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Merchant Cash & Capital, LLC v. Ko

United States District Court, S.D. New York

June 19, 2015




Plaintiff Merchant Cash & Capital LLC ("Merchant Cash") has filed this motion for summary judgment on its petition for confirmation and enforcement of an October 23, 2014 arbitration award (the "Final Award") pursuant to the Federal Arbitration Act (the "FAA"), 9 U.S.C. §§ 1-16. To date, Defendant Jang Hwan Ko d/b/a Jeff's Garage ("Ko" or "Jeff's Garage")[1] has neither acknowledged Plaintiff's confirmation petition nor otherwise sought relief from the Final Award. For the reasons set forth in the remainder of this Opinion, Plaintiff's motion is granted.


A. Factual Background

Plaintiff Merchant Cash is a limited liability company that operates in New York City and purchases receivables from other businesses. Defendant Ko is the sole proprietor of Jeff's Garage, an auto body shop based in Santa Clara, California. On December 12, 2013, Plaintiff and Defendant entered into an agreement (the "Merchant Agreement"), pursuant to which Defendant sold $163, 800.00 of his sales receivables to Plaintiff for an upfront sum of $140, 000.00 (less a $300 fee). (56.1 Stmt. ¶ 7).

As required by the Merchant Agreement, Defendant used a designated bank account at BBCN Bank for all business deposits related to Jeff's Garage. (56.1 Stmt. ¶ 8). He was also obligated to change the business' credit card processing company from Citi National Merchant Service to North American Bancard. ( Id. ). On December 13, 2013, Defendant received a credit card processing terminal from Sure Payment Solutions, a small-business financing company that facilitated communication between the two parties, and ran a $1 test transaction through the machine using his credit card ending in 9221. ( Id. at ¶ 9). Later that same afternoon, [3] Plaintiff wired $139, 700.00 to Jeff's Garage's bank account at BBCN. (Final Award 11). From December 13 to 24, Jeff's Garage processed all credit card transactions through the North American Bancard terminal and remitted $5, 463.20 of its revenue to Plaintiff, leaving an unpaid balance of $158, 336.80. (56.1 Stmt. ¶ 11). Thereafter, Jeff's Garage "withdrew all of the money from its account at BBCN, ... ceased using the North American Bancard terminal, and refused to make further payments to [Plaintiff]." ( Id. ).

B. Procedural Background

After Defendant refused to make further payments, Plaintiff filed suit with the Court on February 3, 2014, claiming breach of contract, breach of representations and warranties, and breach of a personal guarantee against Defendant. (56.1 Stmt. ¶ 13). At Defendant's insistence and with Plaintiff's acquiescence, the parties agreed to arbitrate the dispute before the American Arbitration Association (the "AAA") ( id. at ¶¶ 15-16), and the Court entered an Order staying the case pending arbitration (Apr. 17, 2014 Order (Dkt. #8)).

After initial pleadings had been exchanged before the Arbitrator, on July 26, 2014, Defendant's counsel David Wong notified the Arbitrator that he and his firm would no longer represent Defendant because of "irreconcilable differences" with his client. (Final Award 4). The Arbitrator issued an Order on August 7, 2014, informing Defendant of his right to represent himself, yet strongly urged Defendant to enlist the assistance of someone comfortable with oral and written English to assist him in the proceedings. ( Id. at 5). The Arbitrator also notified Defendant on August 29, 2014, that if he chose not to participate in the proceeding, the matter might nonetheless be heard, and an award might be granted. ( Id. at 6). Defendant did not respond to these notifications.

Throughout August and September, the Arbitrator repeatedly reached out to Defendant regarding discovery requests and administrative matters related to the proceedings, to no avail. ( See Final Award 6-7). After notice to Defendant, the Arbitrator conducted preliminary hearings in his absence and, in a September 15, 2014 email, the Arbitrator notified Defendant of the October 6, 2014 deadline to submit papers supporting his argument. ( Id. at 7). Again, Defendant failed to respond. On October 9, 2014, the Arbitrator sent an email advising the parties that the hearing scheduled for October 20, 2014, would take place via telephone conference, and that since he had not received opposition papers by the October 6 deadline, he would analyze the materials before him on the merits. ( Id. at 8). On October 20, 2014, the Arbitrator conducted the hearing with Plaintiff's representatives present and "neither [Defendant], nor anyone representing his interests dialed in or participated in the call." ( Id. ).

Even in the absence of a formal opposition from Defendant, the Arbitrator considered certain facts contained in a police report, submitted by both sides, that favored the narrative contained in the Answer that defense counsel had submitted at the commencement of the arbitration. (Final Award 3, 11).[4] Ultimately, for various evidentiary reasons set forth in the Final Award, the Arbitrator did not accord much weight to the report. ( Id. at 11).

On October 23, 2014, the Arbitrator awarded the outstanding balance of $158, 336.80 to Plaintiff without interest. (Final Award 13). He further held that each side should bear its own costs, and thereby declined to award attorneys' fees. ( Id. ).

In accordance with the Court's November 14, 2014 Order (Dkt. #17), Plaintiff filed the instant motion for summary judgment on December 18, 2014 (Dkt. #18).[5] Defendant did not file any ...

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