Crosby Marine Transportation, LLC v. Meged Funding Group Corp et al

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF LOUISIANA
IN RE:
CROSBY MARINE TRANSPORTATION,
LLC,
DEBTORS.1
§ CASE NO. 26-10678
§ (JOINTLY ADMINISTERED)
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§ CHAPTER 11
§ COMPLEX CASE
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CROSBY TUGS, L.L.C., CROSBY DREDGING,
LLC, CROSBY MARINE TRANSPORTATION,
LLC, AND BERTUCCI CONTRACTING
COMPANY, L.L.C.,
PLAINTIFFS,
V.
MEGED FUNDING GROUP A/K/A MEGED
FUNDING GROUP CORP,
ALLIANCE ENERGY SERVICES, LLC,
ARENA OFFSHORE,
CANTRELLE SERVICES LLC,
CANTIUM LLC,
CAJUN INDUSTRIES LLC,
CHAMPAGNE ENERGY & ENVIRONMENTAL
SOLUTIONS,
CHEVRON PRODUCTION CO.,
CURTIN MARITIME,
ECOSERV, LLC,
ECOSERV ENVIRONMENTAL SERVICES,
LLC,
GAC NORTH AMERICA,
INGRAM MARINE GROUP,
JOHN W STONE OIL DISTRIBUTOR LLC,
KENOSIS OPERATING COMPANY,
KEVIN GROS CONSULTING,
LOOP LLC,
LUHR CROSBY LLC,
MODERN AMERICAN RECYCLING,
MARSHLAND EQUIPMENT RENTALS,
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§ ADV. NO. 26-1018
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1 The Court entered an Order directing joint administration of the Chapter 11 bankruptcy case of
Crosby Marine Transportation, LLC [No. 26-10678], as lead case, with the Chapter 11 bankruptcy cases of
(i) Crosby Tugs, L.L.C. [No. 26-10679], (ii) Crosby Dredging, LLC [No. 26-10680], and (iii) Bertucci
Contracting Company, L.L.C. [No. 26-10681], on March 24, 2026, [No. 26-10678, ECF Doc. 9; No. 26-
10679, ECF Doc. 4; No. 26-10680, ECF Doc. 4, No. 26-10681, ECF Doc. 4].
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MCDONOUGH MARINE SERVICE,
MORRISON OFFSHORE LLC,
PATRIOT MARINE SERVICES,
PORT OF IBERIA DISTRICT BOARD OF
COMMISSIONERS,
ROSE CAY MARITIME LLC,
SABINE NECHES NAVIGATION DISTRICT,
SPACE EXPLORATION TECHNOLOGIES,
TALA ENVIRONMENTAL LLC,
THOM-SEA BOAT BUILDERS,
TK TOWING INC.,
TPC GROUP LLC,
TRITON DIVING SERVICES LLC,
T&T MARINE SALVAGE INC.,
VENTURE GLOBAL CALCASIEU PASS LLC,
WALTER OIL & GAS,
WHITE FLEET DRILLING,
HEEREMA MARINE CONTRACTORS
NEDERLAND, S.E.,
AQUA CAPITAL LLC.,
BREEZE FUNDING,
CELTIC ADVANCE,
EN OD CAPITAL,
ALO ADVANCE,
CEDAR ADVANCE LLC,
CLEARFUND SOLUTIONS, LLC,
COLDWATER CAPITAL, LLC,
COOPER INVESTMENTS, LLC,
DEPENDENCE PLATINUM,
FOREVER FUNDING LLC,
FREEDOM FUNDING LLC,
GALT FUNDING CO,
INSIGHT CAPITAL LLC,
LIBERTAS FUNDING, LLC,
MOBY CAPITAL LLC D/B/A MOBYCAP,
MYNT GOLD, LLC A/K/A MYNT ADVANCE,
NOVAC EQUITIES LLC,
ODK CAPITAL, LLC D/B/A ON DECK,
ORACAP LLC,
OVERTIME CAPITAL,
PARKVIEW ADVANCE LLC,
PINNACLE BUSINESS FUNDING LLC,
RELIANCE FINANCIAL FL, LLC,
ROCKET CAPITAL NY, LLC.
SQ ADVANCE,
SURGE FUNDING LLC,
TRUE BUSINESS FUNDING LLC,
WEB BANK C/O LIBERTAS FUNDING LLC, &
WYNWOOD CAPITAL GROUP, LLC,
DEFENDANTS.
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MEMORANDUM OPINION AND ORDER
On April 3, 2026, shortly after commencing these jointly administered cases, Crosby
Marine Transportation, LLC (“Crosby Marine”), Crosby Tugs, L.L.C. (“Crosby Tugs”), Crosby
Dredging, LLC (“Crosby Dredging”), and Bertucci Contracting Company, L.L.C. as debtors and
debtors-in-possession (together, the “Debtors”), commenced the above-captioned adversary
proceeding by filing a complaint against certain of their Customers2 as well as numerous MCA
Defendants (the “Complaint”). [ECF Doc. 1]. Through the Complaint, the Debtors seek (i) a
declaration that Crosby Accounts Receivable are property of the estate under 11 U.S.C. § 541
(Count 1); (ii) turnover of cash owed from Customers to Crosby Tugs and Crosby Dredging
pursuant to accounts receivable under 11 U.S.C. § 542 (Count 2); (iii) injunctive relief enjoining
the MCA Defendants from seeking payment of the Debtors’ accounts receivable directly from
Customers (Count 3); (iv) a declaration recharacterizing the MCA Agreements as disguised loans
(Count 4); and (v) a declaration that Interested Parties are adequately protected from any
diminution of the Debtors’ use of cash collateral stemming from the Debtors’ post-petition
receivables (Count 5). See id.
