What to Do When Your Business Gets Sued…

Category: Litigation

Virtually every business owner runs into conflict. This can be with competitors, customers, employees, vendors and suppliers, landlords, tenants or your creditors. When that conflict rises to the level of litigation, as is far too common today, here are five things you need to remember.

Don’t avoid service and don’t procrastinate.  It can be tempting to try to avoid litigation by trying to avoid being served a lawsuit…or, once you are served, to avoid reading through the documents and taking the next important steps. Don’t succumb to this temptation. When you are a party to a lawsuit, time is of the essence.  Accept service and read through the entirety of what was served to you.

Do not contact the opposing party.  This is another temptation. The person who is suing you may be someone you have done business with for years, someone you thought was a friend, or someone you think will back down if you have a conversation with them. Consider this: If they have gotten to the point of filing legal action, the dynamic has changed. Although costly court proceedings are not inevitable, whatever the matter is…it has escalated to a point where you do not want to try to resolve this by yourself. Proper and strategic communications will likely go a long way toward resolving the matter more quickly and at lesser cost (see number 4), than operating out of emotion or impulse. Being sued is emotional. It is hurtful.  It is tempting to respond emotionally when a cool, level head is required to protect your interests.

Assess your possibly relevant insurance coverage and gather relevant documents.   As you read through the complaint and the materials served you, begin making a note of possible insurance coverages that might apply.  Proper insurance coverage can protect your business from unnecessary attorneys’ fees and court costs, and pay a claim made against you.  Even when you have a question about insurance coverage, talk to a qualified attorney or your insurance broker to see if coverage still applies.  When you don’t have sufficient insurance coverage, the litigation costs alone can be overwhelming for a small business

Gather relevant documents.  Again, as you read the complaint, there will always be some form of supporting documents that either confirm or invalidate the allegations being made by the party suing you .  Typically disputes have a digital or physical paper trail. Start thinking about where that trail is stored and getting it together. You need to make sure to keep safe and properly organize any supporting documents, including emails, text messages or other forms of digital communications or records related to the dispute.  It is also important to never destroy evidence because that can be worse than the “smoking gun” that you think will hurt you in a lawsuit.

Get qualified legal advice. Just as there are all kinds of different practitioners of medicine, and you would not go to a nose specialist for a broken arm, it is important to seek out an experienced lawyer who practices civil and or commercial litigation. If you have already have an attorney you use for general business matters, they typically have qualified litigation attorney to whom they can refer you or bring onto your team. There is a misconception that a business can save money by not engaging a litigator until it is “necessary.” If you have been sued, bring a litigator in at once. In the long run, this will likely be a far less costly move. Be open candid and transparent to your lawyer, just as you would your doctor. It is the best way to get optimal advice.  Do not be surprised if your lawyer encourages you to settle. Going to court is costly and outcomes are uncertain. However, the irony often is the lawyers who succeed in court are the ones who most likely can deter your business adversary from taking the risk of going to court. In other words, a credible threat to win at trial is a very big advantage when trying to settle.

For more information, please reach out to me:

David Williams, Chair, Litigation Department
(480) 344-4047