Affidavit of Alexander L. Cheney — Fountainhead v. Womply

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Filing # 134425486 E-Filed 09/13/2021 09:14:40 AM

IN THE CIRCUIT COURT OF THE EIGHTEENTH JUDICIAL CIRCUIT
IN AND FOR SEMINOLE COUNTY, FLORIDA

FOUNTAINHEAD SBP,

Plaintiff,
CIVIL DIVISION

Vv.
CASE NO.: 2021-CA-002143

OTO ANALYTICS, INC. d/b/a WOMPLY,

Defendant.

Nem Nm” Nee None” Ne Se gee! Te” Se Ne

AFFIDAVIT OF ALEXANDER L. CHENEY

STATE OF CALIFORNIA  )

)
COUNTY OF SAN MATEO )

BEFORE ME, the undersigned authority, personally appeared Alexander L. Cheney, who

after being duly sworn, upon his oath affirms and says:

1. My name is Alexander L. Cheney. I am over the age of twenty-one and am capable
of making this affidavit.
2. I am a member of the bar of the State of California and a partner at Willkie Farr &

Gallagher LLP, outside counsel to Oto Analytics, Inc. d/b/a Womply (‘Womply”), in the
arbitration captioned Ofo Analytics, Inc. d/b/a Womply v. Fountainhead SBF LLC, No. 1100-111-
808 (the “Arbitration”).

3. I submit this affidavit in support of Womply’s Motion to Compel Arbitration and
Opposition to Plaintiff's Verified Amended Petition for Order to Show Cause for Expedited
Temporary Injunctive Relief in the above-captioned matter.

4, I base this affidavit on my personal knowledge and on information obtained in the

course of the Arbitration.

*#%* E-FILED: GRANT MALOY, CLERK OF CIRCUIT COURT SEMINOLE COUNTY, FL 09/13/2021 09:14:40 AM.***#*

5. On or about March 23, 2021, Fountainhead and Womply entered into a PPP Loan
Referral Agreement (the “Agreement”), a copy of which is attached as Exhibit 1 to the Complaint.

6. Womply terminated the Agreement, as it is expressly permitted to do, because
Fountainhead failed to pay Womply over $90 million in fees due under the Agreement and a
separate contract between Womply and Fountainhead.

7. On June 15,2021, Womply commenced arbitration against Fountainhead captioned
Oto Analytics, Inc. d/b/a Womply v. Fountainhead SBF LLC, No. 1100-111-808, by filing with
JAMS an arbitration demand and statement of claim (the “Arbitration Demand”).

8. In its Arbitration Demand, Womply asserted claims for, among other things, breach
of contract and declaratory judgment based on Fountainhead’s failure to pay Womply more than
$90 million in fees.

9. On July 23, 2021, Fountainhead submitted an answer to Womply’s Arbitration
Demand and asserted counterclaims against Womply in the Arbitration (the “Arbitration
Counterclaims”).

10. A true and correct copy of relevant excerpts from the Arbitration Counterclaims is
attached hereto as Exhibit A.

ll. On August 5, 2021, JAMS appointed as arbitrator in the Arbitration the Honorable
Elaine Rushing (Ret.) (the “Arbitrator’”), a former California state court judge.

12. On July 27, 2021, Womply and Fountainhead submitted their respective “strike
lists” to JAMS ranking the possible arbitrators provided by JAMS.

13. On August 20, 2021, Womply answered Fountainhead’s counterclaims, disputing
that it breached its obligations under the Agreement.

14. The Arbitrator has scheduled a conference with the parties for September 17, 2021.

15.

STATE OF CALIFORNIA
COUNTY OF SAN MATEO

Fountainhead has not sought emergency relief in the Arbitration.

The foregoing instrument was sworn to and subscribed before me, by means of U physical
presence or O) online notarization, this

L. Cheney,
produced

who iS

by Alexander

personally

known to me or
as identification.

who has

A notary public or other officer compieting this certhitate verifies
onty the identity of the individual who signed the document fo
which this certificate is attached, and nol the truthfulness,
accuracy. of valality of that document.

