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Kelly, Grossman & Flanagan, LLP v Quick Cash, Inc. :: March, 2012 :: New York Ot...
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Kelly, Grossman & Flanagan, LLP v Quick Cash, Inc.
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[*1] Kelly, Grossman & Flanagan, LLP v Quick Cash, Inc. 2012 NY Slip Op 50560(U)
Decided on March 29, 2012 Supreme Court, Suffolk County Pines, J. Published by New
York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is
uncorrected and will not be published in the printed Official Reports.
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Decided on March 29, 2012
Supreme Court, Suffolk County
Kelly, Grossman & Flanagan, LLP, FLANAGAN & ASSOCIATES, PLLC, MURACA & KELLY,
DENNIS KELLY, DAVID GROSSMAN, and SUZANNE FLANAGAN, Plaintiff,
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against
Quick Cash, Inc., CASEFUNDING,, INC., GUARDIAN ADVISORS LP I, GUARDIAN
ADVISORS LP II and MONEY FOR LAWSUITS LP V, Defendants.
04283-2011
Attorney for Plaintiffs
Isaac Zucker, Esq.
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Emily Pines, J.
ORDERED that the motion (001) by Defendants to dismiss the complaint, converted by
the Court into a motion for summary judgment, is granted.
ORDERED that Defendants' request for attorneys' fees is referred to a hearing on April
23, 2012, at 10:00 a.m. before the undersigned.
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Kelly, Grossman & Flanagan, LLP v Quick Cash, Inc. :: March, 2012 :: New York Ot...
http://law.justia.com/cases/new-york/other-courts/2012/2012-ny-slip-op-50560-u.html
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In this action, Plaintiffs seek a judgment declaring that certain agreements between the
parties [*2]are void as criminally usurious in violation of Penal Law §190.04. The record
reveals that Plaintiffs, as partners in a law firm, executed certain documents which
provided that Plaintiffs would repay to Defendants a principal amount plus a fee which
Plaintiffs allege amounted to an annualized interest rate in excess of 40%.
The complaint alleges that in May 2005, non-party Personal Injury Funding IV, LP, an
affiliate and/or predecessor of one of the Defendants, extended a loan in the amount of
$46,250 to plaintiff Muraca & Kelly, LLP. It alleges that, in October 2006, defendant
Money For Lawsuits LP V extended a loan in the amount of $287,500 to plaintiff Muraca
& Kelly, LLP; and the complaint alleges further that in December 2006, defendant
Money For Lawsuits LP V extended a loan in the amount of $227,500 to plaintiff Muraca
& Kelly, LLP. In April 2007, defendant Money For Lawsuits LP V extended a loan in the
amount of $79,500 to plaintiff Muraca & Kelly, LLP. In September 2007, according to
Plaintiffs, defendant Money For Lawsuits LP V extended a loan in the amount of $23,000
to plaintiff Muraca & Kelly, LLP. Plaintiffs allege that each and every one of the loans
provided for the repayment of the principal loan plus a fee at an interest rate in excess
of 40%. Plaintiffs also allege that they have repaid defendants in excess of one million
dollars.
Plaintiffs contend that each and every payment they received from the Defendants was
a loan and, therefore, subject to Criminal Usury laws under NY Penal Law §190.04. In
support of this contention, Plaintiffs rely on the language of the original client
agreements, which set forth that the Plaintiffs are "the Borrower" and the various
defendants "the Lender". There was never any doubt, according to Plaintiffs, that
Defendants were "lending" money. It was only in August 2009, state Plaintiffs, when all
the agreements were consolidated, that Defendants converted the word "loan" to the
word "advance" in order to mask the obvious fact that Defendants were covering for the
lending of funds at a criminally usurious rate.
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Plaintiffs further assert that these loans were never non-recourse loans, despite their
"label", because the Defendants were not at risk. For example, if a judgment debtor
were unable to pay a judgment entered in favor of one of Plaintiffs's clients in an
underlying case, the individual Plaintiffs were still personally liable to Defendants. In
addition, Defendants received their repayment without any reduction for Plaintiffs' costs
or expenses. Moreover, if Plaintiffs were discharged as counsel and unable to find
replacement counsel, Plaintiffs were required to find a new case to replace the collateral
(i.e. former case ) or pay liquidated damages.
