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 Celtic
Advance LLC (“Celtic”) on Counts 1–4 of their Complaint. The Debtors submitted a statement
of uncontested facts, [ECF Doc. 202-1], and Celtic filed an opposition to the MPSJ, [ECF Doc.
276], and a counterstatement of material facts. [ECF Doc. 276-2]. The Debtors filed a reply brief
in support of the MPSJ. [ECF Doc. 292]. In short: The Debtors assert that the text of the MCA
2 Capitalized terms not otherwise defined herein are defined as described in the Complaint and
exhibits attached to the Complaint.
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Agreements executed among Crosby entities and Celtic is unambiguous and reveals that the
agreements are disguised loans as a matter of law. [ECF Docs. 202, 292, ¶ 5 & 292, at 33]. Celtic
does not dispute that the text of the MCA Agreements is unambiguous, but asserts that analysis
reveals that the agreements are by their terms true sales. [ECF Doc. 276, ¶ 57]. 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.
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.
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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. 276]. 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. 276]. As of the date of the Complaint, Crosby Tugs had total accounts
receivable in the amount of $10,840,638.45,3 consisting of current accounts receivable in the
amount of $5,755,785.29,4 and past-due accounts receivable in the amount of $5,084,853.16,5
while Crosby Dredging had total accounts receivable in the amount of $7,874,046.37,6 consisting
of current accounts receivable in the amount of $602,297.63,7 and past-due accounts receivable in
the amount of $7,271,748.74.8 [ECF Doc. 202-1, ¶ 11; ECF Doc. 276].
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 Celtic Advance LLC Crosby Tugs,
Crosby Dredging 12/18/2025
3 See Complaint, Ex. B, Crosby Tugs, Column G.
4 See Complaint, Ex. B, Crosby Tugs, Column D.
5 See Complaint, Ex. B, Crosby Tugs, Column F.
6 See Complaint, Ex. B, Crosby Dredging, Column G.
7 See Complaint, Ex. B, Crosby Dredging, Column D.
8 See Complaint, Ex. B, Crosby Dredging, Column F.
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Agreement
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
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
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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
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. 276]. The Debtors and Celtic do not dispute
that on December 18, 2025, and on February 13, 2026, they entered into the agreements attached
as Exhibits 6 and 7 to the Debtors’ MPSJ and that those agreements are true and correct copies.
[ECF Docs. 202-7 & 202-8; ECF Doc. 202-1, ¶ 24; ECF Doc. 276]. The basic terms of the
agreements are:
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• On December 18, 2025, Kurt J. Crosby, on behalf of Crosby Tugs and individually
as Guarantor, entered into a “Standard Merchant Cash Advance
Agreement”/“Future Receivables Sale and Purchase Agreement” with Celtic for the
“purchase” by Celtic of the Debtor’s “Future Receipts” in the amount of
$262,500.00, for a “Purchase Price” of $175,000.00 (the “First Celtic MCA
Agreement”). [ECF Doc. 202-7, at 1–2 & 19].
• On February 13, 2026, Kurt J. Crosby, on behalf of Crosby Tugs and individually
as Guarantor, entered into a “Standard Merchant Cash Advance
Agreement”/“Future Receivables Sale and Purchase Agreement” with Celtic for the
“purchase” by Celtic of the Debtor’s “Future Receipts” in the amount of
$825,000.00 for and “in consideration of a “Purchase Price” of $550,000.00 (the
“Second Celtic MCA Agreement” and, with the First Celtic MCA Agreement, the
“Celtic MCA Agreements”). [ECF Doc. 202-8, at 1–2 & 19]. 9
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
party at all times. See Campo v. Allstate Ins. Co., 562 F.3d 751, 754 (5th Cir. 2009). “The
9 The remaining terms of the Celtic MCA Agreements are identical. Thus, any references herein to
the operative terms of the First Celtic MCA Agreement include identical provisions contained within the
Second Celtic MCA Agreement.
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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.
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.
