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Division 5 LLC v. Fora Fin'l Advance LLC

Irreparable Injury Shown in Suit Claiming Cash Advance Is Actually Usurious Loan

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OPINION AND ORDER On October 11, 2024, the Court granted a motion for a preliminary injunction filed by Plaintiff Division 5, LLC (“Division 5″) against Defendant Fora Financial, LLC (“Fora”) barring Fora from collecting on a debt owed to it by Division 5 under a Merchant Cash Advance (“MCA”) agreement. (ECF No. 27.) Division 5 argued that the contract violates New York usury laws and is therefore unenforceable, that Fora breached the contract, and that Fora fraudulently induced Division 5 to sign the contract. In its order issuing the preliminary injunction, the Court stated that its reasons would be explained in a forthcoming opinion. This is that opinion. I. Background The following facts are taken from the parties’ sworn declarations and are uncontradicted unless otherwise indicated. This case concerns a dispute over what is commonly called a “Merchant Cash Advance” agreement, in which a company receives a short-term, lump-sum payment in exchange for a promise to deliver a fixed percentage of its future accounts receivable. Plaintiff Division 5, a business specializing in “structural steel and miscellaneous metals fabrications and installation for general contractors and construction managers” (ECF No. 5-2 (“Barker Dec.”) 2), executed such an agreement with Defendant Fora Financial Advance, LLC on June 29, 2023 (Headley Dec.

4, 6). Division 5 is owned by Conrad Barker, based in Connecticut, and has been in business for 11 years. (Id.

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