ACE Funding Source LLC v. Lasen Inc

2025 NY Slip Op 31911(U)

• Court: New York Supreme Court, Kings County
• Decided: May 30, 2025
• Docket: Index No. 513119/2025
• Status: Unpublished

Opinion

ACE Funding Source LLC v Lasen Inc 2025 NY Slip Op 31911(U) May 30, 2025 Supreme Court, Kings County Docket Number: Index No. 513119/2025 Judge: Reginald A. Boddie Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [FILED: KINGS COUNTY CLERK 05/30/2025 11: 10 AM] INDEX NO. 513119/2025 NYSCEF DOC. NO. 56 RECEIVED NYSCEF: 05/30/2025

At an !AS Commercial Part 12 of the Supreme Court of the State of New York, held in and for the County of Kings, at the Courthouse, located at 360 Adams Street, Borough of Brooklyn, City and State of New York on the 30 th day of May 2025.

PRES ENT: Honorable Reginald A. Boddie Justice, Supreme Court ----------------------------------------------------------------------x

ACE FUNDING SOURCE LLC, Index No. 513119/2025

Plaintiff, Cal. No. 3 MS 1 -against-

LASEN INC, JF AVIATION LLC, SK YSKOPES INC and JEFF FARSTAD a/k/a JEFFREY LEON F ARST AD, Decision and Order Defendants,

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The following e-filed papers read herein: NYSCEF Doc Nos. MS I 10-32; 45-53

Defendants' motion for a preliminary injunction is decided as follows:

Background

This action arises from alleged breaches of a Sale of Future Receipts Agreement dated

March 13. 2025 (the "Agreement"), in which defendants Lasen Inc., JF Aviation LLC, and

Skyskopes Inc. (collectively, the "Sellers") allegedly defaulted on their payment obligations, and

defendant Jeff Farstad a/k/a Jeffrey Leon Farstad (''Farstad") allegedly failed to satisfy his personal

guaranty, leaving a balance of $624,580.00 owed to plaintiff.

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Defendants move by order to show cause for a temporary restraining order and preliminary

injunction to enjoin plaintiff from continuing any collection activities, including ACH

withdrawals, UCC lien enforcement, and the issuance of UCC § 9-406 letters to defendants' clients

and customers. Defendants further request the rescission of enforcement actions already taken and

the return of any restrained funds, arguing that absent injunctive relief, they face irreparable

harm-including loss of revenue, reputational damage, and potential collapse of their businesses.

Defendants contend that the underlying Agreement is a criminally usurious loan, void ab initio

under New York law, rather than a legitimate sale of future receivables. Defendants argue that the

Agreement imposes an absolute repayment obligation, with an effective interest rate well above

the 25% criminal usury cap, and lacks genuine risk transfer or reconciliation mechanisms.

Defendants also assert that plaintiff has engaged in tortious interference with their business

relationships by sending misleading 9-406 notices, attempting to divert payments from senior

lienholders, and initiating improper UCC filings. Additionally, defendants claim plaintiff

breached the Agreement by initiating collection efforts prior to any default and failed to provide

consideration to several of the parties it now seeks to bind.

In opposition, plaintiff argues that defendants materially breached the valid and

enforceable Agreement by defaulting on payments without justification and ignoring plaintiffs

attempts to reconcile the remittance schedule. Plaintiff asserts that it purchased 29.67% of

defendants' future receivables for $500,000 less fees, and when defendants ceased remitting daily

ACH payments and failed to respond to communications, plaintiff lawfully exercised its

contractual and UCC rights, including filing a UCC-1 Financing Statement and issuing UCC § 9-

406 lien notices to defendants' account debtors. Plaintiff contends that defendants' criminal usury

defense is meritless because the Agreement is not a loan, but rather a contingent, non-recourse

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purchase of future receivables, evidenced by its reconciliation provisions, lack of a fixed term, and

express recognition that bankruptcy is not a default. Plaintiff also argues there was no tortious

interference because it acted pursuant to explicit contract rights and applicable UCC law.

Additionally, plaintiff rejects defendants' claim that Skyskopes and JF Aviation were not parties

to the Agreement, pointing to their inclusion in the signed document and Farstad's authority to

bind them. Plaintiff asserts that defendants' claimed harm is speculative and compensable by

money damages, and that the balance of equities favors enforcing the contract, not rewriting it

post-breach.

