Merchant Cash Advances come by the dozen these days but one that we have encountered often especially in litigation is Kalamata Capital Group LLC. Kalamata is frequently represented by Berkovitch and Bouskila, a merchant cash advance collection law firm that we have defended many MCA cases against. Berkovitch and Bouskila file suit quickly in our experience and frequently obtain default judgments against business defendants. One of the problems with this field of law is that service of process is frequently mailed to the debtor as opposed to the standard way of having a service processor come to the business or home of the individual. This sort of service is usually provided in small print in the MCA agreement that companies like Kalamata make businesses sign. Ironically, merchant cash advance creditors still manage to serve wrong addresses even with this easier version of service or fail to provide any sort of delivery tracking.
We always explain that the correct way to defend against MCA creditors like Kalamata Capital is by submitting an answer with affirmative defenses including that of usury and counterclaims where appropriate. Berkovitch and Bouskila frequently file motions for summary judgment attempting to have the court rule in their favor early on in the case without having to go through much or any of the discovery process and in order to avoid a potential trial. This has been fairly unsuccessful for them in our experience when proper opposition is filed showing that there are in fact issues that must be decided at trial instead of as a matter of law. This is even more true recently after the number of federal and state cases ruling against MCA lenders and more clearly establishing that merchant cash advances are in fact usurious loans as opposed to the purchase of receivables that they make themselves out to be. State judges are more experienced with these cases now, as they understand the business of Merchant Cash Advances companies and how small and medium businesses are affected by them.
Default judgments are unfortunately common due to the service issues discussed above, so an order to show cause or motion to vacate the default judgment must be filed in order to re-open the case and give the business debtor the ability to defend themselves on the merits of the case. Vacating the judgment removes the ability of Kalamata or other MCAs from levying bank accounts or placing liens against property. It also removes large amount of additional fees that are added on to the debt once a judgment is obtained. We commonly see between $10,000-$20,000 of attorney fees alone added on to a judgment once it is obtained. However, MCA lenders including Kalamata frequently use UCC liens to levy other type of assets as well. UCC liens are particularly dangerous because a creditor like Kalamata uses them without obtaining a judgment or even before a lawsuit is filed. Although we believe the use of these liens is essentially a back-door way of levying assets before a lawsuit even begins, they are powerful tools for MCA lenders. Common targets include attacking a business’s merchant processor, like a Stripe or Square, attaching online platforms such as PayPal, Venmo, Intuit or others and pursuing vendors or clients that owe the business money.
In many cases, a practical resolution is a negotiated settlement that reduces the balance of the already inflated debt and often allows for an interest-free installment agreement that can range for 12 months or longer, eliminating the daily or weekly payments and extreme interest that make it so difficult to pay but so easy to default on. Defending cases against Kalamata Capital LLC and MCA creditors like it is essential to protect a business’s assets and property and to ultimately obtain a reduced settlement.