Do Not Ignore That Lawsuit: Effect of Default Judgments

My hope is that all business owners will be well-aware of legal issues affecting their business and consult trusted counsel early and often. I offer free consultations to any business owner facing a potential business dispute. Many of my business consultations consider legal issues that have already resulted in a lawsuit. There is no good reason to guess or ‘ostrich’ an issue, just call me.

Sometimes we may not see one coming. The civil sheriff serves you with documents, and you may feel a rush of emotion. There could be an urge to shove it in your desk and ignore. Please do not do that.

I Was Just Served With a Lawsuit… Now What?

You are likely holding a summons and a complaint.  The summons outlines what is happening and gives you some information about the legal proceeding that was filed against you. The complaint identifies all parties to a legal dispute, the relevant facts, and the legal basis for which the plaintiff (the suing party) is seeking recovery. It may include an explanation of what the plaintiff is asking the court to do, likely to award damages.

You are now on the clock. Depending on the court, who the parties are, and type of claim, you have a few days to a few weeks to respond. There are no guarantees, but this deadline can be extended by agreement between the parties or the court extending professional courtesies. Many lawsuits are responded to by filing an “Answer”. This document lays out your defenses to the plaintiff’s allegations and discusses any claims you may have against the plaintiff or anyone else. Click here for an in-depth discussion of the typical litigation process for small business.

How Can I Prepare for Litigation?

It is vital that you collect information and documents right away. It can be challenging to prove the substance of prior verbal communications in court, so you will need to save and collect all written communications you may have. You should think about how you communicated with the plaintiff and anyone else involved. Was it by email? Text? Phone? Voicemail? Formal letters? Social media? Hunt down and save all your communications right away.

Same for documents. Business owners sometimes get cute with documents they save or discard. They sometimes do not want to give me something that they believe is harmful. This mindset can be very damaging. It prevents me from fully understanding and fairly evaluating your case and can get you into hot water down the road. Regardless, the document and its information are likely never fully gone. It is more likely that we will get into an expensive fight over evidence that will only run up your costs.

Avoid a Default Judgment

What happens if you ignore a lawsuit? Wis. Stat. 806.02 provides that the court may enter a judgment for the plaintiff if you fail to timely answer. The plaintiff would likely receive what it asked for in the complaint, including a money judgment against you. To be clear, default judgments are collectable the same way a judgment is collectable following a trial. Your property could be seized and other collection efforts could proceed against you.

Even if a default judgment has been entered against you, all hope is not lost. Please contact me immediately. You may be able to beg the court to give you another opportunity to respond. You may be forced to prove that your failure to respond was the result of “mistake, inadvertence, surprise, or excusable neglect.” A court must find “extraordinary circumstances” justifying relief in the interest of justice. We would be headed to court, hat in hand, begging for forgiveness. It is best to avoid this scenario.

Ignoring a Lawsuit is Worse Than Every Other Option

If you or your small business gets served with a lawsuit, ostrich-ing will never help you. The legal system is already working against you. The clock has started, and you have a very limited time to respond and protect your legal rights. All is not lost. I recommend you contact an experienced small business litigator, like me. We can take immediate steps to help protect your rights, develop defenses, and reduce your exposure.



Submit a Comment

Your email address will not be published. Required fields are marked *