How a New York MCA Judgment Reaches Texas, Florida or California

Your merchant cash advance or MCA funder can still file their New York judgement against you regardless of where your business is in the United States. That being said, they cannot continue collections via any county sheriff until they register it in your state. Put simply, a judgment made in another state must first be ”domesticated” in the new state - essentially, put on file at the county courts - before being enforced in the new state. That’s usually just filing a copy of the paperwork. It doesn’t mean a second court trial of the case, but it’s not automatic either; it must be filed to be valid.

You might ask: why does a New York judgment matter to me? Maybe my merchant cash advance deal says that New York law applies, and the case was filed in New York. But I don’t live in New York, or do business there. I’m in California/Florida/Texas, my bank is local and none of my assets are in New York. It’s just a New York judgment, and what does that matter? Federal law generally requires states to give other states’ judgments ”full faith and credit.” To the courts, where the suit was filed and where it’s being enforced are separate questions.

Domesticate and Put a New York Judgment on File

In Texas, the funder needs a ”certified copy” of the New York judgment - e.g. a copy that a court clerk puts a seal on. Then it files it with the court clerk in Texas, along with an affidavit that says who it thinks the debtor is and their last known address. Notice is mailed out, and proof of mailing is filed. The filing of the New York judgment in Texas has the same effect and can be attacked with the same defenses as a Texas judgment could be. It’s treated as a final judgment by Texas courts. Read literally (subject to exceptions), Texas courts are required by court rule to wait 30 days before final judgments are executed.

In Florida, the judgment has to be recorded with the Florida circuit court clerk. The New York judgment has to be a certified copy. The person doing the filing also has to put in an affidavit with what they think the debtor’s last known address is. After it’s recorded with the clerk, the clerk mails notice of the recording to the debtor.

In California it’s different. Here a New York judgment gets put on file under the Sister State Money Judgments Act. It can be used to levy against a nonresident individual or an out-of-state corp that’s not qualified to do business in California right away. However, seized property can’t be sold or paid out until 30 days after the notice of entry is served.

Challenge the New York Judgment

In Florida and California, those ~30 day windows people talk about are about how much time you have to challenge the New York judgment. The challenge has to be based on an acceptable reason the court can actually use, not because you just disagree. In Florida, you have 30 days from the recording to file suit in FL challenging either the NY court’s jurisdiction or the judgment’s validity. You also have to put a notice on record - what’s called a lis pendens - and doing that gives you an automatic stay of any enforcement or lien being put on your business in FL. In California, you can file a motion to vacate the judgment within 30 days of the notice of entry of judgment with any ground that would have been a good defense in California courts. If you were properly served with the original lawsuit and didn’t contest it then, you probably have no right to contest the judgment based on the outcome.

Does New York really have jurisdiction over your business? Was your business properly served? Did you have any opportunity to defend the lawsuit? Has this judgment been appealed or stayed? Is it final, or can it still be called off? Has the Texas/Florida/California filing been done right? These are important questions that can have major consequences for your situation, but they also need lawyers’ work to find the answers to.

If the funder simply filed and you ignored it, a judgment by default can be entered. Default judgments can be tricky to fight - that’s a judgment, not a lawsuit, and they have a different scope of defenses you can raise. In general, don’t ignore any out-of-state MCA lawsuit, because they can lead to a default judgment. As for confessions of judgment, New York only permits confession of judgment filings if the defendant lives or lived in that county when they signed, so generally you’re not facing this if you’re in a different state with no New York home or place of business.

What can they go after once they’ve filed their money judgment? For one, money. That can include bank accounts, receivables, your own business assets. You’ll want to check the judgment paperwork carefully - specifically, check who it’s issued against. If it’s just the business, then only its money is being targeted. By contrast, if it’s both the business and you personally, then it can target your personal assets too. On the other hand, Texas won’t garnish your wages for this kind of debt, and urban homesteads of up to 10 acres are largely protected by law. In Florida, if you’re head of your family and you earn $750/wk or less, you’re fully exempt from wage garnishment - and California has a substantial homestead exemption.

What you need to do now: Get a copy of the judgment. You need the NY court, case number, date, the amount awarded, and the names of who it’s been issued against. Try to find the case file in the NY courts too. Call the TX/FL/CA courts too and ask about the filings they have; you can request copies too. Take note of the dates: when you were served with the suit, when the judgment was entered, when the TX/FL/CA filing was made, and when you got the notice. Don’t try moving or hiding your bank accounts in another state. That won’t make the problem go away.

The main problem with just waiting is that interest accrues - in New York, at 9% a year. Worst of all, the judgment is presumed to be paid only after 20 years. All too many think negotiation is impossible if there’s a judgment; it’s not. Judgment still can be settled, and the settlement should cover satisfaction of the judgment, a release of the guarantors if there were any, a UCC termination if one was filed, pending garnishments, and what will happen if the deal’s terms aren’t met.