In a significant ruling for the insolvency and finance sectors, the Wisconsin Court of Appeals has concluded that a court-appointed receiver may proceed with a preferential transfer claim under state law, notwithstanding forum selection and choice-of-law clauses requiring disputes to be resolved in Utah. The ruling reinforces the priority of Wisconsin’s statutory protections for creditors in receivership proceedings.
The case centers on Ridgeway Trailer Company, a Wisconsin-based business engaged in the sale, rental, and brokerage of truck trailers and parts. In 2019 and early 2020, Ridgeway entered into two merchant cash advance (MCA) agreements with Torro LLC, a Utah-based funding company. Under these agreements, Torro purchased large amounts of Ridgeway’s future receivables—$372,500 and $596,000, respectively—for reduced lump sums of $250,000 and $400,000, less fees.
The contracts included explicit provisions requiring that Utah law govern all disputes and that any litigation be conducted exclusively in Utah courts. The second agreement further emphasized that the transactions were negotiated and carried out in Utah and that Utah had a reasonable relationship to the deal.
In April 2020, Ridgeway entered receivership in Brown County, Wisconsin, under Chapter 128 of the Wisconsin Statutes. Seth E. Dizard was appointed as receiver. According to court records, Ridgeway made $137,180 in payments to Torro within the four months prior to the receivership filing. Dizard initiated a claim against Torro in Wisconsin, seeking to void and recover those payments under Wis. Stat. § 128.07, which allows a receiver to claw back transfers made by an insolvent debtor that favor one creditor over others of the same class.
Torro moved to dismiss the case or transfer it to a Utah state court, citing the forum selection and choice-of-law clauses in the MCA agreements. The circuit court granted the motion and dismissed the action without prejudice. Dizard appealed.
The Wisconsin Court of Appeals reversed the lower court’s decision, holding that Wisconsin’s strong public policy embedded in § 128.07 outweighs the enforcement of the Utah-based contract provisions. The appellate panel emphasized that Wisconsin law protects all creditors by permitting receivers to recover preferential payments made shortly before insolvency proceedings.
The court found that § 128.07 embodies a policy “so important that parties may not avoid it.” While recognizing the general enforceability of contractual forum selection clauses, the court noted that they cannot stand when they undermine an overriding state interest—namely, the equitable treatment of creditors in receivership.
The court also stressed that the receiver and Ridgeway’s other creditors, many of whom are based in Wisconsin, were not parties to the contracts with Torro and had no role in negotiating or agreeing to the Utah provisions. Applying Utah law, the court explained, would have denied them the protections available under Wisconsin’s receivership framework.
In contrast to Wisconsin, Utah law expressly allows insolvent debtors to prefer certain creditors. Moreover, Utah’s Uniform Voidable Transactions Act does not offer a cause of action comparable to that provided under § 128.07, which permits recovery from creditors who had reason to believe a debtor was insolvent at the time of transfer.
Because Wisconsin law would govern in the absence of the disputed clauses—and because that law reflects a fundamental public policy—the appellate court ruled the forum selection and choice-of-law provisions unenforceable. The case was remanded for further proceedings in Wisconsin.
The ruling is expected to have meaningful implications for financiers, funders, and investment professionals involved in MCA transactions, particularly in jurisdictions with active state-level insolvency regimes. It sends a clear message that contract clauses designating out-of-state law or venues may be struck down when they conflict with essential state protections for creditors.
Case Name: Seth E. Dizard, Receiver of Ridgeway Trailer Company v. Torro LLC
Court: Court of Appeals of Wisconsin, District III
Decision Date: April 8, 2025
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