Before the Court is the Debtors’ Motion for Partial Summary Judgment Against MCA
Defendants (the “MPSJ”), [ECF Doc. 202]. The Debtors seek summary judgment against Cedar
Advance LLC (“Cedar”) on Counts 1–4 of their Complaint. The Debtors submitted a statement of
uncontested facts, [ECF Doc. 202-1], and Cedar filed an opposition to the MPSJ, [ECF Doc. 272],
and a counterstatement of material facts, [ECF Doc. 272-2].3 The Debtors filed a reply brief in
2 Capitalized terms not otherwise defined herein are defined as described in the Complaint and
exhibits attached to the Complaint.
3 MCA Defendants Forever Funding LLC, Insight Capital LLC, SQ Advance, Wynwood Capital
Group, LLC joined in Cedar’s opposition. The Court has issued a separate Memorandum Opinion and Order
as to each defendant.
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support of the MPSJ. [ECF Doc. 292]. In short: The Debtors assert that the text of the MCA
Agreement executed among Crosby entities and Cedar is unambiguous and reveals that the
agreement is a disguised loan as a matter of law. [ECF Doc. 202 & 292, ¶ 5]. Cedar does not
dispute that the text of the MCA Agreement is unambiguous and asserts that the agreement is by
its terms a true sale. [ECF Doc. 272]. At the same time, however, Cedar also asserts that summary
judgment is premature because it has not been given adequate time to conduct discovery to make
a complete summary judgment record. See id. In their reply, the Debtors repeat the standard
contract-interpretation principle that where the language of an agreement is unambiguous, a court
must look only at the “four corners” of the agreement (and not to any extrinsic evidence) to
interpret the contract as a matter of law, which precludes the need for further discovery here. [ECF
Doc. 292, ¶ 6]. For the reasons set forth below, the Court GRANTS IN PART and DENIES IN
PART the Debtors’ MPSJ.
JURISDICTION AND VENUE
This Court has jurisdiction to grant the relief provided for herein pursuant to 28 U.S.C.
§ 1334. The matters presently before the Court constitute core proceedings that this Court may
hear and determine on a final basis under 28 U.S.C. § 157(b)(2)(B). Venue is proper pursuant to
28 U.S.C. §§ 1408 and 1409.
UNDISPUTED FACTS
The following material facts are either uncontested, not the subject of a genuine dispute, or
are subject to judicial notice by this Court:
The Debtors and their affiliates are in the marine transportation industry. [ECF Docs. 202-
47, ¶ 8 & 202-48]. The Debtors and their non-debtor affiliates have a fleet of more than 200 vessels
and marine equipment, with Crosby Marine owning approximately 80% of the fleet. [ECF Doc.
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202-47, ¶¶ 23 & 28]. Crosby Tugs assists small freighters, container ships, aircraft carriers, very
large crude carriers, and other vessels into and out of births; escorts oil tankers quickly and safely
through shipping channels and environmentally sensitive waters; and tows ships, semisubmersible
rigs, landing platforms, and other vessels. [ECF Doc. 202-47, ¶ 23]. Crosby Dredging deploys a
variety of equipment to complete dredging work and coastal-restoration projects for a variety of
governmental and private businesses. See id.
By providing those services to their Customers, Crosby Tugs and Crosby Dredging
generate substantial accounts receivable (the “Crosby Accounts Receivable”). [ECF Doc. 202-1,
¶ 9; ECF Doc. 272-2]. Attached to the Complaint as Exhibit B is a schedule of uncollected past-
due and owing Crosby Accounts Receivable as of the filing of the Adversary Complaint. [ECF
Doc. 202-1, ¶ 10; ECF Doc. 272-2]. As of the date of the Complaint, Crosby Tugs had total
accounts receivable in the amount of $10,840,638.45,4 consisting of current accounts receivable
in the amount of $5,755,785.29,5 and past-due accounts receivable in the amount of
$5,084,853.16,6 while Crosby Dredging had total accounts receivable in the amount of
$7,874,046.37,7 consisting of current accounts receivable in the amount of $602,297.63,8 and past-
due accounts receivable in the amount of $7,271,748.74.9 [ECF Doc. 202-1, ¶ 11; ECF Doc. 272-
2].
4 See Complaint, Ex. B, Crosby Tugs, Column G.
5 See Complaint, Ex. B, Crosby Tugs, Column D.
6 See Complaint, Ex. B, Crosby Tugs, Column F.
7 See Complaint, Ex. B, Crosby Dredging, Column G.
8 See Complaint, Ex. B, Crosby Dredging, Column D.
9 See Complaint, Ex. B, Crosby Dredging, Column F.
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Between February 20, 2025, and February 13, 2026, the Debtors and individual MCA
Defendants executed the following prepetition MCA Agreements:
Ex.
