This phrase is metaphorical and should not be taken to mean lying down physically. After the unfair judgement, the community didn't take it lying down and organized a protest.
Pro Tip 2/3
Emotional Response
Implies a strong emotional reaction against something seen as wrong or unfair. He was falsely accused, but he didn't take it lying down and fought for his innocence.
Pro Tip 3/3
Informal Context
It's an informal phrase, more at home in conversation than formal writing. When she was overlooked for promotion, she didn't take it lying down and spoke to her boss.