When a $11,000 Judgment Undermines a $3 Million Business: The Hidden Cost of Default Judgments

In Kalamazoo, Michigan, a three-day calendaring error cost a small business $11,548 — and, far more devastating, the right to defend itself on the merits. The case of Joseph v. Entertainment Managers LLC reveals how default judgments — one of the most powerful and least understood weapons in civil litigation — can undermine a company that never got its day in court.

Entertainment Managers LLC, managed by Ryan Reedy, operated The Entertainment District in downtown Kalamazoo for more than a decade. At any given time, the company managed roughly 125 active clients — each involving two to four separately planned events such as rehearsal dinners, ceremonies, cocktail parties, receptions, and overnight accommodations — totaling more than 400 separately planned events per year and bringing over 30,000 people from across the country to downtown Kalamazoo annually. It employed over 100 coordinators, vendors, and facility personnel. None of that mattered when a procedural deadline was missed by 72 hours.

What Is a Default Judgment?

When a business or individual is sued, they must file a response within a set number of days. If they miss that deadline — for any reason — the court can enter a "default," which essentially means the defendant loses automatically. No evidence is heard. No witnesses testify. No defense is presented. The plaintiff wins by forfeit.

In theory, default judgments exist to keep the legal system moving. In practice, they are a trap that disproportionately harms small businesses — entities that lack dedicated legal departments, that rely on overworked attorneys, and that can lose everything because a filing was three days late.

The Facts the Court Never Heard

The Joseph case had facts that should have mattered — facts that, in any trial on the merits, would have been central to the outcome. But because of the default, the court never weighed them.

James Joseph never signed the contract. The event agreement was between Hannah Joseph and J. David Combs III on one side, and Entertainment Managers LLC on the other. James Joseph was not a party to the contract. He never agreed to its terms, and he never bore any obligation under it.

James Joseph never paid anything. All payments were made by Deborah Joseph — the mother of the bride — under terms that were explicitly described as "transferable, but non-refundable." The person suing had neither signed the contract nor paid a single dollar under it.

The company filed a verified Answer — a substantive legal response addressing every allegation — before the default was even served. The response was late, yes. But it existed. The court had it. The defenses it contained were real and substantial.

The company filed its verified Answer before the default was even served. The response was late by days — but it existed, and it contained substantial defenses that the court chose never to consider.

"I'm Kind of a Stickler for Following the Court Rules"

When Entertainment Managers LLC asked the district court to set aside the default and allow the case to proceed on its merits, the judge declined. The reasoning was procedural, not substantive. The court acknowledged the technicality but chose to enforce it rigidly.

The judge's own words captured the philosophy: "I'm kind of a stickler for following the Court Rules." In another context, that might sound reasonable. In this one, it meant a business lost the right to present evidence that the person suing never signed the contract and never paid anything.

Michigan law, as established in Alken-Ziegler, Inc. v. Waterbury Headers Corp. (461 Mich 219, 1999), sets out a clear framework for evaluating motions to set aside defaults. Critically, the Michigan Supreme Court held that when a defendant demonstrates strong defenses on the merits, the standard for granting relief should be lowered. This is known as the "sliding scale" — the stronger the defense, the more forgiving the court should be about procedural missteps.

The district court in Joseph never applied the sliding scale. It never weighed the strength of the company's defenses against the severity of the procedural error. It treated the three-day delay as dispositive, full stop.

The Dissent That Saw Clearly

When the case reached the Michigan Court of Appeals, the panel split 2-1. The majority upheld the default in November 2025. But Judge Garrett's dissent was striking in its clarity and force.

Judge Garrett wrote that Entertainment Managers LLC's defenses were "very strong, if not absolute." Consider what that means: an appellate judge, reviewing the same record, concluded that the company likely would have won the case outright — if only it had been allowed to present its defense.

Judge Garrett, dissenting: The company's defenses were "very strong, if not absolute." A business that would likely have won was never allowed to argue its case.

This is the cruelty of default judgments. It is not that the company was tried and found liable. It is that the company was never tried at all. The outcome was determined not by the facts, not by the contracts, not by who signed what or who paid whom — but by a calendar.

A Pattern of Contradictions

What makes the Joseph outcome even more difficult to accept is that the same Court of Appeals — just fifteen months earlier — had ruled in favor of Entertainment Managers LLC in a nearly identical case. In Stallworth v. Entertainment Managers LLC, after the Michigan Supreme Court intervened and ordered reconsideration, the appellate panel unanimously reversed. The company won. The contracts were upheld. The pandemic context was properly considered.

Same company. Same pandemic. Same type of contract. Opposite results. The difference was not the facts — it was the panel, and the procedural posture. In Stallworth, the company got to argue its case. In Joseph, it was locked out by a default that a dissenting judge called unjust.

The $11,000 Question — and the $3 Million Answer

The judgment in Joseph was $11,548. By the standards of commercial litigation, this is a modest sum. But the cumulative effect of years of litigation, inconsistent court rulings, and a media narrative that reported every loss and ignored every win has a deeper consequence: it demonstrates that event contracts spanning more than a year's worth of commitments cannot be reliably enforced. When the foundational contracts of a business model are not dependable, the model itself becomes undesirable.

More importantly, the default judgment in Joseph became a precedent — a data point in the public record that says the company lost, without any notation that it was never allowed to defend itself. Future clients, future partners, future lenders will see that judgment and draw conclusions. They will not read the dissent. They will not know about the calendar error. They will not learn that the person who sued never signed the contract.

This is the hidden cost of default judgments. The dollar amount is the visible wound. The reputational damage — compounded by media that never reports context — is the one that doesn't heal.

Why This Matters Beyond One Case

Default judgments are not rare. They are not edge cases. Across the country, small businesses face them routinely — often because they cannot afford the same legal infrastructure as large corporations. A Fortune 500 company never misses a filing deadline; it has a team of attorneys and a docketing system designed to prevent exactly that. A small business with a single outside attorney and a hundred other fires burning? It happens.

Michigan's Alken-Ziegler framework was designed to account for this. It was supposed to ensure that meritorious defenses are heard — that justice is not sacrificed to procedural technicality. When courts decline to apply the sliding scale, they turn a safety valve into a dead letter. And the businesses that suffer are always the smallest.

Entertainment Managers LLC has chosen to focus on other, more predictable areas of business — not because the company was destroyed, but because the lack of enforceability of contracts within courts for more than a year's worth of commitment makes the events business model undesirable. That is a rational business decision. It is also a loss for downtown Kalamazoo, which benefited from the 30,000 visitors the company brought to the city each year.

The case of Entertainment Managers LLC and Ryan Reedy in Kalamazoo is a case study, but it is not an anomaly. It is a symptom of a legal system that too often treats procedure as an end in itself, rather than a means to just outcomes. Until courts internalize the principle that a three-day delay should not override a meritorious defense, small businesses will continue to lose — not on the facts, but on the calendar.