No. Agreement Name MCA Counterparty Debtor
Counterparty Date of
Execution
1 Sale of Future Receipts
Agreement ALO Advance Crosby Tugs,
Crosby Dredging 12/18/2025
2 Revenue Purchase Agreement Aqua Capital LLC Crosby Tugs 2/13/2026
3 Sale of Future Receipts
Agreement Breeze Funding Crosby Dredging 12/1/2025
4 Sale of Future Receipts
Agreement Breeze Funding Crosby Dredging 10/10/2025
5 Standard Merchant Cash
Advance Agreement Cedar Advance LLC Crosby Tugs,
Crosby Dredging 3/11/2025
6 Standard Merchant Cash
Advance
Agreement
Celtic Advance LLC Crosby Tugs,
Crosby Dredging 12/18/2025
7 Standard Merchant Cash
Advance Agreement Celtic Advance LLC Crosby Tugs,
Crosby Dredging 2/13/2026
8 Sale of Future Receipts
Agreement Coldwater Capital Crosby Dredging 5/28/2025
9 Revenue Purchase Agreement Cooper Investments LLC Crosby Tugs,
Crosby Dredging 12/26/2025
10 Revenue Purchase Agreement Cooper Investments LLC Crosby Tugs,
Crosby Dredging 1/22/2026
11 Sale of Future Receipts
Agreement
Dependance Platinum
FL LLC
Tugs, Crosby
Dredging 5/28/2025
12 Standard Merchant Cash
Advance
Agreement
EN OD Capital Crosby Dredging 6/16/2025
13 Standard Merchant Cash
Advance Agreement Forever Funding LLC Crosby Tugs 6/30/2025
14 Revenue Purchase Agreement Freedom Funding LLC Crosby Tugs 12/18/2025
15 Revenue Purchase Agreement Freedom Funding LLC Crosby Tugs 2/13/2026
16 Revenue Purchase Agreement Galt Funding Co. Crosby Tugs 11/25/2025
17 Revenue Purchase Agreement Galt Funding Co. Crosby Tugs,
Crosby Dredging 12/26/2025
18 Standard Merchant Cash
Advance
Agreement
Insight Capital LLC Crosby Dredging 8/21/2025
19 Standard Merchant Cash
Advance Agreement Insight Capital LLC Crosby Dredging 12/2/2025
20 Standard Merchant Cash
Advance Agreement Meged Funding Group
Crosby Tugs,
Crosby Dredging,
Crosby Marine 4/22/2025
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21 Standard Merchant Cash
Advance Agreement Meged Funding Group
Crosby Tugs,
Crosby Dredging,
Tugs, Crosby
Marine
4/22/2025
22 Standard Merchant Cash
Advance Agreement Meged Funding Group
Crosby Tugs,
Crosby Dredging,
Crosby Marine 5/12/2025
23 Agreement of Sale of
Future Receipts Moby Capital, LLC
Crosby Tugs,
Crosby Dredging,
Crosby Marine,
Bertucci
5/12/2025
24 Sale of Future Receipts
Agreement Mynt Advance Crosby Tugs,
Crosby Dredging 11/12/2025
25 Sale of Future Receipts
Agreement Mynt Advance Crosby Tugs,
Crosby Dredging 2/13/2026
26 Revenue Purchase Agreement Novac Equities LLC Crosby Tugs,
Crosby Dredging 12/18/2025
27 Revenue Purchase Agreement Novac Equities LLC Crosby Tugs,
Crosby Dredging 12/26/2025
28 Revenue Purchase Agreement
($100,000.00 Purchase Price) Novac Equities LLC Crosby Tugs,
Crosby Dredging 1/22/2026
29 Revenue Purchase Agreement
($200,000.00 Purchase Price) Novac Equities LLC Crosby Tugs,
Crosby Dredging 1/22/2026
30 Business Loan and
Security Agreement
OnDeck | ODK Capital
LLC Crosby Dredging Undated
31 Agreement of Sale of
Future Receipts Orcacap, LLC Crosby Dredging 4/10/2025
32 Agreement of Sale of
Future Receipts Orcacap, LLC Crosby Dredging 7/11/2025
33 Agreement of Sale of
Future Receipts Orcacap, LLC Crosby Dredging 9/5/2025
34 Sale of Future Receipts
Agreement Overtime Capital Crosby Dredging 6/24/2025
35 Standard Merchant Cash
Advance Agreement Parkview Advance Crosby Tugs 11/12/2025
36 Standard Merchant Cash
Advance Agreement
Pinnacle Business
Funding LLC
Crosby Tugs,
Crosby Dredging 11/12/2025
37 Standard Merchant Cash
Advance Agreement
Pinnacle Business
Funding LLC
Crosby Tugs,
Crosby Dredging 12/26/2025
38 Sale of Future Receipts
Agreement
Reliance Financial FL
LLC
Crosby Tugs,
Crosby Dredging 12/9/2025
39 Agreement for the
Purchase and Sale of
Future Receipts
Rocket Capital NY LLC Crosby Dredging 4/25/2025
40 Merchant Cash Advance SQ Advance
Crosby Tugs,
Crosby Dredging,
Crosby Marine,
Bertucci
6/11/2025
41 Revenue Purchase Agreement Surge Funding LLC Crosby Tugs 11/25/2025
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42 Revenue Purchase Agreement Surge Funding LLC Crosby Tugs 12/26/2025
43 Revenue Purchase Agreement Surge Funding LLC Crosby Tugs 1/22/2026
44 Standard Merchant Cash
Advance Agreement Wynwood Capital Group Crosby Dredging 2/20/2025
45 Standard Merchant Cash
Advance Agreement Wynwood Capital Group Crosby Dredging 3/11/2025
[ECF Doc. 202-1, ¶ 24 & 202-2 to -46; ECF Doc. 272-2]. The Debtors and Cedar do not dispute
that on March 11, 2025, they entered into the agreement attached as Exhibit 5 to the Debtors’
MPSJ and that those agreements are true and correct copies. [ECF Docs. 202-6; ECF Doc. 202-1,
¶ 24; ECF Doc. 272]. The basic terms of the agreement are:
• On March 11, 2025, Kurt J. Crosby, on behalf of “Crosby Dredging, LLC” and
“Crosby Tuggs LLC” entered into a “Standard Merchant Cash Advance
Agreement” with Cedar for the “purchase” of the Debtor’s “Receivables” in the
amount of $ 1,500,000.00, for and “in consideration of a “Purchase Price” of
$1,000,000.00 (the “Cedar MCA Agreement”). [ECF Doc. 202-6, at 1 & ¶ 1].