The complaint further alleges that from December 2007 through February 2008
Defendants extended loans to plaintiff Flanagan & Associates. In August 2009, Plaintiffs
and Defendants executed an Addendum to all prior agreements which provided that
plaintiff Kelly, Grossman & Flanagan, LLP would assume responsibility for all
outstanding loans and would provide additional collateral to secure the outstanding
loans. Plaintiffs allege that the Addendum required them to pay an interest rate in
excess of 40% annually. The instant action seeking declaratory relief voiding the
alleged loans was commenced. [*3]
Defendants moved to dismiss the complaint pursuant to CPLR 3211(a)(7). By order
dated November 23, 2011 (Pines, J.), this Court converted the motion into a summary
judgment motion and directed the parties to file and serve supplemental affidavits and
other available proof, if desired, on thirty days' notice.
Kenneth Bradt avers in his personal affidavit that he is the President and CEO of
defendants Quick Cash, Inc, Case Funding, Inc., and is a general partner in defendants
Guardian Advisors LP I, Guardian Advisors LP II, and Money For Lawsuits LP V (Quick
Cash Entities). He states that the principal purpose of the Quick Cash Entities is to
advance money to attorneys and/or plaintiffs involved in litigation in either recourse
loans or non-recourse advances. Bradt states that in a recourse loan, the attorneys
grant a lien to the Quick Cash Entity against the attorneys' fees expected to be received
on cases handled by the attorney/firm, and the attorney makes either monthly
payments to the Quick Cash Entity or pays when each case settles and/or at the end of
the term of the loan. Bradt avers however, that if the agreement is a non-recourse
advance, the attorney assigns to the Quick Cash Entity a portion of their expected fee
from the case or cases in which the attorney represented one or more of the parties,

Kelly, Grossman & Flanagan, LLP v Quick Cash, Inc. :: March, 2012 :: New York Ot...
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and pays the Quick Cash Entity only as each case settles. If there is no recovery in the
case, then no money is due the Quick Cash Entity.
Bradt states all of the agreements at issue in this case were non-recourse advances,
except for one contract dated February 29, 2007, which was subsequently converted to
a non-recourse advance. At the time of the first advance made by Quick Cash to
plaintiff Muraca & Kelly, in May 2005, it was agreed that Plaintiffs would provide their
anticipated attorneys' fees recovered from three pending actions, and that Quick Cash
would be paid only in the event of a recovery in those cases. It was also agreed that
the obligation would increase at the rate of 3.5% compounded monthly. Plaintiffs Kelly
and Grossman personally guaranteed the performance of this contract.
Bradt states that in October 2006, November 2006, April 2007, September 2007,
plaintiff Muraca & Kelly requested financing from Quick Cash. The parties agreed that
these were non-recourse advances. Plaintiffs also paid a processing fee and an
origination fee with each advance. Plaintiffs Kelly and Grossman personally guaranteed
the performance of each contract. Muraca and Kelly agreed to assign their anticipated
fees in 27 pending actions as collateral. It was further agreed that the obligation would
increase at the rate of 3.99% compounded monthly.
Bradt states that Flanagan & Associates obtained financing from Quick Cash in June
2007 and pledged all of their anticipated fees in two pending actions as collateral.
Flanagan & Associates paid a processing fee. It was agreed that this advance was to be
non-recourse funding. In October 2007, Flanagan paid off this contract in full.
Bradt further avers that in December 2007, plaintiffs Flanagan & Associates and Kelly &
Grossman requested a second cash advance from Quick Cash and entered into three
contracts on December 18, 2007. The Plaintiffs paid a processing fee. It was further
agreed that these advances were to be non-recourse funding, and the obligation would
increase at the rate of 40% compounded quarterly. The Plaintiffs agreed to provide
periodic status updates on the cases held as collateral. [*4]Flanagan, Kelly, and
Grossman personally guaranteed the performance of the contracts. A third cash
advance made to Flanagan & Associates on December 20, 2007, reflected a true loan
agreement with a maturity date of December 19, 2009. The Plaintiffs agreed to assign
their anticipated fees from several pending actions and paid an application fee. Plaintiffs
also agreed to provide periodic status updates regarding the cases held as collateral.
Flanagan personally guaranteed the performance of the contract.
In February 2008, plaintiffs Flanagan and Flanagan & Associates requested a fourth
cash advance from Quick Cash. Flanagan & Associates pledged fees from specific
pending actions as collateral and Quick Cash agreed to make the advance a recourse
loan agreement. Flanagan & Associates agreed to pay off the loan made on December
20, 2007, obtain an additional amount of funding, and pay an origination fee.
In May 2009, plaintiff Kelly, Grossman & Flanagan, a newly formed partnership,
requested funding from Quick Cash for advertising fees and agreed to continue to
prosecute the cases provided by Muraca & Kelly and Flanagan & Associates.
