Someone at Pepsi just learned an expensive lesson: If you're being sued, don't ignore the lawsuit.
In Pepsi's case, the soft drink manufacturer and two of its distributors were sued in Wisconsin court. In April, notice of the lawsuit was sent to the company's offices in North Carolina, where the company is incorporated, but didn't make it to the company's New York-based legal department until September. It then got buried on the desk of a secretary who apparently was busy working on other projects.
But the courts don't twiddle their thumbs while waiting for a defendant to realize they're being sued--even when it's a defendant as big as PepsiCo. Instead, the case moved ahead in Pepsi's absence, and in September the judge who was hearing the case entered a default judgment against the company and awarded the plaintiffs $1.26 billion in damages. About a week later, Pepsi finally learned of the lawsuit.
Needless to say, Pepsi has apparently been scrambling since learning that it owes a 10-figure sum, and has asked the courts to vacate, or throw out, the judgment.
Now, Pepsi has deep pockets, and can afford to spend a lot of money to avoid paying even more money to the plaintiffs who brought the lawsuit. But the story reminds me how easy it would be to make the same mistake.
Fortunately, I've never been sued, but because I have no first-hand experience with litigation, I can imagine how I'd react if I learned someone was suing me. My initial response, "I've been sued! How did this happen? And what does this mean? I need to find a lawyer to help me make heads or tails of it." My next response would be the critical one: I could either find a lawyer, or I could procrastinate. Let's face it, humans have an incredible ability to procrastinate when faced with something challenging or unfamiliar.
The danger of procrastinating is that sometimes we don't decide to act until it's too late. When it comes to court cases, "too late" means you could be on the hook for a lot of money (in a civil case) or jail time and fines (in a criminal case). This is because--if you don't show up to defend yourself--the courts have the discretion to listen to the plaintiff or prosecutor's case, then find you guilty based on the evidence presented against you.
Pepsi, and everyone who's ever ignored a lawsuit, do have a few options. If a default judgment is entered against you, you can go to the court, explain why you failed to defend yourself, and ask the court to set aside the judgment. You'll have to show that you failed to respond to the lawsuit by mistake; that you promptly addressed this issue after learning about the default judgment; and that you have a good defense to the lawsuit. The judge doesn't have to overturn the judgment, but should if you make a good case. Once you've persuaded the judge to overturn the judgment, you'll be back at square one, and will still need to defend the charges in the initial lawsuit.
The lesson learned: Ignoring a lawsuit doesn’t make it go away, but almost certainly guarantees that it will cost you more to resolve in the long run.
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