Hundreds of MCA Lawsuits Are Being Filed in a County With No Connection to the Deal. Here’s What Out-of-State Business Owners Need to Know.

Published September 23, 2026 · CredibleLaw Legal News

A regional business publication in New York has put numbers to something merchant cash advance defense counsel have described anecdotally for years: a single suburban county courthouse has become a preferred filing destination for MCA funders suing small businesses that have never set foot in New York. On September 21, 2026, the Rockland County Business Journal reported that hundreds of MCA collection suits are filed in Rockland County Supreme Court each month by funders such as Mantis Funding, Lendr Online, The Merchant Marketplace, Funding Depot, Funding Futures and Swift Funding — against defendants located in Arizona, Virginia, California and elsewhere. Many end in default judgments. Few are ever defended.

For a business owner who just opened an envelope containing a summons from a New York county they have never heard of, the practical question is narrow and urgent: does this filing location matter, and what happens if nobody responds? The honest answer has two parts. The filing location can matter a great deal — but only if it is raised correctly and on a clock that runs in days, not months. Understanding how MCA venue clauses actually work is the difference between a procedural lever and a missed deadline.

What the Filings Actually Look Like

The publication reviewed dozens of recent filings. Three examples illustrate the pattern, and each one is worth reading closely because the economics and the paperwork tell the same story.

In a suit filed earlier in September by Mantis Funding against an Arizona recycling company and its owner as guarantor, the funder advanced $17,100 against $24,460 in purported future receivables, with repayment set at $299 per day for 82 days. On default, the merchant was also charged a $5,000 default fee, a $2,500 blocked account fee, and a $199 UCC lien fee. The report calculates that, if treated as a loan, the annualized rate on that 82-day transaction would be roughly 288 percent. Businesses in that position often find themselves comparing offers using factor rate versus APR for the first time only after suit is filed — our MCA APR calculator exists for exactly that reason. The Arizona defendant’s local options are covered on our Arizona MCA defense page.

In a second case, Lendr Online sued a Virginia hauling company and its owner after advancing $96,000 against $130,000 in receivables, repayable at $2,579.37 per week for 50 weeks — an annualized rate the report puts near 64 percent if characterized as a loan. The detail that matters most is not the rate. It is that the venue the merchant actually agreed to in the contract was Nassau County, New York. The case was filed in Rockland County instead. Trucking and hauling operators face this pattern disproportionately; see our coverage of transportation-sector MCA lawsuits in New York and our Nassau County MCA defense page.

In a third, Merchant Marketplace Holdings sued a California daycare operator after advancing $18,000 against $31,000 in receivables at $387.50 per day. The contract designated Fairfield County, Connecticut as the agreed forum. The suit was filed in Rockland County, New York.

In each of these, Rockland County is the home of neither party, the contract was not signed there, and the transaction has no apparent connection to the county. The filings reportedly cite a New York City court rule that the report characterizes as irrelevant to the venue chosen. All of the reviewed agreements permitted service of process on out-of-state merchants by certified mail, with no return receipts produced and no process server involved. Funders then commonly wait out a 30-day window and seek default judgments from the county clerk.

Why a Distant County Is an Effective Collection Strategy

The strategy works on arithmetic, not law. A business in Arizona that owes $24,460 must decide whether to retain New York counsel, appear in a court 2,400 miles away, and litigate a case where the funder’s papers are templated and its lawyer files hundreds of these a month. Many owners conclude the defense costs more than the judgment. That calculation is what produces the default rate — and the default judgment is where the real damage begins, because a New York money judgment is portable. It can be domesticated in the merchant’s home state and then enforced there against bank accounts, receivables and, where a personal guarantee exists, the owner individually.

What follows a default judgment is a well-worn sequence: restraining notices under CPLR 5222 that freeze business bank accounts, information subpoenas seeking the merchant’s banking and customer records, and post-judgment collection activity that can continue for years. Our guide to stopping an MCA restraining notice in New York walks through what is and is not available at that stage.

