Served by Sapphire? 5 Deadlines That Decide the Case

The laws of your jurisdiction will outline the deadline by which the Defendant must file an Answer to Sapphire’s Complaint. That deadline is critically important. At the end of the day, a Defendant who ignores the deadline set forth by the court will probably lose the case. When you know your 5 most important deadlines, a lot of uncertainty goes away and you have a roadmap to follow.

1. The answer deadline

This is not as simple as it may seem. Generally, you have to give your written answer to the plaintiff within 20 or 30 days after you have been served, depending on the method of service. It is 20 days if the summons was handed to you personally. If it is not, the deadline is 30 days after service is complete.

Many financing contracts say that disputes will be heard in New York. If that applies to you, these are the rules. However, the 20 to 30 days to answer is common to most jurisdictions. If your case is in a different state, the summons will still tell you what you need to do and by what date. As a technical matter, service need not be in person to you. Service is effective if the summons is delivered to your registered agent or someone else at your place of business. If in doubt, assume the clock is running.

An important thing to remember about service is that it’s not complete just because it started. If somebody left papers with the receptionist at your office and a process server mailed papers to your business address and filed proof of service with the court, service isn’t actually complete until ten days after the server files the proof of service with the court clerk. If papers are served through the Secretary of State, service is complete on delivery to the Secretary.

If you receive the summons without the complaint, you have a right to have a copy. You should ask for it. You must make an appearance and demand a complaint within the same time period that you would have had to respond to the complaint. The plaintiff then has twenty days after the demand to serve the complaint. Otherwise, the case may be dismissed.

Use this time to gather evidence in support of your case, like contracts or documents showing the amounts of money your business took in. Get the complete agreement, including addenda or any other changes or riders. Keep everything and look through it all. If you had any communications from Sapphire in this case, get them, make sure they are complete, and don’t lose them.

2. The removal window

In some situations, a lawsuit filed in state court can be removed to federal court. This can only happen within 30 days of being served with the initial pleading. Note that the deadline is not based on the answer deadline. If you’ve been sued in state court and you think you have a right to be in federal court, talk to a lawyer right away.

3. The default date

Sapphire may be able to win a judgment on a default without proving its case. It may freeze bank accounts or other assets, or, if you signed a personal guarantee, go after you personally. It’s always a good idea to act before a default is entered against you. If you missed the deadline, contact a lawyer right away to see what can be done.

Missing your deadline for filing an answer is not necessarily game over. You can ask the court for more time to answer even after the deadline, but you’ll need a good reason for the delay. If your company was served through the Secretary of State, Sapphire must also mail the summons to its last known address at least 20 days before a default judgment is entered.

Be careful about what you do with funds once litigation has begun. Don’t empty your accounts, transfer money to a family member, or open up a new account to hide deposits. Courts take a very dim view of these tactics, which can be considered fraudulent transfers.

4. The one-year clock

If a judgment is already entered against you, don’t despair. There are still some options available. Judgments are far more complicated to undo than lawsuits are to defend. Any “excusable default” defense must be made in a motion to vacate judgment, made within a year of the service of the judgment and notice of its entry. If you’ve been served with a default judgment, get legal advice immediately.

Or, if you were never handed the papers personally, you may be able to defend within one year of learning about the judgment, but no more than five years after it was entered, if you can show a meritorious defense and got no timely notice. If papers were sent to an old address, or to the wrong person, service might have been improper and you may be able to get the judgment thrown out.

Some judgments come another way. With a confession of judgment, a creditor can get a judgment against you without giving you notice or letting you have a hearing. These were restricted by New York in 2019 against out-of-state businesses. If you are a New York business and your contract is old, you should make sure it doesn’t have a provision giving the plaintiff the right to confess judgment against you.

5. The arbitration award

If you have an arbitration provision in your contract, you may not have to fight your case in court. Instead, it will be submitted to a private arbiter or arbitral panel. Arbitration is different than litigation. In New York, you must apply to a court within 90 days after the arbitrator delivers the award to you or your representative to have the award vacated or modified. If you get an adverse arbitration award, talk to a lawyer right away.

If you face a lawsuit or arbitration, getting ready to respond will frequently bring the funder to the table. But remember that even if you accept a deal and sign a settlement agreement, it’s a contract. Never sign documents in a panic. Do not compound the problem by stacking another advance.

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.