DISCUSSION
A. Summary Judgment Standard
A court grants summary judgment when the pleadings, discovery responses, and affidavits
show no genuine dispute as to any material fact and the evidence entitles the movant to judgment
as a matter of law. See FED. R. CIV. P. 56(a); FED R. BANKR. P. 7056; Celotex Corp. v. Catrett,
477 U.S. 317, 322 (1986). No genuine dispute exists when “a rational trier of fact could not find
for the [nonmovant] based upon the record evidence before the court.” James by James v. Sadler,
909 F.2d 834, 837 (5th Cir. 1990) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 586 (1986)). In deciding a motion for summary judgment, “the judge’s function is not
[herself] to weigh the evidence and determine the truth of the matter but to determine whether
there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). In
so doing, the Court views the facts and evidence in the light most favorable to the non-moving
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party at all times. See Campo v. Allstate Ins. Co., 562 F.3d 751, 754 (5th Cir. 2009). “The
interpretation and enforcement of a contract are questions of law, not fact, and so are appropriately
dealt with at summary judgment.” Anadarko Petroleum Corp. v. Alt. Env’t Solutions, Inc., 169
F.4th 542, 548 (5th Cir. 2026) (citations omitted); see also Tekelec, Inc. v. Verint Sys., Inc., 708
F.3d 658, 664 (5th Cir. 2013) (“The interpretation of an unambiguous contract is a legal question
that can be properly decided on summary judgment.”).10
A party moving for summary judgment bears the initial burden of demonstrating the
absence of a genuine dispute of material fact. See Celotex, 477 U.S. at 317. Where the moving
party also bears the burden of proof at trial, it must “come forward with evidence which would
entitle it to a directed verdict if the evidence went uncontroverted at trial.” Int’l Shortstop, Inc. v.
Rally’s Inc., 939 F.2d 1257, 1264–65 (5th Cir. 1991) (internal quotations omitted). Where the
nonmoving party has the burden of proof at trial for a claim or defense, the moving party can show
that it is entitled to summary judgment by pointing to the absence of evidence supporting the
nonmoving party’s case. See Celotex, 477 U.S. at 325.
B. Standards for Determining Whether a Purported Sale of Receivables Is a True
Sale or a Disguised Loan
Bankruptcy Courts have been tasked with classifying merchant cash advance agreements
as either true sales or disguised loans in a variety of contexts. See, e.g., Greenwich Retail Grp.
10 Cedar argues that the Debtors’ MPSJ is premature because it needs to conduct discovery on “the
actions of the Debtors in connection with confection, execution and prepetition performance under the MCA
agreements generally,” [ECF Doc. 272, at 8], but Cedar has not pointed to any ambiguous language in the
Cedar MCA Agreement that would require the consideration of extrinsic evidence here. Indeed, “[w]here
the terms of a contract are clear and unambiguous, the parties’ intent must be gleaned from the four corners
of the document.” Crawford v. Barker, 64 So.3d 1246, 1255 (Fla. 2011) (citation omitted). “The
interpretation of a contract is a question of law . . . .” Three Keys, Ltd. v. Kennedy Funding, Inc., 28 So.3d
894, 903 (Fla. Dist. Ct. App. 2009) (citation omitted). The Court finds that the language in the Cedar MCA
Agreement is unambiguous; therefore, any extrinsic evidence that Cedar would obtain through discovery
would necessarily be immaterial facts with respect to the Debtors’ MPSJ, and thus would not defeat the
Debtors’ MPSJ under Rule 56.
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LLC v. Moby Capital, LLC (In re Greenwich Retail Grp. LLC), 677 B.R. 473 (Bankr. S.D.N.Y.
2026) (classifying MCA agreements in evaluating application of state usury law); Bircher v.
Funding Metrics, LLC (In re A Goodnight Sleepstore, Inc.), No. 17-03274, 2019 WL 342577, at
*3 (Bankr. E.D.N.C. Jan. 25, 2019) (classifying MCA agreements in evaluating application of
avoidance actions under 11 U.S.C. § 547 & 548); see also generally Kara J. Bruce, The Murky
Process of Characterizing Merchant Cash Advance Agreements, 42 BANKR. L. LETT. 4 (2022).
The parties here ask this Court to determine whether the Cedar MCA Agreement is a true sale as
it is identified on the face of the agreement, or whether the Court should recharacterize the
purported sale as a disguised loan based on the substance of the agreement for purposes of
determining whether the Crosby Accounts Receivable are property of the estate under 11 U.S.C.
§ 541(a).
Property of the estate consists of “all legal or equitable interests of the debtor as of the
commencement of the case.” 11 U.S.C. § 541(a)(1). The parties executed the cedar MCA
Agreement prepetition. If the Cedar MCA Agreement is a true sale of certain of the Crosby
Accounts Receivable, then the Debtors transferred their interests in those receivables prepetition
and did not have a “legal or equitable” interest in them as of the commencement of the case. In
that case, those receivables are not property of the estate. If the Cedar MCA Agreement is a
disguised loan, however, the Debtors retained their interests in the receivables, making them
property of the estate under § 541(a)(1) of the Bankruptcy Code.
Generally, bankruptcy courts look to state law to determine the extent of a party’s interest
in property. See Butner v. United States, 440 U.S. 48, 54–55 (1979). The parties do not dispute
that their respective interests in certain of the Crosby Accounts Receivable under the Cedar MCA
Agreement are governed by Florida law pursuant to the choice-of-law provision in the contract.
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[ECF Docs. 202 & 272]. Under Florida law, “[t]he intent of the parties to a contract should govern
the construction of a contract.” Am. Home Assurance Co. v. Larkin Gen. Hosp., Ltd., 593 So.2d
195, 197 (Fla. 1992) (citation omitted). “Where the terms of a contract are clear and unambiguous,
the parties’ intent must be gleaned from the four corners of the document.” Crawford v. Barker,
64 So.3d 1246, 1255 (Fla. 2011) (citation omitted). “The interpretation of a contract is a question
of law . . . .” Three Keys, Ltd. v. Kennedy Funding, Inc., 28 So.3d 894, 903 (Fla. Dist. Ct. App.
2009) (citation omitted).
