ADDITIONAL CASES Golden Foothill Insurance Services, LLC, Life Factor II, LLC, Life Shares II, LLC, EL Dorado Hills Insurance Solutions, Inc., Lone Wolf Insurance Services, Inc., ELDO Investments, LLC, The Genesis LS Fund, LLC, KTL Holdings, Inc., Stefan Leer, Tatanisha Leer Plaintiff v. Spin Capital, LLC, Avrumi Lubin, Defendant; Third-Party 595367/2022 The following e-filed documents, listed by NYSCEF document number (Motion 010) 186, 187, 188, 189, 190, 191, 192, 193, 194, 195, 196, 197, 198, 213, 214, 215, 216, 217, 218, 226 were read on this motion to/for DISMISS. DECISION + ORDER ON MOTION Upon the foregoing documents, the Counterclaim Defendants’ motion to dismiss the counterclaims for violation of, and conspiracy to violate, 18 USC §1962 (the RICO Act) must be granted because the counterclaims fail to state a claim that the Counterclaim Defendants engaged in a pattern of racketeering activity or collection of an unlawful debt. Simply put, the face amount of the Loan (hereinafter defined) is $2.7 million and this amount exceeds the $2.5 million threshold to which New York’s usury laws apply (N.Y. Gen. Oblig. Law §5-501[6][b]). The Counterclaim Plaintiffs’ arguments that certain portions of the Loan should be recharacterized such that the Loan is subject to the usury laws, and is therefore invalid, fail. The Loan included (i) $1,307,403 in new money, (ii) $1,162,597 to satisfy the defendants’ obligations under the Purchase Agreements (hereinafter defined), (iii) $30,000 to pay legal fees and (iv) $200,000 in closing fees and other costs. The Purchase Agreements were not loans and should not be recharacterized as loans merely because a security interest was granted in the future accounts receivable (see, Colonial Funding Network, Inc. v. Davincitek Corp., 2021 WL 39591, at* 8 [Sup Ct, NY County 2021]). They had (x) a valid reconciliation provision, (y) a non-finite term, and (z) no obligation for repayment if the Sellers declared bankruptcy because a declaration of bankruptcy did not constitute an event of default (Principis Cap., LLC v. I Do, Inc., 201 AD3d 752, 754 [2d Dept 2022]; LG Funding, LLC v. United Senior Properties of Olathe, LLC, 181 AD3d 664, 664 [2d Dept 2020]). The $30,000 for legal fees was not an improper charge because the Counterclaim Plaintiffs authorized the Secured Party to perfect and maintain its security interest in the collateral and agreed that it would pay attorneys’ fees in protecting the Secured Party’s security interests and rights: Debtors each hereby authorizes Secured Party to file any financing statements deemed necessary by Secured Party to perfect or maintain Secured Party’s security interest. Debtors shall be liable for, and Secured Party may charge and collect, all costs and expenses, including but not limited to attorney’s fees, which may be incurred by Secured Party in protecting, preserving and enforcing Secured Party’s security interest and rights (NYSCEF Doc. No. 3) (see, Lloyd Capital Corp. v. Pat Henchar, Inc., 80 NY2d 124, 127 [1992]; Hillair Capital Investments, L.P. v. Integrated Freight Corp., 963 FSupp2d 336, 339 [SD NY 2013]). The defendants’ argument to the contrary — that legal fees were agreed to only with respect to enforcement and that therefore the $30,000 is interest is just wrong. Thus, even if the Court were to recharacterize the $200,000 of other fees, and it is certainly not clear that it should, because the $2.5 million threshold would still be met, the Loan is not subject to usury laws and the counterclaims must be dismissed. The Relevant Facts and Circumstances Reference is made to the Purchase Agreements (NYSCEF Doc. Nos. 189-193) by and between Golden Foothill Insurance Services LLC (Golden Foothill) and other entities (collectively, the Sellers) and BMF Advance, LLC (BMF) or HI Bar Capital (HI Bar, and, together with BMF, hereinafter, collectively, the Purchasers), pursuant to which the Purchasers bought a certain percentage of the Sellers’ future accounts receivable — i.e., they did not buy or pledge 100 percent of the accounts receivable pursuant to any such purchase agreement. Pursuant to the Purchase Agreements, the parties agreed that the Purchasers were to be paid a daily sum calculated as a good-faith percentage estimate of the Sellers’ incoming accounts receivable. The daily amount to be paid was subject to certain reconciliation provisions in the Purchase Agreements pursuant to which the Sellers could demand that the price be adjusted to reflect the actual amount of their receivables that materialized. Reference is also made to a loan of $2.7 million (the Loan) made by Spin Capital, LLC (Spin Capital) to Golden Foothill, Life Factor II LLC (Life Factor) and Life Shares II LLC (Life Shares, and, together with Golden Foothill and Life Factor, the Borrowers) as memorialized by a certain Promissory Note (NYSCEF Doc. No. 2) and secured by a Security Agreement (NYSCEF Doc. No. 3) and three Payment Guaranties (NYSCEF Doc. Nos. 4-6). The Promissory Note, the Security Agreement and the three Payment Guaranties are all part of an integrated transaction and shall hereinafter collectively be referred to as the Loan Documents. As alleged in the Amended Complaint (the AC; NYSCEF Doc. No. 109), the Loan was to be repaid in 31 itemized payments to be made on a weekly basis between June 18, 2021 and January 24, 2022, accumulating interest at 5 percent per month (id., 27). The parties agreed that in the event of a default, the unpaid principal amount of the Loan would be due together with a default fee of $25,000 and the unpaid amount would be subject to 10 percent default interest (id.). The gravamen of the AC is that the Defendants breached the Loan Documents and that they subsequently engaged in unlawful transfers of the rights in the insurance policies that were pledged to Spin Capital pursuant to the Security Agreement as collateral for the Loan. The Amended Answer with Counterclaims (the Answer; NYSCEF Doc. No. 133) asserts RICO claims against Avrumi Lubin, alleging that he operates an unlawful lending enterprise through Spin Capital, BMF, and Hi Bar and that as such this lawsuit amounts to an attempt to collect an unlawful debt (id., 1). To wit, the Answer alleges that the Purchase Agreements and the Promissory Note caused the Counterclaim Plaintiffs to make fixed payments with interests over 100 percent in violation of New York law (id.,
6-8). The Answer further alleges that the Purchase Agreements and the Loan are unconscionable because they (i) contain one-sided terms to benefit the Counterclaim Defendants, BMF, and Hi Bar, (ii) contain false statements, (iii) are designed to cause the Counterclaim Plaintiffs to default, and (iv) contain penalties that violate New York public policy (id.,
