On September 23, 2022, Justice Ruchelsman of the Kings County Commercial Division issued a decision in West Coast Bus. Capital LLC v. NP Skyloft IB LLC, 2022 NY Slip Op. 33493(U), holding that the presence of a reconciliation provision was key to the finding that a cash advance agreement was not an usurious loan, explaining:
In this case, there are no questions of fact the agreement was a cash advance agreement and not a usurious and unenforceable
loan. The agreement contained a reconciliation provision which conclusively establish the agreement was not usurious. The defendants argue the reconciliation provision in the contract was merely illusory and thus not a true reconciliation provision; hence the contract was a loan and was usurious.The courts have developed three criteria evaluating whether a particular arrangement is a loan or a merchant case advance. First, whether there is a reconciliation provision, whether the agreement has an indefinite term and lastly, whether the funder
(Internal quotations and citations omitted).
has recourse if the merchant declares bankruptcy. Thus, a reconciliation provision demonstrates, without any evidence to the contrary, that the plaintiff is not entitled to repayment in all circumstances. In this case the reconciliation provision is mandatory, supporting the simple conclusion the agreement is not a loan. This is particularly true where the defendants have not alleged that reconciliation did not in actuality function as agreed (or, indeed, that the defendants ever even requested reconciliation. While the memorandum in opposition states that on or about March 18, 2022, defendants communicated with plaintiff to request an adjustment or reconciliation of the weekly remittance amount pursuant to the loan agreement. Plaintiff rejected defendants request and demanded that defendant continue to make the weekly remittance payments. There is no evidence supporting that contention. Further, the memorandum cites to Exhibit A however, the defendant did not submit any exhibits. Further, ·the plaintiff submitted two documents, labeled Exhibit A, the merchant agreement and an affidavit from Mr. Saffer a principal of the plaintiff. Neither of those documents raise any questions of fact whether any reconciliation was sought or denied to even challenge its validity.