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 are Debtors’ Motion for Partial Summary Judgment Against MCA
Defendants (the “MPSJ”), [ECF Doc. 202], and a cross-motion for summary judgment (the “Cross-
MSJ”), [ECF Docs. 207 & 208], filed by MCA Defendant Reliance Financial FL, LLC (“Reliance”).3
The Debtors seek summary judgment against Reliance on Counts 1–4 of their Complaint, and
Reliance seeks summary judgment against the Debtors that would dismiss the entire Complaint.
2 Capitalized terms not otherwise defined herein are defined as described in the Complaint and
exhibits attached to the Complaint.
3 MCA Defendants Meged Funding Group a/k/a Meged Funding Group Corp and Dependance
Platinum FL, LLC also joined in the Cross-MSJ. Their cross-motions for summary judgment are addressed
in separate opinions.
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Both motions are opposed. [ECF Docs. 274 & 280]. Both parties submitted statements of
uncontested material facts, [ECF Docs. 202-1 & 207-10], and counterstatements of material facts,
[ECF Docs. 274-1 & 280-1], as well as reply briefs in support of their respective motions, [ECF
Docs. 292 & 293]. In short: The Debtors assert that the text of the MCA Agreement executed
between Crosby entities and Reliance is unambiguous and reveals that the agreement is a disguised
loan as a matter of law. [ECF Doc. 292, ¶ 5]. Reliance agrees that the text of the MCA Agreement
is unambiguous but asserts that the agreement is a true sale of the Debtors’ receivables as a matter
of law. [ECF Docs. 208, at 12; 293, at 4–5]. For the reasons set forth below, the Court GRANTS
IN PART and DENIES IN PART the Debtors’ MPSJ and DENIES Reliance’s Cross-MSJ.
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.
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
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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. 274-1]. 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. 274-1]. 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. 274-
1].
Between February 20, 2025, and February 13, 2026, the Debtors and individual MCA
Defendants executed the following prepetition MCA Agreements:
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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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
21 Standard Merchant Cash
Advance Agreement Meged Funding Group
Crosby Tugs,
Crosby Dredging,
Tugs, Crosby
Marine
4/22/2025
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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
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
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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. 274-1]. The Debtors and Reliance do not
dispute that on December 9, 2025, Kurt J. Crosby, on behalf of “Crosby Tugs LLC,” “Crosby
Dredging, LLC,” and non-debtor affiliate, “Crosby Enterprises, L.L.C.,” entered into a “Sale of
Future Receipts Agreement” with Reliance (the “Reliance MCA Agreement”) and that the copy
attached to the Debtors’ MPSJ as Exhibit 38 is a true and correct copy of that agreement.10 [ECF
Doc. 202-39; ECF Doc. 202-1, ¶ 24; ECF Doc. 274-1]. Under the Reliance MCA Agreement,
Reliance is identified as “Buyer,” the Crosby entities are identified as the “Seller(s),” and the
transaction is described as a “purchase” of each Seller’s “Future Receipts” in the “Purchased
Amount” of $749,500.00 for a “Purchase Price” of $500,000.00. [ECF Docs. 202-39, 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
10 Kurt Crosby also executed the Reliance MCA Agreement in his individual capacity as “Guarantor.”
[ECF Doc. 202-39, at 11].
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so doing, the Court views the facts and evidence in the light most favorable to the non-moving
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.”).
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.
“When parties file cross-motions for summary judgment, [courts] review each party’s
motion independently, viewing the evidence and inferences in the light most favorable to the
nonmoving party.” Cooley v. Hous. Auth. of Slidell, 747 F.3d 295, 298 (5th Cir. 2014) (internal
quotations and citation omitted).
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.
LLC v. Moby Capital, LLC (In re Greenwich Retail Grp. LLC), 677 B.R. 473 (Bankr. S.D.N.Y.
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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 Reliance 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 Reliance MCA
Agreement prepetition. If the Reliance 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 Reliance 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 agree that their
respective interests in certain of the Crosby Accounts Receivable under the Reliance MCA
Agreement are governed by Florida law pursuant to the choice-of-law provision in the contract.
[ECF Docs. 201 & 208]. Under Florida law, “[t]he intent of the parties to a contract should govern
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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.
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.,
11 It is true that the plain language of the Reliance MCA Agreement describes the transaction as a
“sale”:
• The cover page of the agreement lists a “Purchase Price” and states that the “transaction
contemplated by this Agreement is a purchase of Future Receipts.” [ECF Doc. 202-39, at 1].
• Paragraph 1 of the agreement entitled “Sale of Future Receipts” states: “Seller hereby sells
and assigns to Buyer, without recourse, the Purchased Amount of Future Receipts described
above.” [ECF Doc. 202-39, ¶ 1].
