Big win for Carter Ledyard as they defeat a Debt Settlement Company in NY court
Carter Ledyard & Milburn LLP achieved a significant win in defeating the defendants’ motions to dismiss claims of a conspiracy by a debt settlement company (DSC) and debt settlement lawyer to divert merchant customers’ receivables from a revenue-based funder that had purchased it and into the accounts of the DSC.
In NewCo Capital Group VI, LLC v. MCA Resolve LLC, Dominick Dale, et al., N.Y. Co. Index No. 650008/2024, NewCo Capital Group VI, LLC (“NewCo”) alleges that DSCs like the defendant solicit dozens if not hundreds of its customers to breach their revenue purchase agreements (RPA), by blocking regular remittances of their receivables to NewCo and instead using the revenues to pay the DSCs exorbitant fees to purportedly settle with NewCo on the customers’ behalf and to fund settlement accounts. Instead of engaging in the customers’ reconciliation procedures available in the RPA, or even reaching out to NewCo to engage in legitimate settlement discussions, NewCo alleges the DSCs simply run up monthly fees while diverting the customers’ revenues to themselves. Part of the DSC’s alleged strategy is to falsely inform the customers that the RPAs are illegal and do not need to be complied with, while interfering with NewCo’s communications with its customers and its exercise of its contractual default remedies in court.
NewCo also alleges that the DSCs engage New York attorneys, who have no direct relationship or communications with the customers, to delay proceedings in New York courts with frivolous filings to prevent NewCo’s entry of judgment against the merchants for years of litigation, while the DSCs enrich themselves at the customers’ expense. NewCo gave examples of at least 36 cases in New York courts where a single defendant attorney had appeared to apparently run interference for the DSCs. NewCo alleges that the DSCs and attorneys often terminate their relationships with NewCo’s customers after milking them dry and never provide the debt negotiation services the customers supposedly contracted for with the DSCs. This is alleged to leave the customers with a form of double liability—still contractually obligated to NewCo even after being ripped off by the DSCs.
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