Better Holdco, Inc. v. Pierce

Background

On September 29, 2023, the Court granted Better Holdco, Inc.’s motion for summary judgment and stated that Better was entitled to judgment for $2,277,000 plus interest accrued through repayment. The Court later directed Better to submit a proposed judgment. Sarah Pierce objected, and Better submitted an amended proposal.

The parties disputed two aspects of the judgment: how it should reflect limits on Better’s ability to pursue Pierce’s personal assets, and how much interest should accrue after Pierce’s June 5, 2022 default.

Non-Recourse Portion

The notes divided the debt into a Recourse Portion and a Non-Recourse Portion. The Recourse Portion consisted of 51% of the unpaid principal, plus unpaid interest due or compounded under the notes. The Non-Recourse Portion consisted of indebtedness exceeding the Recourse Portion.

The Court held that judgment should be entered against Pierce for the entire principal and interest. But the judgment must state that Pierce may satisfy the $1,115,730 Non-Recourse Portion by returning 220,500 unvested shares to Better. If Pierce chooses that option, Better cannot reject the shares and pursue her personal assets for the Non-Recourse Portion. Better may pursue her personal assets for the Recourse Portion instead.

The Court also stated that Better could not condition acceptance of the shares on Pierce dismissing her separate retaliation lawsuit. The Court rejected Pierce’s argument that Better had to accept all 268,750 of her unvested shares and apply any excess value to the Recourse Portion.

Pierce also argued that the Court could not enter judgment including the Non-Recourse Portion and that Article 9 of the Uniform Commercial Code barred entry of judgment. The Court treated those arguments as a request to reconsider the earlier order. It stated that it would not reconsider that order because the Court had already rejected the Non-Recourse argument and Pierce had not previously raised the Uniform Commercial Code issue.

Default Interest

The notes required unpaid principal and interest subject to collection to accrue interest at the maximum rate allowed under New York law for nonexempt lenders. Better proposed total interest of $817,066.09, consisting of $16,125.87 in pre-default interest and $800,940.22 in default interest. Better calculated the default interest using the full $2,277,000 principal and a 25% annual rate.

The Court agreed with Pierce that Better could not calculate default interest using the entire principal. The notes limited Better’s recourse for the Non-Recourse Portion to the pledged collateral and barred further recourse against Pierce’s assets for that portion. The Court concluded that allowing default interest on the Non-Recourse Portion would undermine that limitation. Because the notes were ambiguous, the Court construed the ambiguity against Better, which drafted the notes.

The Court therefore held that only the $1,161,270 Recourse Portion and the pre-default interest could accrue interest at the default rate. The Court rejected Pierce’s separate argument that Better used an excessive interest rate. It explained that although New York’s ordinary civil-usury limit is 16%, that limit does not apply to loans exceeding $250,000; the applicable criminal-usury cap was 25%.

Disposition

The Court resolved the disputes over the proposed judgment and stated that it would enter judgment by separate order. The opinion does not provide the final recalculated total interest or the separate judgment itself.