If you have ever been served with legal documents, you know that feeling in the pit of your stomach. Finding out your company is being sued can be a highly stressful experience. Before panic sets in, take a breath and know that there is help out there. The key thing is to act promptly, as you have little time to respond to these documents.
You’ve Been Served, Now What?
In order to file a lawsuit in Wisconsin, the person filing the lawsuit – the “plaintiff” – must appropriately serve the person they are suing – the “defendant” – with a Summons and Complaint. The Summons will notify you that you are being sued and when you must appear in court. The Complaint will generally list the plaintiff’s complaints against the defendant. The defendant will have a short period of time to respond to the court and the plaintiff with a pleading called an “Answer.” Under Wisconsin law, the defendant must file this answer within 20-45 days, depending on the circumstances.
Do I Really Need to Get a Lawyer?
Generally speaking, now is a good time to talk to a lawyer, even if you ultimately decide to proceed without one. If you operate your business as a sole proprietor or are operating in a partnership, you may legally respond to a lawsuit without an attorney. However, if you are operating a corporation, you must ensure that the corporation is represented by legal counsel.
If you are operating a limited liability company (LLC), the law is not as clear with regard to retaining counsel to represent the LLC. With that being said, it is generally the preferred course of action when an LLC is sued. According to the Wisconsin State Bar, “if a limited liability company faces litigation, its nonlawyer members risk violating the unauthorized-practice-of-law statute if they try to represent the entity and face losing limited liability protection for the LLC’s liabilities.”
For example, in Carmain v. Affiliated Capital Corp., a nonlawyer prepared a letter and filed it with the clerk of the court, declaring it to be an answer. The plaintiff responded by filing a default judgment, stating that a timely answer had not been filed. The court held that a nonlawyer “could not legally appear on behalf of [the defendant] and her letter was not a legally valid answer.” The court of appeals affirmed the lower court’s finding that the letter was not a proper answer and that the default judgment was appropriate.
What is clear is that an LLC sued in small claims court may be represented by nonlawyers as long as they are full-time authorized employees of the LLC. However, the safest course of action is always to talk to an attorney if you are served with a lawsuit. An experienced business litigator will be able to discern whether the service of the Summons and Complaint were proper, and discuss with you how you should proceed.
What if I Just Ignore the Summons and Complaint?
Ignoring a Summons and Complaint is never a good idea. If you fail to file a proper Answer within the time limitations set forth by the courts, you risk a default judgment. Essentially, a default judgment means that the plaintiff wins because you never rebutted their claims. A default judgment entitles the plaintiff to the damages that they claimed in their Complaint. If no damages were claimed in the Complaint, the plaintiff will have to prove their damages to the court.
Under extraordinary circumstances, a default judgment may be overruled by the judge, generally for purposes of avoiding injustice. In situations in which a default judgment has already been ordered or entered, the defendant may invoke Wis. Stat. section 806.07 (1)(a), which permits relief if the defendant’s behavior or action that underlay the judgment was the result of “mistake, inadvertence, surprise, or excusable neglect.” In addition, section 806.07(1)(h) allows relief from a default judgment for “any other reasons justifying relief from the operation of the judgment.” Whether to find excusable neglect or not is a discretionary legal conclusion reached after the court considers the totality of the circumstances – the reason for missing the deadline and all the interests-of-justice factors.
My Company Was Wronged by the Plaintiff – What Can I do?
If you have been sued and you feel that the plaintiff was in the wrong, you have the option of filing a counterclaim. This means that you may take affirmative action against the plaintiff, which may decrease any potential damages that the plaintiff has claimed.
A lawsuit can bring turmoil to your life. But one thing is certain: if you don’t ignore it, you have more options than you think. Talk to an attorney at Kerkman Wagner & Dunn as soon as possible upon finding out that you’re being sued, and we will use our legal expertise to advise you towards the best course of action. We have extensive experience in business litigation, so contact us today, and we will get started immediately on your case.