Vacatur Is Not a Sympathy Motion
Courts do not vacate default judgments because the defendant is sorry, or because the debt is large, or because the business is in trouble. They vacate default judgments because a specific legal ground exists — a procedural defect, a substantive illegality, a fraud on the tribunal — and because the party seeking vacatur has presented that ground with precision. The seven grounds that follow have each produced vacatur in MCA cases.
Non-Residency Under the 2019 COJ Amendment
New York amended CPLR Section 3218 in 2019 to prohibit the filing of confessions of judgment against defendants who are not residents of New York at the time of execution. The amendment was a direct response to the mass filing of COJs against out-of-state merchants — a practice documented in investigative reporting that revealed New York courts were being used as collection instruments against businesses that had no meaningful connection to the state. If your confession of judgment was filed after August 30, 2019 and you operated a business outside New York, the filing violates the amended statute and the judgment is subject to vacatur on that basis alone.
Defects in the Affidavit of Confession
A COJ requires a supporting affidavit that identifies the specific sum owed, the facts out of which the debt arose, and the ground for the defendant’s authority to confess judgment. Courts have vacated COJs where the affidavit described the debt in circular or conclusory terms, where the affidavit failed to identify the factual basis for the debt with sufficient specificity, or where the person who executed the affidavit lacked authority to bind the business. These are technical grounds, but they are well-established and courts apply them without hesitation when the defects are plain.
Criminal Usury as a Void Contract Defense
In New York, a contract that violates the criminal usury statute is void, not merely voidable. A void contract cannot be the basis for a valid judgment. Following the Appellate Division’s ruling in early 2024 that certain MCA agreements are criminally usurious loans, the void-contract argument has become a viable ground for vacatur of judgments entered on those agreements. The merchant must demonstrate that the agreement, on its face or through extrinsic evidence about the effective rate, constitutes criminal usury — but that showing, where possible, is outcome-determinative.
Fraud in the Procurement of the Judgment
CPLR Section 5015(a)(3) authorizes vacatur where the judgment was obtained through fraud, misrepresentation, or other misconduct of an adverse party. In the MCA context, this ground applies where the funder filed suit in New York knowing the merchant had no notice and no opportunity to contest, where the funder misrepresented the nature of the debt in its papers, or where the funder obtained the COJ through a form affidavit that inaccurately described the transaction. The Yellowstone settlement, which involved vacatur of over a thousand judgments, rested in part on findings about how those judgments were obtained.
Excusable Default With a Meritorious Defense
The most commonly invoked vacatur ground requires showing both a reasonable excuse for the default and a potentially meritorious defense to the underlying claim. The excuse need not be compelling — courts have accepted administrative oversights, failures of communication with counsel, and even simple neglect where the meritorious defense is strong. The meritorious defense in MCA cases is typically the usury argument, the unconscionability argument, or the reconciliation clause argument, any of which may suffice as the predicate for vacatur under this standard.
Lack of Proper Service
A judgment entered without proper service of process is void for want of jurisdiction. MCA companies that file suit or COJs against businesses that have moved, changed ownership, or dissolved without updating their registered agent information may have served an address with no connection to the defendant. Service on a registered agent that no longer exists, or on a person who had no authority to receive service on behalf of the entity, presents a colorable jurisdictional defect and the resulting judgment may be challenged at any time, without the one-year limitation that applies to excusable default motions.
Newly Discovered Evidence
CPLR Section 5015(a)(2) provides for vacatur where new evidence that could not have been discovered before the judgment now exists and would likely have produced a different result. In the MCA context, this ground is most available after significant public enforcement actions — such as the New York AG’s 2024 lawsuit against Yellowstone and related funders — which produced documentary evidence about industry-wide practices that individual merchants could not have assembled on their own. Evidence that the funder systematically ignored reconciliation requests, for example, may constitute newly discovered evidence sufficient to reopen a judgment entered on a different factual record.