State of Calihan;
County ctu Mateo

proved to af satisfactory evidence to fe he
person(sf who appeared before me.

(Seal) Signature

Alexander L. Cheney so

Notary Public

Name typed, printed or stamped
My Commission Expires:

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EXHIBIT A

JAMS ARBITRATION
IN THE MATTER OF THE ARBITRATION BETWEEN
OTO ANALYTICS, INC. D/B/A WOMPLY, No. 1100-111-808
Claimant,
Vv,
FOUNTAINHEAD SBF LLC,

Respondent.

/

RESPONDENT’S ANSWER, AFFIRMATIVE DEFENSES, AND COUNTERCLAIMS

Respondent, Fountainhead SBF LLC (“Fountainhead”), submits its Answer and Affirmative
Defenses to the Demand for Arbitration and Statement of Claim (the “Statement of Claim”) filed
by Claimant, Oto Analytics, Inc. d/b/a Womply (“Womply”).' Fountainhead also submits its
Counterclaims against Womply.

I. INTRODUCTION AND PRELIMINARY STATEMENT

Fountainhead is a small business lender that is licensed and supervised by the United States
Small Business Administration (the “SBA”). Among other things, Fountainhead funds and services
loans created under the Paycheck Protection Program (the “PPP”).

The PPP is a relief program designed to assist small businesses struggling with the economic
disruption that has resulted from the COVID-19 pandemic, by providing inexpensive loans to small
businesses to allow them to pay certain expenses, such as employee payroll. In early February 2021,
the United States government and the SBA made modifications to the PPP, for the purpose of
providing sole proprietors, independent contractors, and self-employed business owners better access

to PPP funding. The program concluded accepting applications on May 31, 2021.

' Fountainhead denies all allegations in the Statement of Claim not specitically addressed in this
Answer, Affirmative Defenses, and Counterclaim.

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2. JAMS has jurisdiction over these Counterclaims pursuant to Section 12 of the
Operative Agreement. Ex, 3, at § 12.

COUNT I - BREACH OF CONTRACT
(FAILURE TO PROVIDE LOAN FILES}

3. Fountainhead repeats and re-alleges the allegations of paragraphs 1 — 2 of these
Counterclaims, as if fully set forth herein.

4. On or about March 23, 2021, Fountainhead and Womply entered into the Operative
Agreement, with an effective date of February 9, 2021, pursuant to which Fountainhead engaged

Womply to provide referrals and technology access to Fountainhead in connection with applicants

seeking loans under the PPP. Ex. 3.

5. The term of the Operative Agreement was Pe

6. On or about May 26, 2021, while Womply was seeking to obtain additional fees from
Fountainhead, Womply sent Fountainhead the Notice of Termination, through which Womply
terminated the Operative Agreement pursuant to Section 6.2 based upon Fountainhead’s alleged
breach of contract.

7. Section 6.3 of the Operative Agreement provides in its entirety (with emphasis added):

Ex. 3, at § 6.3.

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8. After receiving Womply’s Notice of Termination on June 1, 2021, Fountainhead
requested that Womply comply with its obligations under Section 6.3 of the Operative Agreement by
providing it with copies of the Loan Files.

9. As of July 23, 2021, however, W/omply has failed and refused to provide Fountainhead
with copies of the Loan Files, at various points in time: (i) asserting that it is not under any obligation
to produce the Loan Files because Womply belicves it is entitled to more money from Fountainhead,
(ii) relying upon an arbitrary and baseless interpretation of the term “loan file” chat is inconsistent with
standard lending practice and regulatory authority, and (ili) complaining of the burden imposed on it
by making the required production of the Loan Files.

10. Moreover, Section 11 of the Operative Agreement provides that the Operative
Agreement is ne ae SBA. regulations require lenders
of record to maintain access to their loan files.

11. In connection with Womply’s decision to block lenders’ access to their own loan files,
the SBA sent a “reminder” to certain lenders regarding the need to provide the SBA with access to
lender files, including “all records and documents, relating to SBA guaranteed loans,” citing a number
of regulations and pieces of authority concerning items that must be maintained in the loan file.

