New York Attorney General Letitia James filed suit this week against arbitration platform RapidRuling and its two founders, alleging the company posed as a neutral forum while secretly building a system designed to manufacture quick judgments for merchant cash advance lenders against small businesses.
The verified petition, filed in New York County Supreme Court against Mediation and Civil Arbitration, Inc. and attorneys Zachary Meyer and Andrew Sachs, accuses the respondents of repeated fraud, deception, and abusiveness under Executive Law Section 63(12) and General Business Law Section 349. The case marks one of the first enforcement actions to invoke the abusiveness standard added to GBL 349 under the FAIR Business Practices Act, which went into effect this past February.
The filing signals how aggressively regulators are now scrutinizing the dispute resolution mechanisms underpinning debt enforcement, not just the underlying credit products. The suit alleges RapidRuling was conceived in 2019 in coordination with MCA company LCF Group, formerly Last Chance Funding, which drafted and edited the arbitration rules it would later invoke as a claimant. The timing followed New York’s August 2019 ban on filing confessions of judgment against out-of-state debtors, a move the petition frames as the catalyst for an alternative collection tool.
According to the investigation, the rules contained asymmetrical provisions, including a truncated response deadline and discovery available only above a $1 million threshold, that produced near-automatic default awards. Of roughly 2,760 matters pending or completed by March 2023, fewer than 3% were contested. The petition states that in RapidRuling’s first three years, only one merchant prevailed in a contested case, and that outcome stemmed from a filing error by the lender. The lawsuit also alleges arbitrators were trained using sample awards that rejected merchant defenses, with some final awards reproducing the same typo found in the template.
The petition further alleges that days after Meyer testified in September 2024, the founders incorporated an identically named entity in Texas and amended the rules to relocate the arbitral seat to Dallas, while continuing to operate from New York. Several courts had already questioned RapidRuling awards, with one federal judge writing that the volume and one-sidedness of rulings raised alarm that the forum existed solely to enforce MCA agreements.
