For small- to medium-sized business owners, the cost and burden of resolving a lawsuit can seem catastrophic and overwhelming, leading some business owners to simply ignore the issue (or procrastinate until it’s too late).
But ignoring a lawsuit is a poor strategy. It can and will lead to unintended consequences that may be far worse than losing the case outright.
Instead, consult with a commercial or business law attorney for guidance. Navigating litigation is simply a legal process, and an experienced attorney can guide you through it, carrying much of the burden for you while also taking your budget into consideration.
As a firm that’s counseled owners and executives from businesses of all types, our team at Hendershot Cowart P.C. understands that many may hesitate to contact an attorney when facing a lawsuit.
Ignoring a claim, as we’ll explain, isn’t much of an option at all.
Served with a lawsuit? Let us shoulder the burden. Call (713) 909-7323 today to speak with an attorney.
What Happens If You Ignore a Lawsuit?
In Texas, there are Rules of Civil Procedure that govern how a civil court case is conducted, including what happens if a defendant (the party against whom a claim is made) fails to respond to a lawsuit.
For most cases filed in Texas, the Texas Rules of Civil Procedure give you until the next Monday after the expiration of 20 days to file an answer.
If you fail to respond by filing an answer or other pleading within the required time frame, the court will proceed without your input, and likely issue a default judgment – a court ruling made in favor of the plaintiff (the party filing the claim) because you didn’t respond.
Ignoring a lawsuit can have severe, lasting consequences for your business:
- Financial consequences: The plaintiff may be awarded the full amount of damages they are seeking, regardless of whether those damages are exaggerated or unsupported by the facts. You lose any opportunity to contest the amount or nature of the damages claimed.
- Loss of business assets: Once a default judgment is entered, the plaintiff can take steps to enforce that judgment, which may include garnishing your business’s bank accounts, seizing assets, or placing liens on property.
- Credit damage: A judgment can damage your credit score, making it difficult to obtain loans or credit cards.
- Potential personal liability: If you are the owner of a closely held business or are personally named in the lawsuit, the plaintiff may go after your personal assets to satisfy the judgment. This could include your home, vehicles, and personal bank accounts, especially if the court finds you acted in bad faith or engaged in fraudulent activity.
- Loss of legal rights: When you fail to respond, you waive your right to challenge the claims being made against you, even if they are false or inflated.
By choosing not to respond, you're giving up control over the outcome of the case. You allow the plaintiff – and the court – to dictate the terms, with potentially devastating consequences for your business.
Responding to a lawsuit, on the other hand, gives you a chance to present your side, challenge the plaintiff’s claims, and, at the very least, negotiate a settlement that could minimize financial damage and protect your business’s future.
What Is a Default Judgment?
The Texas Rules of Civil Procedure state that if a defendant fails to respond to a lawsuit by filing an answer or other pleading within the required time frame, the plaintiff can file a motion for default. If the court grants the motion, a default judgment will be entered against the defendant.
A default judgment means that the court will rule in favor of the plaintiff without the defendant's input. The court will typically award the plaintiff the relief requested in their complaint, which could include monetary damages, injunctive relief, or other forms of relief.
Learn more about the litigation process: So, Your Business Has Been Sued. Now What?
Can a Default Judgment Be Overturned?
In some cases, a default judgment can be overturned, but it’s a difficult process. You must act quickly, typically filing a motion for new trial within 30 days after the judgment is entered. To be successful, you’ll need to prove:
- Good cause: You must show that your failure to respond was due to accident or mistake, not intentional disregard of the lawsuit.
- A valid defense: You must demonstrate that you have a legitimate defense against the plaintiff’s claims.
- No undue delay: You must act promptly to file your motion and not cause additional delays.
Even if you meet these criteria, the court has the discretion to deny your request, making it critical to avoid default judgment in the first place by responding to the lawsuit promptly.
What Should You Do Instead of Ignoring a Lawsuit?
If you’ve been served with a lawsuit, the worst thing you can do is nothing. Here’s what you should do instead:
- Read the lawsuit carefully: Take the time to understand the claims being made against you. This will give you a clear sense of what the plaintiff is seeking.
- Contact an attorney: Legal counsel is crucial when navigating a lawsuit. An experienced business attorney can help you evaluate the claims, identify possible defenses, and develop a strategy for responding, all while taking your budget into consideration.
- File a timely response: As mentioned, you typically have about 20 days to file your official response. Your attorney can help ensure that you meet all deadlines and requirements.
- Prepare for the next steps: After filing your response, you and your attorney will work to build your case, gather evidence, and potentially negotiate a settlement to resolve the matter without a trial.
Finally, consider retaining an attorney to provide general counsel services. The next time a problem arises, you can be better positioned to reach a speedier, more favorable resolution. An outside general counsel can also identify and address potential risks and blind spots before they become larger problems.
Served With a Lawsuit? Hendershot Cowart P.C. Can Help.
Choosing to respond to a lawsuit puts you in control of your legal situation. Ignoring the lawsuit, on the other hand, gives control to the plaintiff and the court, and strips you of your ability to de-escalate potentially injurious situations before they impact your bottom line, strain relationships, or cause reputational harm.
At Hendershot Cowart P.C., our experienced attorneys have helped countless businesses in Texas navigate lawsuits, protect their assets, and defend their reputation. If you’ve been served with a lawsuit, don’t wait until it’s too late. Give us a call at (713) 909-7323 or contact us online to learn how we can help.
