Legal Briefs
New York Court of Appeals Dismisses Case That Challenged MCA Legality
June 13, 2023The New York Court of Appeals dismissed AH Wines Inc., et al. v C6 Capital Funding LLC. Its reasoning was brief.
“Appeal dismissed without costs, by the Court sua sponte, upon the ground that the issues presented have become moot,” the order says.
For a more complete understanding of the outcome, please contact an attorney.
Kate Fisher, Chris Murray Recipients of the Greg Nowak Impact Award
June 5, 2023
The Alternative Finance Bar Association selected two recipients for this year’s Greg Nowak Impact Award. They were Katherine C. Fisher, Partner of Hudson Cook, LLP and Christopher R. Murray, Managing Member of Murray Legal, PLLC. Winners are generally selected for their all-around efforts for the legal community both on matters of law and outside of it.
Greg Nowak, who passed away in 2021, was a partner of Troutman Pepper and a beloved founding member of the AFBA. The winner of last year’s award was David A. Picon, a Partner of Proskauer Rose LLP.
Register for The 5th Annual Alternative Finance Bar Association Conference
May 22, 2023The AFBA Conference is BACK.
If you are an attorney in this industry, you won’t want to miss the Alternative Finance Bar Association’s (AFBA) 5th Annual Conference, here in NYC June 5-6. They will be covering current events in the legal world of alternative finance, including upcoming NY disclosure requirements, recent caselaw developments, latest in collections law, regulatory current events and a lot more. This is an extremely reputable bar association with top notch attorneys in the field.
For more detailed information & a registration link, click here: https://www.eventbrite.com/e/afba-5th-annual-conference-tickets-622494496797
Federal Judge: Legal Challenge to California’s Commercial Financing Disclosure Law Has Merit, Orders SBFA Case to Proceed
April 3, 2023
A federal judge has ordered the Small Business Finance Association’s (SBFA) case against Clothilde Hewlett in her capacity as Commissioner of the California Department of Financial Protection & Innovation (DFPI) to proceed. On March 30, The Honorable R. Gary Klausner denied defendant’s motion to dismiss the claims that the State’s commercial financing disclosure law is both unconstitutional and preempted by the federal Truth in Lending Act (TILA).
The case, originally filed on December 2, 2022, argued, broadly speaking:
- That the regulations violate the First Amendment on the premise that they compel the group’s members to make inaccurate disclosures to customers while at the same time prohibiting members from engaging in communications that could be used to clarify or correct the required false or misleading information to customers.
- That APR is defined and governed at the federal level by TILA and that California’s own customized spin on it would only serve to confuse customers.
The Court has now ruled that these claims have been sufficiently alleged, allowing the SBFA the opportunity to prove its case.
Steve Denis, the Executive Director of the SBFA, told deBanked that the win at this juncture was validation for what the organization has been saying for the past few years.
“I think [this victory] is really good news. It’s a lawsuit that the entire industry should be behind,” he said.
The outcome of the case could have far reaching effects. New York, for example, has enacted similarly misleading APR rules that are soon slated to go into effect while other states have contemplated following in its footsteps.
“I think if we win this lawsuit the APR argument is over,” Denis said.
To that end, anyone in the industry that would like further information about what’s taking place can contact Denis at sdenis@sbfassociation.org.
California DFPI Seeks to Dismiss Commercial Financing Disclosure Lawsuit
March 17, 2023Clothilde Hewlett, in her official capacity as Commissioner of the California Department of Financial Protection and Innovation, has asked the Court to dismiss the lawsuit over commercial financing disclosures brought by the Small Business Finance Association (SBFA). Both sides have entered in all their arguments (the DPFI filed its reply on March 13th.) It is now up to the Court to decide if the claims survive this stage of litigation.
“Lender” Sued for $10 Million
February 21, 2023
King Family Lending says that it offers loans from $10,000 to $2M with 1-4 month terms that can be funded within 24 hours. There’s a collateral requirement, however, which could be anything from inventory, to real estate, to equipment, to sports contracts, to POs, to crypto. Founded in 2020, the lender was a borrower itself, allegedly borrowing more than $10 million from a law firm in order for it to make 97 loans to third parties.
According to a lawsuit filed on February 11, however, its alleged that King Family Lending and its owner never made any such loans and that the owner simply committed fraud and swindled the money.
The story behind King Family Lending, which includes all types of twists and turns, is best told by the Daily Mail. Enjoy.
New Challenge to MCA Legality in New York
February 10, 2023
It’s effectively well settled law, that proper purchases of future receivables are not considered loans in New York State. But a three year-old merchant cash advance case is poised to become center stage for a fresh review of that policy.
At issue is AH Wines Inc., et al. v C6 Capital Funding LLC which the New York Court of Appeals recently agreed to hear. The crux of the plaintiff’s arguments has been that defendant’s purchase of future receivables was actually a usurious loan. The plaintiff was unsuccessful at both the trial court level and appellate level with their case and so appealed to the highest possible court in New York, the Court of Appeals. On February 9, the motion for leave to appeal was granted.
Trial of PPP Lending CEO To Start in May at Earliest
January 2, 2023The trial of Rafael Martinez, the CEO of MBE Capital Partners, LLC that was arrested last year for fraud related to PPP lending and borrowing, is slated to begin in May at the earliest, according to the docket. The government accused Martinez of using false representations and documents to fraudulently obtain the approval of the SBA for his company to be a non-bank lender through the PPP. He subsequently used that approval to obtain $932M to issue PPP loans and generate $71M in lender fees. It is the first known case of a PPP lender being charged criminally. Martinez pled not guilty.