It is worth noting what is not at issue here. New York banned confessions of judgment against non-New York residents in 2019 through an amendment to CPLR 3218, which closed the fastest of the old shortcuts. The filings described in the report are ordinary lawsuits followed by ordinary defaults — slower, but reaching the same destination when no one appears. Background on the older mechanism is on our confession of judgment page.

What New York Law Actually Says About Venue

This is where precision matters, because the most common thing said about improper venue online is wrong.

Under CPLR 509, the place of trial is the county the plaintiff designates — unless it is changed by court order on motion or by the plaintiff’s consent. That is the default rule, and it is why a funder can file in a county with no connection to the case and have the filing accepted by the clerk. CPLR 503 sets the residence-based standards for what counts as a proper county in the first place.

Where the parties signed a written agreement fixing the place of trial before suit, CPLR 501 provides that the agreement shall be enforced upon a motion for change of place of trial. That is the provision that gives the Nassau County and Fairfield County clauses described above their force. CPLR 510 supplies the grounds: the designated county is not a proper county, an impartial trial cannot be had there, or the convenience of material witnesses and the ends of justice favor a change.

The 15-Day Clock Most Defendants Never Hear About

The mechanism is in CPLR 511, and it is unforgiving. A demand for change of place of trial on the ground that the designated county is improper must be served with the answer or before the answer is served. After serving that written demand naming the county the defendant contends is proper, the defendant may move to change the place of trial within fifteen days after service of the demand — unless the plaintiff consents in writing within five days. New York appellate courts have enforced that fifteen-day limit strictly, denying motions filed even a handful of days late. A defendant who misses the sequence does not lose the argument entirely, but it converts from a change of venue sought as of right into a discretionary application addressed to the court.

Two corrections are necessary here, and any business owner reading about this story elsewhere should hold onto them:

• A venue problem is a transfer problem, not a dismissal. The remedy under CPLR 501 and 510 is to move the case to the proper county — not to erase the claim. A merchant who wins a venue motion still has a lawsuit to defend, just in a different courthouse. Grounds for dismissing an MCA lawsuit in New York are a separate analysis.
• Venue and jurisdiction are different questions. Venue is which New York county hears the case. Personal jurisdiction is whether a New York court may hear a claim against an out-of-state defendant at all — usually turning on a forum-selection or consent-to-jurisdiction clause in the agreement. See MCA personal jurisdiction defense, jurisdiction defenses in New York MCA cases, and whether MCA lenders can sue in another state.

The Service Question

The report’s observation that the agreements permit service by certified mail without return receipts raises a distinct issue. Parties can contract around default service methods in some circumstances, and courts have upheld contractual service provisions where they comport with due process. But whether a particular mailing satisfied the contract’s own terms — correct address, correct entity, proof of what was actually sent — is fact-specific, and defects in service are among the more common grounds for attacking a judgment after the fact. This is a question for counsel reviewing the actual affidavit of service in the file, not a conclusion a merchant should assume. Our MCA civil procedure defense overview covers the categories.

Why This Story Is Landing Now: the Kossoff Ruling

The timing is not coincidental. On July 27, 2026, the United States Bankruptcy Court for the Southern District of New York issued a decision that has been read across the industry as a significant escalation. In In re Kossoff PLLC, 2026 WL 2168916 (Bankr. S.D.N.Y. July 27, 2026), Judge David S. Jones granted a trustee’s motion for partial summary judgment holding that 19 merchant cash advance agreements between Capital Stack, LLC and a collapsed New York real estate law firm were loans under New York law rather than true sales of future receivables. The opinion is available from the court, and the ruling was covered by Bloomberg Law and analyzed in detail by Troutman Pepper Locke.

The numbers give the decision its weight. Capital Stack advanced approximately $10.88 million under the agreements against a total required repayment of roughly $14.88 million. About $8 million had been repaid by the time of the bankruptcy, and the ruling opens the door to avoidance litigation over those transfers.

