Highland Hill Capital Filed Suit: 7 Questions to Answer Before You Respond

If Highland Hill Capital has sued your business, you have to respond within the time provided, usually 20 to 30 days. In this article, I’ll give you 7 questions to answer before you respond to a lawsuit from Highland Hill Capital so you can be well-equipped to make the best decision for you, and your business.

1. Lawsuit or confession of judgment

There are two ways Highland Hill Capital can sue you. One is a lawsuit and the other is a “confession of judgment” which is a document signed by you in which you agreed that you would owe the debt, and if it was not paid, the lender could file the confession of judgment in court for enforcement. Confessions of judgment give Highland Hill Capital a lot more power than a typical lawsuit. Typically, in a lawsuit, you’ll get a notice. However, with confessions of judgment, they get a confession of judgment, and then they get a judgment on it. It’s important to know what type of document you’re working with, so you can use the proper legal protections.

2. Which court, and where

Whether it’s a confession of judgment or a lawsuit, you need to look at where that court is located. The answer will tell you what rights you have to assert. Different courts have different rules. In New York, for example, since 2019, state law has restricted filing confessions of judgment against businesses based outside of New York. You need to look for the caption to see which court, and where. With a case number, you can check on what the court knows about the case. In New York, NYSCEF gives a breakdown of deadlines and filings. In federal court, PACER does the same thing.

3. How long you have

Once you know whether it’s a lawsuit, or confession of judgment, and the court it is in, the third thing you need to know is your timeframe. You want to look at your notice very closely for that information. You typically have a 20 to 30 day timeframe to respond, but not always. In a lawsuit against a business in New York, you are supposed to respond within 20 days if the summons was handed to you personally in New York, and 30 days if served by Secretary of State or through substituted service. If you are not sure, you should respond sooner. Look carefully at that notice for the time you have, and when it runs from.

4. Who can respond

In New York, a corporation is required to appear through an attorney, except in certain small-claims-type cases. You appear to the lawsuit by serving an answer, a notice of appearance, or a motion that extends your time to answer. If you do nothing, it could end with a default judgment that Highland Hill Capital can start enforcing against you and your business.

5. What a missed deadline costs

The worst case is if you do nothing. If that happens, you can get a default judgment entered against you and your business. That can result in Highland Hill Capital obtaining a judgment lien, a bank account levy, or even a restraining notice. If you missed your deadline, it is important to contact a lawyer to ask whether you can cure the default. Sometimes you can. However, you have to act fast. Valid grounds could be defective service, excusable neglect, or a meritorious defense. The time to act varies by jurisdiction. In New York, you have one year from the date that the judgment was served on you with notice of entry. As soon as you realize the default was entered, you should consult with a lawyer. Even if a year is a long time, you don’t want to go past it.

Just because a judgment was obtained, does not mean you can not settle. It costs you more than it would have before the judgment or before the lawsuit, but it’s usually better than years of garnishment.

6. Whether you have a defense

You need to decide if you have a defense, whether you want to answer it, or if you just want to resolve it. It’s important to work with an attorney who knows about merchant cash advances to determine what your defenses may be.

One important defense against merchant cash advance companies is whether it’s really a loan subject to New York’s usury cap. In New York in 2020, the appeals court said that courts usually weigh the presence of reconciliation provisions, a finite termination date, and whether there was recourse to the merchant in the event of bankruptcy.

Reconciliation matters here too. When economic conditions are difficult, you might not be making as much revenue, and there is often a clause in the contract that allows adjustments for that. However, funders typically don’t volunteer to exercise that adjustment. If you had other funding in place, stacking might be a factor as well. It’s important to speak to an attorney to find out whether you can make those arguments, and in what court.

7. Settle, defend, or something else

Finally, you need to decide whether you should settle, or if you want to defend. It’s best to decide sooner rather than later. Once you’ve talked to an attorney, you may decide to defend, to settle, or to file bankruptcy.

Even after they file suit, there is often something that can be done. If you have the lawsuit pending against you, sometimes the fact that the funder might have to go through the cost of litigation is a reason that they might settle for less. Keep in mind that if you have more than one funder, you should do settlements together. Otherwise you might trigger a default from the other one.

Bankruptcy typically works to stop pending litigation against you or your business. If you have stacking, often the best thing to do is have an attorney negotiate a coordinated settlement rather than file bankruptcy. Make sure that your business bank accounts remain open and in good standing, because closing your bank account, even if the lawsuit is pending, can be deemed to be a breach of the agreement.

The sooner you respond, the better, as you will have more options and less expense. After you answer these seven questions, you’ll be equipped to understand the options, and the effects of each one.

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.