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.
On January 13, 2026, New York County Commercial Division Justice Andrea Masley issued a detailed decision denying almost all arguments in the DSC’s and attorney’s two motions to dismiss.
The decision sustained NewCo’s claims against the Florida-based DSC and its principals, holding they had subjected themselves to the jurisdiction of a New York court by purposefully contracting to supply services—including legal defense—in New York and committing tortious acts in the state to interfere with NewCo’s customer relationships. It also sustained NewCo’s core claims against the DSC for tortious interference with contractual relations, conversion, and civil conspiracy, finding sufficient allegations that defendants knowingly induced merchant breaches by offering false promises of debt resolution and directing diversion of receivables that were purchased by NewCo. The decision further rejected dismissal of NewCo’s punitive damages claims against the DSC, citing its well-pleaded allegations of a malicious, patterned course of conduct directed at the public and courts.
The decision also fully denied the debt settlement attorney’s motion to dismiss, rejecting arguments of attorney immunity and finding sufficient allegations that they provided substantial assistance to the alleged scheme through frivolous and vexatious litigation tactics. Significantly, the decision sustained NewCo’s Judiciary Law § 487 for attorney fraud based on NewCo’s claims of egregious, chronic deceit—including repeated appearances without proper engagement letters or client communication, and abusive motion practice—across at least 36 related cases.
The court’s order allows NewCo to continue advancing its claims for damages arising from uncollected receivables, increased litigation and funding costs, and related harms against the DSC and attorneys through discovery and trial.
“We are gratified by Justice Masley’s thorough analysis and decision to sustain NewCo’s claims against these coordinated efforts to undermine legitimate financing arrangements,” said Jacob H. Nemon of Carter Ledyard. “The ruling puts debt settlement companies and their hand-selected attorneys on notice that neither funders nor the New York courts are going to tolerate their vexatious and fraudulent conduct, regardless of where the debt settlement companies are in the country. The companies will not evade accountability for converting secured assets.”
Carter Ledyard continues to represent NewCo in this and other commercial litigation matters involving revenue-based financing.
Partner Jacob H. Nemon and Associate Kevin M. Simpson secured the win for NewCo in this matter.