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

Getting sued by Coolidge Capital is a serious issue for your business. They are a merchant cash advance funder based in Carle Place, New York, and they want their money. So this lawsuit is probably in New York state court. If your business was handed the summons, then it has 20 days to respond; if it was served in some other way, your business has 30 days. If your business ignores the lawsuit, the plaintiff wins by default. So don’t ignore it and don’t try to run out the clock. You need a lawyer.

1. Count your days

If you were handed the summons (also called “personal service”), you have 20 days to answer. If the summons was served some other way, such as through the Secretary of State, then it’s 30 days. Service by the secretary of state counts as served when the state receives the papers, not when you receive them by certified mail. Write it down and note the date.

Look carefully at your summons to see what court it is in. If the case is in a different state, some of the terms will be different. Your time to answer will be different, for example. In Florida, your time to respond is 20 days after service, not 30. Even if the case is in a distant state, you can’t just ignore it. You have to respond in that court, wherever it is.

2. Know what a default costs

If you ignore the lawsuit, then in New York, the plaintiff files a few papers with the clerk, and the judgment gets entered. The judgment includes court costs. Interest is added at the statutory rate of 9% per year. And the NY judgment can be filed in Florida and used to seize a Florida bank account.

3. Hire a lawyer now

You will be tempted to save money by putting off hiring a lawyer. You are probably pressed for cash right now. Still, you need a lawyer and need to respond to the lawsuit. A company is generally not allowed to represent itself without a lawyer. Lawyers are licensed on a state-by-state basis. If you get sued in New York, you need a New York lawyer. 20 to 30 days is actually not that long for a lawyer to evaluate your case. So start looking right away.

4. Check how you were served

The law on how to serve a defendant (meaning deliver court papers) is tricky. If there is anything unusual or strange about the way you were served, check with a lawyer to make sure the court got jurisdiction. After you figure out if you were served the right way, you can decide whether to raise it in your answer to the suit or in a motion to dismiss. And if the argument is raised in the answer, then you have to file a motion to dismiss on it within 60 days after the answer is served on the plaintiff or you will lose the right to bring up the issue of service. The court can make exceptions, but you need to ask for them and show it would be a hardship not to have the chance to argue about bad service.

In a cash advance lawsuit, the contract usually has a clause that names a particular law and court. But they don’t always follow their own contract; watch to make sure they used the right court. And you need to raise it fairly quickly - otherwise, the court could rule that you waived it.

5. Think about federal court

If the case is between citizens of different states and there is more than $75,000 at stake, a case can be moved to federal court. The case can be moved only within 30 days after the case is served, so think about it during the first week.

6. Read your agreement

Coolidge says it is not a loan but a purchase of receivables. Usury laws only apply to loans, not sales. Some courts have ruled that a purchase of a stream of future payments at a discount can be outside the usury law. But this is an unsettled area of law, and courts may look at the substance of the transaction, especially if the funder bore no risk. Did Coolidge make you sign a personal guaranty? Are payments fixed or tied to something else? The company may have treated you the same as if you were just paying back borrowed money, and you can try to use that against them in court. Whether this will work depends on the particular facts of the situation.

On Florida deals from 2024 on, Florida law requires the funder to give you a written disclosure before closing. It must include how much you pay in total, over time, and what the financing costs are. But its violation doesn’t void the deal or give you a claim by itself. If you didn’t receive the disclosure or it was wrong, this may help prove how the contract was sold.

7. Get something on file

If you can do nothing else, make sure to get an answer or motion in before the deadline. Your lawyer can ask the court for more time, and the court can give more time. A court can also accept an answer that is late. If you are late, a court might require a good reason why your answer was late. A default judgment can be challenged by filing a motion with the court where it was entered within one year after the defendant is served with it and with notice of its entry.

Some lenders ask for a Confession of Judgment in their contracts. If you did sign one, it will show up in your contract. Florida has a law that keeps courts from enforcing a confession of judgment signed before the lawsuit. By confessing judgment in New York rather than Florida, they can force the judgment debtor to travel out of state to undo the confession. The court clerk will mail you a notice when someone records a New York judgment in Florida. From then, you have a short window to challenge the New York court’s jurisdiction or whether the judgment was valid, and ask Florida to pause collection while the motion in New York is pending. Do these things quickly.

If Coolidge is not your only problem, a business with debts of no more than $3,424,000, at least half from business activity, may be eligible to reorganize in Subchapter V. Talk to a business bankruptcy lawyer. And first, make sure to answer your lawsuit.

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.