167 A.D.3d 448
N.Y. App. Div.2018Background
- Plaintiff Cash4Cases bought an interest in defendant Brunetti’s pending personal-injury claim and advanced $76,930 under an "Agreement for Purchase of Claim."
- The agreement charged a Compounded Monthly Carrying Charge of 3.2% (APR 45.93%) and conditioned repayment on Brunetti’s successful recovery of proceeds from the lawsuit.
- $60,000 of the advance was used to purchase and pay off a prior advance from Fast Trak Legal.
- After Brunetti settled his underlying claim and received proceeds, he refused to pay the amount demanded by Cash4Cases, asserting the agreement was usurious and unconscionable.
- Supreme Court granted Cash4Cases summary judgment in lieu of complaint; the Appellate Division, First Department affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the transaction is a loan subject to usury law | Agreement is an assignment/purchase of claim, not a loan; so usury does not apply | The effective cost is excessive interest, so transaction is usurious | Not a loan; repayment is contingent on lawsuit recovery, so usury defense fails |
| Whether the agreement is unconscionable | Terms were disclosed; defendant had counsel and initialed pages; contingent repayment justifies high charge | Rate is oppressive and terms unreasonably favor plaintiff | Not unconscionable: defendant had meaningful choice, counsel, and contingent risk supports high charge |
| Whether plaintiff overpaid Fast Trak and mutual mistake affects recovery | Overpayment was minimal per Fast Trak agreement; plaintiff entitled to adjusted amount | Claimed larger overpayment ($5,600) that would nullify or alter recovery | Court found only $100 overpayment and adjusted award; discrepancy insufficient to void agreement for mutual mistake |
| Entitlement to summary judgment in lieu of complaint | Clear contract terms and undisputed facts support judgment for plaintiff | Disputed allegations of usury, unconscionability, and overpayment raise triable issues | Summary judgment affirmed; defendant’s defenses fail as a matter of law |
Key Cases Cited
- Siedel v. 18 E. 17th St. Owners, 79 N.Y.2d 735 (1992) (usury defense applies only when the transaction is a loan)
- Rubenstein v. Small, 273 A.D. 102 (1st Dep't 1947) (repayment contingent on litigation success indicates assignment, not a loan)
- Warburg, Pincus Equity Partners, L.P. v. Keane, 22 A.D.3d 321 (1st Dep't 2005) (unconscionability requires lack of meaningful choice and unreasonably favorable terms)
- Jerome M. Eisenberg, Inc. v. Hall, 147 A.D.3d 602 (1st Dep't 2017) (insubstantial discrepancies do not automatically void agreements for mutual mistake)