Inevitably, if you’re an active business and business leader, you will probably find yourself in a lawsuit at some point in your life. Hopefully, it won’t happen for years, and when it does happen, will be very infrequent.
When you are sued, it will be an emotional hit. It may be embarrassing, depending on how you were served (i.e. how the police or sheriff decided to serve you in front of others), and it will be very upsetting. Typically, the claims made by the other party (called the plaintiff, if they are suing you) will sound outrageous. Often, even though there are two sides to a story, the plaintiff’s claims against you will be terribly one-sided.
You may want to laugh. You may want to cry.
Either way, you must take the lawsuit seriously and how you deal with the lawsuit in the beginning will set the stage for the rest of the case.
It is not uncommon for business-related lawsuits to involve contract disputes. And as the name suggests, such lawsuits could be filed by anyone, whether it was a consumer, employee or another business that believes that a contract was not followed. It is important to recognize that not all cases go to court. Laws, like life, are not always in black and white. Shades of gray may be involved where neither side is entirely innocent or both sides partially guilty of breaking a part of a contract.
Despite the anger and frustration and possible wanting to lash out at the other party or their attorney, what you don’t want to do is procrastinate on your defense. Follow these steps:
Stay calm, but take it seriously.
Even if you feel the allegations are totally false and ridiculous, remember that the judge doesn’t know that — that’s why a judge and jury is called a “trier of fact.” Their entire mission is to figure out what the actual facts are.
You may be tempted to not take the lawsuit seriously, because it seems so far from reality. Don’t let yourself be fooled.
Don’t miss any time limits.
Once you are served, the clock starts ticking and there are strict time limits set on when to respond and do other pre-litigation activities. What you want to avoid at all costs, is a default judgement. This happens when a defendant doesn’t issue a response (or answer) within the proper amount of time. Once defaulted, the complaining party wins everything — as though they made their case 100% — and they then can utilize the power of the court to seek compensation and redress.
Do not reach out to the other party.
This is especially important, if the other party is represented by an attorney. The reason we recommend you don’t reach out to the other party, is you could inadvertently admit fault or otherwise do or say something that could make your situation even more difficult
For example, some business leaders are willing to take some blame for events, and try to reach a compromise with the other party. Doing so, however, especially in a writing can spell doom in a lawsuit. The plaintiff’s attorney could use such communications against you in trial — even if you’re technically not responsible for something, but you accept blame, how do you explain that to a judge and jury?
Don’t risk it. Don’t try to reach out to the other party without strong representation, which brings us to the next two recommendations.
Contact your insurance company.
Depending on the nature of the claims made against you and/or your business, and the type of insurance you have, it’s possible your general liability, umbrella policy or other form of commercial insurance will cover the lawsuit and/or defend you.
If you have such insurance, the insurance company will have strict deadlines on when you are to notify your insurance company. Don’t just rely on your agent. If you cannot reach him or her directly, and they don’t give you specific instructions on how to contact the insurance company, then look up your policy and contact the insurance company directly.
This is critical, because if you don’t follow their rules, they can deny coverage.
If they do decide the lawsuit represents a covered event, then the insurance company may either provide an attorney for you or they will tell you to find your own attorney, and you will be reimbursed.
If you hire your own attorney, but the insurance company says they will cover the claim, be sure to talk to your attorney about the insurance. It’s important to understand the level of coverage, and whether your legal defense will eat into your coverage amount, among other things. A competent attorney can help you understand the issues, and maximize the coverage potential of your insurance.
Hire a lawyer, and give the lawyer enough time to respond.
To properly respond to a lawsuit, it’s not enough to simply deny all allegations against you. Oftentimes, there are other issues that need to be raised immediately, such as counterclaims. If you don’t properly raise the counterclaims when you answer, you may be barred from raising counterclaims later.
Sometimes, the plaintiff — if not well represented — may not properly file the lawsuit in the first place. If they make such a mistake, then it may be possible to request a dismissal. The possibilities are almost endless, but they can be very arcane and technical. For example, if the complaint isn’t proper, it may be dismissed for “failure to state a claim.” Other reasons to seek dismissal include jurisdictional issues, incorrect parties and more.
In short, filing an initial answer is not the time to try and do things yourself.
When seeking a lawyer to represent you, you want to find an attorney who is experienced in litigation, has a good rating with a reputable source (i.e. Martindale-Hubble, A/V Rating is their highest), is ethical, experienced in your industry and business, and matches your personality.
Lawsuits are a lawyer’s game — lawyer’s know the rules. Don’t panic, but don’t shortchange your defense.
Business Law Southwest, LLC (BLSW). Business Law that Makes Business Sense. A Slingshot company.