Sued by Amsterdam Capital? 7 Steps to Take in the First 20 Days

Your written agreement is probably governed by New York law, and it allows the plaintiff to sue you in New York courts. You need to get experienced help to draft a formal answer to the lawsuit and have it served within 20 or 30 days. If you don’t your business is at risk of getting a judgment from the court for the whole amount. Above all, you should move swiftly to secure the services of a commercial litigation lawyer experienced in defending lawsuits from merchant cash advance companies.

1. Read the summons closely

If you have been sued by Amsterdam, the first thing to do is read the summons closely and look at the date you were served with it. The summons tells you who is suing you, where you are being sued, and the amount of the lawsuit. It also lays out the court’s deadline for you to answer the complaint. You can tell whether this is a state or federal court by looking at the first page of the complaint. Look at the heading and search for the name of the court. If the contract contains a mandatory venue provision, then the lawsuit will likely be filed in the court indicated in the provision.

2. Count your deadline

Depending on how the lawsuit papers were handed to you or your business you’ll have 20 or 30 days to respond. If you were hand delivered the lawsuit papers inside New York you will have 20 days to answer the complaint or file a motion. If you were served outside New York, or by mail or another method, you will likely have 30 days to answer the complaint or file a motion. If you were not personally handed the lawsuit papers, call your lawyer and discuss whether you have 20 or 30 days to respond. It is very risky to do nothing and just let the deadline pass you by.

3. Hire a New York lawyer

A business owner should never try to handle a lawsuit by Amsterdam Capital Solutions on their own. This means that if you own a corporation or LLC and you have been sued by Amsterdam Capital you cannot just walk into court yourself and explain why the lawsuit has no merit. You need to hire a lawyer to file formal answer or file your motion.

4. Pull out your agreement

Check your original cash advance agreement and try to find the date the contract was signed and the amount of the advance. Check for the amount of the outstanding balance. Are the numbers in the complaint different from the numbers in the contract and correspondence? Also look for the personal guaranty. If you signed a personal guaranty your personal assets are at risk. It may also have a confession of judgment provision in it allowing Amsterdam Capital to secure a judgment against your business without ever going to court.

5. Ask whether it is really a loan

Consider whether your advance agreement could be re-characterized as a loan agreement under New York state law. Cash advance lenders run the risk that their financing deals are de facto loans and therefore subject to state laws governing usury. When deciding whether or not an agreement is a bona fide cash advance agreement, courts will consider whether there is a reconciliation provision, or a method for the merchant to pay less than the stated amount if sales decline, whether there is a finite term, and whether the funder has recourse to the merchant in the event of a bankruptcy filing.

If it is a loan, criminal usury comes into play in New York when a lender charges interest of more than 25% per year and doesn’t have a proper license to make the loan in the first place. A top court decision in 2021 says a corporation can bring up criminal usury as a defense. If a loan is determined to be criminally usurious it is unenforceable and void, which means the borrower has no obligation to repay either principal or interest.

6. Do not let it default

Do not ignore the lawsuit summons because if you ignore it and do nothing a default judgment could be entered against your business. This is a huge problem for your company since a judgment creditor can pursue collections and seize business assets.

A New York judgment does not cross state lines to enforce itself. Instead, the creditor has to go through a formal process to convert it into the legal equivalent of a judgment in the state where the bank account is located. The merits of the original case generally cannot be re-argued, but there are narrow procedural defenses available.

There’s a pretty good chance you’ve heard about the laws that shield a person’s home from creditors, or the protections that come into play when someone has a garnishment order served on them. But businesses are treated differently. A creditor can attach to the company operating account.

7. If you are already late

If it has been more than 20 or 30 days since you were served and a default has not been entered against you yet, you still have options. The court may grant a motion to open up your default and let you defend the lawsuit if you can show a reasonable excuse for the delay. If a default has already been entered you will likely need to seek to vacate the judgment, which is an extra layer of complication you don’t want. You have one year from the date you were served with the judgment and notice of its entry to file your request to have the default opened up, so do not wait.

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.