12. In order to comply with its obligations to provide the Loan Files, Womply could
simply reinstate Fountainhead’s access to the Technology Platform, which would require little more
than a click of a button.

13. | Womply’s failure and refusal to provide Fountainhead with copies of the Loan Files
constitutes a breach of Womply’s contractual obligation under Section 6.3 and Section 11 of the

Operative Agreement.

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14. Womply’s breach has prevented Fountainhead from funding loan applications,
servicing existing borrowers, complying with law enforcement requests, and adhering to SBA

regulations, causing economic and reputational damage to Fountainhead.

COUNT II - BREACH OF CONTRACT
(FAILURE TO PROVIDE A FUNCTIONAL TECHNOLOGY PLATFORM)

15. Fountainhead repeats and re-alleges the allegations of paragraphs 1 — 14 of these
Counterclaims, as if fully set forth herein.

16. On or about March 23, 2021, Fountainhead and Womply entered into the Operative
Agreement, with an effective date of February 9, 2021, pursuant to which Fountainhead engaged
Womply to provide referrals and technology access to Fountainhead in connection with applicants

secking loans under the PPP. Ex. 3.

17. Section 2 of the Operative Agreement provides that pe

18. Womply breached Section 2 of the Operative Agreement because of the many defects

in the Technology Platform, including, among other things: (i) the Technology Platform failing to
adequately track loans, such that Fountainhead was not even awate of the existence of over 100
potential loans, which Fountainhead could not fund as a result; (ii) the Technology Platform failing to
adequately require potential Borrowers to provide critical tax documentation, resulting in
Fountainhead having to decline hundreds of loan applications; (ii) in many cases, missing or
incomplete documentation relating to loans and potential loans, or delays in obtaining such
documentation, including know-your-customer information, banking information, signed
documentation, and required SBA forms for each loan, and (tv) lack of customer service or support,

requiring Fountainhead to hire a team of contractors to handle customer support phone calls from

MIADOCS 22657012 4

disgruntled potential borrowers, and attempt to help such potential borrowers solve problems related
to the Technology Platform.

19. These defects resulted in Fountainhead’s inability to fund hundreds of PPP loans,
causing significant economic loss to Fountainhead in lost lender fees and reputational damage.

COUNT III —BREACH OF THE COVENANT OF GOOD FAITH AND FaIR DEALING

20. Fountainhead repeats and realleges the allegations tn paragraphs 1-19 of these
Counterclaims, as if fully set forth herein.

21, A contractual relationship existed between the parties by virtue of the Operative
Agreement and predecessor agreements (z2., the Initial Agreement and the Letter Agreement).

22. The parties entered into those agreements with the understanding and expectation that
the parties would act in good faith and deal fairly with each other pursuant to their terms.

23. The law implies in every contract a covenant of good faith and fair dealing, and the
obligations imposed by the implied covenant of good faith and fair dealing govern the manner in
which the contractual obligations must be discharged - fairly and in good faith.

24. Womply has violated the covenant of good faith and fair dealing in various significant
ways, including: (i) improperly abusing its power by renegotiating its agreements with Fountainhead
to obtain more favorable economic terms for itself, (u) attempting to utilize its control of the Loan
Files to extract even more favorable economic terms for itself, (12) improperly terminating the
Operative Agreement in order to block Fountainhead’s access to the Loan Files, (iv} refusing to
provide Fountainhead with its Loan Files by relying on a baseless and arbitrary definition of the term
“Loan File,” (v) refusing to comply to law enforcement requests for Loan File information, and (v1)
refusing to cooperate with Fountainhead in connection with law enforcement requests and

Fountainhead’s regulatory obligations.

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25. As a result of this conduct by Womply, Fountainhead has suffered damages and will
continue to suffer damages in the future, including fees that otherwise would not have to be paid to
Womply (per the initial agreements), lost lender fees, and reputational harm.

Count LV — ToRTIOUS INFERFERENCE

26. Fountainhead repeats and realleges the allegations in paragraphs 1-25 of these
Counterclaims, as if fully set forth herein.

