MEMORANDUM OPINION AND ORDER Defendant Livewire Ergogenics Inc. borrowed $30,000 from American E Group LLC. In exchange, Defendant agreed to repay the loan in full in six months at an annual interest rate of 20 percent. Defendant also agreed to issue Plaintiff $50,000 worth of Defendant’s stock as additional consideration for the loan. Defendant failed to either issue the stock or pay the loan, and now argues that the implied interest rate of the loan is criminally usurious, and, thus, that the promissory note representing the loan is void. Both parties agree that the value of the stock Defendant was required to deliver as consideration for the loan can be considered to determine whether the effective interest rate on the loan exceeds the 25 percent cap imposed by New York’s criminal usury statute.The parties’ briefing focuses on the question of whether the value of the stock can be ascertained as a matter of law on a motion to dismiss. Defendant argues that the value of the consideration is plain from the face of the parties’ note; Plaintiff argues that valuation of the stock raises a question of fact not suitable for resolution in a motion to dismiss. But the motion to dismiss must be denied for a reason that was not addressed by the parties at all in their briefing. Because the promissory note contains an express cap on the maximum interest that Plaintiff can collect, the Court cannot determine that it is criminally usurious on its face. As a result, Defendant’s motion to dismiss is DENIED.I. BACKGROUNDDefendant Livewire Ergogenics Inc. is a publicly-traded corporation that develops nutritional products. Am. Compl. (ECF No.7) 9. In 2015, Defendant sought capital to fund its operations. Id. 10. Defendant was introduced to Plaintiff in November of that year, and asked it for a loan. Id. 11. Plaintiff agreed, and that same month, loaned Defendant $30,000, which was disbursed directly to Defendant and certain of its representatives. Id. 12.In connection with the loan, Defendant executed a promissory note (the “Note”), dated as of November 17, 2015, in favor of Plaintiff. Id. Ex. A. In the Note, Defendant promised to repay the principal amount of the loan six months after the date of the Note (the “Maturity Date”). Defendant also agreed to pay interest on the Note at a rate of 20 percent per annum, due in full on the Maturity Date. Note at 1.The Note also required Defendant to pay additional consideration for the loan through the issuance of stock to Plaintiff. The Note provided thatMoreover, as additional consideration for this Note, the Borrower will give to the Lender restricted shares of the Borrower equal to US$50,000.00 (the “Restricted Shares”) that will be convertible to freely tradeable shares on the Maturity Date. The Borrower will provide to the Lender, at the Borrower’s expense, an opinion of counsel stating that, on the Maturity Date, the Restricted Shares are freely trans ferrable pursuant to SEC Rule 144A….Id.The Note set forth a number of events of default and described the consequences of those defaults. Note §4. Failure by Defendant to pay the principal and interest on the Note within 30 days after the Maturity Date constituted an event of default. The Note included a particularly rich bounty for Plaintiff following the occurrence of such a default: “if an Event of Default shall occur, then the Restricted Shares shall be freely transferable and this Note shall be immediately convertible to ten (10) times the liquidated value of the Indebtedness.” Id.1The Note contained a cap on the maximum interest rate that could be charged pursuant to its terms. Section 5 reads as followsMaximum Interest Rate: In no event shall any agreed to or actual interest charged, reserved or taken by the Lender as consideration for this Note exceed twenty percent (20 percent ). In the event that the interest provisions of this Note shall result at any time or for any reason in an effective rate of interest that exceeds twenty percent (20 percent ), then without further agreement or notice the obligation to be fulfilled shall be automatically reduced to such limit and all sums received by the Lender in excess of those lawfully collective as interest shall be applied against the principal of this Note immediate upon the Lender’s receipt thereof….Id. §5.Section 7 of the Note expressly provided for the severability of unenforceable provisions of the Note. The relevant language from the Note is quoted below.Severability: If any provision of this Note is, for any reason, invalid or unenforceable, the remaining provisions of this Note will nevertheless be valid and enforceable and will remain in full force and effect. Any provision of this Note that is held invalid or unenforceable by a court of competent jurisdiction will be deemed modified to the extent necessary to make it valid and enforceable and as so modified will remain in full force and effect.Id. §7. The Note is governed by New York law. Id. §14.Defendant never issued the Restricted Shares to Plaintiff as required by the terms of the Note. Am. Compl. 19. Nor did Defendant pay the principal and interest outstanding under the Note on the Maturity Date; it has not paid to date. Id.
