Capital One Taxi Medallion Finance, Respondent,v.Patton R. Corrigan et al., Appellants.BriefN.Y.Oct 11, 2018ORIGINAL APL-2017-00190 New York County Clerk’s Index No. 651841/15 Court of appeal# STATE OF NEW YORK O CAPITAL ONE TAXI MEDALLION FINANCE, Plaintiff-Respondent, against - PATTON R. CORRIGAN and MICHAEL LEVINE, Defendants-Appellants. BRIEF OF AMICUS CURIAE, THE ASSOCIATION OF COMMERCIAL FINANCE ATTORNEYS, INC. Deborah A. Reperowitz Stradley Ronon Stevens & Young, LLP 100 Park Avenue, Suite 200 New York, NY 10017 Tel: (212) 812-4124 Fax: (646) 682-7180 May 11,2018 COURT OF APPEALS OF THE STATE OF NEW YORK ■x CAPITAL ONE TAXI MEDALLION FINANCE, APL-2017-00190 Plaintiff-Respondent, CORPORATE DISCLOSURE STATEMENT OF THE ASSOCIATION OF COMMERCIAL FINANCE ATTORNEYS, INC. v. PATTON R. CORRIGAN and MICHAEL LEVINE, Defendants-Appellants. ■x CORPORATE DISCLOSURE STATEMENT Pursuant to New York Court of Appeals Rule of Practice 500.1(f), The Association of Commercial Finance Attorneys, Inc. (“AGFA”) states that it is a not-for-profit corporation and that it has no parent, subsidiary or affiliate. Respectfully submitted, STRADLEY RONON STEVENS & YOUNG, LLP By: Deborah A. Reperowitz 100 Park Avenue, Suite 2000 New York, New York 10017 Telephone: (212)812-4138 Facsimile: (646) 682.7180 Email: firstname.lastname@example.orgDated: May 16, 2018 TABLE OF CONTENTS STATEMENT OF INTEREST OF AMICUS CURIAE. PRELIMINARY STATEMENT FACTS ARGUMENT 1 .2 .4 6 Guarantees are an Inherent and Vital Component of the Loan Process 6 Enforcement of Guarantees Through the Accelerated Judgment Process of CPLR § 3213 Is Required to Ensure the Efficacy of Guarantees I. II. 14 CONCLUSION 19 i TABLE OF AUTHORITIES Cases Capital One Taxi Medallion Fin. v. Corrigan, 2016 WL 3927654 (N.Y. Sup. Ct. July 15, 2016) See Capital One Taxi Medallion Fin. v. Corrigan, 147 A.D.3d 677 (1st Dep’t. 2017) Cooperatieve Central Raiffeisen-Boerenleenbank, B.A. v. Navarro, 36 N.E.3d 80 (N.Y. 2015) Great Plains Capital Corp. v. Levi, 960 N.Y.S.2d 50 (N.Y. Civ. Ct. 2012) In re Lyondell Chem. Co., 402 B.R. 571 (Bankr. S.D.N.Y. 2009) In re A. Tarricone, Inc., 286 B.R. 256 (Bankr. S.D.N.Y. 2002) J.D. Structures, Inc. v. Waldbaum, 282 A.D.2d 434 (N.Y. App. Div. 2001) Judari L.L.C. v. Cycletech Inc., 246 A.D.2d 736 (N.Y. App. Div. 1998) Philadelphia Taxi Ass'n, Inc v. Uber Techs., Inc., No. 17-1871, 2018 WL 1474373 (3dCir. Mar. 27, 2018) Rotuba Extruders, Inc. v. Ceppos, 46 N.Y.2d 223 (N.Y. 1978) Sharma v. Skaarup Ship Mgmt. Corp., 916 F.2d 820 (2d Cir. 1990) SCP (Bermuda) Inc. v. Bermudatel Ltd., 224 A.D.2d 214 at 216 (N.Y. App. Div. 1996) .4,17 5,6 14, 16 16 7, 13 8 14 2 11 14 13 15 Statutes CPLR§ 3213 Other Authorities Andy Peters, Taxi Loan Book's Value Cut Almost 50% at Signature Bank (July 19, 2017) Charles R. Schaefer, You and Your Eager Entrepreneur When Someone Wants to Buy A Business, Bus. L. TODAY (NOV. / Dec. 1995) Charles E. Cheatham, Economic and Regulatory Factors Relating to Penn Square Bank, 27 OKLA. CITYU. L. REV. 1051 (2002) Christopher K. Seide, Consumer Financial Protection Post Dodd-Frank: Solutions to Protect Consumers Against Wrongful Foreclosure Practices and Predatory Subprime Auto Lending, 3 U. PUERTO Rico Bus. L.J. 219, 254 (2012) passim 12 7 12 .6 ii CNBC, liber, Lyft Take Down Not Just Cab Drivers, But Also Lenders, CNBC (July 15, 2017) Danielle Furtaro, Taxi Medallion Owners Find Their Dreams Dashed by Uber, Lyft, NEW YORK POST (July 5, 2016) Desjardins, Jeff, BUSINESS INSIDER, Here’s Why Small Businesses Fail (Aug. 2,2017) First Preliminary Rep. of Advisory Committee on Practice and Procedure, N.Y. Legis. Doc. No. 6(b) (Feb. 1, 1957) Gardner, Lawrence, Getting Personal What If the Banker Needs A Loan Guarantee Beyond the Assets of the Business?, Bus. L. TODAY at 43 (MAY/JUNE 1997)... 