27. As Womply was well-aware, a primary purpose of the Technology Platform was to
facilitate referrals of potential PPP borrowers and allow Fountainhead to provide loans to those
potential borrowers in a commercially viable manner.

28. For the purpose of obtaining improper negotiating leverage in a fee dispute with
Fountainhead, Womply cut off Fountainhead’s access to the Technology Platform, in an effort to
disrupt the relationship between Fountainhead and its borrowers and prospective borrowers.

29. In many instances - and the number continues to increase with each day that
Fountainhead does not have access to the Technology Platform — those relationships are disrupted
because Fountainhead is unable to access Loan Files, fund loans or service existing borrowers.

30. This improper conduct on the part of Womply has caused — and will continue to cause
— economic and reputational harm to Fountainhead.

COUNT V — DECLARATORY RELIEF

31. Fountainhead repeats and realleges the allegations in paragraphs 1-30 as if fully set
forth herein.

32. An actual, present controversy regarding Fountainhead’s rights and obligations exist,
which is the proper subject of declaratory relief.

33. Fountainhead seeks a declaratory judgment that: (1) the Initial Agreement and Letter
Agreement have been superseded to the extent they concern the same subject matter as the Operative

Agreement, given the existence of the Entire Agreement Clause, (ii) Fountainhead does not owe
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Womply ie loans referred to Fountainhead through the Technology Plattorm,

(iii) the fee table set forth in Section 4.3 of the Operative Agreement is to be read progressively, not
retroactively, and (iv) Womply ts obligated under the Operative Agreement to return to Fountainhead

its Loan Files, which include all of the information contained on the Technology Platform.

Vi. REQUEST FOR RELIEF

Fountainhead respectfully requests an award in arbitration as follows:

(i) Womply takes nothing by reason of the Statement of Claim;

(ii) Fountainhead is awarded its damages resulting from Womply’s breach of Section 6.3 and
Section 11 of the Operative Agreement, which respectively provide that Womply must return
Fountainhead’s Loan Files and the Operative Agreement is subject to SBA regulations, which require
lenders to maintain access to their loan files, in an amount to be determined by the arbitrator;

(iit) Fountainhead is awarded its damages resulting from Womply’s breach of Section 2 of the
Operative Agreement, which provides that Womply must make available to Fountainhead a
technology platform that facilitates loan referrals, in an amount to be determined by the arbitrator;

(iv) Fountainhead is awarded its damages resulting from Womplv’s breach of the covenant of
good faith and fair dealing, in an amount to be determined by the arbitrator;

(v) Fountainhead is awarded its damages resulting from Womply’s tortious interference with
Fountainhead’s relationship with its borrowers and potential borrowers, in an amount to be
determined by the arbitrator;

(vi) A declaration that: (i) the Initial Agreement and Letter Agreement have been superseded
to the extent they concern the same subject matter as the Operative Agreement, given the existence
of the Entire Agreement Clause, (it) Fountainhead docs not owe i :: loans
referred to Fountainhead through the Technology Platform, (iii) the fee table set forth in Section 4.3

of the Operative Agreement is to be read progressively, not retroactively, and (iv) Womply is obligated

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under the Operative Agreement to return to Fountainhead its Loan Files, which include all of the

information contained on the Technology Platform; and

(vii) Any other relief the arbitrator deems just and proper.

Dated: July 23, 2021

MIADOCS 22657012 4

Respectfully subzmitted,

SHUTTS & BOWEN LLP

Attorneys for Fountainhead

Southeast Financial Center, Suite 4100
200 S. Biscayne Blvd.

Miami, Florida 33131

(t) (305) 415-9063

By: /s/ Daniel T. Stabile
Daniel T. Stabile, Esq.

(ec) dstabile(@shutts.com
John Bustard, Esq.

(e) jbustard@shutts.com
Lorenia Lopez, Esq.

(e) Hopez@shutts.com

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CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing Answer, Defenses, and

Counterclaim was served via the JAMS Portal and electronic mail on July 23, 2021 upon:

/s/ Daniel Tramel Stabile
Daniel Tramel Stabile, Esq.

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