When determining whether a contract evidences a sale or a loan, courts look to substance
over form. See Kay v. Amendola, 129 So.2d 170, 172 (Fla. Dist. Ct. App. 1961).11 No published
decisions indicate that Florida courts have interpreted merchant cash advance agreements
specifically, but bankruptcy courts have recently characterized merchant cash advance agreements
containing Florida choice-of-law provisions and relied heavily on New York law. See In re
McKenzie Contracting, LLC, No. 8:24-BK-01255-RCT, 2024 WL 3508375, at *2–6 (Bankr. M.D.
11 It is true that the plain language of the Cedar MCA Agreement describes the transaction as a “sale”:
• The agreement lists a “Purchase Price” and states: “This is the amount being paid to
Merchant(s) for the Receivables Purchased Amount (defined below).” [ECF Doc. 202-6, at 1].
• Paragraph 1 of the agreement entitled “Sale of Future Receipts” states: “Merchant(s) hereby
sell, assign, and transfer to CEDAR (making CEDAR the absolute owner) in consideration of
the funds provided for (“Purchase Price”) specified above, all of each Merchant’s future
accounts, contract rights, and other obligation arising from or relating to the payment of monies
from each Merchant’s customers and/or third party payors . . . .” [ECF Doc. 202-6, ¶ 1].
• Paragraph 14 of the agreement entitled “Sale of Receivables” states: “Each Merchant and
CEDAR agree that the Purchase Price under this Agreement is in exchange for the Receivables
Purchased Amount and that such Purchase Price is not intended to be, nor shall it be construed
as a loan from CEDAR to any Merchant.” [ECF Doc. 202-6, ¶ 14].
But this Court is not bound by the language in the Cedar MCA Agreement labeling the transaction as a sale
because the characterization of a transaction as a true sale or a disguised loan turns on the substance of the
transaction rather than its form. See Kay v. Amendola, 129 So.2d 170, 172 (Fla. Dist. Ct. App. 1961); Adar
Bays, LLC v. GeneSYS ID, Inc., 37 N.Y.3d 320, 334 (2021).
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Fla. July 19, 2024) (characterizing MCA agreements governed by Florida law and attached to
Proofs of Claim 5-1 and 47-1 for Subchapter V designation purposes); In re IVF Orlando, Inc.,
No. 6:24-BK-05475-TPG, 2025 WL 2831400, at *10–14 (Bankr. M.D. Fla. Oct. 3, 2025)
(characterizing MCA agreements governed by Florida law for confirmation purposes).
New York courts have identified various non-exclusive hallmarks to evaluate whether a
purported sale of receivables is, in substance, a loan. In the context of evaluating a transaction
under usury law, one court found that “[u]nless a principal sum advanced is repayable absolutely,
the transaction is not a loan” and weighed three factors to determine whether repayment is absolute
or contingent: “(1) whether there is a reconciliation provision in the agreement; (2) whether the
agreement has a finite term; and (3) whether there is any recourse should the merchant declare
bankruptcy.” LG Funding, LLC v. United Senior Props. of Olathe, LLC, 181 A.D.3d 664, 666
(N.Y. App. Div. 2d Dept. 2020) (citing cases). But those “three factors provide only a guide to
analysis.” Fleetwood Servs., LLC v. Ram Capital Funding, LLC, No. 20-CV-5120, 2022 WL
1997207, at *9 (S.D.N.Y. June 6, 2022). “They do not dictate the conclusion, and a court need not
find the presence of all three factors in concluding that a transaction is a loan.” Id. (citations
omitted). Similarly, to determine property of a debtor’s estate under § 541, another court weighed
eight other characteristics to decide whether a purported sale of receivables is actually a loan:
(1) Language of the documents and conduct of the parties;
(2) Recourse to the seller;
(3) Seller’s retention of servicing and commingling of proceeds;
(4) Purchaser’s failure to investigate the credit of the account debtor;
(5) Seller’s right to excess collections;
(6) Purchaser’s right to alter pricing terms;
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(7) Seller’s retention of right to alter or compromise unilaterally the terms of
the transferred assets; and
(8) Seller’s retention of right to repurchase assets.
In re R&J Pizza Corp., No. 14-43066, 2014 WL 12973408, at *3 (Bankr. E.D.N.Y. Oct. 14, 2014)
(citing Robert D. Aicher & William J. Fellerhoff, Characterization of a Transfer of Receivables as
a Sale or a Secured Loan Upon Bankruptcy of the Transferor, 65 AM. BANKR. L. J. 181, 186–94
(1991)); see also Cap Call, LLC v. Foster (In re Shoot the Moon, LLC), 635 B.R. 797, 813 (Bankr.
D. Mont. 2021) (weighing those hallmarks to determine whether a transaction was a true sale or
disguised loan under usury law and to resolve an avoidance action).
But courts characterizing MCAs have increasingly backed away from the mechanical
application of any one set of factors in favor of a flexible, totality-of-the-circumstances approach.
As explained by Judge Wiles:
[I]t ought to be clear (though sometimes it appears to be overlooked) that when a
court is asked to determine whether, in substance, a transaction was actually a sale
or a loan, the court should not begin and end its inquiry by considering only whether
the transaction has all of the ordinary characteristics of a loan. In deciding what
the substance of [a] transaction really is, a court must also consider whether the
transaction has the features one would expect to see in a sale. A court that does not
do so has only examined half of the relevant question.
Greenwich Retail Grp. LLC v. Moby Capital, LLC (In re Greenwich Retail Grp. LLC), 677 B.R.
473, 500 (Bankr. S.D.N.Y. 2026). “That said, a consideration that overlays and unites the factors
is how the parties allocated risk.” In re Shoot the Moon, LLC, 635 B.R. at 813. “A sale typically
occurs when the risk of loss from the purchased assets passes to the buyer—a gamble usually
reflected in the purchase price.” Id. at 813–14. “Conversely, in a disguised loan, the parties may
employ various methods to allocate risk—the putative seller typically remains exposed to the
underlying receivables and may grant the putative buyer recourse to sources of recovery beyond
the receivables.” Id. at 814.
