On September 24, 2025, the New York Appellate Division, Second Department, granted Carter Ledyard’s appeal on behalf of a revenue purchase agreement (RPA) funder in Apollo Funding Co. v. Dave Reilly Construction, LLC. The Appellate Division reversed a lower court decision that erroneously found questions of fact whether the funder had actually given its merchant customer a disguised loan rather than purchased its receivables for an upfront purchase price.
The lower court had opined, without reference to the terms of the actual RPA, that it “bears a striking resemblance to the loan agreements that were found to be usurious and unconscionable” in unrelated high-profile cases. The lower court overlooked meaningful differences between the agreements and allegations in the various cases. Additionally, without pointing to actual evidence of wrongdoing, the lower court suggested the funder was using the courts as a “cudgel to enforce potentially illegal and/or unconscionable loans.”
The Appellate Division’s decision reversed and granted summary judgment enforcing the RPA against the merchant. It ruled that the funder presented sufficient evidence of the merchant’s default and demonstrated that the funder’s RPA complied with the applicable legal standard that distinguishes purchases of receivables from a loan. The court noted that there was no evidence that would even suggest a question of fact whether the funder engaged in usurious lending.
In fact, the Appellate Division found that the funder’s RPA contained an effective reconciliation provision that the merchant could take advantage of to adjust its remittances in the event of changes to its levels of daily receivables. However, because the merchant did not bother engaging in the reconciliation procedure, the Appellate Division held it was precluded from reviewing if the provision would have been effective or not.
“This reversal could not come at a more critical time for the receivables-based financing industry,” said Carter Ledyard partner Jacob Nemon. “The Appellate Division’s decision reaffirmed that a funder need only demonstrate that its agreement complies with the court’s three-part test for a purchase of receivables, and sent a message to lower courts that they must do so as well on an individual basis focused on the actual evidence of each case.”
Carter Ledyard partner Jacob H. Nemon briefed and argued the appeal.