9 Goodman, Sherri, Why Banks Ask for A Personal Guarantee Before A Loan (Oct. 12, 2007) Helmore, Edward, THE GUARDIAN, End of the Road? New York's Cabs Face Uncertain Future in Wake of Uber and Lyft (July 29, 2017) Lux, Melinda, Negotiating Commercial Loans for Closely Held Companies When ,8, 12-13 NC STATE UNIV., POOLE COLLEGE OF MANAGEMENT, Impact of Risk Management Failures on the Financial Crisis (Jan. 3, 2011) Nelson, Laura, L.A. TIMES, Uber and Lyft have Devastated L.A.'s Taxi Industry, City Records Show (Apr. 14, 2016) Raymond Hannigan & Ross Hirsch, Consider Pursuing Guarantors in State Court, N.Y. LAW J. (Jul. 14, 2010) U.S. BUREAU OF LABOR STATISTICS, Entrepreneurship and the U.S. Economy, Survival Rates of Establishments (Apr. 28, 2016) WILLIAM BLAIR, Specialty Finance Industry Insights, atp. 1 (Dec. 2014) Winnie Housekept, Taxi Medallions, Once a Safe Investment, Now Drag Owners Into Debt, NYTimes.com (Sept. 10, 2017) Treatises Honigsberg, Colleen, State Contract Law and Debt Contracting (June 20, 2013) Kove, Myron, 1 Real Estate Transactions: Structure and Analysis § 4:45 (Aug. 2017) Real Estate Transactions: Structure and Analysis, § 10:4 Economics of Diversification and Liquidity (Aug. 2017) 12 12 8 14 .7 11 Credit is Tight, PRAC. LAWYER, (Aug. 2011), 15 11 .2 .8 10 11 .3, 16 13 9 Other Sources Brief of Respondent, Capital One Taxi Medallion Fin. v. Corrigan, No. 2017-00190 (N.Y. Jan. 26, 2018) 5 STATEMENT OF INTEREST OF AMICUS CURIAE The Association of Commercial Finance Attorneys, Inc. (“ACFA”) is a non¬ profit association that has in excess of 140 members in more than thirty states and a number of foreign countries. Its members include in-house and private practice attorneys who represent commercial borrowers, as well as commercial finance companies, including banks, leasing companies and companies that provide access to capital through non-traditional sources. Its membership actively participates in the drafting, modification, reform and interpretation of commercial and insolvency law. ACFA is dedicated to furthering the practice of law applicable to middle- market commercial credit transactions and commercial bankruptcy matters, and regularly conducts educational programs covering topics related to commercial finance, insolvency and ethics. Approximately, forty-five percent of ACFA’s members reside and/or practice law in New York, and they routinely represent clients in financing transactions and litigation involving New York residents and/or the application of New York law. When a dispute arises in connection with a loan transaction, ACFA members often represent their clients in New York courts, applying New York substantive and procedural law, including CPLR § 3213. ACFA seeks to participate as an amicus curiae in this case because the enforceability of guarantees, particularly pursuant to CPLR § 3213, is of paramount importance to its members and the clients they represent. 1 PRELIMINARY STATEMENT Guarantees are critical to the lending industry, affording lenders additional assurance that they will be repaid. Guarantees also allow borrowers to borrow increased amounts on more favorable terms. In particular, personal guarantees of commercial debt, which generally are provided by the principals of the borrower, confirm the principals’ commitment to the success of their business and the repayment of their business’ debt. CPLR § 3213 provides an accelerated process for obtaining judgment on instruments for the “payment of money only”. The ability of a lender to enforce a guarantee through this accelerated judgment process further enhances the value of guarantees by expediting payment, minimizing the costs of collection, rapidly disposing of meritless claims and defenses and preventing the dissipation of assets throughout protracted litigation by unscrupulous guarantors, or otherwise. See Judari L.L.C. v. Cycletech Inc., 246 A.D.2d 736, 73 (N.Y. App. Div. 1998) (CPLR § 3213) operates to quickly eliminate meritless claims and defenses “based on facts extrinsic to an instrument”. ). See also Raymond Hannigan & Ross Hirsch, Consider Pursuing Guarantors in State Court, N.Y. LAW J. (Jul. 14, 2010), available at http://www.henick.com/content/uploads/2016/01/3f7248341d7c4a05 d05873ad4a9a4453.pdf (“Time is clearly ‘of the essence’ for a lender in obtaining 2 judgment against guarantors. The longer the delay, the longer that the guarantors’ financial position might deteriorate, or their assets might be dissipated.”). This case involves a challenge to the enforcement of absolute, irrevocable, unconditional personal guarantees through the expedited process set forth in CPLR 3213. Appellants’ challenge must be rejected and the unanimous decision of the Appellate Division, First Department, in favor of the lender and against the guarantors, must be affirmed in order to mitigate credit risk and promote lending to