Discussion

"Although the purpose of a preliminary injunction is to preserve the status quo pending a

trial, the remedy is considered a drastic one, which should be used sparingly" (A layoff v A layoff,

112 AD3d 564, 565 [2d Dept 2013] [citation omitted]). "To obtain a preliminary injunction, a

movant must establish, by clear and convincing evidence, ( 1) a likelihood of success on the merits,

(2) irreparable injury absent a preliminary injunction, and (3) a balancing of the equities in the

movant's favor" (id.). "The movant must show that the irreparable harm is imminent, not remote

or speculative" (Family-Friendly Media, Inc. v Recorder Tel. Network, 74 AD3d 738, 739 [2d

Dept 201 0] [citations and internal quotation marks omitted]). "Moreover, [e ]conomic loss, which

is compensable by money damages. does not constitute irreparable harm" (id.). "The decision to

grant or deny a preliminary injunction lies within the sound discretion of the Supreme Court" (id.).

"The rudimentary element of usury is the existence of a loan or forbearance of money, and

where there is no loan, there can be no usury, however unconscionable the contract may be"

(Principis Capital, LLC v I Do, Inc., 201 AD3d 752, 754 [2d Dept 2022] [citation omitted]). ··To

determine whether a transaction constitutes a usurious loan: [t]he court must examine whether the

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plaintiff is absolutely entitled to repayment under all circumstances" (id. [internal quotation marks

omitted]). "Unless a principal sum advanced is repayable absolutely, the transaction is not a loan"

(id). ''Usually, courts weigh three factors when determining whether repayment is absolute or

contingent: ( l) whether there is a reconciliation provision in the agreement; (2) whether the

agreement has a finite term; and (3) whether there is any recourse should the merchant declare

bankruptcy" (id).

Here, defendants fail to demonstrate any likelihood of success on the merits of their

criminal usury claim, as plaintiff established as a matter of law that the transaction set forth in the

Agreement was a purchase of future receivables, not a loan. The Agreement here contains specific

provisions that defeat a claim of absolute repayment-an essential element of any usurious loan

claim. As set forth in Section 4 of the Agreement, upon request by either party and submission of

relevant documentation, plaintiff is obligated to adjust the daily remittance amount to match the

agreed-upon percentage of actual receipts. It is undisputed that defendants failed to submit any

such request pursuant to Section 4 of the Agreement. Moreover, the Agreement lacks a finite term

for repayment, as payments are to continue until the purchased amount is collected, without any

specified deadline. Furthermore, the Agreement expressly acknowledges the risk of business

downturn or bankruptcy and does not treat such events as defaults, as Section 6 of the Agreement

makes clear that plaintiff assumes the risk that the full purchased amount may never be remitted if

the business fails or ceases operations in the ordinary course. Accordingly, given that the

Agreement includes a reconciliation provision, lacks a finite term, and expressly disclaims default

in the event of bankruptcy, defendants fail to demonstrate any likelihood of success on the merits

of their criminal usury claim.

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"In order to state a cause of action to recover for tortious interference with prospective

economic advantage, the plaintiff must allege a specific business relationship with an identified

third party with which the defendants interfered" (Influx Capital, LLC v Pershin, 186 AD3d 1622,

1624 [2d Dept 2020] [citation omitted]). '"The plaintiff must plead more culpable conduct than

required for tortious interference with existing contracts" (id. [internal citation marks omitted]).

"This standard is met where the interference with prospective business relations was accomplished

by wrongful means or where the offending party acted for the sole purpose of hanning the other

party" (id.). "Wrongful means include physical violence, fraud or misrepresentation, civil suits

and criminal prosecutions, and some degrees of economic pressure; they do not, however, include

persuasion alone although it is knowingly directed at interference with the contract" (Carvel Corp.

v Noonan, 3 NY3d 182, 191 [2004] [citations and internal quotation marks omitted]). "[ A ]s a

general rule, the defendant's conduct must amount to a crime or an independent tort" (id.).