Bradt states that the Addendum was entered into by the parties on August 13, 2009, to
modify some of the payment terms, wherein the Kelly & Grossman attorneys agreed to
pay to Quick Cash 75% of the attorney fees and permitted retention of 25% of the
attorney fees from the collateral. The anticipated attorneys' fees from sixteen pending
actions were added to the collateral. In addition, a provision for liquidated damages was
added in the amount of two times the payment obligation if a breach occurred. The
Addendum converted the Flanagan recourse loan agreement dated February 29, 2008,
into a non-recourse agreement, removed the requirement of Flanagan's personal
guarantee, and deemed the Flanagan recourse loan agreement to be null and void.
Bradt states that the actual amount that was paid to all the Plaintiffs plus fees and costs
was one million two hundred thousand sis hundred sixty one dollars and thirteen cents
($1,215,66.13). In contrast to the Plaintiffs' allegation that they have paid Defendants
in excess of $1,000,000, Bradt avers that Quick Cash's records indicate that the actual
amount received from the Kelly & Grossman attorneys was $451,136.27, and the
amount received from Flanagan was $122,711.91. In addition, Bradt states that the
Plaintiffs are in breach of the contracts, including not paying pursuant to the terms of

Kelly, Grossman & Flanagan, LLP v Quick Cash, Inc. :: March, 2012 :: New York Ot...
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the agreements, not providing accurate up to date status of the collateral cases and
refusing to provide the settlement documents as required by the contracts.
A party moving for summary judgment must make a prima facie showing of entitlement
as a matter of law, offering sufficient evidence to demonstrate the absence of any
material issues of fact. Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 487 NYS2d
316 (1985); Zuckerman v New York, 49 NY2d 557, 427 NYS2d 595 (1980). Of course,
summary judgment is a drastic remedy and should not be granted where there is any
doubt as to the existence of a triable issue, Stewart Title Ins. Co. v Equitable Land
Servs., 207 AD2d 880, 616 NYS2d 650 (2d Dept 1994), but once a prima facie showing
has been made, the burden shifts to the party opposing the motion to produce
evidentiary proof in admissible form sufficient to establish material issues of fact which
require a [*5]trial of the action. Alvarez v Prospect Hosp., 68 NY2d 320, 508 NYS2d
923 (1986).
"[I]t is well settled that when parties set down their agreement in a clear, complete
document, their writing should . . . be enforced according to its terms.'" South Rd.
Assoc., LLC v International Bus. Machs. Corp., 4 NY3d 272, 277, 793 NYS2d 835
(2005), quoting Vermont Teddy Bear Co. v 538 Madison Realty Co., 1 NY3d 470, 475,
775 NYS2d 765 (2004). When interpreting a contract, "the court should arrive at a
construction which will give fair meaning to all of the language employed by the parties
to reach a practical interpretation of the expressions of the parties so that their
reasonable expectation will be realized." Herzfeld v Herzfeld,50 AD3d 851, 857 NYS2d
170 (2d Dept 2008). If the terms of a written contract are clear and unambiguous,
intent of the parties must be found within the four corners of the contract. Correnti v
Allstate Props., LLC, 38 AD3d 588, 832 NYS2d 594 (2d Dept 2007). Extrinsic evidence
of the parties' intent may be considered only if the agreement is ambiguous, which is
an issue of law for the courts to decide. Innophos, Inc. v Rhodia, S.A., 10 NY3d 25, 852
NYS2d 820 (2008). A contract is unambiguous if the language it uses has a definite and
precise meaning, unattended by the danger of misconception in the purport of the
agreement itself and there is no reasonable basis of difference of opinion. Greenfield v
Philles Records, Inc., 98 NY2d 562, 750 NYS2d 565 (2002).
In order to constitute a transaction subject to the Penal Code § 190.40, prohibiting
criminal usury, such transaction must constitute a loan. Donatelli v Siskind, 170 AD2d
433, 565 NYS2d 264 (2d Dep't 1991). Usury laws do not apply to investments (GOL § 5
-501[2]). Where a transaction involves interest to be paid based upon a contingency
which is in the control of the debtor, usury will not apply. Summer v People, 29 NY 337
(1864). In order to determine whether a particular transaction qualifies as a loan
subject to a criminal usury prohibitions, courts look to the purpose of the transaction;
i.e., to lend money at a usurious rate dictated by the lender. Donatelli v Siskind, 170
AD2d 433, 565, NYS2d 224 (2d Dep't 1991). Thus, the purpose of a transaction is
determined by its true character, under all circumstances, rather than by its title.
Vjuetta v Euro-Quest Corp., 29 AD3d 895 (2d Dep't 2006).