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Thus, the root of the true-sale-versus-disguised-loan analysis is the transfer of risk. But it
is also important to distinguish the type of risk that is indicative of a true sale from the ordinary
credit risks that are borne by any lender. That the purported buyer is not guaranteed full repayment
under all conceivable circumstances is not sufficient to characterize a transaction as a true sale
because all loans come with at least some degree of risk that the lender will not receive the benefit
of the bargain. See In re Greenwich Retail Grp. LLC, 677 B.R. at 499 (“The risk that a borrower
might die or become insolvent, for example, is a risk that every lender takes . . . .”). The relevant
question is: Who is exposed to the direct risk of non-payment of the receivables?
“Where the lender has purchased the accounts receivable, the borrower’s debt is
extinguished and the lender’s risk with regard to the performance of the accounts
is direct, that is, the lender and not the borrower bears the risk of non-performance
by the account debtor.” However, where economic analysis reveals that “the
lender’s risk is derivative or secondary, that is, the borrower remains liable for the
debt and bears the risk of non-payment by the account debtor, while the lender only
bears the risk that the account debtor’s non-payment will leave the borrower unable
to [pay],” then there has not been a bona fide purchase of receivables and the
transaction is, in substance, a loan.
Haymount Urgent Care PC, 609 F. Supp. 3d at 247 (quoting Endico Potatoes, Inc. v. CIT
Grp./Factoring, Inc., 67 F. 3d 1063, 1069 (2d Cir. 1995)). Indeed, “parties who are not directly
exposed to market risk in the value of the underlying assets are likely to be lenders . . . .” Adar
Bays, LLC, 179 N.E.3d at 622 (citations omitted). Thus, “[t]he deciding factor in the ‘sale’ versus
‘loan’ dispute is generally the transfer of risk—if the ‘buyer’ is absolutely entitled to repayment
under all circumstances, then the risk remains with the ‘seller’ and the transaction is considered a
loan.” In re McKenzie Contracting, LLC, 2024 LA 3508375, at *2 (citations omitted)); see also
In re IVF Orlando, Inc., 2025 WL 28331400, at *10 (finding that the transfer-of-risk factor “carries
the greatest weight”). “Obviously, the economic substance of the transaction controls this
determination.” In re McKenzie Contracting, LLC, 2024 WL 3508375, at *2.
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C. Under Florida Law, the Cedar MCA Agreement is a Disguised Loan.
1. The Debtors overwhelmingly bear the direct risk of non-payment of the
Crosby Accounts Receivables.
Several provisions in the Cedar MCA Agreement work together effectively to shield Cedar
from all risk that the purchased receivables may be uncollectible, placing that risk squarely upon
the Debtors. Under the Cedar MCA Agreement, Cedar purportedly purchased “Receivables”
generically identified as “all payments made by cash, check, credit or debit card, electronic
transfer, or other form of monetary payment in the ordinary course of each merchant’s business,
for the payment of each Merchant’s sale of good or services.” [ECF Doc. 202-6, ¶ 1]. Because
the Cedar MCA Agreement identifies no particular revenue source, Cedar bore no actual risk of
non-payment from any specific customer of the Debtors. See Haymount Urgent Care PC v.
GoFund Advance, LLC, 609 F. Supp. 3d 237, 249 (S.D.N.Y. 2022) (finding that non-specific
receivables showed that purported risks of a buyer did not actually exist). Indeed, the fact that no
specific receivables are identified in the Cedar MCA Agreement bears strongly on the question of
risk because the Debtors’ obligation to repay the purchase price is independent of the collectability
of any particular receivable. Thus, the failure to collect on any particular account never affects the
amount Cedar is entitled to recover under the Cedar MCA Agreements, so the direct risk of non-
collectability remains with the Debtors.
Further, although ostensibly a sale of “future receipts” or “Receivables,” Cedar’s collateral
securing performance is substantially broader than the receivables purchased. Paragraph 29 of the
Cedar MCA Agreement provides:
To secure each Merchant’s performance obligations to CEDAR under this
Agreement and any future agreement with CEDAR, each Merchant hereby grants
to CEDAR a security interest in collateral (the “Collateral”), that is defined
collectively: (a) all accounts, including without limitation, all deposit accounts,
accounts-receivable, and other receivables, as those terms are defined by
Article 9 of the Uniform Commercial Codes (the “UCC”), now or hereafter
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owned or acquired by any Merchant; and (b) all proceeds, as that term is
defined by Article 9 of the UCC. The parties acknowledge and agree that any
security interest granted to CEDAR under other agreement between any Merchant
or Guarantor and CEDAR (the “Cross-Collateral”) will secure the obligation
hereunder and under this Agreement.
[ECF Doc. 202-6, ¶ 29 (emphasis added)]. Although not as extensive as the security interests
discussed in In re Shoot The Moon and Fleetwood Services, LLC, Cedar’s security interest is still
substantially broader than the receivables purportedly purchased; the collateral description
includes “all deposit accounts,” which gives Cedar a security interest over virtually all of the
Debtors’ operating funds. “The fact that the documents contemplate a broad security package for
[Cedar] to generally collaterize payment obligations in indicative of a loan, not a sale.” In re Shoot
the Moon, LLC, 635 B.R. at 815.
