NY Court Says MCA Agreement is a Factoring Agreement, Not a Loan

A New York Supreme Court judge that was presiding over a breach of contract claim (653596/2018) in a merchant cash advance agreement, said he was bound to follow the decision issued in Champion Auto Sales, the landmark appellate ruling in 2018.

In Principis Capital LLC v Team Van Eyk, Inc. et al, Principis sued the defendants over a breach of contract. Defendants “did not deny the facts underlying the motion or the the amount due,” the judge said, “but asserted instead that the Agreement is not an agreement for the purchase of future receivables; but is instead, a criminally usurious loan, and is therefore void as a matter of public policy.”

This defense actually led to victory for the plaintiff.

The Appellate Division, First Department, in Champion Auto Sales, LLC v Pearl Beta Funding, LLC (159 AD3d 507, 507 [1st Dept], lv denied 31 NY3d 910 [2018]) has considered this issue, involving a merchant agreement substantially similar to the agreement in this matter, and has held that the type of agreement involved in this case is a factoring agreement rather than a usurious loan. This court is bound to follow Champion and, therefore finds that the Agreement is a factoring agreement and not, as defendants assert, a usurious loan. There are, therefore, no genuine triable issues of fact, and plaintiff is entitled to summary judgment on its complaint.

Case closed.