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 Celtic MCA Agreements are true sales as
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identified on the face of the agreements, or whether the Court should recharacterize the purported
sales as disguised loans based on the substance of the agreements 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 Celtic MCA
Agreements prepetition. If the Celtic MCA Agreements are true sales 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 Celtic MCA Agreements are
disguised loans, 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 Celtic MCA
Agreements are governed by New York law pursuant to a choice-of-law provision in the contract.
[ECF Docs. 202 & 276]. New York’s general rule of contract interpretation is that “agreements
are construed in accord with the parties’ intent and the best evidence of what parties to a written
agreement intend is what they say in their writing.” Donohue v. Cuomo, 38 N.Y.3d 1, 12 (2022)
(internal quotations and citation omitted). Indeed, “[w]here the terms of a contract are clear and
unambiguous, the intent of the parties must be found within the four corners of the contract, giving
a practical interpretation to the language employed and reading the contract as a whole.” Ellington
v. EMI Music, Inc., 21 N.E.3d 1000, 1003 (N.Y. 2014) (citations omitted).
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When determining whether a contract evidences a sale or a loan, New York law requires
courts look to substance over form. See Adar Bays, LLC v. GeneSYS ID, Inc., 37 N.Y.3d 320, 334
(2021) (“When determining whether a transaction is a loan, substance—not form—controls.”
(citation omitted)); see also Butler Trucking LLC v. CashFloit, LLC (In re Butler Trucking LLC),
No. 25-3004, 2025 WL 1934205, at *5 (Bankr. N.D. Ohio July 14, 2025) (under New York law,
“courts do not rely solely on the form or labels used by the parties; rather, they scrutinize whether
the economic risk of ownership truly transferred to the purported buyer” (citing cases)).10 Courts
applying New York law 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
10 It is true that the plain language of the Celtic MCA Agreements describes the transactions as
“sales”:
• On page 2, the agreements are labeled as “Future Receivables Sale and Purchase
Agreement[s].” [ECF Docs. 202-7, at 2].
• Paragraph III of the Celtic MCA Agreements entitled “Sale of Purchased Future Receipts”
states: “Seller hereby irrevocably assigns, transfers and conveys onto Purchaser all of the
Seller’s right, title and interest in the Specified Percentage of the Future Receipts . . . . By
virtue of this Agreement, Seller transfers to Purchaser full and complete ownership of the
Purchased Future Receipts and Seller retains no legal or equitable interest therein.” [ECF
Docs. 202-7, ¶ III].
• Paragraph XIII of the Celtic MCA Agreements entitled “Risk Sharing Acknowledgments
and Arrangements” states, in part: “This Agreement consummates the sale of the
Purchased Future Receipts at a discount, not the borrowing of funds by the Seller from
Purchaser.” [ECF Docs. 202-7, ¶ III(b)].
• Paragraph XIII of the Celtic MCA Agreements entitled “Risk Sharing Acknowledgments
and Arrangements” also states, in part: “The Parties agree that the Purchase Price is paid
to the Seller in consideration for the acquisition of the Purchased Future Receipts and that
payment of the Purchase Price by the Purchaser is not intended to be, nor shall it be
construed as a loan from the Purchaser to the Seller that requires absolute and unconditional
repayment on a specified maturity date.” [ECF Docs. 202-7, ¶ III(k)].
But this Court is not bound by the language in the Celtic MCA Agreements labeling the transaction as a
sale because under New York law, 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 Adar Bays, LLC v. GeneSYS ID, Inc., 37
N.Y.3d 320, 334 (2021).
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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.
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.
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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 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. See
Haymount Urgent Care PC v. GoFund Advance, LLC, 609 F. Supp. 3d 237, 247 (S.D.N.Y. 2022).
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
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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).
C. Under New York Law, the Celtic MCA Agreements Are Disguised Loans.
1. The Debtors overwhelmingly bear the direct risk of non-payment of the
Crosby Accounts Receivables.
Several provisions in the Celtic MCA Agreements work together effectively to shield Celtic
from all risk that the purchased receivables may be uncollectible, placing that risk squarely upon
the Debtors. Under the Celtic MCA Agreements, Celtic purportedly purchased “Future Receipts”
generically identified as “all of the Seller’s receipts of monies for the sale of its goods and services
after the Effective Date of this Agreement.” [ECF Doc. 202-7, ¶ I(f)]. Because the Celtic MCA
Agreements identify no particular revenue source, Celtic 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 Celtic MCA Agreements bears strongly on the question of risk because the
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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 Celtic
is entitled to recover under the Celtic MCA Agreements, so the direct risk of non-collectability
remains with the Debtors.
