Default judgments can have serious consequences for businesses. A company may suddenly learn that a judgment has been entered against it only after a bank account, payment processor account, or other asset has been restrained. When that happens, quick action matters.
Arpino Law recently helped a business client obtain relief from a default judgment in a commercial litigation matter pending in the Onondaga County Commercial Division of the New York State Supreme Court. The case involved claims arising from an alleged business financing agreement.
The plaintiff claimed that several business entities and an individual were liable for a substantial balance under the agreement, along with interest, costs, disbursements, and attorney’s fees. Our client disputed that it was properly responsible for the alleged debt.
The Problem: A Judgment and a Restrained PayPal Account
Our client contacted us after learning that a default judgment had been entered and that one of its payment processing accounts had been restrained.
After reviewing the court record, we identified several issues that supported an application to vacate the judgment. Among other things, our position was that the client had previously appeared in the action through prior counsel, that there were serious notice issues relating to the default application, and that the client had meaningful defenses to the underlying claims.
The client’s defenses included that it was a separate business entity, that it did not receive the subject funding, and that the person alleged to have bound the company to the agreement did not have authority to do so.
The Result: Default Judgment Vacated
After we filed motion papers seeking to vacate the default judgment, the opposing party consented to the relief requested. The motion (called an order to show cause) was handled by attorney David Arpino, with assistance from Arnold Arpino. After the motion was filed, the opposing party consented to the relief requested.
The parties entered into a stipulation vacating the default judgment as to our client. The stipulation also required that any restraints, levies, executions, or enforcement actions against our client—including the restraint placed on the client’s payment processing account—be released promptly.
The agreement also allowed our client to serve and file an answer to the complaint, preserving its right to defend the case on the merits.
This was an important result because it moved the case away from judgment enforcement and back to where it belonged: a contested litigation matter where our client could assert its defenses.
Why This Matters for New York Businesses
A default judgment is not always the end of the case. Depending on the facts, a business may have grounds to ask the court to vacate a default judgment.
Common issues that may support vacating a default judgment include:
- Improper service;
- Lack of notice of a default judgment application;
- Confusion caused by prior counsel’s withdrawal;
- A reasonable excuse for the default;
- A meritorious defense;
- Lack of authority to bind the company;
- The wrong business entity being sued or included in a judgment.
Every case is different, and timing is important. A business that waits too long may lose valuable arguments or face continued enforcement efforts.
Facing a Default Judgment or Account Restraint?
If your business has been served with a lawsuit, received notice of a default judgment, or discovered that a bank account, merchant account, payment processor account, or other asset has been restrained, you should speak with an attorney quickly.
Arpino Law represents businesses and individuals in commercial litigation, debt collection disputes, contract matters, and judgment enforcement issues throughout New York.
Contact Arpino Law today to discuss your case.