Does the Montana Business Owner Need a Lawyer?
A merchant cash advance is usually a purchase of receivables. They are collected through debits, daily or weekly. Defaulted debts are collected through a lawsuit, lien and bank levy. Does the Montana business owner need a lawyer? If a merchant cash advance funder has sued a Montana business owner in New York under a forum selection clause in their contract, we care about the lawyer licensed in New York. We care about the Montana lawyer when the judgment is transferred to Montana for collection, or when a lawsuit is filed in a Montana court, or in a bankruptcy filed in the District of Montana.
Montana has no commercial financing disclosure law. As of August 2026, no Montana statute makes a funder show a business the amount financed, the total repayment, the finance charge, or an estimated annual rate. No state agency registers small business finance providers either. Montana’s payday lending rules protect individual consumers and do not reach commercial products such as merchant cash advances. A Montana merchant therefore has no state disclosure violation to point to. Its leverage has to come from usury law, contract defenses, and the rules governing judgments.
Montana’s usury law is unusually strong for a business borrower because the general ceiling has no exemption for business loans. Section 31-1-107 caps written agreements at 15% a year or 6 points above the federal prime rate, whichever is greater. Banks and other regulated lenders are exempt. Under Section 31-1-108, a lender that charges more forfeits double the agreed interest. A borrower who has already paid can sue to recover double the interest paid. That suit must be filed within two years after the payment, and only after the borrower makes a written demand for return of the interest. Funders may also invoke Section 31-1-112(2), which exempts finance operations that fund transactions between merchants. Montana’s appellate courts have not decided whether a merchant cash advance funder fits that exemption.
A leading decision is Cap Call, LLC v. Foster (In re Shoot the Moon, LLC), 635 B.R. 797 (Mont. Bkrty. Ct. Sep. 10, 2021). Shoot the Moon, and its affiliates, owned and operated 16 restaurants in Montana, Idaho, and Washington and they had 18 transactions with CapCall. Judge Whitman L. Holt determined that the advances were really disguised loans. He pointed to CapCall’s blanket liens on all the assets, personal guaranties, confessions of judgment, stacked advances, and the contracts’ use of the term debtor to describe the merchant. The contracts called for New York law. The court applied Montana usury law because application of New York law would contravene Montana’s strong policy and Montana had the greater interest. Annual rates of 82% to 175% led to judgment for usury of $1,216,685, plus $424,756.58 in attorneys’ fees under Montana’s fee reciprocity statute.
The shortcomings with Shoot the Moon are:
- it is a single bankruptcy court case, not binding on a Montana state court or the Montana Supreme Court;
- usury laws were applied only to the 11 agreements executed by an LLC incorporated in Montana;
- the court recovered $1,129,071 of avoidable preferential transfers under the bankruptcy code, which is not available to a merchant outside of bankruptcy;
- the trustee retains segregated credit card receipts in the amount of $228,449.93 because CapCall had no legitimate interest in them post bankruptcy.
Confession of Judgment
Montana doesn’t recognize confession-of-judgment clauses. Under Section 28-2-709, a written contract that promises payment of money may not contain a provision allowing someone to confess judgment against a party to the contract. This prohibition extends to clauses granting authority to an agent to accept service of process or consent to a default. Such clauses are void and unenforceable in Montana courts, and there is no exception in the statute for business contracts. Montana does allow for the confession of judgment, but only under Section 27-9-101, which is expressly subject to Section 28-2-709. So, a funder can’t use the confession the merchant signed at the time of the transaction to get a quick judgment in Montana.
Likewise, New York pulled their foot out of the trapdoor in 2019. Senate Bill S6395 was signed on August 30, 2019 and changed CPLR 3218 to say that a confession of judgment is only allowed to be filed in the New York county in which the debtor resided at the time the debtor signed the confession or where the debtor subsequently moves. The law applies to any confession of judgment filed on or after the effective date regardless of when the confession was signed. A corporation is deemed to reside where it has a place of business. Thus a Montana merchant who does not have a place of business in New York is no longer vulnerable to a New York confessed judgment, but a merchant who does have a place in New York may still be vulnerable.
If there is no confession the funder has to sue. Many MCA agreements state that although the business is not located in New York, the venue of any legal action is New York. Many Montana merchants are being sued in New York state courts. A funder may also sue a Montana merchant in a Montana state district court or the United States District Court for the District of Montana if federal court has jurisdiction. The District of Montana has court houses in Billings, Butte, Great Falls, Helena, and Missoula and appeals to the Ninth Circuit. A federal court judgment from New York may be registered with the federal district court in Montana under 28 U.S.C. 1963 once it has become final. After the federal court judgment is registered it has the same effect as a federal court judgment of the court where it was registered.
A New York state judgment may be enforced against assets in Montana pursuant to the Uniform Enforcement of Foreign Judgments Act, Montana Code Annotated, Section 25-9-501 through 25-9-508. A certified copy of a New York state judgment may be filed in any Montana district court by the creditor who shall pay a $60.00 fee and file an affidavit containing addresses of both parties. The creditor shall mail the judgment debtor and attorney of record of the judgment debtor by certified mail. No execution proceeds are paid to the creditor until 30 days after mailing the notice. The filed judgment has the same effect as a judgment of the Montana courts (Section 25-9-503), and may be reopened, vacated, or stayed upon the same grounds as would apply if entered in the State of Montana. The court shall stay the judgment during the pendency of an appeal on the giving of a required bond (Section 25-9-505).
After filing in Montana, the creditor can collect the judgment the same as any other judgment under Montana law. The creditor obtains a writ of execution ordering the sheriff or other levying officer to collect and files a praecipe specifying which property to seize, including checking and savings accounts, cars, and other personal property. Montana law excludes from collection certain property including amounts necessary to support the debtor’s family. At this time a Montana lawyer is most helpful. The Montana lawyer is capable of objecting to the filing, raising defenses provided by Section 25-9-503, obtaining a stay, and claiming exemptions before the 30-day period expires. The same reasoning applies as to which lawyer to hire first. If the summons to pay came from a New York court, the first lawyer hired must be capable of appearing in New York.
The New York lawyer must answer before default, raise recharacterization, the choice of law defense provided by Shoot the Moon, and the Montana usury policy. The Montana lawyer is first if the funder sued in Montana or filed a New York judgment in a Montana district court. If no suit has been filed yet, a settlement negotiator who can invoke the Montana usury penalty can settle the debt without suit.
A bankruptcy lawyer is the first call if the advances are overlapping and the company can’t pay the debits, and second, Shoot the Moon has already demonstrated that bankruptcy provides a range of solutions not available in civil litigation, including the recovery of preferential transfers made in the 90 days before bankruptcy.
The United States Bankruptcy Court for the District of Montana is based in Butte. Filing may also be made in Billings, Great Falls and Missoula. The U.S. Trustee program for Montana is operated by the Boise office. A Montana bankruptcy attorney with an understanding of how Shoot the Moon views these agreements may be the most valuable attorney an overextended Montana merchant may hire.