• Paragraph 6 of the agreement entitled “Nonrecourse Sale of Future Receipts (THIS IS NOT A
LOAN)” states: “Seller is selling a portion of a future revenue stream to Buyer at a discount,
not borrowing money from Buyer.” [ECF Doc. 202-39, ¶ 6].
But this Court is not bound by the language in the Reliance 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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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;
(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.
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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.
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
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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 WL 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 Reliance 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 Reliance MCA Agreement work together effectively to shield
Reliance from all risk that the purchased receivables may be uncollectible, placing that risk
squarely upon the Debtors. Under the Reliance MCA Agreement, Reliance purportedly purchased
“Future Receipts,” generically identified as “all payments received by Seller, or its right to receive
such payments, in the ordinary course of Seller’s business . . . .” [ECF Doc. 202-39, at 1]. Because
the Reliance MCA Agreement identifies no particular revenue source, Reliance 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 Reliance 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 Reliance is entitled to recover under the Reliance MCA Agreement, so
the direct risk of non-collectability remains with the Debtors.
The Reliance MCA Agreement also gives Reliance direct access, control, and authority to
sweep funds from the Debtors’ bank account:
Seller authorizes Buyer to debit an Authorized Account on each Remittance Day,
by initiating an ACH debit entry or by creating a remotely created check or
electronically created item, in the amount of the initial Periodic Amount . . . . For
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this purpose, Seller shall provide Buyer with all required account information
and will provide an appropriate ACH authorization to Buyer.
[ECF Doc. 202-39, ¶ 3 (emphasis added)].12 The Reliance MCA Agreement also includes a
personal guarantee executed by Kurt J. Crosby, “irrevocably, absolutely, and unconditionally
guarantee[ing] to Buyer prompt and complete performance” of the Debtors’ obligations. [ECF
Doc. 202-39, ¶ 30]. And if a Debtor under the Reliance MCA Agreement “violates or fails to
comply with any term or covenant in the agreement,”13 Reliance can choose from a host of
aggressive remedial provisions, including acceleration of the debt:
a. Buyer may increase the Specified Percentage to 100% and may adjust the
Periodic Amount to reflect the new Specified Percentage.
b. Buyer shall have the right to collect the full undelivered Purchased Amount
plus all fees and charges (including collection and legal fees as more fully
12 The Reliance MCA Agreement further provides:
Seller hereby authorizes Buyer to present automated clearing house (ACH)
debits to the account identified above . . . .
In the event that Seller closes an Authorized Account, or the Authorized Account has
insufficient funds for any ACH transaction under this Authorization Agreement, Seller
authorizes Buyer to contract Seller’s financial institution and obtain information (including
account number, routing number and available balance) concerning any other deposit
account(s) maintained by Seller with Seller’s financial institution, and to initiate ACH
transactions under this Authorization Agreement to such additional account(s). To the
extent necessary, Seller grants Buyer a limited Power of Attorney to take action in
Seller’s name to facilitate this Authorization Agreement.
[ECF Doc. 202-39, at 14 (emphasis added)].
13 Under the Reliance MCA Agreement, the Debtors’ responsibilities include:
a. No Interference. Seller must deposit all Future Receipts into an Authorized Account on a daily
basis and must instruct Seller’s credit card processor, which must be approved by Buyer (the
“Processor”) to deposit all Payment Card receipts of Seller into an Authorized account on a
daily basis. Seller agrees not to (i) change any Authorized Account without the express written
consent of Buyer, (ii) create any new depository account, (iii) revoke Buyer’s authorization to
debit an Authorized Account, (iv) close an Authorized Account without the express written
consent of Buyer or, (v) take any other action that denies, or interferes with, Buyer’s rights
under this agreement, including but not limited to Buyer’s right to receive its share of revenue
received by Seller.
[ECF Doc. 202-39, ¶ 13].
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described in this Agreement) assessed under this Agreement, which will
become due and payable in full immediately.
c. Buyer may enforce the provisions of the Guaranty of Performance against
each Guarantor.
d. Seller shall pay to Buyer all reasonable costs associated with Seller’s breach. If
demanded by Buyer, Seller shall pay Buyer a collection charge in an amount
equal to 33% of the undelivered balance of the Purchased Amount . . . .
e. Buyer may proceed to protect and enforce its rights and remedies by arbitration
or lawsuit. In any such arbitration or lawsuit, under which Buyer shall recover
judgment against Seller, Seller shall be liable for all of Buyer’s costs, including
but not limited to all reasonable attorneys’ fees and court costs. However, the
rights of Buyer under this provision shall be limited as provided in the
arbitration provision set forth below.
f. Buyer may debit depository accounts wherever situated by means of ACH debit
or facsimile signature on a computer-generated check drawn on any of the
Seller’s banking accounts for all sums due to Buyer.