businesses, particularly small and mid-sized businesses and those that present a higher risk of nonpayment. The outcome of this case is particularly important to the lending industry because parties to loan transactions routinely agree that their transactions will be governed by New York law. See Flonigsberg, Colleen, State Contract Law and Debt Contracting at p. 7, n. 11 (June 20, 2013), available at https:// wwwO.gsb.columbiaedu /mygsb/faculty/research /pubfiles/5989/FIKS2013 06_ 20.pdf (“New York in particular is known for developing a court system that is friendly to commercial parties. . . . For example, New York allows plaintiffs seeking to enforce their rights ‘based upon an instrument for the payment of money only’ to expedite the litigation process.”). As a result of its well-reasoned laws, “New York [has become] a state widely known to compete for contracts [and] is the state most frequently used for debt contracting and has increased its dominance during the past twenty years.” Id. at p. 22. 3 FACTS In April 2012, Capital One Taxi Medallion Finance (“Capital One Taxi”) provided an $80 million line of credit (the “Loan”) to Transit Funding Associates, LLC (“TFA”). TFA borrowed in excess of $57 million from Capital One Taxi that it has not repaid. Appellants, Patton R. Corrigan and Michael Levine (collectively, the “Guarantors”, and each, a “Guarantor”), are principals and owners of TFA. Each Guarantor executed a guaranty securing TFA’s obligations under the Loan, which by its plain and unambiguous terms is an “absolute, irrevocable and unconditional” guaranty (collectively, the “Guarantees”, and each, a “Guaranty”). Specifically, the Guarantees provide: Guarantor’s liability hereunder shall in no way be limited or impaired by . . . the invalidity, irregularity or unenforceability, in whole or in part, of any of the Loan Documents, this Guaranty or any other instrument or agreement executed or delivered to the Lender in connection with the Loan, except to the extent that there is a final adjudication by a court of competent jurisdiction of a valid defense to Borrower’s obligations under the Loan Documents to payment of its liabilities. No invalidity, irregularity or unenforceability of all or any part of the liabilities hereby guaranteed or of any security therefor or any other circumstance that might otherwise constitute a legal or equitable defense of a guarantor shall affect, impair or be a defense to this Guaranty, and this Guaranty is a primary obligation of the undersigned. See Capital One Taxi Medallion Fin. v. Corrigan, available at 2016 WL 3927654 at p. 3 (July 15, 2016) (emphasis added). See also Guaranty of Patton R. Corrigan at Appendix p. A145. 4 Following TFA’s default under the Loan, in May 2015, Capital One Taxi filed a motion for summary judgment in lieu of complaint pursuant to CPLR 3213 against the Guarantors, seeking to enforce its rights under the Guarantees. See Brief of Plaintiff-Respondent at p. 11, Capital One Taxi Medallion Fin. v. Corrigan, No. 2017-00190 (N.Y. Jan. 26, 2018). Although TFA is pursuing a claim against Capital One Taxi for negligent impairment of collateral in a separate action, no adjudication, let alone a “final” adjudication, of any defense to TFA’s payment obligations to Capital One Taxi has been rendered. See Capital One Taxi Medallion Fin. v. Corrigan, 147 A.D.3d 677, 677 (1st Dep’t. 2017). The Guarantors ignored the plain and unambiguous language of the Guarantees, as well as, the purpose of CPLR § 3213, and opposed Capital One Taxi’s motion for summary judgment. The basis for their objection was that TFA’s assertion of a claim against Capital One Taxi in a separate law suit operates to delay or completely defeat Capital One Taxi’s right to enforce the Guarantees under CPLR § 3213. See Corrigan, 147 A.D.3d at 677. In July 2016, the trial court erroneously disregarded the critical role that guarantees play in the lending industry, the plain language of the Guarantees and the purposes of CPLR § 3213, and denied summary judgment in favor of Capital One Taxi. See generally Corrigan, available at 2016 WL 3927654 (July 15, 2016). In so doing, the trial court held that Capital One Taxi had established its 5 prima facie case of entitlement to relief under the Guarantees, yet denied Capital One Taxi’s motion because TFA was pursuing a claim against Capital