The contracts dated May 6, 2005, October 10, 2006, December 7, 2006, April 9, 2007,
June 5, 2007, and September 9, 2007 provide at paragraph 4.7 or 4.8 :
"Attorney represents and warrants that Attorney fully understands that the Advance
made hereunder is not a recourse loan, but a non-recourse financial transaction
pursuant to which Investor's funds are at full risk."
The Addendum to the Agreements by and among Quick Cash, Money For Lawsuits and
Casefunding and affiliated entities, Muraca & Kelly, Dennis Kelly, Esq., David Grossman,
Esq., Flanagan & Associates, PLLC, Suzanne Flanagan, Esq., and Kelly Grossman &
Flanagan, LLP, dated August 13, 2009, page 8, provides, in part:
* * * Upon the signing of this Addendum, the Flanagan Recourse Agreement(s) shall be
deemed null and void and the amounts due pursuant to those recourse agreement(s)
are now incorporated in full [*6]herein as non-recourse.
Defendants have demonstrated their prima facie entitlement to judgment as a matter of
law by proving that the disputed contracts are non-recourse advance agreements. In
support of their motion, defendants contend that none of the contracts that exist as of

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today are true loan documents and they are not subject to the usury statutes. Copies of
the alleged loan documents executed between the parties all so demonstrate.
Plaintiffs' contention that the language in the contacts was ambiguous, that "borrower"
and "lender," automatically qualify the contracts as loans and that the origination fees
and processing fees, typically charged in connection with loans, qualify the contracts as
loans is unpersuasive. In fact, the Defendants were always at risk of no recourse
whenever one of the underlying cases went to trial and resulted in no recovery. Such
circumstances simply cannot be stated to constitute a "loan". The Court finds that the
language in the contracts was not ambiguous, and the intent of the parties is clear, as
demonstrated by the plaintiffs' express acknowledgment, as sophisticated attorneys, in
each contract that a non-recourse agreement for a cash advance was entered into and
not a loan.
The Court finds the holding in Matter of Strategies, LLC v. Ferreira (28 Misc 3d 1205[A],
2010 NY Slip Op 51159[U][2010]), to be persuasive. In that proceeding to confirm an
arbitration award, the petitioner was a limited liability company that provided funding
for a legal action brought by respondent Baltazar Ferreira, in which he was represented
by respondent, the law firm of Jeffrey Lessoff. The funding, approximately $120,000,
was a non-recourse advance pursuant to two agreements between the parties. The
respondents agreed to pay petitioner from the proceeds received in the underlying
action. The underlying action was subsequently settled for $250,000 and respondents
began collecting the settlement proceeds. After respondents failed to pay petitioner its
share of the settlement proceeds, petitioner initiated arbitration proceedings pursuant
to the agreements to collect its share. An arbitrator issued an award in favor of
petitioner holding respondents jointly and severally liable for approximately $120,000,
plus 2.99% interest per month compounded monthly in accordance with the contract,
plus additional simple interest and attorneys' and arbitration fees. In granting
petitioner's motion to confirm the award of the arbitrator, the Supreme Court, New York
County (Hunter, J.) rejected the respondents claim that the interest rate that was part
of the arbitration award amounted to usury. In holding that the defense of usury was
not applicable, the Court stated:
The concept of usury applies to loans, which are typically paid at a fixed or variable rate
over a term. The instant transaction, by contrast, is an ownership interest in proceeds
for a claim, contingent on the actual existence of any proceeds, Had respondents been
unsuccessful in negotiating a settlement or winning a judgment, petitioner would have
no contractual right to payment. Thus, usury does not apply to the instant case. (See
O'Farrell v. Martin, 292 NYS 581 [City Ct. NY 1936] [holding "[W]hen payment or
enforcement rests on a contingency, the agreement is valid though it provides for a
return in excess of the legal rate of interest."]). [*7]
Similarly, here, the transactions between the parties create ownership interests in
proceeds of claims, contingent on the actual existence of any proceeds. Plaintiffs would
have no contractual right to payment had Defendants been unsuccessful in negotiating
settlements or winning judgments in the underlying actions. Therefore, under the
circumstances, usury does not apply and the Defendants' motion for summary
judgment dismissing Plaintiffs' complaint is granted.
Defendants' request for an award of its attorneys' fees is referred to a conference on
April 23, 2012, at 10:00 a.m. before the undersigned.
This constitutes the DECISION and ORDER of the Court.
Dated: March 29, 2012
Riverhead, New York
EMILY PINES
J. S. C.

Kelly, Grossman & Flanagan, LLP v Quick Cash, Inc. :: March, 2012 :: New York Ot...
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