FORA FINANCIAL ADVANCE LLC v. PILLAR CONSULTING LLC (2025)

Order, Supreme Court, New York County (Jennifer G. Schecter, J.), entered July 5, 2024, which, to the extent appealed from, denied defendant's motion to dismiss the cause of action for tortious interference with contract and declined to consider the question of whether the liquidated damages clause in the parties’ agreement constituted an unenforceable penalty, unanimously modified, on the law, to dismiss the tortious interference cause of action, and otherwise affirmed, without costs.

Supreme Court correctly declined to consider whether the liquidated damages provision, called an “Interference Fee,” in defendant's independent sales organization (ISO) agreement with plaintiffs constitutes an unenforceable penalty (see JMD Holding Corp. v. Congress Fin. Corp., 4 N.Y.3d 373, 795 N.Y.S.2d 502, 828 N.E.2d 604 [2005];  see also Crown IT Servs., Inc. v. Koval–Olsen, 11 A.D.3d 263, 782 N.Y.S.2d 708 [1st Dept. 2004]).  The amount stipulated as liquidated damages is tied to the loan balance that would have been due to plaintiffs if defendant had not breached the terms of the parties’ contract and “interfered” with plaintiffs’ third-party loan agreements with merchants referred by defendant, as is alleged (see NGM Mgt. Group, LLC v. Bareburger Group, LLC, 224 A.D.3d 600, 603–604, 206 N.Y.S.3d 267 [1st Dept. 2024]).  In any event, liquidated damages provisions have routinely been held to be enforceable against sophisticated parties like defendant (see Elk 33 E. 33rd LLC v. Sticky's Corporate LLC, 228 A.D.3d 455, 455–456, 213 N.Y.S.3d 44 [1st Dept. 2024]).

However, the complaint fails to sufficiently state a cause of action for tortious interference with contract (see Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 424, 646 N.Y.S.2d 76, 668 N.E.2d 1370 [1996]).  Plaintiffs broadly speculate that defendant was “involved” in certain merchants defaulting on their respective loan agreements but fail to point to any specific conduct (see Kaplan v. Conway & Conway, 173 A.D.3d 452, 453, 102 N.Y.S.3d 612 [1st Dept. 2019]).  Moreover, plaintiffs’ tortious interference claim is duplicative of their breach of contract claim because it is based entirely on allegations that defendant induced merchants to obtain financing from additional sources and failed to disclose adverse information about the merchants it referred, all of which constitute violations of the ISO agreement (see IKB Intl. S.A. v. Wells Fargo Bank, N.A., 40 N.Y.3d 277, 290, 197 N.Y.S.3d 719, 220 N.E.3d 646 [2023]).