Courtside: $11M collected after appeal on default judgment

Usually, serving a defendant with a lawsuit isn’t a critical point in litigation. But sometimes, it can mean the difference between a symbolic but basically worthless piece of paper and $11 million in the bank.

Just ask Rudy Veit. He filed a lawsuit in 2009 on behalf of his clients, a man injured when he was shocked while working at the Columbia Mall and his wife. Veit pursued negligence and loss of consortium claims against International Environmental Management Inc., which he alleged installed and maintained a trash compactor that injured Ricky Sieg.

A process server served a registered agent for International Environmental Management, but apparently, according to an appellate court ruling, the business had moved and had more than one state certificate of authority and registered agent. The upshot was that the agent was properly served but didn’t forward the lawsuit to IEM’s correct address.

Ultimately, Veit and others at his firm, Jefferson City-based Carson & Coil, won a $9.7 million default judgment against the business in Boone County Circuit Court. The plaintiffs’ team put on evidence and experts to quantify the Siegs’ amount of damages and Boone County Circuit Judge Kevin Crane entered a judgment in their favor in March 2010.

Veit then waited a year to try to collect on it. That’s because under Supreme Court Rule 74.05, a defendant can move to set aside a judgment for good cause — but must do so within a year.

In March 2011, Veit reached out to IEM seeking to be paid. At that point, IEM filed a motion seeking to set aside the default judgment under another rule, Rule 74.06, arguing it wasn’t served with the suit back in 2009 so the judgment was void.

The trial court affirmed the judgment, and the company appealed further. In June of this year, the Missouri Court of Appeals Western District ruled the company was properly served under Missouri law and court rules, so a valid judgment exists.

Veit said he has never before collected on a sizable default judgment.

The appellate court held that just because a corporation has been administratively dissolved doesn’t mean it can’t be served with litigation, and that it’s not the plaintiffs’ fault that the agent who was served didn’t pass the case on to the company.

“IEM’s actions in this regard highlight that it was its own neglect [or one of its registered agent’s] in not updating its most recent certificate of authority, and not any unreasonableness inherent to Missouri law, that caused its current predicament,” the court said.

The plaintiff told the circuit court in September that the company had paid the judgment — which by then, with interest, amounted to more than $11 million.

There are lessons in this case story:

1) On rare occasions, default judgments can lead to legitimate payouts.

2) Critics could argue the Supreme Court’s Rules of Civil Procedure allow for gamesmanship.

Indeed, in another case featured in this week’s issue, Douglas v. Johnson, a law firm touts its success getting a judge to set aside a nearly $3 million default judgment against its client. But an attorney groused that the plaintiff’s lawyer in that case also waited a year to act on the judgment so the defendant couldn’t easily move to set it aside. But in that case, under a different scenario, the lawyers managed to get a judge to throw it out anyway.

3) Businesses should be careful when changing or adding to their paperwork with the state identifying who has legal authority to be served on their behalf.

In its ruling affirming that the service process in the Sieg case was valid, the judge writing for the majority nonetheless expressed concern.

“We sympathize with IEM, but to hold in its favor would require us to either (1) disregard the plain language of section 351.602.5; or (2) create a due process right to actual knowledge of the pendency of a lawsuit, despite proper service upon a corporation’s registered agent,” wrote Judge Karen King Mitchell. “Our duty is to apply the law, not undo it simply because the facts in a particular case give us pause.”

Kelly Wiese is the Verdicts & Settlements editor. You can reach her at [email protected].