February 27, 2026 – Robert L. Rattet and James B. Glucksman, with the active participation of John D. Molino and Craig M. Price, achieved a significant legal victory in a very active area of bankruptcy and commercial litigation involving Merchant Cash Advance Lenders (“MCAs”). On February 20, 2026, Judge Michael Wiles of Bankruptcy Court for the Southern District of New York substantially denied two MCAs’ Motions to Dismiss DHC’s adversary complaint seeking to knock-out the MCAs’ claims. The Court agreed with DHC, holding that the following issues raised by DHC  were legally meritorious: 1) the question of whether the “sales” and “repurchase obligations” between the MCAs and the Debtors constituted disguised loan agreements (the “Loan Obligations”); 2) whether the principal and interest due under the Loan Obligations are void under New York’s criminal usury statute, Penal Law §190.40; 3) whether the entire transaction can be unwound as a fraudulent conveyance; and 4) whether the claims of the MCAs must be denied on the basis that said parties hold a voidable preference or fraudulent conveyance. The Court is allowing repleading on the issues of: 1) whether the claim constitutes in whole or in part unmatured interest; and 2) whether the claims can be equitably subordinated.

Issues regarding MCAs have been hotly contested in the Bankruptcy Courts recently as this type of predatory lending has increased, and this victory should help small businesses that enter into such transactions to avoid similar obligations in the future.