Atipana Credit Opportunity Fund Lawsuit: 6 Defenses Worth Raising in Your Answer

If Atipana Credit Opportunity Fund is suing you in New York, at least there is hope. Answer the complaint and file it in time, and raise six common defenses: bad service and personal jurisdiction, criminal usury, being an out-of-state lender suing in New York, debits after the lawsuit, make the lender prove its case, and protect your bank accounts.

1. Answer on time

You will have a specified number of days to file an answer with the court after being served, and missing the deadline can mean you lose by default. A New York defendant usually has 20 days to respond if served in-person, or 30 days if service was made other ways. The deadline matters for another reason: if personal jurisdiction is not challenged with the Answer, or in a separate motion served before answer is due, it is waived. It cannot be asserted later. If you have already lost by default, the first step is to ask to vacate it. However, make sure the one-year deadline is not about to expire, counted from notice of the judgment.

2. Criminal usury

Corporations can’t use civil usury as a defense, but the criminal version could defeat a funder. Criminal usury in New York means to charge more than 25% a year. However, that only applies if the deal was indeed a loan, which the court must evaluate. The court in LG Funding considered three factors to decide whether a deal is a loan: is there a reconciliation provision, is the term finite, and can the funder recover if the business goes bankrupt. Some courts look at whether the reconciliation was just a courtesy or done at all, and if not, they see the deal as a loan since it appears repayment was expected regardless of business performance. If a court finds the funder charged criminal usury, they forfeit the entire principal of the debt and all interest.

3. Wrong court entirely

Suppose that the Plaintiff is organized under the laws of a state other than New York. If your business is organized in another state, the Plaintiff may not have the right to sue you in a New York court because you are both “outsiders.” You can ask the court to dismiss the case for lack of subject matter jurisdiction. If this happens, the creditor would need to refile against you in your home state. It may help to show that the claim itself did not arise in New York. However, if the funder wired money from a New York bank, the claim could still be considered to have arisen in this state. Check the bank statement that shows where you got the money: the wire details often show the sending bank’s location or routing number.

4. Debits after the suit

If the funder has kept taking auto-debits from the company’s checking account even after suing, it would give the company an argument to have the suit dismissed. Courts have dismissed lawsuits or denied the funder summary judgment on that ground.

5. Make them prove it

In a 2023 case against Empire Restaurants, a court in Brooklyn told Atipana that it needed to prove its claim before the judge could grant it summary judgment, even when a defendant fails to oppose a request for summary judgment. In a 2024 case citing that ruling, the court denied summary judgment because the payment history submitted by the plaintiff was from another company, which never gave an affidavit. So challenge the validity of any evidence the lender offers to prove its claim.

6. Guard your bank accounts

A company’s bank account in another state should not be reachable by a New York judgment, but funders often try anyway. If the account is held outside New York, a New York court cannot freeze or garnish it, no matter if the bank has a New York branch. A restraining notice also becomes void after one year. Once the year is over, a bank is required to release any money it has been holding unless there was a levy or the creditor won a turnover order. That is why fighting any turnover proceeding matters.

Even if the court will not grant a turnover proceeding, the funder can still send a UCC lien notice, putting a freeze on payments your customers or card processor owe you. In 2024 a judge found that one such lien was damaging the debtor’s business, and removed it, finding the contract had a usual hallmark of a usurious loan.

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.