Should New York State Governor Kathy Hochul sign Bill S7476, businesses may have more options when it comes to suing an out-of-state customer for non-payment in New York.
The bill would essentially make it so that every company registered to do business in New York agrees that the New York courts have “jurisdiction” over them.
It has always been possible to sue your out-of-state customer in New York if your business is an official entity with the state. However, if your customer was not registered as “doing business” in New York or merely had a small percentage of its transactions within the state, then the non-paying customer might be able to have the case dismissed or transferred to a different jurisdiction.
Suing an Out-of-State Customer
Assuming the governor signs the bill, you could bring your debt collection case in New York, requiring your customer to come and defend the case. And, if a corporate entity, the non-paying customer would need to retain counsel as a corporation. They can not represent themselves in New York courts. In the event the non-paying company defaults on the debt, assuming your counsel drafted the summons and complaint properly, you could obtain a default judgment. A default judgment is valid for 20 years and is enforceable in New York. If your customer does business with another New York company, you can restrain any monies that would be due to the non-paying company and redirect the funds to satisfy your judgment. You can also possibly restrain a merchant account or register the judgment in another state across the country. The process to register or domesticate the judgment in another state would differ based on the state’s requirements.
If the non-paying customer defends the case, and the case continues without settlement, it could become expensive and inconvenient for the out-of-state customer to continue to defend. The party may then seek to resolve the claim with payment, especially in cases involving $200,000 or less.
If signed into law, Bill S7476 will amend the following:
- Civil Practice Law and Rules (CPLR) Section 301-a
- New York Business Corporation Law Section 1301
- General Associations Law Section 18
- New York Limited Liability Law Section 802
- Not For Profit Corporation Law Section 1301
- New York Partnership Law Section 121-902
- New York Partnership Law Section 121-1502
Regardless of whether the governor signs the bill or not, the terms of your underlying agreement will dictate whether you can sue in New York as well as if you need to mediate or arbitrate. If there is a requirement to do something other than sue in New York, you will need to follow those guidelines. Otherwise, you may be able to bring your debt collection case in New York State.
If you have a debt collection matter you need assistance with or are looking to collect on a debt collection matter in New York, contact Frank, Frank, Goldstein and Nager.
