the Agreement, it is clear to this Court that this Agreement is a Predatory Lending Scheme and not a Merchant Cash Agreement.

Specifically, certain provisions outlined in the Agreement make it clear that this is a Predatory Lending Scheme including, but not limited to, the following: i) an Underwriting Fee of $1,750.00; ii) an additional ACH Setup Fee of $1,750.00; iii) a Weekly Maintenance Fee of $24.99; iv) a Blocked/Stopped Fee of $1,000.00; v) a Default Fee of 30% of the outstanding balance, or $5,000.00, whichever is greater, which rendered a Default Fee in this action of $16,099.00; vi) the Specified Percentage of 20% of Company Defendant's receivables per day; vii) pursuant to the Agreement, in the event of a default, Plaintiff has the option to require Company Defendant to pay Plaintiff 35% of the unpaid balance as additional liquidated damages; viii) attorney fees, which may include a contingency fee of up to 40% of the amount claimed; ix) the parties must waive their right to a jury trial; x) the parties must waive their right to a class action lawsuit; xi) the Agreement states that "[i]n any litigation or arbitration commenced by [Plaintiff], each [Defendant] will not be permitted to interpose any counterclaim;" and xii) this Court notes that Plaintiff has requested prejudgment interest at the rate of nine percent (9%). However, Plaintiff also requests post-judgment interest at an unspecified rate, which, pursuant to the Agreement would be at a rate of 24%.

"To determine whether a transaction constitutes a usurious loan, it 'must be considered in its totality and judged by its real character, rather than by the name, color, or form which the parties have seen fit to give it.'" (Crystal Springs Capital, Inc. v. Big Thicket Coin, LLC, 220 AD3d 745, 746, 198 N.Y.S.3d 142, 144 [2d Dept. 2023] quoting LG Funding, LLC v. United Senior Props. of Olathe, LLC, 181 AD3d 664, 665 [2010]). "Unless a principal sum advanced is repayable absolutely, the transaction is not a loan." (LG Funding, LLC v. United Senior Props. of Olathe, LLC, 181 AD3d 664, 666 [2010]). Generally, there are three factors to weigh when courts determine whether repayment is absolute or contingent: "(1) whether there is a reconciliation provision in the agreement; (2) whether the agreement has a finite term; and (3) whether there is any recourse should the merchant declare bankruptcy." (Id.).

"New York usury law is composed of General Obligations Law §§ 5-501, 5-511, 5-21; Banking Law § 14-a(1); and Penal Law §190.40. Together, the statutes establish that loans of less than $250,000 to individuals cannot exceed at 16% annual rate." (Adar Bays, LLC v. GeneSYS ID, Inc., 37 NY3d 320, 326, 157 N.Y.S.3d 800, 804 [2021]). "More specifically, the General Obligations Law and Banking Law provide that the maximum rate of interest upon a 'loan or forbearance of any money, goods, or things' shall be 16% per annum unless otherwise provided by law." (Id. quoting General Obligations Law §5-501[1]; see Banking Law §14-a[1]). [*4]Additionally, "no person or corporation shall, directly or indirectly, charge, take or receive any money, goods or things in action as interest on the loan or forbearance of any money, goods or things at a rate exceeding [16%]." (General Obligations Law §5-501[2]).

In the instant matter, it is clear that this Agreement is a Predatory Lending Scheme — a usurious loan disguised as a Merchant Cash Agreement — as the Agreement provided, inter alia, that in exchange for the Purchase Price, Defendants were obligated to authorize Plaintiff to automatically debit twenty percent (20%) of their daily receivables each day, Plaintiff was under no obligation to reconcile payments as the reconciliation clause (Paragraph 4) of the Agreement is clear that reconciliations requested by Defendants are at the discretion of Plaintiff, and Plaintiff was entitled to collect the entirety of the uncollected purchase amount, plus all fees due under the Agreement — which amount to an egregious total balance due — in the event of Defendants' default. These terms establish that the subject Agreement was a loan requiring absolute payment. (See id.). Additionally, the Agreement renders Defendants responsible for twenty-four percent (24%) post-judgment interest, which is higher than what is permitted pursuant to New York usury law. The exceedingly high interest rate, coupled with numerous high-cost fees, renders this Agreement a Predatory Lending Scheme.

Accordingly, even though the Defendants have not moved for summary judgment, the Court, upon searching the record, and for the reasons stated above, grants summary judgment to the Defendants. (See CPLR §3212[b]). In Merritt Hill Vineyards Inc. v. Windy Heights Vineyard, Inc. 61 NY2d 106 (1984), the Court of Appeals held that CPLR §3212 (subd [b]), provides that "[i]f it shall appear that any party other than the moving party is entitled to a summary judgment, the court may grant such judgment without the necessity of a cross-motion."

Accordingly, it is hereby

ORDERED, that Plaintiff's motion to dismiss Defendants' counterclaim (Motion Seq. No. 001) is DENIED; and it is further

ORDERED, that Plaintiff's motion for summary judgment against Defendants (Motion Seq. No. 002) is DENIED; and it is further

ORDERED, the Defendants have been GRANTED summary judgement and this action is DISMISSED WITH PREJUDICE as the Agreement advanced by Plaintiff amounts to a Predatory Lending Scheme in violation of New York usury law; and it is further

ORDERED, that Plaintiff's counsel shall serve a copy of this Order upon all Defendants within seven (7) days from the date of this Order via first class overnight mail with tracking. An affidavit of service shall be electronically filed.

This constitutes the Decision and Order of this Court.