The Three Factors Courts Apply

New York courts assessing whether revenue-based financing is really a loan have converged on the three-factor framework from LG Funding, LLC v. United Senior Properties of Olathe, LLC, 181 A.D.3d 664 (2d Dep’t 2020) — reconciliation, finite term, and recourse in bankruptcy — read against the substance-over-form principle the Court of Appeals applied in Adar Bays, LLC v. GeneSYS ID, Inc., 37 N.Y.3d 320 (2021). Our page on the LG Funding merchant cash advance test breaks the factors down. In Kossoff, each factor cut against the funder:

• Reconciliation was illusory. Any adjustment to payments rested entirely in the funder’s discretion, with no binding obligation to honor a merchant’s request and no mechanism to refund prior over-collections. This is the single most examined clause in MCA litigation — see MCA reconciliation rights.
• Mandatory daily ACH remittances combined with automatic default on a missed payment made the repayment period calculable with mathematical certainty — a hallmark of a loan, not a purchase of fluctuating receivables.
• The bankruptcy carve-out offered no meaningful protection, because the default provisions were broad enough that a merchant filing bankruptcy would almost certainly have already defaulted, extinguishing the carve-out’s benefit.

Kossoff also materially extends Judge Jones’s earlier ruling in In re J.P.R. Mechanical Inc. (Bankr. S.D.N.Y. 2025), where the court addressed MCA agreements on a largely undisputed record after the funder missed discovery deadlines. In Kossoff, the funder litigated actively, submitted expert testimony and argued course of dealing and actual reconciliation history — and the agreements were still recharacterized. That procedural contrast is the reason practitioners treat Kossoff as the more consequential of the two. Background on the underlying theory is on our disguised loan defense page and our New York MCA usury law overview.

What Kossoff Does Not Mean

Accurate expectations matter more than encouraging ones, and several claims circulating about this decision overstate it.

• It is a bankruptcy court decision on partial summary judgment. It is persuasive, not binding precedent on New York state courts, and there is no public indication of whether it will be appealed.
• It does not void MCA agreements generally. It held that these particular agreements, on this record, were loans. Other courts examining differently drafted contracts — including agreements with genuinely mandatory, retroactive reconciliation — have reached different results.
• Recharacterization is not automatic relief. New York’s civil usury cap of 16 percent generally cannot be asserted by a corporate borrower, and while criminal usury at 25 percent under Penal Law § 190.40 can be raised defensively, courts have divided on how far a corporate borrower may use it affirmatively to void an agreement. Our page on whether MCAs are usury violations and our New York usury defense overview address the distinction.
• It does not change venue law. Nothing in Kossoff affects where a funder may file a collection action or how quickly a defendant must object.

If Your Business Has Been Served From a New York County

The sequence below is about preserving options, not about any particular outcome. Every item depends on the contract, the state where the business operates, and the papers actually filed.

• Record the service date and the method. The deadline to respond runs from service, and the response window for an out-of-state defendant can differ from the window for a defendant served in New York. The envelope, the postmark and the enclosures should be preserved intact.
• Find the venue and forum clauses in the agreement before anything else. If the contract names a specific county or state and the case was filed somewhere else, that is a CPLR 501 issue — and under CPLR 511 the demand must be served with or before the answer. See MCA venue clause defense.
• Pull the reconciliation provision. Whether it is mandatory or discretionary, retroactive or prospective only, is the question every recharacterization argument turns on. Details are on our reconciliation rights page.
• Check whether a personal guarantee was signed and by whom. Guarantee exposure follows a different analysis — see MCA personal guarantee lawsuits in New York.
• Do not ignore the papers because the courthouse is far away. That assumption is what the filing pattern depends on. The first 48 hours after an MCA lawsuit and the New York MCA lawsuit timeline lay out what typically happens next.

If a Default Judgment Has Already Been Entered

A default is not automatically the end. CPLR 5015 allows a court to relieve a party from a judgment on several grounds, including excusable default — which generally requires both a reasonable excuse and a potentially meritorious defense — and lack of jurisdiction to render the judgment. Separately, CPLR 3215 requires a plaintiff to take proceedings for a default within one year or face dismissal of the complaint as abandoned. Timing, the strength of the underlying defense, and the quality of the service record all bear on whether vacatur is realistic. Our pages on vacating an MCA default judgment in New York, MCA default judgments in New York, and default judgment defense generally explain the standards in more detail.

