Many merchant cash advance agreements contain arbitration provisions, forum-selection clauses, or contractual language that attempts to dictate where disputes must be resolved. These provisions can significantly affect the course of litigation and may provide important strategic opportunities for businesses facing lawsuits and collection efforts.

Arbitration clauses are often intended to require disputes to be resolved outside traditional court proceedings. However, questions frequently arise regarding whether the funding company complied with its own contractual obligations before commencing litigation. In some cases, businesses are sued in court even though the agreement contains mandatory arbitration language. When that occurs, defendants may have the right to seek enforcement of arbitration provisions or challenge the propriety of the judicial proceeding.

Forum-selection issues present another important area of defense, particularly for companies operating entirely outside New York. Many businesses have no offices, employees, customers, bank accounts, or operations within the state, yet find themselves defending lawsuits in New York courts simply because the funding company is headquartered there. The existence of a contractual forum clause does not automatically resolve every jurisdictional question, especially where statutory requirements or principles of fairness may point in another direction.

Out-of-state businesses may possess defenses based upon personal jurisdiction, forum non conveniens, and the absence of meaningful connections to the selected venue. Courts frequently examine whether defendants purposefully availed themselves of a particular jurisdiction or whether litigation would be more appropriately conducted elsewhere. The size of the transaction, the location of the parties, and the actual conduct underlying the agreement may all become relevant considerations.

Forum and arbitration disputes are not merely procedural technicalities. They often affect litigation costs, access to witnesses, the governing law, and the overall ability of a business to defend itself effectively. For small and medium-sized enterprises, being forced to litigate hundreds or thousands of miles from their operations can create extraordinary burdens.

A careful review of contractual dispute-resolution provisions should occur at the earliest stages of any case. Understanding where a matter should be heard—and whether it belongs in court at all—can provide substantial strategic advantages and may influence every aspect of the defense moving forward.