Pac Western Financial LLC Filed Suit: 7 Questions to Answer Before You Respond

If Pac Western Financial LLC has filed suit against your business, never underestimate the seriousness of a pending lawsuit. The first thing you should not do is to ignore the lawsuit. There is an old legal saw that says that you should never ignore a subpoena, and the same goes for lawsuits: ignoring it will not make the problem go away. Under the law, a defendant has to defend the case, settle it, or work out some sort of arrangement with the plaintiff. Before you respond to any lawsuit, it is important to determine seven things: when your answer is due, which court has the case, what a default would cost, what you signed, whether the claim holds up, what the lender can take, and what you can afford.

1. When were you served?

You have 21 days to prepare an Answer if you have been served in Utah. If you have received a summons that you have to file an answer in Utah but you were served outside Utah, you will have 30 days to file. You must respond to the lawsuit by the deadline: if you don’t, then the lender can get a default judgment against you. Do not let things slide because you have a wrong time frame in your mind.

2. Which court has the case?

Check your paperwork to find out which court is handling the matter. There are two possible answers. The lawsuit may be in the Utah state courts. The other possible court is the Federal District Court. You need to know which jurisdiction your case is in because the procedure is different in each court. If your business is out of state and the dollar amount of the lawsuit exceeds $75,000, not counting interest and costs, then the suit can also be heard in federal court. If the federal court is where the case is being tried, you will need to follow federal rules.

3. What would a default cost?

If you do not answer the complaint, a default judgment may be entered against you. A default judgment is a decision in favor of the creditor because the debtor did not file an answer or appear in court. In Utah, the clerk can enter a default judgment against you for a fixed sum if three things happen: if (1) you were personally served, (2) you never appeared, and (3) the lender filed a sworn statement showing the amount owed. You should be aware that many different things can happen when you allow a judgment to be taken against you. Often the plaintiff’s first efforts to collect on a judgment involve garnished receivables, bank levies and placing liens on business property. If your Answer is late, you may still be able to get the default overturned. In the Utah state courts, there is a window of opportunity to set aside a default. The court may set aside a default for good cause.

4. What did you sign?

Before you defend yourself in court, you need to read your contract and relevant documents so that you understand what your legal rights and responsibilities are. The signed documents control your defense. Look for evidence that indicates to whom you owe the obligation, how much you owe, and what the payments are. Is the lawsuit based on your personal guarantee for the business loan? The lender may be able to collect against you individually for the amount due on the loan. Check to see whether the business secured the loan with an assignment of account, lien on equipment, a promissory note or other security agreement.

5. Does the claim hold up?

Just because someone is suing you does not mean that they have a winnable case. A plaintiff’s claims may not stand up in court or the statute of limitations may have expired. If you have been sued over a written contract in Utah, the lender must file within six years after the cause of action accrues. The cause of action accrues when the debt arises, the last written acknowledgment by the defendant, or the last payment by the defendant. If the lender filed later than six years from the last of the above occurrences, the lawsuit may be time-barred. Also, you should make sure that the plaintiff is entitled to the damages that it is seeking under your agreement. If you find out that the lender has made mistakes, then you should be sure to include that in your Answer.

6. What can the lender take?

Your equipment may be the collateral for the loan, and in such a case, a secured creditor could exercise its rights to the collateral after a default and repossess it without going to court, as long as there is no breach of the peace. It is also possible that the commercial lender may file a UCC-1 with the state. That UCC-1 filing usually covers all your business assets and keeps other lenders from gaining a position ahead of the lender. That makes your credit difficult and a refinance out of the question until it’s cleared.

7. What can you afford?

Even though you are being sued, that does not necessarily mean that you will need to go through the entire lawsuit process. In fact, it is likely that you will not have to. Pac Western may be willing to settle for a lower payment or may be willing to accept new repayment terms. One option is a lump-sum payoff for less than the full balance, in exchange for a release, UCC termination and dismissal. Another is negotiating for a fixed monthly payment schedule in the interim, with the lawsuit held in abeyance. Not every case qualifies. Your Answer shows that you will put up a fight, which may cause Pac Western to reconsider the dollar amount it thinks it can recover. It will be important to use this leverage to your advantage so that you can work out the best deal for you and your business. Take time to get your bearings and figure out what is going on and what options are available to you.

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.