Your Business Has Been Sued? What Next?

Posted by on Sep 5, 2013 in Uncategorized | 0 comments

Call Your Lawyer or Find A Lawyer

The very first call you should make is to a lawyer. He or she will guide you.

As a general summary, here is what a lawyer would normally expect you to do:

If you don’t have a relationship with a lawyer, there will be some preliminary steps. These can usually be done quickly. The lawyer will have to ensure that he or she does not have a conflict with the other party or parties. So, do not provide details to the lawyer until all conflicts are cleared and you have engaged the lawyer’s services.
Once conflicts are cleared and the relationship is established:
Forward all court papers to the lawyer by the fastest means;
Identify clearly when the lawsuit (complaint) was received (the first deadline is no more than a month away);
Gather relevant information internal to your business;
Gather the file, including all relevant emails and correspondence;
Share all information with the lawyer;
Let the lawyer know the earliest time you can discuss the matter in detail;
Take affirmative steps to ensure no documents or other information related to the matter are lost or destroyed (ask your lawyer about this).

Notify Any Applicable Insurer Without Delay

If you’re in doubt, call the insurer and follow your claims requirements carefully. Talk to your lawyer about any applicable insurance.

No Communications

In general, your business should have a policy of not communicating about legal matters. Once a lawsuit is filed, do not discuss the lawsuit with anyone until you have your lawyer’s guidance.

What’s at Risk? 

Before you can figure out how to respond to a lawsuit, you need to work with your lawyer to assess your potential exposure:

What does the complaint ask for: money? an injunction?
What’s the truth of the claims in the complaint?
Have you or your agents behaved in a way that might expose you to punitive damages?
Are there risks of you having to pay the other side’s attorneys’ fees? (The answer is usually “no,” but there are exceptions.)
Which side realistically has the better case?
How much will it cost to defend the lawsuit?

Develop a Plan

Don’t just turn the matter over to an attorney. Stay involved. Do you have counterclaims against the plaintiff? How will money affect your plan of action? What is your bottom line aim for the litigation? Ask for a budget from your lawyer by phases. At a minimum:

Phase 1. Responding to the Complaint / Motions to Dismiss.
Phase 2. Discovery.
Phase 3. Motions for Summary Judgment.
Phase 4. Preparation for Trial.
Phase 5. Trial.

If you’re unfamiliar with litigation, working through a budget will give you a better perspective on the litigation. The lawyer may have to develop the case to give you a reasonably accurate budget for the final phases, but it is usually possible to budget for the phase you’re in along with the next phase.

Ask about expenses. There’s more than attorneys’ fees. There’s travel, document handling (copying/scanning/collecting), court reporters (for depositions), and potentially expert witnesses, to name a few.

Be an Economically Rational Actor

A lawsuit is going to cost you time and money.  It is rarely smart to fight on principle.  Ensure that your litigation is planned to achieve success at the right price.


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