Served by Fundr: 8 Documents to Pull Before You Respond

When an owner gets an actual complaint for money due from Fundr, the time to act is measured in days. Before you talk to the funder or sign anything, you need a big set of records in hand: the summons and complaint, a proof of service of those papers, the agreement with Fundr, your guarantee, Fundr’s payment history on the agreement, any reconciliation request, any notices sent to the bank and any notice of a UCC filing by Fundr, and any judgment it claims to have. That’s not everything, but it’s the beginning of your facts.

1. The summons and complaint

You need to find these right away. Your secretary might already have emailed a copy, but you’re looking for the complete set. The first papers in a lawsuit are a summons, a complaint and any exhibits attached to the complaint. Note which court, who is the plaintiff, what kind of business entity it is, and every named defendant. Check who’s listed on the front page of the complaint as defendants: your business, you personally, maybe another business, too. You’re about to have a conversation with a lawyer, and you want to start by holding the same records.

If you’re getting emails or letters from the lawyer or the Fundr company, keep them with their envelopes if they came by mail. But an email or a demand letter is not a lawsuit.

2. Your record of service

Write down what happened when you were served with the summons and complaint. Remember that the date is important. Make a note of the date, who handed the papers to you and how they were handed to you (paper in hand, mail or tacked to door). The deadline for responding to a summons and complaint depends on when you were served, and the way you were served, and it will not necessarily be thirty days from when you opened the envelope. In New York, the deadline to respond to a lawsuit is generally twenty days after they hand you the papers in your hand, but thirty days after a process server gives them to someone else or nails them on your door, counted from when service is complete.

The conversation you had with Fundr did not stop the clock, even if it sounded like a settlement discussion. Only an answer, notice of appearance, or motion counts.

3. The signed agreement

Every funder sends a contract, and the one that matters is the one you signed. Copy it out of your files and grab any amendment or modification. Compare it to the complaint, and see if the plaintiff is the same one named in the agreement. If the plaintiff is a different business, ask how they got the right to sue. Find and circle these clauses: where the parties agree any dispute will be heard, what law governs, and any arbitration agreement. Your being out of New York won’t end the case by itself.

4. The personal guarantee

You need to see the guarantee, if you haven’t already. Some personal guarantees cover only particular misconduct; others are unconditional promises to pay. Be sure you know what’s on the paper. A claim that you (or the business) are in breach will need its own legal review.

5. Payment history and bank statements

Get the payment history from your bank statement, starting from the beginning of the business relationship. Find the funder’s initial advance, and all future debits and credit corrections. If the funder had access to your bank account, you should have a record of all their withdrawals and credits. Do not count on any balance claimed by Fundr.

6. Reconciliation requests and replies

Give the lawyer every reconciliation request you sent and the funder’s replies, with dates. You’ll want to show how the revenue declined. Just labeling it an advance won’t settle the case.

7. Bank, UCC and customer notices

Get a record of every notice, beginning with the one that claimed money in your account, a frozen account or processor hold. There’s a big difference between getting a copy of an assignment of payment rights, a copy of a UCC-1 filing, a bank notice and a bank subpoena. A letter to your customers to pay an assignee is something else again. You should be wary about moving accounts or resources, before you get legal advice.

8. Any judgment already entered

Never take for granted that a default judgment or confessed judgment has been correctly entered, or that nothing can be done about it. A New York court as of August 2019 will no longer accept a confessed judgment against an owner outside New York.

Get a copy of the judgment that the funder got. You should never assume that fighting over the judgment will delay collection, because you can’t afford to guess wrong.

Now’s the Time to Get Help

Now’s the time to get help. A settlement company negotiating with a funder for you is not a lawyer and not representing you in court. If you’re making a deal, get all the terms in writing first. It ought to include the total amount paid, the dates it’s paid, what parties and businesses are covered, and whether the guarantee is also cleared. It should also say how the case ends, and what happens if you miss any payment. The conversation alone won’t do it.

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.