Finkel Law Group is pleased to report that it has scored another victory for one of the firm’s clients in Santa Clara County Superior Court. In August 2014, a client from Washington, D.C. contacted our office in San Francisco seeking our assistance to defend against a frivolous lawsuit filed against him in California seeking $3,833,440 in damages for breach of contract and fraud.
As a result of actions taken, or not taken, by the client’s Washington, D.C. based attorneys, the client had been the victim of a lawsuit filed in the Santa Clara County Superior Court several months earlier that had resulted in entry of a default judgment against the client in the amount of $3,833,440. When the client became aware of the judgment he asked us to take action to set aside the default, vacate the judgment, and move to have the case dismissed on whatever legal and factual bases we could identify.
We quickly prepared an expedited application to toss out the default judgment. Upon providing opposing counsel with notice of our motion, as required by the rules, the plaintiff quickly, and somewhat dishonestly, filed his own motion requesting the court enter the default judgment against our client in the amount of more than $3.8 million. If the court had granted the motion, and issued an order against our client, the plaintiff would have had the legal right to levy against our client’s assets wherever they may have been located to collect his $3.8 million judgment.
We acted immediately by filing an ex parte application with the Santa Clara County Superior Court, obtaining a stay of execution on the judgment. We also got permission to file a motion, toss out the default judgment, and dismiss the case on the grounds that the court lacked personal and subject matter jurisdiction.
The dispute that led to the filing of the lawsuit in San Jose had already played itself out in Washington, D.C. and was based on a contract that contained a forum selection clause that stated all disputes would be resolved in the courts of the District of Columbia. It also involved parties who were residents of Washington, D.C. and Maryland, and had absolutely no contacts within the State of California.
After several months of defending against the plaintiff’s extensive and persistent procedural motions to perpetuate a wrongly-secured default judgment, the matter came before Judge Elfving in Department 9 of the Santa Clara County Superior Court in February 2015. The firm’s attorneys argued persuasively that the default judgment should be tossed out because it had been improperly secured.
We further argued that the court should dismiss the case because the dispute arose thousands of miles away in Washington, D.C., over a contract that required the parties to resolve all disputes in the District of Columbia, between parties that had no contacts whatsoever with the State of California. Judge Elfving heard arguments by both parties. A day after the hearing the court issued a final order granting all of the relief that we requested on behalf of our client. The court set aside the default, vacated the judgment, and dismissed the case for lack of jurisdiction over the parties and the subject matter. Our client escaped a$3,833,440 judgment and lived to tell the tale.
So what are the take aways from a case like this? I’m glad you asked!
First, if a lawsuit is filed against you, it’s critical to seek legal counsel quickly — even if it is clearly a frivolous lawsuit. Your circumstance may benefit from a speedy response. As time passes, your options can become limited while the impact on your life and business operations worsen.
Second, in most cases, your agreements should have strong forum selection clauses that specify an exclusive location where it will be convenient for you to sue or be sued. In our client’s case, letting time pass after they were first sued created some difficulty, but the fact that their agreement with the plaintiff had a clear forum selection clause worked to our benefit.