One Taxi in a separate action. Id. On February 28, 2017, the Appellate Division, First Department (Tom, J.P., Renwick, Saxe, Feinman, Gesmer, JJ), reversed the decision of the trial court and entered a unanimous Decision and Order, granting Capital One Taxi’s motion for summary judgment in lieu of complaint pursuant to CPLR § 3213. See Corrigan, 147 A.D.3d at 677. It is this decision that the Guarantors/Appellants seek to reverse. ARGUMENT I. Guarantees are an Inherent and Vital Component of the Loan Process There is a natural tension and a delicate balance between lenders and borrowers. While lenders are in the business of making loans, they must protect their stockholders and investors by minimizing the risk of payment defaults by their borrowers. See Christopher K. Seide, Consumer Financial Protection Post Dodd-Frank: Solutions to Protect Consumers Against Wrongful Foreclosure Practices and Predatory Subprime Auto Lending, 3 U. PUERTO RlCO Bus. L.J. 219, 254 at n. 161 (2012) (“To mitigate the impact of default risk, lenders often charge rates of return that correspond to the debtor's level of default risk. The higher the risk, the higher the required return, [and] vice versa.”) (quoting INVESTOPEDIA, 6 http://www.investopedia. comterms/d/defaultrisk.asp#axzzluZs9wLQt). On the other hand, borrowers seek to obtain loans, often in amounts greater than those for which they qualify, that have low interest rates and fees, as well as minimal restrictive covenants. Personal guarantees commonly are used to balance the goals of lenders and borrowers. Specifically, personal guarantees provide a mechanism for borrowers to obtain credit while providing increased “comfort [to lenders] that they’ll get paid.” In re Lyondell Chem. Co., 402 B.R. 571, 593 (Bankr. S.D.N.Y. 2009). When presented with a commercial loan application, lenders are faced with the task of evaluating the likelihood of the potential borrower’s default. Obtaining the personal guarantee of company principals is a routinely employed risk mitigant. See, e.g., Goodman, Sherri, Why Banks Ask for A Personal Guarantee Before A Loan (Oct. 12, 2007), available at https://www.bizjournals.com/austin /news/2017/10/12Avhy-banks-ask-for-a-personal-guarantee-before-a.html (explaining how personal guarantees on commercial loans “became the norm”.); Charles R. Schaefer, You and Your Eager Entrepreneur When Someone Wants to Buy A Business, Bus. L. TODAY, (Nov. / Dec. 1995) at 43, 46 (“Entrepreneur personal guarantees (usually with spouses) will almost always be required.”). Personal guarantees constitute credit enhancements for the commercial borrower, providing an additional source of collateral from which the lender may recover in 7 the event of the borrower’s default. See In re A. Tarricone, Inc., 286 B.R. 256, 268 (Bankr. S.D.N.Y. 2002) (“Personal guarantees of corporate debt by insiders enhance the likelihood that a lender will be repaid .... if the corporate debtor fails to repay the loan, the lender may have recourse to the guarantors' personal assets, if any exist.”). Thus, personal guarantees of commercial debt are almost certainly required where the borrower is a small business', a closely held company, a limited liability company, a company with no credit history, or a company that has a credit rating or history that is too poor to qualify for a loan.2 See Lux, Melinda, Negotiating Commercial Loans for Closely Held Companies When Credit is Tight, PRAC. LAWYER, (Aug. 2011) at p. 45 (“Unless [a] closely held company is well established with a history of strong profitability or owns valuable property, commercial lenders generally require that the company's owners personally guaranty the loan.”). In addition to providing an additional source from which the lender can recover if the commercial borrower defaults, a principal’s personal guarantee With respect to SBA loans, “[i]ndividuals who own 20% or more of a small business applicant must provide an unlimited personal guaranty.” U.S. SMALL BUSINESS ADMINISTRATION, OFFICE OF FINANCIAL ASSISTANCE, Unconditional Guarantee, available at https://www.sba.gov/document /sba-form-148-unconditional-guarantee. See, e.g., Desjardins, Jeff, BUSINESS INSIDER, Here’s Why Small Businesses Fail (Aug. 2, 2017), available at http://www.businessinsider.com/why-small-businesses-fail-infographic-2017- 8 (citing statistics that show 50% of new businesses fail in 5 years with 90% eventually failing); U.S. BUREAU OF LABOR STATISTICS, Entrepreneurship and the U.S. Economy, Survival Rates of Establishments (Apr. 28, 2016), available at https://www.bls.gov/bdm /entrepreneurship/bdm_ chart3.htm (documenting survival rates of businesses from 1994 -2015). 