Further, although ostensibly a sale of “Future Receipts,” Celtic’s collateral securing
performance is substantially broader than the receivables purchased. The Celtic MCA Agreements
provide:
As security for the prompt and complete payment and performance of any
and all liabilities, obligations, covenants or agreements of the Seller pursuant to this
Agreement (collectively, the “Obligations”), the Seller hereby pledges, assigns and
hypothecates to the Purchaser (the “Pledge”) and grants to the Purchaser a
continuing, perfected and first priority lien upon and security interest in all of the
Seller’s rights, titles and interest in all accounts, including, but not limited to:
deposit accounts, accounts receivables, other receivables, chattel paper,
documents, equipment, general intangibles, instruments and inventory
(collectively, the “Collateral”), whether now existing or hereinafter acquired.
[ECF Doc. 202-7, ¶ XVIII(a) (emphasis added)]. “The fact that the documents contemplate a
broad security package for [Celtic] to generally collateralize payment obligations is indicative of
a loan, not a sale.” In re Shoot the Moon, LLC, 635 B.R. at 815.
The Celtic MCA Agreements also give Celtic rights and recourse against property in
addition to its collateral. Indeed, the Celtic MCA Agreements give Celtic direct access, control,
and authority to sweep funds from the Debtors’ bank account:
• During the term of this Agreement, the Seller shall: (i) deposit all Future
Receipts into one (and only one) bank account, which shall be preapproved by
the Purchaser (the “Approved Bank Account”); (ii) use one (and only one)
credit card processor, which shall be preapproved by the Purchaser (the
“Approved Processor”); and (iii) deposit all credit card receipts into the
Approved Bank Account. In the event the Approved Bank Account or
Approved Processor shall become unavailable or shall cease to operate during
the term of this Agreement, Seller shall arrange for another Approved Bank
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Account or Approved Processor within twenty-four (24) hours. [ECF 202-7,
¶ VII (emphasis added)].
• The Seller hereby authorizes the Purchaser to initiate electronic payments or
ACH debits from the Approved Bank Account in the amount of the Scheduled
Remittance on each Business Day commencing on the Effective Date until the
Purchaser receives the full Purchased Amount. The Parties agree that the
Seller shall provide Purchaser with all access code(s) for the Approved Bank
Account. [ECF Doc. 202-7, ¶ VIII (emphasis added)].11
The Celtic MCA Agreements also include a personal guarantee executed by Kurt J. Crosby,
guaranteeing “prompt, full, faithful and complete performance and observance of all of Seller’s
Obligations under the Agreement.” [ECF Docs. 202-7, 18, at ¶ 1]. And upon the occurrence of an
event of default,12 Celtic can choose from a host of aggressive remedial provisions, including but
not limited to those found in the section labeled “Remedies” in the Celtic MCA Agreements:
Upon the Seller’s default, the Purchaser may immediately proceed to
protect and enforce its rights under this Agreement by:
11 The Celtic MCA Agreements further required the Seller to
execute an agreement with the Purchaser that shall authorize the Purchaser to
arrange for electric fund transfers and/or ACH Payments of the Scheduled
Remittances or Adjusted Scheduled Remittance from the Approved Bank Account.
The Seller shall provide the Purchaser and/or its authorized agent with all the
information, authorizations and passwords necessary to verify the Seller’s
receivables, receipts and deposits in the Approved Bank Account. The Seller shall
authorize the Purchaser and/or its agent to deduct the payments to Purchaser. The
authorization shall be irrevocable until such time when the Seller shall has satisfied
its obligations under this Agreement.
[ECF Doc. 202-7, ¶ XX(a) (emphasis added)].