The Cedar MCA Agreement also gives Cedar rights and recourse against property in
addition to its collateral. Indeed, the Cedar MCA Agreements give Cedar direct access, control,
and authority to sweep funds from the Debtors’ bank account:
The Receivables Purchased Amount shall be paid to CEDAR by each
Merchant irrevocably authorizing only one depositing account acceptable to
CEDAR (the “Account”) to remit the percentage specified above (the
“Specified Percentage”) of each Merchant’s settlement amounts due from each
transaction, until such time as CEDAR receives payment in full of the
Receivables Purchased Amount. Each Merchant hereby authorizes CEDAR
to ACH debit in one or more ACH transactions the specified remittances and
any applicable fees listed in Section 2 from the Account on a daily basis (unless
a different frequency is provided for herein) as of the next business day after
the dates of this Agreement and will provide CEDAR with all required access
codes and monthly bank statements. Each Merchant understands that it will be held
responsibility for any fees resulting from a rejected ACH attempt or an Event of
Default (see Section 2). CEDAR is not responsible for any overdrafts or rejected
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transactions that may result from CEDAR’s ACH debiting the Specified Percentage
amounts under the terms of this Agreement . . . .
[ECF Doc. 202-6, ¶ 1 (emphasis added)].12 The Cedar MCA Agreement also includes a personal
guarantee executed by Kurt J. Crosby, guaranteeing “each Merchant’s performance of all of the
representations, warranties, and covenants made by each Merchant.” [ECF Docs. 202-6, ¶ G1].
And upon the occurrence of an event of default,13 Cedar can choose from a host of aggressive
remedial provisions, labeled “Protections Against Default” in the Cedar MCA Agreement,
including acceleration of the debt:
12 The Cedar MCA Agreements further required the Debtor-borrower to
appoint a bank acceptable to CEDAR, to obtain electronic fund transfer services and/or
“ACH” payments. Merchant(s) shall provide CEDAR and/or its authorized agent with all
of the information, authorizations, and passwords necessary to verify each Merchant’s
Receivables. Merchant(s) shall authorize CEDAR and/or its agent(s) to deduct the
amounts owed to CEDAR for the Receivables as specified herein from settlement
amounts which would otherwise be due to each Merchant and to pay such amounts
to CEDAR by permitting CEDAR to withdraw the Specified Percentage by ACH
debiting of the account. The authorization shall be irrevocable as to each Merchant
absent CEDAR’s written consent until the Receivables Purchased Amount has been paid
in full or the Merchant becomes bankruptcy or goes out of business without any prior
default under this Agreement.
[ECF Doc. 202-6, ¶ 5 (emphasis added)].
13 Under the Cedar MCA Agreements, an “Event of Default” occurs when:
(1) Any representation or warranty by any Merchant to CEDAR proves to have been made
intentionally false or misleading in any material respect when made;
(2) Any Merchant causes any ACH debit to the Account by CEDAR to be blocked or
stopped without providing any advance written notice to CEDAR with an alternative
method for CEDAR to collect the blocked or stopped payment . . . ;
(3) Any Merchant intentionally prevents CEDAR from collecting any part of the
Receivables Purchased Amount; or
(4) Any Merchant causes any ACH debit to the Account by any person or entity other than
CEDAR to be stopped or otherwise returned that would result in an ACH Return
Code . . . and that Merchant does not within two business days thereafter provide
CEDAR with written notice thereof explaining why that Merchant caused the ACH
debit to be stopped or otherwise returned . . . .
[ECF Doc. 202-6, ¶ 30].
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The following Protections 1 through 6 may be invoked by CEDAR, immediately
and without notice to any Merchant if any Event of Default listed in Section 30
has occurred.
Protection 1: The full uncollected Receivables Purchased Amount plus
all fees due under this Agreement may become dues and payable in full
immediately.
Protection 2. CEDAR may enforce the provisions of the Guarantee
against Guarantor.
Protection 3. CEDAR may enforce its security interest in the Collateral
identified in Section 29.
Protection 4. CEDAR may proceed to protect and enforce its rights and
remedies by litigation or arbitration.
Protection 5. CEDAR may debit any Merchant’s depository accounts
wherever situated by means of ACH debit or electronic or facsimile signature
on a computer-generated check drawn on any Merchant’s bank account or
otherwise, in an amount consistent with the terms of this Agreement.
Protection 6. CEDAR will have the right, without waiving any of its rights
and remedies and without notice to any Merchant and/or Guarantor, to notify each
Merchant’s credit card and/or check processor and account debtor(s) on behalf of
each Merchant. Each Merchant hereby grants to CEDAR an irrevocable
power-of-attorney, which power-of-attorney will be coupled with an interest,
and hereby appoints CEDAR and its representatives as each Merchant’s
attorney-in-fact to take any and all action necessary to direct such new or
additional credit card and/or check processor and account debtor(s) to make
payment to CEDAR as contemplated by this Section.
[ECF Doc. 202-6, ¶ 16 (emphasis added)]; see also [ECF Doc. 202-6, ¶ 31 (“Remedies”)].
A Debtor under the Cedar MCA Agreement could fail to fund one sweep of its account—
constituting an event of default, see supra note 13—and find itself subject to immediate
acceleration of the full amount of the transaction outstanding without notice. Under the Cedar
MCA Agreement, Cedar can act as the Debtors’ attorney-in-fact and force the Debtors to obtain
new credit to pay amounts accelerated under the contract. And if Cedar is unable to recover its
outstanding balance from the Debtor’s bank account, Cedar is entitled to chase full repayment
from Kurt Crosby as guarantor of the debt. Read in tandem, the provisions of the Cedar MCA
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Agreement makes it obvious that Cedar bore zero risk of a revenue shortfall in the Debtors’
receivables; rather, the provisions are structured to ensure the Debtor’s absolute payment
obligation. “The repayment and remedy terms of the MCA agreements . . . operate in a manner
more akin to a standard, high interest-rate loan than to a genuine transfer of the risks associated
with specified receivables.” Haymount Urgent Care PC, 609 F. Supp.3d at 249.