8 confirms the principal’s long-term commitment to the success of the borrower’s business. Id. (“[I]t is usually in the company’s best interests for the personal guaranty obligations of the owners to be uniform so that the owners’ motivations and interests with respect to the repayment of the loan are aligned.”). Placing sufficient financial resources of the principals at risk solidifies their commitment to maximize repayment of their business’ loan, including during a sale, liquidation, bankruptcy or other wind-down of the borrower’s operations. See Gardner, Lawrence, Getting Personal What If the Banker Needs A Loan Guarantee Beyond the Assets of the Business?, Bus. L. TODAY at 43 (MAY/JUNE 1997) (“When a banker has a personal guarantee, it reduces the risk that a frustrated owner may give up on a business during times of financial difficulty.”). Guarantees are of paramount importance when a lender, such as Capital One Taxi, concentrates its lending in a particular industry. See, e.g., Real Estate Transactions: Structure and Analysis, § 10:4 Economics of Diversification and Liquidity (Aug. 2017) (observing that when an investor invests “in an undiversified and nonmarketable, i.e., highly illiquid, security [it] will demand compensation for the additional risk of the undiversification and the illiquidity.”). Specialty lenders — those that loan exclusively into narrow business segments — are not uncommon and provide a source of funding for certain businesses that otherwise may not be able to obtain a loan or may not be able to obtain a loan on as favorable terms as a 9 specialty lender will be able to provide. See WILLIAM BLAIR, Specialty Finance Industry Insights, at p. 1 (Dec. 2014) (“Typically, specialty finance firms are thought of as non-bank lenders that make loans to consumers and small to midsize businesses that cannot otherwise obtain financing.”), available at https://www. williamblair.eom/~/media/.../Emarketing/2014/IB/spec_fm_2014_12.pdf. Specialty lenders generally have deep knowledge of the operations, values, and financial needs of the particular industry into which they lend, which is imperative since the success of specialty lenders rises and falls with the success of the business sector they finance. See generally Emily Maltby, Entrepreneurs Find Success With Specialty Lenders, WALL ST. J. (Updated April 26, 2010). This increased risk can be mitigated by guarantees that provide alternative types of assets from which to recover in the event that the bottom falls out of the niche industry a lender finances. See id. (recognizing that “specialized lenders are considered risky, especially in light of the financial fallout that resulted from a too- high concentration of loans in the real estate market.”) By way of example, Capital One Taxi lends only to the taxi business sector, thus the value of all of its borrowers — and the value of the collateral they deliver to Capital One Taxi — is tied to the success of the taxi industry. As has been the subject of many articles, the value of the taxi industry has been devastated by relatively new competitors in the market, including ride-hail apps such as Uber, 10 Lyft, Via, Gett and Juno. See, e.g., Helmore, Edward, THE GUARDIAN, End of the Road? New York's Cabs Face Uncertain Future in Wake ofUber and Lyft (July 29, 2017), available at https://www.theguardian.com/us-news/2017/jul/29/ new-york- yellow-cabs-taxis-uber-lyft; Nelson, Laura, L.A. TIMES, Uber and Lyft have Devastated L.A.'s Taxi Industry, City Records Show (Apr. 14, 2016), available at http://www.latimes.com/local/lanow/la-me-ln-uber-lyft-taxis-la-20160413- story.html. It is unlikely that these competitors will exit the market, thus it is a near certainty that, at least for the foreseeable future, the values of medallions and the taxi industry generally will not substantially recover from the precipitous fall of the once booming taxi business. See Winnie Housekept, Taxi Medallions, Once a Safe Investment, Now Drag Owners Into Debt, NYTimes.com (Sept. 10, 2017) (“Just as homeowners faced ruin when housing markets sank, struggling cab owners...are now facing foreclosure and bankruptcy.”). It is not just taxi owners and operators who are suffering as a consequence of the fall of the taxi industry. Lenders also have been negatively impacted. See Philadelphia Taxi Ass'n, Inc v. Uber Techs., Inc., No. 17-1871, 2018 WL 1474373, at *2 (3d Cir. Mar. 27, 2018) (“The value of each medallion dropped significantly, to approximately $80,000 in November of 2016. fifteen percent of medallions have been confiscated by the lenders due to default by drivers.”). Indeed, specialty lenders into the industry are suffering significant losses, and have been forced to 11 wind-down. See, e.g., JJber, Lyft Take Down Not Just Cab Drivers, But Also Lenders, CNBC (July 15, 2017) (three New York-based credit unions that specialized in lending money against taxi cab medallions have been placed into conservatorship as medallion values plummet); Danielle Furtaro, Taxi Medallion Owners Find Their Dreams Dashed by Uber, Lyft, NEW YORK POST (July 5, 2016)(values of once lucrative taxi business plummet with the surge of e-hail apps, and state takes control over another failed medallion lender). See also Andy Peters, Taxi Loan Book's Value Cut Almost 50% at Signature Bank (July 19, 2017). Accordingly, it is critical that specialty lenders have personal guarantees of their commercial debt to ensure the cooperation of their borrowers’ owners and an alternative form of assets from which to recover in case the entire industry goes bust. See Charles E. Cheatham, Economic and Regulatory Factors Relating to Penn Square Bank, 27 OKLA. CITY U. L. REV. 1051, 1057 (2002) (describing plight of a specialty lender after bust of oil market). While at first it may appear that guarantees are beneficial only to lenders, they indisputably provide a corresponding benefit to commercial borrowers by enhancing their creditworthiness. Absent personal guarantees, many start-up, small and mid-sized businesses would be unable to obtain credit. See generally Lux supra at p. 45. Moreover, loan amounts, pricing and covenants are based upon the value of the borrower’s collateral package, including guarantees, and the 12 risk of nonpayment. See, e.g., Sharma v. Skaarup Ship Mgmt. Corp., 916 F.2d 820, 826-27 (2d Cir. 1990) (“[t]he principal [amount] of the loan is determined by the market value of the collateral and the creditworthiness of the borrower. . .[while the] interest rate is determined by the time value of money in the credit market and the creditworthiness of the borrower.”); Lux supra at p. 45 (“The lender's guaranty requirements primarily depend on the strength of the company and the guarantors and the available collateral.”); See Kove, Myron, 1 Real Estate Transactions: Structure and Analysis § 4:45 (Aug. 2017) (“If the borrower can provide additional collateral. . . or personal guaranties by . . . other creditworthy parties, the interest rate may be reduced.”). Accordingly, the delivery of the personal guarantees of a commercial borrower’s principals and/or owners can afford the borrower access to credit if it otherwise lacks sufficient creditworthiness, and can be used by the borrower to obtain more favorable loan terms, including lower interest rates and fees. Based upon the compelling role that personal guarantees play in the commercial lending industry, it is not surprising that the Bankruptcy Court for the Southern District of New York has determined that “guaranties should be respected and honored wherever possible” to serve the public interest. In re Lyondell Chem. Co., 402 B.R. at 593. 13 II. Enforcement of Guarantees Through the Accelerated Judgment Process of CPLR § 3213 Is Required to Ensure the Efficacy of Guarantees From its inception, CPLR § 3213 was intended “to provide a speedy and effective means of securing a judgment on claims that are presumptively meritorious.” J.D. Structures, Inc. v. Waldbaum, 282 A.D.2d 434, 723 (N.Y. App. Div. 2001). As clearly set forth in the Rule’s legislative history, CPLR § 3213 was designed for situations where “a formal complaint is superfluous, and even the delay incident upon waiting for an answer and then moving for summary judgment is needless.” First Preliminary Rep. of Advisory Committee on Practice and Procedure, N.Y. Legis. Doc. No. 