It’s a letter that no business owner wants to open - the one from the Clerk of Courts advising you that your business is the defendant in a lawsuit.
What should you do if your business has been sued?
Unfortunately, lawsuits are a risk of doing business. That does not make litigation any less stressful, costly, or time consuming.
But how you respond and what you do after you’ve been notified that your business has been sued can go a long way toward protecting yourself and your business, and put you in the best position to move forward past this hurdle.
If you know you’re going to be sued, the first thing you should do is contact a lawyer.
In most cases, lawsuits don’t come out of thin air. You may have been contacted by an unhappy customer who wanted you to address a problem they had with the way you were doing business. When this happens, contact a lawyer as soon as possible. Many lawsuits can be avoided by getting a lawyer involved early. An experienced business lawyer may be able to work out a settlement that will avoid the lawsuit with minimal disruption to your business.
Other times, you may not have known the lawsuit was coming, or your discussions with the other party degenerated quickly and they just filed a lawsuit.
Either way, getting a lawyer on board as quickly as possible can actually save you time and money in the long run, and may prevent you from saying something that will not be favorable if presented to a judge or jury.
Many business owners are worried about the cost of hiring a lawyer. But the costs of not hiring a lawyer can often be more expensive than the lawyer’s fees, and the damage to your business and your reputation could be even more severe if you don’t work with an expert who knows the law, and how to defend your business.
When choosing a lawyer to defend you in a business lawsuit, make sure you hire a lawyer who has experience defending businesses and business owners, and who has handled this type of case.
Businesses face all types of claims, including labor and employment issues, breach of contract claims, and personal injury claims. Different lawyers have more experience defending certain types of claims, so make sure your lawyer is well-versed in handling the type of claim presented in the lawsuit that has been filed.
Once you have a lawyer on board, your lawyer will want to know when you were notified of the lawsuit. The date you received service - that is, the date the clerk of courts formally notified you that your business was being sued - starts the clock on how long you have to respond.
Your lawyer will be able to determine the relevant deadlines, but contact a lawyer as soon as possible to avoid missing important filing dates. Failure to respond in a timely manner can cause problems, and could even result in judgment being entered against your business.
In addition, once you hire a lawyer you establish attorney-client privilege, which means that internal investigations and communications with your lawyer cannot be discovered by other parties to the lawsuit. Avoid discussing the lawsuit with anyone other than your attorney, as this could waive the privilege and mean that certain information must be turned over.
Once you know how long you have to respond, it’s time to figure out how you want to respond.
The Complaint is the formal document that starts the lawsuit. It contains the allegations made by the plaintiff against you and your business.
In response, a defendant files an Answer which formally responds to the allegations in the Complaint. Some items will be admitted, while others will be denied.
Your lawyer will work with you to investigate the allegations in the Complaint and determine which aspects are true and which are in dispute.
In order to respond properly, it’s important that you know and understand how your responses can impact your potential liability exposure so you can make a better decision on how you wish to proceed with the case.
Just because you have been sued does not mean you don’t have options. You may be able to have the case dismissed quickly, either by having your lawyer file a motion to dismiss the case, or through a quick settlement with the plaintiff. Depending on the nature of your case, these options may significantly reduce the time and expense of the lawsuit. But a quick resolution isn’t always in your best interest, especially if the plaintiff’s demands are not reasonable.
Other times it is best to continue litigating the case, which will allow you and your lawyer to learn more about the relative strengths and weaknesses of your case, and to bring the plaintiff’s expectations in line with reality.
There are certain things you do not want to do after you have been sued.
First, do not communicate directly with the plaintiff. Things that you say in an effort to resolve the lawsuit could end up being used against you. Therefore, don’t contact the plaintiff or the plaintiff’s lawyer until you have met with your own attorney. From that point forward, all communications should occur between the lawyers.
If the plaintiff is someone that you must communicate with, such as a shareholder, a business partner, an employee, or another business, be clear that you will not discuss the lawsuit with them.
Second, depending on the nature of the claims against you and your business, the lawsuit might be covered by your insurance company. But never assume that the claim will be covered. Consult with your personal business attorney and, if there’s a possibility that an insurance policy might cover the claim, your lawyer can and should reach out to the insurance company to make that determination.
Finally, do not ignore the lawsuit. It will not go away, and ignoring it will only make the problems worse. You have a specific amount of time to respond to the lawsuit. If you do not formally respond by filing the appropriate documents with the court, the court can enter a default judgment against you and your business, which means that the plaintiff will win and you will be forced to pay whatever judgment the court enters.
Litigation can be long and stressful. To make it go as smoothly as possible, be honest with your lawyer and don’t cover anything up. It is easier for your lawyer to design a defense strategy knowing all the information, than to be surprised at the last minute by something that you already knew about but wanted to hide.
Stay in contact with your lawyer, and feel free to ask questions. When your lawyer asks you to review documents or asks you to provide information, do it as quickly as possible.
Otherwise, stay focused on your business and do not allow the lawsuit to become all-consuming. Remember that you have a successful business to operate, and continue making good business decisions. All too often clients say “Why should we pay this person? We did nothing wrong?” In many cases, winning the lawsuit is more expensive than settling. Continue to make good business calculations, and resist the urge to let anger or pride get in the way.
Finally, don’t let a business lawsuit rattle you. Hold your head high, be proud of your accomplishments, and continue to move your business forward.
If your business has been sued, contact an experienced North Dakota business lawyer at Fremstad Law today.
From our offices in Fargo and Valley City, Fremstad Law’s Joel Fremstad and James Teigland help move you forward. Contact us today by calling (701) 478-7620.
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