12 Under the Celtic MCA Agreements, an “Event of Default” occurs when:
i. The Seller shall violate any term, condition or covenant in this Agreement
governing the Seller’s obligations of timely delivery of the Scheduled Remittances or
Adjusted Scheduled Remittance to the Purchaser;
ii. The Seller shall violate any term, condition, or covenant in this Agreement in
regard to any other sums due for any reason whatsoever other than as the result of the
Seller’s business ceasing its operations exclusively due to any of the Valid Excuses;
iii. Seller knowingly or willfully provides incorrect, false or misleading information
to the Purchaser at any time;
iv. The Seller shall violate any term, condition or covenant in this Agreement;
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i. Enforcing its rights as a creditor, including, but not limited to, notifying any
account debtor(s) of the Seller’s of the Purchaser’s security interest;
ii. Enforcing the provisions of the Personal Guarantee of Performance
against the Guarantor(s) without first seeking recourse from the Seller for
the full balance owed at the time of default, plus applicable fees and costs;
iii. Notifying the Seller’s credit card processor of this Agreement and to
direct such credit card processor to make payments directly to the
Purchaser of any and all amounts received by said credit card processor on
behalf of the Seller;
iv. Commencing a law suit, whether for specific performance of any covenant,
agreement or other provision contained herein, or to enforce the discharge
of the Seller’s obligations hereunder, or any other legal or equitable right or
remedy;
v. In case any Event of Default occurs and it is not waived, the Purchaser will
be entitled to the issuance of an injunction, restraining order, or any other
equitable relief in Purchaser’s favor, subject to court approval, restraining
the Seller’s accounts and/or receivables up to the amount due to the
Purchaser as a result of the Event of Default and the Seller will be deemed
to have consented to the granting of an application for the same to any
court of competent jurisdiction without any prior notice to the Sellers
and without the Purchaser being required to furnish a bond or other
undertaking in connection with the application;
v. The Seller uses multiple depository accounts without obtaining prior written
consent of the Purchaser;
vi. The Seller fails to deposit any portion of its Future Receipts into the Approved
Bank Account;
vii. The Seller changes the Approved Bank Account or Approved Processor without
obtaining prior written consent of the Purchaser;
viii. The Seller interferes with the Purchaser’s collection of the Scheduled Remittance
or Adjusted Scheduled Remittance, including, but not limited to the Seller interfering with
ACH Payments;
ix. Two (2) or more ACH transactions attempted by the Purchaser are rejected by the
Seller’s Bank;
x. The Seller takes on additional financing (known as “Stacking”) at any times after
the Effective Date and prior to the final payment pursuant to this Agreement; or
xi. The Guaranty shall for any reason cease to be in full force and effect.
[ECF Doc. 202-7, ¶ IX(a)].
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vi. In case the Guarantor’s obligations become due hereunder and are not
waived, the Purchaser will be entitled to the issuance of an injunction,
restraining order, or other equitable relief in the Purchaser’s favor, subject
to court approval, restraining the Seller and Guarantor’s accounts and/or
receivables up to the amount due to the Purchaser as a result of the Event of
Default, and the Seller and Guarantor, each, in their individual capacities,
will be deemed to have consented to the granting of an application for the
same to any court of competent jurisdiction, without any prior notice to the
Seller or Guarantor and without the Purchaser being required to furnish a
bond or other undertaking in connection with the application.
[ECF Doc. 202-7, ¶ XIX(c) (emphasis added)].
A Debtor under the Celtic MCA Agreements could fail to fund one sweep of its account—
constituting an event of default, see supra note 12—and find itself subject to immediate
acceleration of the full amount of the transaction outstanding without notice.13 Under the Celtic
MCA Agreements, Celtic can act as the Debtors’ attorney-in-fact
to take any action or execute any instrument or document: (i) to settle all
obligations due to the Purchaser from any credit card processor and/or account
debtor(s) of the Seller; (ii) upon occurrence of an Event of Default, to perform any
and all obligations of the Seller under this Agreement to protect the value of the
Collateral by obtaining the required insurance; (iii) to collect monies due or to
become due under or in respect of any of the Collateral; (iv) to receive, endorse and
collect any checks, notes, drafts, instruments, documents or chattel paper in
connection with this Agreement; (v) to sign the Seller’s name on any invoice,
bill of lading, or assignment directing customers or account debtors (collectively,
“Account Debtors”) to make payment directly to the Purchaser; and (vi) to file any
claims or take any action or institute any proceeding which the Purchaser may deem
necessary for the collection of any of the unpaid Purchased Amount from the
Collateral, or otherwise enforce its rights with respect to the collection of the
Purchased Amount.
