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Amy Cohen: The cost of ignoring a complaint can be extreme

It’s The Law

Posted: January 7, 2010 9:59 p.m.
Updated: January 8, 2010 4:55 a.m.
These days, everyone is looking for ways to save money. Couples who want a divorce are holding off because they cannot afford it.
Couples who are already divorced are going back to court to have support orders retooled because of changes in financial status.

Companies that are owed money are rethinking collection policies, sometimes opting to hold off chasing bad debt at the risk of losing more money.

Some are choosing to wait it out, believing when things turn around, they can once again pursue what is owed them.

Unfortunately, there are some situations where you do not have the luxury of ignoring a problem and hoping it will go away. Some companies continue to chase debts and debtors by filing lawsuits, and if you are one of those people being sued, now is not the time to ignore that complaint.

In a recent case in Wisconsin, PepsiCo was hit with a $1.26 billion default judgment after failing to respond to a complaint. At a hearing held in November, the court vacated the judgment. Even though PepsiCo now seemingly has a reprieve and an opportunity to be heard in that matter, a valuable lesson can be learned and should be heeded: Ignoring a complaint could be costly.

When a lawsuit is filed, the plaintiff (the person who filed the lawsuit) has a certain amount of time in which to serve the complaint on the defendant, usually using a process server or the sheriff’s department.

The process server has to first attempt to hand the documents directly to the defendant. If that is unsuccessful after several tries, the process server can leave copies of the documents with an adult (over age 18) at the home or business address of the defendant and must also mail copies of the documents.

Once the complaint and any related documents have been served, the defendant has 30 days to file a written response, which may take the form of an answer, a cross-complaint (if the defendant believes that the plaintiff owes money or has injured him or her) or a demurrer (which is a motion attacking the complaint on various legal bases).

Once the response is filed, the case proceeds with the court.

If a response is not filed, the plaintiff can request an entry of default which effectively prevents the defendant from answering or appearing before the court.

The defendant can obtain relief from the default, but it will require a motion (and likely the payment of attorneys’ fees), as well as possibly having to pay fees to the plaintiff, and the court may ask for a reason why a response was not filed in time.

Once the default has been entered, the plaintiff can request default judgment.

To do so, the plaintiff presents the evidence (documents or witnesses’ testimony) to the judge, and if the judge is satisfied with the evidence, default judgment will be entered.

After that, the plaintiff can proceed with collection, which can include placing a lien on the defendant’s property, garnishing wages from the defendant’s employer or seizing money in the defendant’s bank accounts.

Such remedies may seem drastic, but you cannot assert your rights without first filing a timely response.

If a default judgment is entered, it is difficult, though not impossible, to have the judgment vacated.

Generally, there are substantial fees involved. Also, even if the defendant is successful in having the judgment vacated there is still an underlying default to have vacated as well.

All of these efforts can be extremely costly and do not ensure a result in the defendant’s favor. Success only means that the defendant can now defend the original complaint (and may pay an attorney to do so).

Filing a response and defending a lawsuit might cost more than some are willing to spend these days, but the alternative is a valid, collectable judgment against you, and the risk of having your bank account seized and your wages garnished is much more costly in the long run.

Amy Cohen is an attorney with Anker, Reed, Hymes, Schreiber & Cohen, APC, a full-service business, real estate, civil litigation and estate planning law firm. Her column reflects her own views and not necessarily those of The Signal. “It’s The Law” appears Fridays and rotates between members of the Santa Clarita Valley Bar Association. Nothing contained herein shall be or is intended to be construed as providing legal advice.


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