The Wider Regulatory Picture

The filing pattern is developing against a regulatory backdrop that has shifted considerably. The New York Attorney General’s office has pursued MCA funders directly; its Yellowstone Capital settlement cancelled $534 million in merchant debt, required vacatur of collection actions, and provided for termination of liens against merchant property on request. Several bills pending in the New York legislature would extend civil and criminal usury caps to merchant cash advances, invoice financing and revenue-based financing, and would require MCA providers and originators to be licensed through the Department of Financial Services — a change that would substantially expand state enforcement reach. None of those bills is law today.

At the state level more broadly, ten states now impose commercial financing disclosure requirements reaching MCAs, and the enforcement structures differ in a way that is often misreported: several of those regimes, including Florida, Utah and Texas, are enforceable only by the regulator and expressly do not void the underlying transaction. Our merchant cash advance laws by state page tracks the current landscape, and ongoing developments are collected on our MCA news page.

For merchants whose exposure spans several advances rather than one, the analysis widens beyond any single lawsuit. Options can include negotiated settlement, restructuring, or — where the business remains viable — a reorganization filing, which triggers the automatic stay and can halt pending MCA lawsuits. Our MCA bankruptcy options overview compares those paths. Cases that exceed the monetary threshold may also land in New York’s Commercial Division.

Frequently Asked Questions

Can an MCA company sue my business in a New York county I have never been to?

It can file there. Under CPLR 509, the place of trial is the county the plaintiff designates unless changed by court order or the plaintiff’s consent. Whether the filing survives a properly and timely made objection is a different question, governed by CPLR 501, 510 and 511.

My contract says a different county. Does filing in the wrong one get the case dismissed?

Generally no. Under CPLR 501, a written pre-suit agreement fixing the place of trial is enforced on a motion for change of place of trial. The remedy is transfer to the agreed county, not dismissal of the claim.

How long do I have to object to venue?

Under CPLR 511, a demand for change of place of trial on improper-venue grounds must be served with the answer or before it, and the motion must follow within fifteen days of serving the demand unless the plaintiff consents within five days. New York courts enforce the fifteen-day limit strictly.

I was served by certified mail with no return receipt. Is that valid?

It depends on the agreement and the facts. Many MCA contracts authorize service by mail, and contractual service provisions can be upheld where they satisfy due process. Whether a specific mailing complied with the contract and with due process requires review of the actual affidavit of service by counsel.

Does the Kossoff ruling mean my MCA is void?

No. In re Kossoff PLLC held that 19 specific agreements, on that record, were loans under New York law. It is a bankruptcy court decision on partial summary judgment — persuasive rather than binding on state courts — and recharacterization does not by itself cancel an obligation.

What makes a reconciliation clause a problem for the funder?

Courts applying the LG Funding factors look for whether reconciliation is mandatory rather than discretionary, whether it operates retroactively to refund over-collections, and whether the merchant can actually invoke it. Discretionary, prospective-only reconciliation weighed heavily against the funder in Kossoff.

A default judgment was already entered against my business. Is anything still available?

Possibly. CPLR 5015 permits relief from a judgment on grounds including excusable default — generally requiring a reasonable excuse plus a potentially meritorious defense — and lack of jurisdiction. CPLR 3215 also requires a plaintiff to take proceedings within one year of a default. Outcomes turn on the specific record.

Can a New York judgment be enforced against my business in another state?

Yes. Money judgments are generally portable and can be domesticated in the state where the business or its assets are located, after which enforcement proceeds under that state’s rules. This is why defaults taken in a distant county have consequences at home.

Getting Help With an MCA Lawsuit

CredibleLaw is a national legal resource and attorney referral network. It is not a law firm and does not provide legal representation or legal advice. Business owners facing an MCA collection suit, a frozen account or a judgment can request a free case review or call 888-201-0441 to be connected with an attorney in the applicable jurisdiction. Additional background is available on our MCA defense resource hub, our New York MCA defense overview, and our guides to MCA lawsuit defense and available legal defenses. County-level resources include Queens, Nassau County and White Plains.

This article is for general informational purposes only and is not legal advice. Statutes, court rules and case law change, and their application depends on the specific facts of each matter. Readers should consult a licensed attorney in the relevant jurisdiction before acting on any information here.