Stacking Lawsuit Could Go to Trial

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CourtroomA lawsuit between RapidAdvance and Pearl Capital that has been making its way through the Maryland state court system for two years may be heading to trial.

In this case, plaintiff Small Business Financial Solutions, LLC (SBFS AKA RapidAdvance) alleged that Pearl Beta Funding, LLC (AKA Pearl Capital) interfered with a loan agreement it had with a merchant when Pearl “stacked” financial obligations to Pearl on top of the obligations the customer owed to SBFS. Ultimately the merchant defaulted and SBFS wants to hold Pearl responsible for the damages it incurred.

Pearl originally moved to dismiss the suit but was unsuccessful. Later, Pearl filed a motion for summary judgment. On September 29th, that motion was denied, with the judge opining that issues of fact remained that were best left for a jury.

Unless Pearl appeals the decision or the parties settle, the case will go to a jury.

A representative for Pearl Capital declined to comment on the decision, citing ongoing litigation.

Patrick Siegfried, Assistant General Counsel for RapidAdvance, opted to tell deBanked the following:

“The court’s decision from many months ago to reject Pearl’s motion to dismiss and its more recent decision to reject the motion for summary judgment and permit this case to go to trial confirms the anti-stacking position RapidAdvance has consistently taken. The court’s rulings make it clear that when a funding company funds a merchant knowing that doing so is a breach of the customer’s agreement with another funder and the stacker’s funding is a substantial cause of the merchant defaulting with the other funder, its actions constitute tortious interference. As a result, the company that stacked can be held liable for the losses the original funder incurs. While the outcome at trial is impossible to predict as the court will need [to] decide whether there are sufficient facts to satisfy each element, RapidAdvance is pleased that its legal reasoning on stacking has been confirmed in a written opinion and that we now have the roadmap for pursuing others that tortiously interfere with our contracts by stacking.”

Of note, is that RapidAdvance brought this case in The Circuit Court for Montgomery County, Maryland. Few other players in the industry may be able to designate Maryland as the proper venue. The standards for tortious interference may not be the same in other states. There are many circumstances in the case not discussed in this synopsis. Consult an attorney before drawing any conclusions. YOU CAN DOWNLOAD THE FULL DECISION HERE.

The case is Small Business Financial Solutions, LLC v. Pearl Beta Funding, LLC Case No. 411478-V in the Circuit Court for Montgomery County, Maryland.

Last modified: October 18, 2017
Sean Murray

Category: Legal Briefs

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