The features of the Cedar MCA Agreement weigh in favor of finding the transactions to be
disguised loans. See In re Greenwich Retail Grp. LLC, 677 B.R. at 503–04; id. at 248–50. In sum:
Although none of these features is dispositive alone, their collective effect weighs
heavily in favor of characterizing the transactions as loans. As a whole, they
provide [Cedar] with at least conditional recourse and expanded legal rights against
[the Debtor] entities and the personal guarantors. Plus, they allocate great risk to
the [Debtor] counterparty while protecting [Cedar] with much more than just the
receivables. [Cedar’s] panoply of rights, remedies, and potential control is highly
unusual in the context of an asset sale. Such an overall arrangement is consistent
with a debtor-creditor relationship, not a seller-buyer relationship.
In re Shoot the Moon, 635 B.R. at 817.
2. On balance, other hallmarks of the Cedar MCA Agreement weigh in favor
of the Court’s conclusion that the agreements are disguised loans.
At first glance, the Cedar MCA Agreement appears to contain an indefinite term because
they require the Debtors to continue to pay regular, installment amounts until they have fully paid
the sum of “receivables” purportedly purchased. A contract with an indefinite term is suggestive
of a true sale. “A fixed term is typical of a loan, while an indefinite term of receiving a fixed
percentage of actual receipts may suggest that the lender has assumed the risk associated with the
receivables not being collected.” Lateral Recovery LLC v. Queen Funding, LLC, No. 21-9607,
2022 WL 2829913, at *6 (S.D.N.Y. July 20, 2022) (citing Fleetwood Servs., LLC v. Ram Capital
Funding, LLC, No. 20-CV-5120, 2022 WL 1997207, at *9 (S.D.N.Y. June 6, 2022)). But the Cedar
MCA Agreement has a de facto fixed term that can be calculated by dividing the amount that the
Debtors owe by the amount of daily payments. As discussed above, a failure to fund Cedar’s
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sweeps of the Debtors’ account will not serve to indefinitely extend the term—it will only result
in an event of default and accelerate the term without notice. And as also made clear above, Cedar
assumes no risk for uncollected receivables. Thus, this factor weighs in favor of the Court finding
the Cedar MCA Agreement to be a disguised loan.
Finally, Paragraph 4 of the Cedar MCA Agreement entitled “Reconciliations” allows the
Debtors to request Cedar to perform a reconciliation or accounting of sweeps taken from the
Debtors’ accounts with amounts owing under the agreement. [ECF Doc. 202-6, ¶ 4 (“Any
Merchant may contact CEDAR’s Reconciliation Department to request that CEDAR conduct a
reconciliation in order to ensure that the amount that CEDAR has collected equals the Specified
Percentage of Merchant(s)’s Receivables under this Agreement.”)]. Under the agreement, the
Debtors may seek reconciliation an unlimited number of times. See id. Two outcomes exist after
reconciliation:
If a reconciliation determines that CEDAR collected more than it was entitled to,
then CEDAR will credit to the Account all amounts to which CEDAR was not
entitled and, if there is an Estimated Payment, decrease the amount of the Estimated
Payment so that it is consistent with the Specified Percentage of Merchant(s)’s
Receivables from the date of the Agreement through the date of the reconciliation.
[But] [i]f a reconciliation determines that CEDAR collected less than it was entitled
to, then CEDAR will debit from the Account all additional amounts to which
CEDAR was entitled and, if there is an Estimated Payment, increase the amount of
the Estimated Payment so that it is consistent with the Specified Percentage of
Merchant(s)’s Receivables from the date of the Agreement through the date of the
reconciliation.
Id. Regardless of the outcome—as determined by Cedar—the amounts owed by the Debtors under
the Cedar MCA Agreement is never reduced due to unforeseen adverse business developments
outside the Debtors’ control. Reconciliation may delay repayment (or accelerate it if Cedar finds
that the Debtors’ records are incorrect) but the reconciliation process does nothing to shift the risk
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of uncollectible receivables from the Debtors.14 For that reason, the Court finds that this particular
reconciliation provision weighs in favor of a finding that the Cedar MCA Agreement is not a true
sales, but rather a disguised loan.
CONCLUSION
The Court thus concludes that the unambiguous terms of the Cedar MCA Agreement
substantively reveal the Debtors’ complete exposure to the direct risk of non-payment of Crosby
Accounts Receivables, making those agreements disguised loans under Florida law. The Court
grants judgment as a matter of law in favor of the Debtors and against Cedar as to Counts I, III,
and IV of the Complaint.15 Accordingly,
IT IS ORDERED that the Debtors’ MPSJ is GRANTED IN PART as to Counts I, III,
and IV of the Complaint as against Cedar, and DENIED IN PART as to Count II of the Complaint
as against Cedar.
14 Arguably, the reconciliation process here is illusory; as discussed above, elsewhere in the Cedar
MCA Agreement, the failure to fund one sweep results in an irremediable infraction that would foreclose
any possibility of future reconciliation. Upon such an event of default, Cedar may employ any or all of the
“Protections Against Default” to ensure repayment under the Cedar MCA Agreement is accomplished.
15 The Debtors’ MPSJ seeks summary judgment on Counts I through IV of the Complaint “as against
those MCA Defendants identified in the Adversary Complaint,” [ECF Doc. 202], but Count II seeks relief
solely against the Defendants identified as “Customers” of the Debtors.
Because the Court finds the Cedar MCA Agreement to be a disguised loan, it need not address the
Debtors’ alternative argument that, even if the Cedar MCA Agreements is a true sale, the Debtors retain
residual and reversionary interests in the Crosby Accounts Receivable because the agreements only purport
to vest Cedar with a capped or fractional interest in those accounts receivable. [ECF Doc. 202, at 44].
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A separate judgment on the Complaint filed in the above-captioned Adversary Proceeding
consistent with this Memorandum Opinion and Order will be entered contemporaneously and in
accordance with Bankruptcy Rules 7054 and 9021.
New Orleans, Louisiana, June 18, 2026.
__________________________________________
MEREDITH S. GRABILL
UNITED STATES BANKRUPTCY JUDGE
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