Served by Wellen Capital LLC: 8 Documents to Pull Before You Respond

When you are served with a civil case in New York, you have 20 days from the date you are handed the Summons and Complaint or 30 days if the papers were left with someone else at a business. It’s critical to pull eight things before you respond to a Wellen Capital LLC lawsuit: the court papers, your agreement with Wellen and its key clauses, the guaranty, your bank statements, and any notices of liens filed against you. You should begin gathering all documents now.

1. The summons and complaint

If this is a state court case, the summons may be at the end of the papers that were served on you, and it tells you that you’ve been sued. It has the name of the plaintiff, the defendant (you) and information about where to file court papers. Find the summons and write down the different dates on it so you can calculate the time you have to respond in writing to the lawsuit. If no complaint came with it, you can ask for it, which can extend your deadline. Write down your deadlines and be on top of this, because if you’re sued and you don’t show up in court, the court can enter a judgment against you.

2. The court file

You can look up your case online. Then if you want to look at the physical file, you can go to the courthouse where it is assigned. Often, the file number and location will be included on the summons. Check the Affidavit of Service. The affidavit of service says how you were served, which is what gives you 20 days or 30 days to file a formal response. If Wellen Capital sued you, it may have attached as an exhibit to the complaint a copy of the receivables agreement you signed. Read it carefully.

3. The merchant agreement

This could be what they are suing you on in order to try to show the court you still owe money. The agreement includes the fees and how they will be paid, which may be through ACH debits from your bank account. The language of the agreement can affect the case against you if your lawyer is able to find legitimate defenses to what you’re being sued for. In one New York case, the funder bought $75,000 of future receivables from a construction company for $50,000 and gave the company $46,335 in advance, keeping a $3,665 fee.

4. The reconciliation clause

Find the reconciliation clause, which means that the merchant can ask to adjust payments up or down if weekly sales rise or fall. That makes the term indefinite, which can let the funder avoid usury laws.

5. The default and bankruptcy terms

The documents have a clause that determines what should happen if there is a default. Read that section. If bankruptcy is listed in that section as a valid reason for not paying, then the funder does not have an automatic right to repayment. New York court cases have largely looked at three things in determining whether a merchant’s funding was an advance on future sales or a loan with interest. They ask whether the merchant agreement has a reconciliation clause, whether the term of the agreement is finite, and if the funding agreement has recourse if the merchant goes bankrupt. If the contract is considered a loan, interest rates over 25% a year can be criminal usury.

6. The personal guaranty

If the business owner signed a personal guaranty, then the funder may be able to come after the owner personally for missed payments. In that New York case, the court entered a judgment against the merchant and the owner. Check the personal guaranty to see what you promised and whether you agreed to be responsible for the debt if you declared bankruptcy.

7. Your bank statements

Pull all your bank statements for the period of the merchant advance. Check them carefully for the ACH debits, which may show a company you recognize as the recipient or the bank the funder went through. Also check to see if any were rejected by the bank as insufficient funds. In that New York case, the deal didn’t look like a loan to the court in the first place, because the merchant agreement had a reconciliation clause, which made the term indefinite, and also had a bankruptcy term that excused payment. Under New York law, if the contract is not a loan, it can’t be a usurious one.

8. UCC liens and confessions

Search the UCC filings by name on the New York Department of State site for any filings against you. The official certified search for each name costs $25. Most UCCs lapse after five years, unless they have been continued by the funder. Any confession of judgment you signed must be filed within three years of signing. Also, it must be filed in the county where you lived or had a place of business.

Say you’re late, and a default judgment is already entered. You may still have a chance to stop it, but a motion to vacate a default judgment for excusable default can only be filed within one year of service of the judgment and notice of entry, so act quickly.

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.