Alabama Businesses Facing an MCA Default Judgment in New York

The judgment came before the phone call

A lot of Alabama owners discover a merchant cash advance case the same way: the bank calls, or a transfer bounces, and the explanation turns out to be a judgment entered in a New York county they have never been to. The lawsuit they expected to be warned about is already over.

That order of events is not a mistake, and it is not rare. It is what happens when a case is filed somewhere the defendant is not, and nobody appears.

How New York lets that happen

CPLR § 3215 is the mechanism. When a defendant has failed to appear or plead, the plaintiff may seek a default judgment. Where the claim is for a sum certain, or a sum that can be made certain by computation, the application goes to the clerk within one year of the default, and on the requisite proof the clerk enters judgment for the amount demanded, plus costs and interest.

Read that again for what it does not contain: a hearing, a judge, or any occasion on which the merits of the funder's arithmetic are examined. A merchant cash advance balance is exactly the kind of figure that can be presented as a sum certain.

Undoing it is a motion, not a conversation

A judgment entered this way is not permanent, but it is not casually reversed either. CPLR Rule 5015 lets the court that rendered a judgment relieve a party from it on specified grounds. The first is excusable default — and that ground carries its own clock, running one year after service of a copy of the judgment with written notice of its entry upon the moving party.

So there are two timelines in play and they are easy to confuse: the one that was missed, and the one now running to do something about it. The second is measured from paperwork, which means the date is findable rather than arguable.

What the judgment is doing while this is sorted out

It is working. A New York judgment creditor's first instrument is usually the restraining notice under CPLR § 5222, which may be issued by the clerk or by the judgment creditor's attorney as an officer of the court and served on someone holding the debtor's property.

What that reaches when the account sits in an Alabama bank runs through the procedures of the state where the bank is, and that is a question for counsel admitted there. Whether the New York judgment behind it should exist at all is the New York question, and it is the one that makes the rest moot if it goes the right way.

The clock you were supposed to meet

For completeness, because it explains the default rather than excusing it: CPLR § 320 gives a defendant twenty days after service of the summons to appear, by answer, by notice of appearance, or by a motion that extends the time to answer, with longer periods in defined circumstances including particular methods of service. It does not pause for distance, and it does not pause while a company looks for a lawyer.

What to do first, from Alabama

1. Get the index number and the county. From the bank, in writing, if that is where the news came from. Everything else is looked up from those two facts.
2. Find out when the judgment was entered, and when notice of entry was served. Those dates set the window for a motion, and they are not the same date.
3. Do not move money. It will not help and it creates a second problem on top of the first.
4. Put the original agreement next to the judgment. What was signed and what was entered are two documents, and the distance between them is where the argument lives.

How an MCA lawsuit is defended sets out the ordinary course when a case is answered on time. If no lawsuit preceded the judgment at all, a confession of judgment is usually the explanation, and a restrained account is what it does next.