[ECF Doc 202-7, ¶ XIX(d)]. And if Celtic is unable to recover its outstanding balance from the
Debtors’ bank account, Celtic is entitled to chase full repayment from Kurt Crosby as guarantor of
the debt without first seeking recourse from the “Seller.” Read in tandem, the provisions of the
13 [ECF Doc. 202-7, ¶ XIX(b) (“Upon occurrence of an Event of Default due to the Seller’s breach of
its obligations under this Agreement, the Seller shall immediately deliver to the Purchaser the entire unpaid
portion of the Purchased Amount.”)].
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Celtic MCA Agreements make it obvious that Celtic bore zero risk of a revenue shortfall in the
Debtors’ receivables; rather, the provisions are structured to ensure the Debtors’ 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 Celtic MCA Agreements 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 [Celtic] 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 [Celtic] with much more than just the
receivables. [Celtic’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 Celtic MCA Agreements weigh in favor
of the Court’s conclusion that the agreements are disguised loans.
At first glance, the Celtic MCA Agreements appear 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 and specifically states that “[t]his Agreement does
not have a fixed duration and shall expire upon the date when the Purchased Amount and all other
sums due to the Purchaser are paid in full (“Expiration Date”).” [ECF Doc. 202-7, 1 & ¶ II]. And,
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)
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(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 Celtic MCA Agreements have 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 Celtic’s 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, Celtic assumes no risk for uncollected receivables.
Thus, this factor weighs in favor of the Court finding the Celtic MCA Agreements to be disguised
loans.
Finally, Paragraph X(a) of the Celtic MCA Agreements entitled “Reconciliation” allows
the Debtors to request Celtic to perform a reconciliation for purposes of modifying the amount of
the daily “Scheduled Remittance.” [ECF Doc. 202-7, ¶ X(a) (“If at any time during the term of
this Agreement Seller shall experience unforeseen decreases to their Daily Receipts, Seller shall
have the right, at its sole and absolute discretion, to request a modification to their Scheduled
Remittance.”)]. “Such a modification to their Scheduled Remittance (the “Reconciliation”) shall
be performed by Purchaser within five (5) Business Days following the written request by Seller
for said Reconciliation.” Id. Under the Celtic MCA Agreements, the Debtors may seek
reconciliation an unlimited number of times. [ECF Doc. 202-7, ¶ X(c)].
Regardless of the outcome—as determined by Celtic—the amounts owed by the Debtors
under the Celtic MCA Agreements are never reduced due to unforeseen adverse business
developments outside the Debtors’ control. Reconciliation may delay repayment (or accelerate it
if Celtic 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 Celtic
MCA Agreements, the failure to fund one sweep results in an irremediable infraction that would foreclose
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that this particular reconciliation provision weighs in favor of a finding that the Celtic MCA
Agreements are not true sales, but rather disguised loans.
CONCLUSION
The Court thus concludes that the unambiguous terms of the Celtic MCA Agreements
substantively reveal the Debtors’ complete exposure to the direct risk of non-payment of Crosby
Accounts Receivables, making those agreements disguised loans under New York law. The Court
grants judgment as a matter of law in favor of the Debtors and against Celtic 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 Celtic, and DENIED IN PART as to Count II of the Complaint
as against Celtic.
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
any possibility of future reconciliation. Upon such an event of default, Celtic may employ any or all of the
“Remedies” made available to it to ensure repayment under the Celtic MCA Agreement is accomplished.
See supra pages 16–18.
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 Celtic MCA Agreements to be disguised loans, it need not address the
Debtors’ alternative argument that, even if the Celtic MCA Agreements are true sales, the Debtors retain
residual and reversionary interests in the Crosby Accounts Receivable because the agreements only purport
to vest Celtic with a capped or fractional interest in those accounts receivable. [ECF Doc. 202, at 44].
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