What to do when your business is sued?

It is imperative to understand what to do if your business is being sued. Whether you just started or have an established business, the reality of our legal culture is that any business can be sued at any time. Whether it is an unhappy customer, a disgruntled employee, a supplier, someone claiming he or she got hurt at your location or by your product, another business complaining about competition, even the government, are all potential plaintiffs against you. Thus, knowing which action to take upon learning you are being sued is a great asset to your business.

Before You Are Sued

You will typically receive a demand letter before being sued. Demand letters originate from an individual who is complaining about your actions and demanding that you implement corrective actions. Demand letters are not actually lawsuits. It is recommended to consult your lawyer about the demand letter in order to decide how to respond. At times, you may be able to show the writer that you did nothing wrong or you may be able to reach a settlement agreement. By taking these necessary measures, you could avoid being sued all together.

The Formal Complaint

If the matter is not resolved though a demand letter or settlement, you will receive a formal complaint. A formal complaint typically is delivered by a sheriff or other person, mailed to your company or given to whomever your company indicated as the “agent for service of process.” Accompanied with the complaint is a “summons.” A summons indicates that you have been sued, states the claims being made, tell you how long you have to respond, and identify the appropriate court.

Normally, a lawsuit doesn’t proceed until you have received the complaint. Some people who are anticipating a lawsuit will try to avoid the process server. Typically these efforts bear no fruit. Technology enables sheriffs and process servers find you. If they can’t, the court permits plaintiffs to publish in a newspaper and allow that to suffice as service. Thus, it is recommended to receive the complaint and take the necessary measures to defend the claim. Consult your lawyer to receive guidance on whether it is best to receive the complaint of try to avoid service.

Review the Papers Promptly

Typically, you are only allotted 20 – 30 days to respond to a complaint in most courts. Additionally, a hearing can sometimes be set within of 3 – 10 days. A lawyer must use these time extensions to learn the facts and prepare a response. Do not forget to respond to the complaint promptly. Read the complaint and find out how soon you must respond.

At times, people read the complaint, see the claims are false, and decide not to take the claim seriously. If your business gets sued, the problem is that the court or judge doesn’t know whose side to believe. Even if the claims are ridiculous, you have to take the claim seriously and respond. If you don’t, the court will enter a default judgment that is not in your favor.

Contact Your Lawyer

If your business gets sued, call and give the relevant papers to your lawyer immediately. The sooner you do this, the more time your lawyer has to learn the facts, gather information, interview witnesses, and construct a strategy with you. Tell your lawyer everything, even if it is confidential information. Your lawyer can provide the best representation by anticipating both your strengths and weaknesses. Keeping secrets from your lawyer makes them vulnerable for surprises from the other side that will greatly damage the outcome of your case.

Check Insurance

Defending a lawsuit can be quite costly due to court fees, investigation costs, and legal fees. Depending on the nature of your claims, your insurance company may pay or help pay for your defense, settle the claim, and even pay any award against you. It is recommended to verify your business and homeowner’s insurance. Check your current and older policies. Verify if you are covered by insurance of a trade association, your landlord, or policies brought by suppliers, vendors or others that may consider your company insured. Converse with your lawyer and insurance agent to find out what kind of insurance you possess so that you can obtain help to resolve your claim. Do this quickly so that the insurance company can be notified promptly. Otherwise, they will not be obligated to assist you with your case.

Don’t Discuss It With Anyone Else

Generally, you should not be discussing your lawsuit with anyone else except your attorney in order to ensure the most successful outcome possible. If you divulge too much, it is likely that things will be used against you. Information you reveal may find its way to your opponent. Anything that you mention to your friends you will be forced to testify about. Thus, it is best to limit your conversations on the lawsuit to things your lawyer says are permissible to discuss.

That being said, it is okay to discuss with your spouse, clergy, or doctor about your upcoming case. Lawsuits can cause you a great deal of stress and anxiety. The law states that you do not have to relay what you told these particular individuals in confidence. These people will not be able to give you legal advice on the case, however, they can help reduce your anxiety.

Preserve Records

Any records that could be relevant to the case should be stored in a safe place. Additionally, if you dispose of records pertinent to a lawsuit while the suit is impending, it could be illegal. Enron and Arthur Anderson illustrate the need to preserve all relevant records and emails.

Consider Compromise and Settlement

Normally when people are being sued, they want to defend and win no matter the cost. Even if you believe that you are right, there will always be opposing lawyers and judges who may not agree with you. Consider the benefits of reaching a settlement agreement.

Any business owner has a high likelihood of being sued at some point. Taking these preventative actions will help ease the tension of being sued, help you deal with the case, and help you obtain the best result.

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George Meszaros is the editor and co-founder of Success Harbor where entrepreneurs learn about building successful companies. Success Harbor is dedicated to document the entrepreneurial journey through interviews, original research, and unique content. George Meszaros is also co-founder of Webene, a web design and digital marketing agency.