Being sued: service, the answer deadline, default judgment, discovery, settlement, and small claims

Being served

A lawsuit begins when the plaintiff files a complaint with a court. You are then served with the summons and complaint, usually by a process server handing them to you, to your registered agent, or to someone at your business. Service is what starts your clock. If your entity has a registered agent, make sure the agent's address is current and that whoever receives mail there forwards it the same day. Lawsuits are lost because a summons sat in a mailbox.

The answer deadline

After service you have a fixed number of days to file a response, called an answer, or a motion. The number varies by court: federal and state courts differ, small claims courts differ again, and some states count differently depending on how you were served. This course does not quote a number because quoting the wrong one is worse than none. Read the summons; it states the deadline. Then confirm it with the court clerk or a lawyer the same day.

Default judgment

If the deadline passes with no response, the plaintiff asks the court for a default judgment: a ruling in their favor for the amount claimed, entered without any hearing of your side. It is a public record and it is collectable, as Lesson 1 described. Courts will sometimes set a default aside if you move quickly and have a good reason, but it is expensive, uncertain, and entirely avoidable by responding on time.

The answer

An answer responds to each allegation (admit, deny, or lack knowledge) and lists your defenses. Some defenses are lost if they are not raised in the answer, including the statute of limitations and arbitration. This is the point at which a business should have a lawyer, even if it did not for the demand letter. In most courts a corporation or LLC must be represented by a lawyer and cannot appear through its owner; small claims courts are the usual exception.

Discovery

After the pleadings, each side can demand documents, written answers and sworn testimony from the other. For a business this means producing the records the claim is about, and in a marketing or employment case that can mean the entire history of a practice, not just the instance in the complaint. This is why Lesson 7 insisted on preservation: records that were deleted after notice are the subject of their own motion, and the court can instruct the jury to assume they were damaging.

Settlement

The large majority of civil cases settle before trial. Settlement after filing is the same transaction as settlement after a demand letter, with a stipulation of dismissal filed with the court, and usually at a higher number because both sides have spent money. A court may also order mediation. Settling is not losing; it is the normal end of a case.

Small claims

Every state has a small claims court for disputes under a dollar limit that varies by state. Procedures are simplified, lawyers are often not required and in some states not permitted, and the case is decided quickly. Many customer and invoice disputes belong there. The limit and the rules are on your state court's self-help website, which is also where to look for answer deadlines and forms.

Insurance, again

If you notified your insurer at the letter stage, send the complaint the day you are served. If you did not, notify now. A covered claim comes with appointed defense counsel, which changes the economics of the whole case.