6(b) (Feb. 1, 1957) at p. 91. See also Cooperative Central Raiffeisen-Boerenleenbank, B.A. v. Navarro, 36 N.E.3d 80, 84 (N.Y. 2015) (CPLR § 3213 “was enacted to provide quick relief on documentary claims so presumptively meritorious that a formal complaint is superfluous”) (internal quotations omitted). The summary process afforded under CPLR § 3213 enhances the value of personal guarantees in the lending process, making it a “common business practice” for lenders to require personal guarantees of commercial notes governed by New York law. See Rotuba Extruders, Inc. v. Ceppos, 46 N.Y.2d 223, 231 (N.Y. 1978). Indeed, this Court has recognized that the accelerated judgement process set forth in CPLR § 3213 reflects a policy of “fosterfing] certainty and definiteness in the law of commercial paper”. Ceppos, 46 N.Y.2d at 228, n. 2. In accordance with this policy, New York courts 14 consistently accelerate judgment under CPLR § 3213 when, as Capital One Taxi did in the instant case, a lender presents “proof of the notes and guarantees, and defendants’ default under their terms”. SCP (Bermuda) Inc. v. Bermudatel Ltd., 224 A.D.2d 214 at 216 (N.Y. App. Div. 1996). This “certainty and definiteness” in the enforcement of guarantees is essential to a lender’s ability to manage credit risk, which is a critical lender business function. In fact, the failure of lenders to manage credit risk has been cited as a primary cause of The Great Recession of 2008. See NC STATE UNIV., POOLE COLLEGE OF MANAGEMENT, Impact of Risk Management Failures on the Financial Crisis (Jan. 3, 2011) (“Failures of corporate governance and risk management at many systemically important financial institutions are among key causes of the crisis, as concluded by the [Financial Crisis Inquiry] Commission.”), available at https://erm .ncsu.edu/library/article/fmancial-crisis-failures. There are numerous additional benefits inherent in the summary process of CPLR § 3213. First, by shortening the time for obtaining judgment and recovery, the Rule prevents unscrupulous guarantors from disposing of assets that otherwise would be available to satisfy the defaulted commercial borrower’s obligations. Second, the expedited process of CPLR § 3213 prevents the incurrence of unnecessary costs associated with protracted litigation, which generally are passed on to the borrower, and in a default situation, the guarantors. In the instant case, 15 for example, Capital One Taxi’s collection efforts have been delayed for almost three years. Third, use of CPLR 3213’s summary process to enforce guarantees avoids the delays of meritless litigation and conserves judicial resources. Fourth— and critically— “pro-lender laws”, such as CPLR 3213, do not only benefit lenders. As noted by one authority, such laws promote the lending industry generally by affording borrowers loans that have “longer maturities] and have higher dollar values and lower interest rates.” See Honigsberg, supra at p. 22 (discussing the benefits of pro-lender laws in debt transactions, with specific references to New York’s lending laws). Finally, in the instant case, TFA is a commercial borrower, and itself a specialty lender. Commercial borrowers and their principals are presumed to understand the rights and remedies created under their loan transactions, including the common use of the summary process of CPLR § 3213 to enforce guarantees under New York law. See Navarro, 36 N.E.3d 80, 88 (noting that sophisticated parties are charged with knowing “the world of commercial dealings” and the consequences of the agreements they enter); Great Plains Capital Corp. v. Levi, 960 N.Y.S.2d 50 at * 17 (N.Y. Civ. Ct. 2012) (“public policy requires that a person who, for the accommodation of the bank, executes an instrument which is in form a binding obligation, [is] estopped from thereafter asserting that simultaneously the parties agreed that the instrument should not be enforced.”). To permit 16 commercial borrowers and/or their principals to defeat the accelerated process established by CPLR § 3213, as well as the fundamental purpose of absolute, irrevocable, unconditional guarantees, will result in turmoil in the lending industry to the detriment of lenders and borrowers. This is particularly true in cases such as this case, where the value of the lender’s collateral has been impaired. In