Every time I think that the construction industry has learned that failure to respond to a lawsuit is never the correct response, another case of default judgment comes out. I’ve discussed on multiple occasions that failure to respond can only lead to disaster. Aside from being barred from making any substantive response to the allegations against you, there are other consequences including the inability to seek a reasonable settlement because the other side has no reason to negotiate.
One of the more disastrous results recently came about in the Norfolk Division of the Eastern District of Virginia District Court. The case of L & W Supply Corp v. Driven Construction et. al. involved a supplier that sought to enforce its credit agreement against both the corporate entity of the contractor, Driven, and the guarantor, a principal of the company. Needless to say, there was no response to the lawsuit and the Plaintiff filed for default judgment.
After going through the procedural and factual background of the case, the Court entered default judgment for the Plaintiff in full against all defendants including entering judgment for attorney fees, costs, and pre and post-judgment interest. In doing so, the Court discussed the main factors for the entry of a liquidated amount of judgment on default and stated the following in concluding that the defendants had not just missed a deadline:
[w]hile the damages that would result from a default judgment in this case are significant, the effect of the judgment is not harsh considering: (1) the damages amount is largely predicted by the plain text of the agreement and (2) plaintiff incurred significant losses as a result of defendant’s failure to fulfill its contractual obligations. Finally, there is no indication that a good-faith mistake or excusable neglect caused the defendant’s default.
In short, the Court did not think that the defendants took the lawsuit seriously.
The takeaways? (1) Never fail to respond. At best you could get away with it by the skin of your teeth, but the more likely result is one such as the result in this case. (2) Always contact an experienced construction attorney to discuss your options in responding. (3) Failure to respond will even take away any ability to negotiate terms even in the instance that you agree that you owe the debt.
I always recommend that you read the case for yourself and that you let me know your thoughts.
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