Despite Criminal Usury Claim, Court Compels Arbitration

A New York resident sued an alternative small business lender for, among other counts, criminal usury related to small business financing that the resident’s business had received and that the resident had agreed to guarantee. The agreement included a provision that required that “all claims brought by the signing principal, as well as the business itself” be resolved by arbitration. In response to the complaint, the lender filed a motion to compel arbitration as provided by the agreement.

In its decision, the court explained that “[u]nder the FAA [Federal Arbitration Act], a court must compel arbitration if it finds that: (1) a valid arbitration agreement exists between the parties; and (2) the dispute before it falls within the scope of the agreement.” After reviewing the facts of the present case, the court found that “here, [the resident], as owner of [the business] and as personal guarantor, signed the Agreement, manifesting his intent to be bound by the Agreement’s terms and its arbitration provision.” Additionally, the court held that the resident’s personal guaranty of the financing was subject to the arbitration provision.

Therefore, the court granted the lender’s motion and stayed the case pending the completion of the arbitration.

Caudill v Can Capital, Inc., 2017 N.Y. Misc. LEXIS 9, 2017 NY Slip Op 30008(U) (N.Y. Sup. Ct. Jan. 3, 2017)

About Patrick Siegfried

Patrick Siegfried is the author of the Usury Law Blog. Patrick is a practicing attorney in Bethesda, Maryland. Patrick’s work focuses on issues regarding alternative small business financing. He can be reached at
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