the instant case, the trial court expressly found that Capital One Taxi “has made out its prima facie claim” under CPLR § 3213. Corrigan, available at 2016 WL 3927654 at p. 4. The trial court also acknowledged, and the parties do not dispute, that no “final adjudication by a court of competent jurisdiction of a valid defense to Borrower’s obligations” has been entered. Id. at p. 5. Nonetheless, the trial court erroneously concluded that Capital One Taxi was not entitled to enforce the Guarantees under CPLR § 3213 because TFA, as borrower, asserted mere allegations in a separate law suit against Capital One Taxi. Id. The trial court’s holding negates the fundamental value and significance of CPLR § 3213 by allowing a commercial borrower to delay enforcement of its principals’ guarantees by asserting a claim against the lender, regardless of the merit of the claim. The value of a personal guarantee under New York law is largely dependent upon the lender’s ability to promptly and efficiently collect on the guarantee when a commercial borrower defaults. In effect, by its decision, the trial court impermissibly converted absolute, irrevocable, unconditional Guarantees into 17 conditional guarantees. The trial court’s disregard for the purposes of the Guarantees and their absolute, irrevocable, unconditional nature, as well as the objectives of CPLR § 3213, undermines the value of guarantees generally and the vital role they play in the lending process. Accordingly, reversal of the decision rendered by the Appellate Division, First Department, as sought by the Guarantors herein, will vitiate the critical value of guarantees to the detriment of lenders and borrowers, alike, and will wreak havoc in the commercial lending industry whenever New York procedure is applicable. CONCLUSION For all of the foregoing reasons, the Amicus requests that the Court affirm the decision entered by the Appellate Division, First Department, granting Capital One Taxi’s motion for summary judgment in lieu of complaint pursuant to CPLR § 3213. Respectfully submitted, STRADESY RONON STEVENS & YOUNG, LLP fCeperowitzÿEsq.V 100 Park Avenue, Suite 2000ÿ \ New York, New York 10017 Telephone: (212)812-4138 Facsimile: (646) 682.7180 Email: email@example.comDated: May 14, 2018 18 CERTIFICATE OF COMPLIANCE Court Rule 500.1 & 500.13(c)(1) I hereby certify that the total number of words in the brief, inclusive of headings and footnotes and exclusive of the brief cover, disclosure statement, table of contents, table of authorities, signature block, and certification of compliance does not exceed 7,000 words. I also certify that the body of this brief has been prepared in a proportionally spaced typeface using Microsoft Word in 14-point Times New Roman and the footnotes are printed in 12-point Times New Roman. Dated: New York, New York May 14, 2018 Deborah A. Reperowitz 1 #3519712 v. 4 COURT OF APPEALS OF THE STATE OF NEW YORK ■x CAPITAL ONE TAXI MEDALLION FINANCE, APL-2017-00190 Plaintiff-Respondent, AFFIRMATION OF SERVICEv. PATTON R. CORRIGAN and MICHAEL LEVINE, Defendants-Appellants. ■x I, Deborah A. Reperowitz, an attorney duly admitted to the practice of law before the Courts of the State of New York, hereby affirm the following to be true under the penalty of perjury pursuant to CPLR § 2106: I am not a party to the within action, am over 18 years of age, and reside in Ocean County, New Jersey. On June 12, 2018, 1 caused the attached Amicus Brief of The Association of Commercial Finance Attorneys, Inc. to be served by UPS mail, upon the following: Skadden, Arps, Slate, Meagher & Flom LLP George A. Zimmerman, Esq. Four Times Square New York, New York 10036 Attorneys for Plaintiff-Respondent Friedman Kaplan Seiler & Adelman LLP Robert S. Smith, Esq. Jennifer A. Mustes, Esq. 7 Times Square New York, New York 10036 Attorneys for Defendants-Appellants Mololamken LLP Steven F. Molo, Esq. Robert K. Kry, Esq. Michelle J. Parthum, Esq. 430 Park Avenue New York, New York 10022 Attorneys for Defendants-Appellants Date: June 12, 2018 STRADLEY RONON STEVENS & YOUNG, LLP By: /s/'DefmaA Deborah A. Reperowitz, Esq. 100 Park Avenue, Suite 2000 New York, New York 10017 Telephone: (212) 812-4138 Facsimile: (646) 682.7180 Email: firstname.lastname@example.org Attorneys for proposed Amici Curiae, The Association of Commercial Finance Attorneys, Inc.