How the Wrong Registered Agent Could Cost You Your Lawsuit—Before It Begins

As a legal services provider, you’ve had plenty of opportunities to observe that people aren’t infallible.

And when legal issues are involved, mistakes can be quite costly.

This is especially true when it comes to litigation, with its myriad rules and specific stages of progression. Any lapse in keeping a case on track—regardless of the reasons why—can negatively impact the outcome.

If an error occurs at the very beginning, when the lawsuit is being served, the result can be especially harsh. If you’re the defendant, you could end up with a judgment against you—without your side of the argument ever being heard in court.

Your registered agent is critical—as long as it’s not part of the problem

It happens more often than you might expect, and the consequences can be devastating. Consider the outcomes in these cases when service of process didn’t go as contemplated by the rules governing court procedure.

Errors can occur during service of process simply because busy people put things aside and forget about them.

In 2009, PepsiCo was slapped with a $1.26 billion (with a “B”) default judgment after failing to respond to a lawsuit. A secretary had received correspondence about the suit at the company’s New York headquarters, but forgot about the letter after putting it in a drawer. The company didn’t realize its mistake until the judgment had already been entered.

The judgment ended up being vacated by the appellate court, but what if it hadn’t been? PepsiCo could have survived if the award were upheld, but a damages award of that size would immediately put most companies out of business.

Even when the registered agent is properly served, problems can arise if that individual doesn’t follow the law.

An Indiana sports bar found this out the hard way in 2015 when its owner/registered agent accepted service of a personal-injury lawsuit. Yet because the complaint used the sports bar’s common name (frequently referred to as a “d/b/a”), the agent thought this rendered the service invalid. Consequently, he didn’t think he had to do anything.

The registered agent was incorrect; the service was indeed valid and the suit proceeded. Because the sports bar didn’t respond, the court entered a judgment for the plaintiff of more than $68,000, plus interest.

The court upheld the judgment on appeal, noting that the registered agent’s actions were not excusable neglect.

Mistakes don’t just happen to support staff. Service of process may not go as intended even if the registered agent is an attorney.

A gas station operator based in California experienced this when it was faced with a class action suit in 2010. The complaint was properly served on the registered agent, who was also the company’s counsel.

Yet the attorney never told anyone else at the company about the lawsuit—until after a $4 million default judgement had been ordered against it. Fortunately for the company, the court ended up setting aside the judgment.

An automated registered agent service won’t let you down

Though two of these cases turned out well enough for the defendants, such relief comes at a cost. The time and money required to mount an appeal can cripple many companies. And of course, there’s no guarantee that an appeal would be successful.

One thing is clear: these cases all show that courts take service-of-process failures seriously. Businesses must do the same or risk the same or similar fate as these defendants—if not worse.

The good news is that an automated registered agent service can prevent mistakes like these.

A fully automated, all-digital registered agent service won’t forget to notify you of a lawsuit or any other critical legal correspondence it receives on your behalf. It will forward your legal documents quickly and automatically. And your notifications will always reach the right person(s) in your organization, because you have total control over who receives them.

No one wants to be the target of a lawsuit, but don’t make a mistake that could cost you the suit before it ever begins. Automated services like LegalInc help eliminate human error. You (or your clients) will always receive legal correspondence, compliance deadlines and other business-related documents that need your attention in a timely manner. That means you’ll never miss a deadline that could result in a default judgment—one that could force you to close your doors.

Our eBook “5 Ways a Registered Agent Keeps You Healthy” explains more about the benefits of automating your registered agent service. Click here to download your free copy today.

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