Monday Funding v Black Friday Deals

Interesting recent case in Supreme Court, Nassau County Monday Funding v. Black Friday Deals, 85 Misc. 3d 1286 (Sup. Ct. Nassau County May 2025) (Justice Christopher T. McGrath) 

 

A recent case, Monday Funding v. Black Friday Deals, 85 Misc. 3d 1286 (Sup. Ct. Nassau County May 2025), decided by Justice Christopher T. McGrath, subjected the Merchant Cash Advance Agreement in question to a well reasoned, searching analysis. The Court went beyond the typical 3-point formula to look at the entire document. Many cases look at just 3 aspects of the agreement, an analysis which can often fall short of getting to the heart of the matter. The 3 features most often examined are (a) whether the term is finite or indefinite, (b) whether bankruptcy is a default, and (c) whether there is a reconciliation clause. These points neglect to take into account other important factors, such as, e.g., -whether the business failing or going out of business is a default triggering liability on the part of the personal guarantor, even though there may not have been a federal bankruptcy filing; -whether the reconciliation agreement is illusory; or -whether the financial terms are bizarrely unfair. 

 

In the Monday Funding case, in response to the lender’s motion to strike affirmative defenses, Justice McGrath denied the motion, and then searched the record and granted defendants summary judgment dismissing the complaint. Justice McGrath reasoned as follows: This Court must be satisfied that this “Merchant Cash Advance Agreement” advanced by the Plaintiff is not a “Predatory Lending Scheme” that is used to target vulnerable small businesses and their owners by issuing loans with excessive fees and high interest rates. In this ease, from the four corners of the Agreement, it is clear to this Court that this Agreement is a Predatory Lending Scheme and not a Merchant Cash Agreement. Specifically, certain provisions outlined in the Agreement make it clear that this is a Predatory Lending Scheme including, but not limited to, the following: i) an Underwriting Fee of $1,750.00; ii) an additional ACH Setup Fee of $1,750.09; iii) a Weekly Maintenance Fee of $24.99; iv) a Blocked/Stopped Fee of $1,000.00; v) a Default Fee of 30% of the outstanding balance, or $5,000.00, whichever is greater, which rendered a Default Fee in this action of $16,099.00; vi) the Specified Percentage of 20% of Company Defendant’s receivables per day; vii) pursuant to the Agreement, in the event of a default, Plaintiff has the option to require Company Defendant to pay Plaintiff 35% of the unpaid balance as additional liquidated damages; viii) attorney fees, which may include a contingency fee of up to 40% of the amount claimed: ix) the parties must waive their right to a jury trial; x) the parties must waive their right to a class action lawsuit; xi) the Agreement states that “[i]n any litigation or arbitration commenced by [Plaintiff], each [Defendant] will not he permitted to interpose any counterclaim;” and xii) this Court notes that Plaintiff has requested prejudgment interest at the rate of pine percent (9%). However, Plaintiff also requests post-judgment interest at an unspecified rate, which, pursuant to the Agreement would be at a rate of 24%. “To determine whether a transaction constitutes a usurious loan, it ‘must be considered in its totality and, judged by its real character, rather than by the name, color, or form which the parties have seen fit to give it.'”….. 

 

The Court granted summary judgment to defendants, dismissing the complaint. This is an important, well-reasoned decision.

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