Gold Lion Steel LLC v. Glob. Merch. Cash
| Decision Date | 28 February 2022 |
| Docket Number | Civil 21-cv-10702 (KSH) (CLW) |
| Parties | GOLD LION STEEL LLC, ROBERT REBIMBAS, AND RIMON NAHAS, Plaintiffs, v. GLOBAL MERCHANT CASH, INC., d/b/a WALL STREET FUNDING, Defendant. |
| Court | U.S. District Court — District of New Jersey |
NOT FOR PUBLICATION
In this action, plaintiffs Gold Lion Steel LLC (“Gold Lion”), Robert Rebimbas, and Rimon Nahas (collectively “plaintiffs”) allege that defendant Global Merchant Cash, Inc., d/b/a Wall Street Funding (“Global Merchant”) willfully entered into two usurious loan agreements in violation of the criminal usury statute, N.J.S.A. 2C:21-19, and the New Jersey Consumer Fraud Act, N.J.S.A 56:8-1 et seq. Global Merchant has moved (D.E. 9) to dismiss the complaint and compel arbitration pursuant to the terms of the arbitration clauses in the loan agreements. The motion is fully briefed, and the Court decides it without oral argument.
According to the allegations in the complaint (D.E. 1), Gold Lion and Global Merchant entered into two loan agreement-one on January 14 and another on February 12, 2021-both of which were entitled “Agreement for the Purchase and Sale of Future Receipts.” (Compl. ¶ 13; see D.E. 9-3 and 9-4, Loan Agmts.) The loan agreements were structured as “merchant cash advance” agreements, which typically involve a small business that “agrees to sell a percentage of its future receivables for a lump sum payment, ” and further “agrees to a repayment exceeding the amount of the lump sum payment.” (Compl. ¶ 9.) The repayments are generally made in daily installments, which “reflect[] a percentage of the business's estimated average daily receivables.” (Id.)
Pursuant to the terms of the loan agreements, Gold Lion agreed to repay the January loan within 180 days at ¶ 143% interest rate and the February loan within 164 days at ¶ 164% interest rate. (Id. ¶¶ 14-17.) The loans were to be repaid in fixed daily payments of $270.28 and $520.44, respectively. (Id. ¶¶ 14, 16; see Loan Agmts. at 1.) Rebimbas and Nahas, Gold Lion's owners, guaranteed the loans as “Validity Guarantors, ” and agreed that Global Merchant could pursue a judgment against them if Gold Lion breached any “representation, warranty, and/or covenant” under the loan agreements. (Compl. ¶¶ 3-4, 29-32; Loan Agmts. at ¶ 35.)
The loan agreements contain an arbitration clause, which provides in pertinent part as follows:
(Loan Agmts. at ¶ 31 (emphases added).) They also contain a New York choice-of-law clause, which provides:
Governing Law. THIS AGREEMENT AND ALL TRANSACTIONS IT CONTEMPLATES, INCLUDING ALL ISSUES CONCERNING THE VALIDITY OF THE AGREEMENT AND ANY TRANSACTIONS IT CONTEMPLATES, THE CONTRUCTION OF ITS TERMS, AND THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES SHALL BE GOVERNED BY AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK . . . THE PARTIES AGREE THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE ENTIRE RELATIONSHIP BETWEEN AND AMONG THE PARTIES, INCLUDING WITHOUT LIMITATION, ALL ISSUES OR CLAIMS ARISING OUT OF, RELATING TO, IN CONNECTION WITH, OR INCIDENT TO THIS AGREEMENT AND ANY TRANSACTIONS IT CONTEMPLATES . . .
(Loan Agmts. at ¶ 29 (emphasis added).)[1]
Plaintiffs filed their complaint in this Court on May 4, 2021, relying on diversity jurisdiction. (D.E. 1.) In their two-count complaint, plaintiffs allege that Gold Merchant willfully entered into criminally usurious transactions in violation of the criminal usury statute and the New Jersey Consumer Fraud Act (“CFA”). (See Compl. ¶¶ 33-43.) Global Merchant has now moved (D.E. 9) to dismiss the complaint and compel arbitration, arguing that plaintiffs' claims clearly fall within the scope of the loan agreements' arbitration clauses, which are valid and enforceable regardless of whether the Court applies the law of New York (the choice-of-law state) or New Jersey (the forum state). Plaintiffs oppose the motion and urge the Court to apply New Jersey law, though they argue that the arbitration clauses are unenforceable regardless of which state's law applies. They further contend that even if the clauses are deemed enforceable, this action should be stayed pending conclusion of the arbitration. (D.E. 13, Opp. Br.) In reply, Global Merchant argues that the delegation provision in the arbitration clauses requires that the matter be dismissed. (D.E. 16, Reply Br.)
After the motion was fully briefed, the Court issued an order to show cause (D.E. 17) and requested written submissions addressing why this action should not be transferred to the United States District Court for the Southern District of New York in light of the requirement that arbitration be conducted outside the district “in the County of New York, State of New York.” (See Loan Agmts. at ¶ 31). Plaintiffs expressed no opposition to transfer; Global Merchant urged the Court to find that dismissal is the appropriate remedy. (See D.E. 18, 19, Supp. Brs.)
The Court must first determine which law applies to the instant motion because, as explained supra, the loan agreements contain a New York choice-of-law provision. (See Loan Agmts. at ¶ 29.) As a general matter, if an agreement “contains both a choice-of-law clause and an arbitration clause, the reviewing court will interpret the arbitration clause under the substantive law chosen by the parties.” GAR Disability Advocs., LLC v. Taylor, 365 F.Supp.3d 522, 527 (D.N.J. 2019) (McNulty, J.) (citing Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 63-64 (1995)); see Abedi v. New Age Med. Clinic PA, 2019 WL 1760845, at *3-4 (D.N.J. Apr. 18, 2019) (McNulty, J.) (). However, because plaintiffs argue that the choice-of-law provision should not apply here, the Court will conduct a traditional choice-of-law analysis.
In a diversity action, “a district court must apply the choice of law rules of the forum state to determine what law will govern each of the issues of a case.” Thabault v. Chait, 541 F.3d 512, 535 (3d Cir. 2008). Under New Jersey's choice-of-law rules, “effect [is given] to contracting parties' private choice of law clauses unless they conflict with New Jersey public policy.” Gen Motors Corp. v. New A.C. Chevrolet, Inc., 263 F.3d 296, 331 n. 21 (3d Cir. 2001); Goldwell of New Jersey, Inc. v. KPSS, Inc., 622 F.Supp.2d 168, 193 (D.N.J. 2009) (same). Here, plaintiffs argue that New Jersey law should apply irrespective of the New York choice-of-law provision in the loan agreements because “application of New York law is contrary to New...
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