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Business & Employment Law

Default Judgment – Hiding From a Lawsuit Doesn’t Make It Go Away

How the judge squashed the idea of not paying for their squash

business law default judgment While we are still experiencing temperatures in the nineties, fall has officially begun. So even though we still need the A/C to be on, we can at least enjoy the hearty flavors and vibrant colors of the autumn harvest. Yes, it’s the season for zucchini, squash, pumpkins, and butternut squash. In fact, butternut squash seems to be popping into my life a lot lately.

business law default judgmentI recently enjoyed roasted butternut squash (complete with the seeds) made into vinaigrette with fresh cilantro. Slightly nutty and naturally sweet, it was a great dish to start the fall food season.

I enjoyed it so much that when I went out for dinner last week I decided to be daring and experience more of what the butternut squash had to offer in the form of butternut squash soup with sage-flavored marshmallows and basil leaves. To my delight, I watched the creamy swirl of the marshmallows as they melted in my soup and added a sweet richness all its own.

While I was reveling in the flavors of what may turn out to be my new favorite comfort food, I got to thinking about a case where a produce distributor had to do a lot more than dig in the dirt to reap the rewards of their autumn harvest.

The Case

Fred’s Organic Foods is a maker of soups like the one I described above. In New York, New Man Designed Systems, Ltd. d/b/a Fred’s Organic Foods (“Fred’s”) made soups that were sold and distributed to retail food stores. Agri Exotic Trading, Inc. (“Agri”) was a wholesale distributor of produce.

On or about October 6, 2005, Agri sold and delivered 3,250 pounds of organic vegetables to Fred’s. These included yellow potatoes, green cabbage, white onions, yellow onions, red beets and spinach. The cost of this purchase was $2,405.00. On or about November 11, 2005, Agri again sold and delivered 105 units of organic vegetables to Fred’s. This purchase included Spanish onions, butternut squash, rutabagas and red onions. The cost for this purchase was $2,132.50. Both Fred’s and Agri are licensed dealers under the Agricultural Commodities Act of 1930 (“PACA”). As such they are under the control of the U.S. Department of Agriculture.

Needless to say, Agri wasn’t very happy when Fred’s paid only $200.00 for both shipments.

Time To Call The Lawyers

default-judgement-1aOn or about March 20, 2006, Argi lodged an informal complaint with the USDA seeking the balance of the invoiced amount. Fred’s didn’t answer the informal complaint so Argi filed a formal complaint with the USDA on or about June 27, 2006. Fred’s response to the formal complaint was the same as their response to the informal complaint – nothing.

Following Fred’s failure to answer the formal complaint, a default order was issued by the USDA adopting as findings of fact the facts alleged in the formal complaint. The reparation order directed Fred’s to pay $4,337.50 with interest at a rate of 5.07%, plus the $300.00 handling fee for filing the complaint.

On January 5, 2007, plaintiff (Agri) filed action seeking enforcement of the USDA order and asserting claims under PACA’s trust provisions. Following defendants’ (Fred’s) failure to answer the Complaint, Agri filed a motion for judgment by default.

The Judge granted the default judgment for Agri judgment of $10,698.62, consisting of $4,637.50 in damages, $5,513.92 in attorneys’ fees and costs, and $547.20 in interest through May 31, 2008 and at a rate of $.60 per day until the entry of judgment.

What is a default judgment?

business law default judgmentA default judgment results if a defendant in a lawsuit fails to respond to a complaint in the time set by law, then the plaintiff (suer) can request that the default (failure) be entered into the court record by the clerk, which gives the plaintiff the right to get a default judgment.

No response means no trial

In the U.S., a default judgment is entered against the defaulting party without consideration of the merits of the case. A default judgment is binding and may be entered against a party who fails to:

  • Respond to a complaint.
  • Appear at a scheduled hearing or trial.
  • Obey a discovery order.

In this case, Agri filed multiple complaints and Fred’s failed to respond to any of them. Although Fred’s had opportunities to file an answer or otherwise defend itself, it didn’t respond so the Judge was allowed to consider all the facts of Argi’s complaints were admitted by Fred’s.

In other words, Fred’s admitted to liability without a trial taking place. Then, to obtain a judgment, Argi only had to prove its damages, i.e., the monies it lost. Argi had testimony from its President swearing to the veracity of two invoices totaling $4,537.50; Fred’s only payment of $200; and its attorneys’ fees. The Judge also took notice of the $300 filing fee and had the discretion to award interest (and did!).

Wishful Thinking Doesn’t Hold Up In Court

business law default judgmentIf you or your business is sued, take a deep breath and deal with it head on. Sometimes people are sued and they think the allegations are false so they ignore it. This isn’t a wise course of action to say the least. Wishing it away or expecting it will resolve itself without your is about as logical as saying, “You can’t see me because I have my eyes closed.”

With a default judgment, it won’t matter if the facts are true or false, because the Judge can treat your failure to respond as an admission of your liability.

Want to know more? Ask us about it at the next Free Legal Forum coming up on October 1st. Contact me for details.