Court grants Motion to Dismiss for lack of personal jurisdiction where MCA Company relied on a contractual method of service but failed to authenticate such contract

Here is another recent case where an MCA company failed: Wynwood Capital Group LLC v. Confluence Corp. (2024 NY Slip Op 50557(U)).

Wynwood Capital Group LLC, an MCA company, sued Confluence Corp. and its individual guarantor for allegedly breaching a merchant agreement by failing to pay what was due thereunder. As is common practice among MCA companies, Wynwood Capital included language in the agreement allowing for service of legal process by regular mail or email, rather than the more stringent methods outlined in New York’s Civil Practice Law and Rules. So they filed a complaint and served the complaint by mail on the defendants, which was not in compliance with any CPLR methods. The defendants moved to dismiss the complaint, and the motion to dismiss was granted because the MCA company failed to “authenticate” the agreement that contained the provision for the simplified service.

After a thorough examination of case law pertaining to the validity of contractually agreed-upon methods of service of process, the court ruled:

….this Court holds that (a) contractual parties are free to mutually agree upon a method of service of process other than those provided for in statute, such as Business Corporation Law § 307 or CPLR provisions such as 308, 312-a and 313, (b) they may elect to subject themselves to service of process by a variety of means, such as regular (first-class) mail, certified mail, or certified mail return requested, or even the computer-era communication means of email, (3) the burden of proof on the issue of whether personal jurisdiction was acquired through service of process in accordance with a contractual provision lies with the plaintiff, (4) the contract must be proved to be valid in the first instance, and (5) service of process in reliance upon a contractual provision must have been effectuated strictly in accordance therewith.

In this case, the plaintiff failed to provide sufficient evidence to establish the authenticity and validity of the Merchant Cash Agreement. Despite the defendants’ denial of the document’s legitimacy in their answer, the plaintiff did not submit an affidavit from anyone with personal knowledge of the contract’s execution. Furthermore, the plaintiff offered no proof that the computer-generated typeface name on the agreement constituted the individual’s actual signature or consent to the terms. Consequently, the plaintiff did not meet its burden of proving the Merchant Cash Agreement’s validity or establishing it as a business record.

Conclusion

You see, you can agree to service of legal process by any method prior to any lawsuit, but then, if the plaintiff wants to rely on that provision in court, it also has the burden of proving that the agreement containing the service method was valid.