Answering a Fortress Merchant Solutions INC Complaint: 5 Things to Check First

If Fortress Merchant Solutions INC has filed a complaint against your business, you should check your emails and mail, find out when you have to file an answer, figure out if you were served properly or can get an extension, review your agreement and balance to find any possible defenses, and confirm whether a judgment or a bank restraint order has been filed before you settle. Do not ignore the lawsuit. Review it immediately with a business attorney. Comply with all of the court deadlines. Failure to take the proper legal steps to respond to the lawsuit can result in a default judgment against your business.

1. Confirm it is a lawsuit

Determine whether the documents are a court complaint (lawsuit), a demand letter, an arbitration demand, or a different type of collection method. Remember that just because someone says you are being sued does not mean it has been filed with the court.

Make sure it is not just a payment notice, a collection letter, or an automated fax without a case number. Review the document to see if it is dated and contains a case or complaint number, a court address, and specific due dates for responses and appearances. Identify who filed the lawsuit (the “plaintiff”) and who is being sued (the “defendant”). Search the case using the case number to make sure it is a legal action (lawsuit) against your business.

2. Find the real deadline

Confirm the actual deadline to answer or reply to the lawsuit. Every state has different rules as to how long after you are served you must file an answer. The deadline is typically tied to the service method.

If you were given the summons personally, in New York you usually have 20 days to appear or answer the case. If service was completed by substituted service, meaning a copy was left with a family member or someone at your business, or tacked to your door with a mailing (nail and mail), you may have 30 days after service was completed to appear or answer. A corporation in a New York case cannot be represented by an owner in court. It must be represented by a licensed attorney, apart from limited exceptions. Negotiating a payment plan or payment schedule does not stop the legal action from continuing.

3. Check service and the court

Confirm that you were properly served by someone authorized to serve legal papers and that it was done in compliance with all state rules. Did you receive the lawsuit documents personally or were they left at your business? Were you served in a state where you do not do business? Was a manager or employee the one served? If the lawsuit was not properly served, that does not mean it will automatically go away, but there may be ways to get it dismissed.

Just because you do not do business in a state does not mean the court lacks jurisdiction over your company for a contract dispute. Before you respond and file your answer, be sure to review your contract or agreement and look for clauses on where a dispute must be filed (venue), the state law that applies to the contract (governing law), and whether you agreed to settle disputes through arbitration instead of the court.

In New York, if you raise improper service in your answer, you generally lose that objection unless you move to dismiss on that ground within 60 days after serving the answer.

4. Compare the agreement and balance

Review the signed contract or agreement at issue in the complaint to make sure it is accurate and that you owe the claimed balance. Get your credit card or bank statements to see what payments, if any, you made towards the debt. Compare the lawsuit balance with your own records to see if you might have been overcharged.

Do you have payment records and documents that show the funder consistently took money even though sales dropped, and did not adjust the daily debits as promised? Did you email or speak to a representative of the funder and request that the payments be reduced or stopped because the business was no longer operating or was making little or no sales? Keep records of these communications.

The parties calling it an advance does not decide whether it is really a loan. In a 2020 New York case, the appeals court in LG Funding said whether a merchant cash advance is really a loan depends on three things: a reconciliation provision, a finite term, and recourse if the merchant goes bankrupt. This matters because New York criminal usury (over 25% a year) applies only if it is a loan.

In New York, defenses such as payment, release, fraud, illegality and the statute of limitations must be pleaded as “affirmative defenses” in an answer. The statute of limitations (deadline) for breach of contract is generally six years. These arguments are not automatic. They must be carefully explained and documented with evidence. If you are sued as an individual and the agreement includes a guarantee, find it and determine if you signed it.

5. Look for a judgment before settling

Before you enter into a settlement or payment agreement, review the court website and your local business mail to make sure you were not served with a lawsuit or there is no judgment (money award) against you. Look to see if your bank account was restrained.

If you find out there is already a default judgment against your business, the clock may be ticking on what you can do about it. In New York, a motion to vacate for excusable default must be made within one year after you’re served with the judgment and notice of entry. Relief is not guaranteed. Go back through your records and have a lawyer review this with you quickly to see what can be done. This is not a time to wait and do nothing.

If your bank account has been frozen or your customer payments are being sent to a third party, it is important to get the actual legal document that was used to do this. It may be a court order (restraining notice), a financing statement, a notice of assignment, or a different type of document. You should get all the original documents and review them closely with your attorney before making any account changes.

If you settle a lawsuit or debt with one of these funders, make sure the written agreement covers all key points. These include the total payment amount, how and when payments must be made, what businesses, owners and guarantees are released, how the court case will be ended and any judgment satisfied, and when the settlement payment is complete and restraints, liens or UCC filings are released. Include what happens if a payment is missed. Every agreement should be put in writing and reviewed before signing.

A free contract review costs nothing and takes a day or two. Call (888) 837-7053, or send the agreements to Delancey Street for a straight read on your options.