Served by Silver Capital? 5 Deadlines That Decide the Case

If Silver Capital has sued your business in New York, you should take it extremely seriously. Missing any of the deadlines in the case could be expensive. This article discusses five deadlines you should not miss.

The state system gives you either twenty or thirty days to answer a lawsuit, depending on how it is served. To move the case to federal court you must do so within thirty days. If the service was really bad, you can challenge it within sixty days after you respond. Judgments by confession have their own special rule. Finally, even if you miss all those deadlines and end up with a default, you may still have a year to ask the court to undo it.

Merchant cash advance (“MCA”) contracts usually put the law of New York and the courts there in charge. No matter where your business is, most MCAs will sue you in a New York court. The lawsuits usually name the company and every owner who signed a personal guarantee.

1. The answer deadline

Your deadline to answer depends on the type of service used to give you the lawsuit papers. If it was served directly to the business, by a process server, within New York, you get twenty days. If the lawsuit was served on the Secretary of State as your agent, then you have thirty days after service is complete. Even if you have thirty days, you should get your answer filed as soon as possible.

You generally have thirty days to answer if the lawsuit was served outside New York. If your business is a corporation, you need to hire a lawyer to appear. You should not try to appear on your own. If no appearance is made by you or your lawyer, the court can rule against the business and anyone who signed a guarantee.

2. The removal window

In some situations, a case that begins in state court can be transferred to federal court if requested in time. The deadline to ask the court to transfer, or “remove,” the case to federal court is thirty days after the lawsuit was served.

3. The service objection

In some cases, a lawsuit will be served with such improper service that you can move to dismiss on that basis. The deadline to do that is sixty days after you serve your answer. The court could find you waive the issue if you let that window pass.

4. The confession of judgment

Many MCA agreements are written to allow the lender to enter the transaction directly into court, without suing. A judgment by confession needs to be filed within three years of signing. The filing can only be done in a county where the business has a place of business. If you’re outside New York, that probably means it can’t be filed here.

5. Undoing a default judgment

Sometimes things go wrong and you miss a deadline. In that case, the court may issue a judgment by default. However, if a judgment is issued against your business, it’s not the end. You can still move to undo, or vacate, the judgment if you do it within a year of being served with notice that it was entered.

If you’re a corporation, the process server can deliver your papers to the Department of State. But before a default judgment can be entered, the lender also needs to have mailed you the summons at your last known address, giving at least twenty days’ notice of the lawsuit.

If you were never served personally and only learn of the judgment later, and have a real defense, you may have a year to go back to court and get the judgment reopened. That window cannot close later than five years after the judgment entered. And the appeal of the judgment itself must be filed within thirty days of being served with notice of its entry.

The Opportunity to Raise Defenses

There are good reasons for you to answer on time. Among them, the opportunity to raise defenses. If an MCA is found to be a loan in disguise, the defense of usury could come into play. Courts look at a contract’s reconciliation clause, whether there’s a finite term, and whether the lender can still collect if your business goes bankrupt. This question is fact-sensitive and decided differently from case to case.

There are more types of defense, too. Did a default really happen under the contract? Did your lender follow its reconciliation instructions precisely? If not, then that could undercut its default claim. Did it send notices out to your customers? Was their timing proper? All these issues can become important.

Settlements in MCA cases are common. The strength of your defenses makes a difference. If you have good defenses and can raise them in time, you can go into negotiations from a stronger position.

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.