"Conduct that is not criminal or tortious will generally be lawful and thus insufficiently culpable

to create liability for interference with prospective contracts or other nonbinding economic

relations" (id.). If "[plaintiffs] have not shown that [defendants'] conduct was criminal or

independently tortious, they cannot recover unless an exception to the general rule is applicable"

(id.). '"Such an exception has been recognized where a defendant engages in conduct for the sole

purpose of inflicting intentional harm on plaintiffs" (id. [internal quotation marks omitted]).

Here, defendants fail to demonstrate any likelihood of success on the merits regarding their

tortious interference with prospective economic advantage claim. Defendants have not identified

any specific customer or prospective economic relationship that plaintiff allegedly disrupted;

instead, defendants offer speculative and conclusory assertions that "[b ]ecause [plaintiff] has

already sent 9-406 letters to a number of [d]efendants' customers, it can be inferred that [plaintiff]

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will imminently send letters to all of [d]efendants' customers and potential revenue sources

seeking to enforce [d]efendants' remedies under Uniform Commercial Code 9-406"' and that

"[plaintiffJ has used and imminently will continue to use its UCC-1 lien to tortiously and

intentionally interfere with every aspect of [d]efendants' business including all prospective

economic advantages."

Moreover, defendants fail to show that plaintiffs conduct-issuing UCC § 9-406 notices

and filing a UCC-1 Financing Statement-was accomplished through wrongful means consisting

of criminal conduct or an independent tort, rather than collection efforts enforcing a valid security

interest after a borrower's default pursuant to rights expressly granted under the Agreement and in

full compliance with Article 9 of the Uniform Commercial Code. Defendants fail to show that

plaintiffs conduct is "for the sole purpose of inflicting intentional harm on plaintiffs," as at least

one purpose of plaintiffs conduct is to protect its economic interest in collecting purchased

receivables following defendants' default Accordingly, defendants fail to demonstrate any

likelihood of success on the merits of their tortious interference with prospective economic

advantage claim.

Defendants also fail to demonstrate any likelihood of success on their breach of contract

claim. Their sole argument is that plaintiff "alleges that [d]efendants breached the contract on

April 8, 2025," yet "sta[r ]ted collection efforts as early as the 4th of April, exercising their default

remedies in breach of the Agreement, where there had been no declaration of default or demand

for payment." However, as plaintiff correctly explains, the reference to April 8, 2025, in the

Complaint was a non-substantive, inadvertent typographical error. A review of the record,

including email and text correspondence and the payment processing report, confirms that

defendants were in default as of April 3, 2025. Accordingly, Plaintiff was entitled to begin

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exercising its contractual remedies after that date, and defendants' argument does not support a

viable claim for breach.

As to defendants' argument that plaintiff fails to state a claim against Skyskopes Inc., JF

Aviation LLC, or Farstad, defendants fail to demonstrate any likelihood of success on such

defense. Defendants argue that "[b ]ecause there was no consideration to those defendants, there

is no enforceable contract as to them, and [d]efendants are likely to succeed on the defense of

failure to state a claim.'' However, the Agreement explicitly and unambiguously defines "Seller"

as "LASEN, INC. AND ALL ENTITIES WHO SIGN BELOW AS SELLER." Both Skyskopes

Inc. and JF Aviation LLC are named sellers in the Agreement, and Farstad signed the Agreement

on behalf of each of those entities, as well as on behalf of Lasen Inc. Furthermore, Farstad also

executed a personal guaranty in support of the Agreement. In addition, Section 18 of the

Agreement states: "[ e ]ach Seller agrees that it is jointly and severally liable to Buyer for the

obligation to deliver the Purchased Amount from its own Future Receipts," confirming that each

of the defendant entities undertook a direct and independent liability to plaintiff, and that plaintiff

relied on these collective representations in entering the Agreement.

As Defendants fail to establish any likelihood of success on the merits of any of their claims

or defenses, they have not met the threshold requirement for the issuance of a preliminary

injunction. Accordingly, defendants· request for injunctive relief must be denied.

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Conclusion

Based on the foregoing, defendants' motion for a preliminary injunction is denied. The

previously granted temporary restraining order dated May 8, 2025, is hereby vacated. Any

argument not explicitly addressed herein was considered and deemed to be without merit or

unnecessary to address given the court's determination.

ENTER:

~ Honorable Reginald A. Boddie Justice, Supreme Court

HON. REGINALD A. BODDIE J.S.C.

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