[ECF Doc. 202-39, ¶ 15 (emphasis added)].
A Debtor under the Reliance MCA Agreement could fail to fund one sweep of its account
and find itself subject to immediate acceleration of the full amount of the transaction outstanding.
And if Reliance is unable to recover its outstanding balance from the Debtor’s bank account,
Reliance is entitled to chase full repayment from Kurt Crosby as guarantor of the debt. Read in
tandem, the provisions of the Reliance MCA Agreement make it obvious that Reliance 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
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genuine transfer of the risks associated with specified receivables.” Haymount Urgent Care PC,
609 F. Supp.3d at 249.
The features of the Reliance MCA Agreement weigh in favor of finding the transaction to
be a disguised loan. 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 [Reliance] 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 [Reliance] with much more than
just the receivables. [Reliance’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 Reliance MCA Agreement weigh in favor
of the Court’s conclusion that the agreement is a disguised loan.
At first glance, the Reliance MCA Agreement appears to contain an indefinite term because
it requires 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
Reliance 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
Reliance’s sweeps of the Debtors’ account will not serve to indefinitely extend the term—it will
only result in the Debtor being in breach of the agreement and accelerate the term. And as also
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made clear above, Reliance assumes no risk for uncollected receivables. Thus, this factor weighs
in favor of the Court finding the Reliance MCA Agreement to be a disguised loan.
Finally, Paragraph 4 of the Reliance MCA Agreement entitled “Reconciliation Process
(IMPORTANT PROTECTION FOR SELLER)” allows the Debtors to request Reliance to perform
a reconciliation or accounting of sweeps taken from the Debtors’ accounts with amounts owing
under the agreement. [ECF Doc. 202-39, ¶ 4 (“At any time, Seller or Buyer have the right to
require a new review of Seller’s revenue for the purpose of evaluating whether the Periodic
Amount continues to accurately reflect the Specified Percentage of Seller’s actual revenue for the
period reviewed (a ‘reconciliation’).”)]. Under the agreement, the Debtors may seek reconciliation
an unlimited number of times. See id. Two outcomes exist after reconciliation:
If there was an excess, then Buyer shall decrease the Periodic Amount for each
subsequent Remittance Day. If there was a shortfall, then Buyer may (but is not
required to) increase the Periodic Amount for each subsequent Remittance Day. In
either case, Buyer shall adjust the Periodic Amount to an amount equal to the
Specified Percentage of Seller’s reasonably anticipated average revenue, based on
the Reconciliation Information. After an adjustment, the Periodic Amount shall
remain unchanged until a subsequent adjustment occurs in accordance with this
Section.
Id. Regardless of the outcome—as determined by Reliance—the amounts owed by the Debtors
under the Reliance MCA Agreement are never reduced due to unforeseen adverse business
developments outside the Debtors’ control. Reconciliation may delay repayment (or accelerate it
if Reliance finds that the Debtors’ records are incorrect) but the reconciliation process does nothing
to shift the risk of uncollectible receivables from the Debtors.14 For that reason, the Court finds
14 Arguably, the reconciliation process here is illusory; as discussed above, elsewhere in the Reliance
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, Reliance may employ any or all of
its contractual remedies to ensure repayment under the Reliance MCA Agreement is accomplished.
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that this particular reconciliation provision weighs in favor of a finding that the Reliance MCA
Agreement is not a true sale, but rather a disguised loan.
CONCLUSION
The Court thus concludes that the unambiguous terms of the Reliance MCA Agreement
substantively reveal the Debtors’ complete exposure to the direct risk of non-payment of Crosby
Accounts Receivables, making the agreement a disguised loan under Florida law. The Court grants
judgment as a matter of law in favor of the Debtors on Counts I, III, and IV of the Complaint and
denies Reliance’s cross-motion for summary judgment.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 Reliance, and DENIED IN PART as to Count II of the
Complaint as against Reliance.
IT IS FURTHER ORDERED that Reliance’s Cross-MSJ is DENIED.
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 17, 2026.
__________________________________________
MEREDITH S. GRABILL
UNITED STATES BANKRUPTCY JUDGE
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 Reliance MCA Agreement to be a disguised loan, it need not address
the Debtors’ alternative argument that, even if the Reliance MCA Agreement is a true sale, the Debtors
retain residual and reversionary interests in the Crosby Accounts Receivable because the agreement only
purports to vest Reliance with a capped or fractional interest in those accounts receivable. [ECF Doc. 202,
at 44].
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