A Preliminary Injunction Requires More Than a TRO — and So Does Defeating One
When an MCA company moves for a preliminary injunction, it is seeking something more durable than the emergency TRO it may have already obtained. A preliminary injunction can remain in force for the duration of the litigation — months or years — and its terms can restrict your ability to manage your business, access financing, or transfer assets throughout that period. The hearing on preliminary injunction is your first full opportunity to challenge the funder’s position on the merits, and the defenses available at that stage are broader than many merchants realize.
Defense 1: No Likelihood of Success on the Merits
The threshold requirement for preliminary injunction is a likelihood of success on the merits. Where the underlying MCA agreement is a criminally usurious loan under New York law — and the Appellate Division’s 2024 ruling in Crystal Springs Capital supplied a concrete framework for that argument — the funder cannot demonstrate likelihood of success on its contract claims, because the contract is void. A void contract cannot be enforced, and a court cannot issue injunctive relief in aid of an unenforceable obligation. This defense, where the usury case is strong, can defeat the injunction at its foundational premise.
Defense 2: No Irreparable Harm to the Funder
Injunctive relief requires irreparable harm, which means harm that cannot be adequately compensated through money damages. MCA funders almost always frame their claimed harm as financial loss — the risk that the merchant will dissipate assets, close the business, or otherwise render a money judgment uncollectable. But financial loss, without more, is not irreparable harm. Courts have denied preliminary injunctions in MCA cases where the funder’s claimed harm was recoverable through a money judgment and no showing of actual asset dissipation was made.
Defense 3: The Balance of Hardships Tips Against the Injunction
Even where the funder can show some likelihood of success and some harm, the court must weigh those factors against the harm to the merchant from issuance of the injunction. Where the injunction would freeze operating accounts, prevent payroll, and force business closure — while the funder’s potential harm is limited to a delayed money recovery — the balance of hardships may weigh decisively against issuing the injunction. Present this argument with specificity: dollar amounts, named obligations at risk, and a timeline for business failure if the injunction issues.
Defense 4: The Public Interest Weighs Against Enforcement
Federal courts applying the preliminary injunction standard consider whether issuance of the injunction would harm the public interest. In MCA cases, where significant regulatory and judicial attention has focused on the industry’s practices as potentially exploitative of small businesses, the public interest argument carries more weight than it once did. Courts have been receptive to arguments that enforcing injunctions in aid of potentially usurious contracts is contrary to the public policy underlying state usury statutes.
Defense 5: The Funder Delayed in Seeking Relief
Preliminary injunctions require urgency. A funder that waited months after the alleged default to seek injunctive relief, or that continued to accept partial payments while building its legal position, undermines its claim of irreparable harm through its own conduct. Delay in seeking preliminary injunctive relief — particularly where the delay is significant and unexplained — is recognized ground for denial in most jurisdictions. Document the timeline from default to injunction motion carefully; gaps in that timeline are meaningful.
Defense 6: The Requested Relief Is Overbroad
Even where some form of injunctive relief might be appropriate, a preliminary injunction that freezes all business accounts, bars all asset transfers, and prohibits the merchant from operating its business in the ordinary course is subject to challenge as overbroad. Courts may narrow the injunction’s scope — limiting it, for example, to restraint against extraordinary asset transfers while leaving ordinary operating activity undisturbed — where the merchant demonstrates that the overbreadth causes harm disproportionate to the funder’s legitimate interest in preserving assets pending judgment. Consultation is the beginning of that argument, not its end.
