Failing to Defend Litigation: Strategic or Silly?
By Kluger, Kaplan, Silverman, Katzen & Levine, P.L. June 19, 2013
By Todd A. Levine
It is not uncommon for businesses that are suffering financially to make the strategic decision not to defend a lawsuit. Particularly during the recession, I saw many businesses that simply could not withstand the cost of litigation, choosing instead to allow the plaintiff to obtain a default judgment.
While this strategy sometimes makes good business sense, there are often reasons to reconsider. For example, unpaid creditors might challenge transfers to insiders as fraudulent and seek to set aside those transfers, either in a bankruptcy proceeding or in a supplemental proceeding in state court. Even if unsuccessful, these proceedings can become expensive to defend.
Before making a decision about obtaining a default, consider speaking with a business litigation specialist to evaluate the complaint and make recommendations about the risks of obtaining a default versus defending the lawsuit. The dollars spent today to evaluate the situation and obtain an informed recommendation can save thousands down the road.