10 Cases Where Businesses Beat MCA Lawsuits
Key Takeaways
- The strongest defense is loan reclassification. If the court calls your MCA a loan, it can be voided as usurious
- COJ vacatur motions win in 50-65% of cases when you file fast with real grounds
- Unconscionability arguments are catching on as courts start calling MCA terms what they are
- You don't need a trial to win. Cases that never get there still settle better when you put up a real fight
MCA funders are not bulletproof in court. Businesses that put up a real defense win, and they do it regularly. Through loan reclassification, getting a COJ vacated, unconscionability rulings, owners have beaten MCA claims a lot of different ways.
Here are 10 cases where businesses beat MCA lawsuits, with takeaways that might apply to you. Delancey Street at (212) 210-1851 has helped win a lot of MCA defense cases.
Loan Reclassification Voids $250K MCA
A restaurant chain argued its MCA was really a loan: fixed daily payments, no reconciliation. The court agreed, reclassified it, and found the 180% effective APR usurious under state law. The whole obligation got voided.
Legal Disclaimer
This article is for informational purposes only and does not constitute legal advice. Laws and regulations vary by jurisdiction and change frequently. Consult a qualified attorney for advice specific to your situation. The information below is current as of 2026 but may not reflect the most recent legal developments.
Legal Topics Covered
- Loan Reclassification Voids $250K MCA
- COJ Vacated for Out-of-State Defendant
- Unconscionable Terms Render Agreement Void
- Personal Guarantee Severed from Invalid MCA
- Bank Account Unfrozen After Emergency Motion
- Class Action Survives Motion to Dismiss
- Overpayment Recovered Through Counterclaim
- Forum Selection Clause Overturned
- Funder Sanctioned for Collection Harassment
- MCA Broker Liable for Misrepresentation
- Key Case Outcomes
- When You Need an Attorney
What's Actually at Stake
The legal points below decide real money. On a typical $100,000 MCA balance, a negotiated resolution lands around a 54% reduction before fees — but only if your defense holds up.
The chart shows where every dollar of that balance goes once a settlement closes. Know these numbers before you sign anything or respond to a filing.
Loan Reclassification Voids $250K MCA
A restaurant chain argued its MCA was really a loan: fixed daily payments, no reconciliation. The court agreed, reclassified it, and found the 180% effective APR usurious under state law. The whole obligation got voided.
COJ Vacated for Out-of-State Defendant
A Texas trucking company got hit with a COJ judgment in New York. The court vacated it under NY's 2019 COJ reform, which bars COJ enforcement against out-of-state defendants.
Unconscionable Terms Render Agreement Void
A dental practice argued its MCA was unconscionable: a 1.55 factor rate, daily debits eating 35% of daily revenue, and punitive default terms. The court agreed and declared the agreement void.
Personal Guarantee Severed from Invalid MCA
A construction company owner argued that if the underlying MCA was a usurious loan, the personal guarantee tied to it should fall too. The court agreed and released the owner from personal liability.
Bank Account Unfrozen After Emergency Motion
An MCA funder froze $340,000 belonging to a medical practice. The business filed an emergency order to show cause, proving the money was needed for payroll and patient care. The court released 80% of the frozen funds within 72 hours.
Class Action Survives Motion to Dismiss
A group of small business owners filed a class action claiming an MCA funder used deceptive marketing and charged usurious rates. The court denied the funder's motion to dismiss and let the case move into discovery.
Overpayment Recovered Through Counterclaim
An auto repair shop showed its MCA funder had collected $47,000 more than the purchased amount. The court ordered the funder to refund the overpayment and cover the shop's attorney fees.
Forum Selection Clause Overturned
A California ecommerce company challenged a New York forum selection clause as unreasonable. The court moved the case to California, where the defendant had a home court advantage and CA consumer protections to lean on.
Funder Sanctioned for Collection Harassment
A staffing agency logged more than 200 calls in 30 days from an MCA funder, including calls to its clients and the owner's family. The court sanctioned the funder and awarded $50,000 in compensatory damages.
MCA Broker Liable for Misrepresentation
A business owner proved the MCA broker lied about the key terms of the advance, including the total cost and how payments worked. The court held the broker jointly liable with the funder for damages.
Key Case Outcomes
MCA voided as usurious loan
COJ vacated — $175K judgment dismissed
Agreement voided as unconscionable
Personal guarantee voided
$272K released within 72 hours
Case proceeding — strong signal
$47K refund + attorney fees
Venue transferred to defendant's state
$50K damages + sanctions
Broker held liable for damages
When You Need an Attorney
Based on the legal landscape covered in this article, professional legal representation is strongly recommended in these situations:
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Frequently Asked Questions
More often than people expect. Hard numbers are tough to pin down since most cases settle out of court, but businesses with an experienced MCA defense attorney get a good outcome (dismissal, vacatur, or a much smaller settlement) in roughly 60-75% of cases.
Loan reclassification, where you argue the MCA is really a usurious loan, is the most powerful play when the facts back it up. Other defenses that work: COJ procedural challenges, unconscionability, fraud in the inducement, and lack of personal jurisdiction.
Almost no MCA cases reach trial. Most get resolved through settlement, a motion to dismiss, or COJ vacatur. File strong defenses and show you're willing to litigate, and that's usually enough to get a good settlement without ever stepping into a courtroom.
Sometimes, yes. A lot of MCA agreements have a fee-shifting provision, and courts have made funders pay the borrower's legal fees when the borrower wins. Some states also let you recover fees for UDAP violations.