4 Actions To Take If Your Business Is Facing A Lawsuit

If your business gets hit with a lawsuit, it can be a traumatic and costly experience. Unfortunately, in today’s highly litigious society, lawsuits are far-too common, with up to 53% of all small businesses in the U.S. sued each year, according to the Small Business Administration.

One of the worst parts of being sued is that whether you are in the right or not, you can still be on the hook for extremely expensive attorney’s fees and court costs. And this comes on top of all the time you lose in the midst of conflict, not to mention the potential damage to your brand’s reputation. This is exactly why we support our business clients to stay out of court and out of conflict with proactive planning. 

But sometimes no matter how well prepared or proactive you are, you can still be sued or threatened with a lawsuit. If your business is facing a lawsuit, here are some things that can help prepare yourself and your company for what lies ahead. 

01 - Understand the process

When dealing with a lawsuit, it can help to understand some basics about the legal process. In a civil lawsuit, the plaintiff is the party bringing the lawsuit in court, and the defendant is the party being sued. You may learn about a lawsuit when you receive a summons and complaint. A summons is a written notice, which usually is accompanied by a complaint, notifying the defendant and the court that the complaint has been served on all relevant parties, while listing the time frame you have to respond to the complaint. 

The complaint is a legal document written by the plaintiff’s attorney that serves many purposes, including identifying the parties involved in the lawsuit, outlining the reason(s) for the lawsuit, and identifying the type of relief that’s sought. The complaint likely lists various allegations against your company that form the legal basis for the lawsuit. 

For example, it could allege that the plaintiff sustained personal injuries on your company’s property, it could allege that your company breached a legal agreement, or it could allege that one of your employees was wrongfully terminated. Whatever the plaintiff claims, at the end of the complaint, you’ll find a request for some sort of relief, likely monetary damages.

Alternatively, you may have received an attorney’s letter or a letter from a potential litigant, with a complaint attached, although the lawsuit has yet to be filed.

02 - Don’t ignore it

It might be tempting to ignore a lawsuit (or the threat of one), especially if you think it’s frivolous. But ignoring a lawsuit is the absolute worst thing you can do, as ignoring it can result in the court issuing a default judgment against you. Even if you’ve done nothing wrong and the allegations are completely fabricated, if you ignore a lawsuit, the court can issue a default judgment against you, and you’ll be required to pay the resulting judgment. 

Furthermore, once a lawsuit is filed, you should never communicate with the party suing you, even if it’s an employee or someone you’ve done business with for years. And if you are contacted by the other party’s lawyer, don’t discuss the case with them either, and tell them they need to contact your lawyer, even if you haven’t hired one yet.

Other things you might need to do include preserving evidence that may be relevant to the lawsuit. Such records include documents and electronic communications, such as email, photos, and voicemail. If you have a document shredding policy, suspend it until you have consulted with a lawyer. 

In some cases, you may need to take photos and/or video of these records or other items. If so, make sure to include the time and date with every image. Your lawyer can provide additional details about how exactly to prepare for the lawsuit.

03 - Contact your insurance provider

If you have the proper business insurance, your insurance company will provide you with a lawyer and pay your legal fees, court costs, and even the damages, if you lose the case. Such coverage can protect you from many different types of lawsuits. 

For example, employment practices insurance provides protection against lawsuits initiated by employees. General liability insurance covers lawsuits initiated by third parties for injuries and/or property damage related to your business And cyber insurance protects against lawsuits due to Internet breaches, hacking, and network failures. 

Business insurance should always be your first line of defense against liability of all kinds, and this is why having the right coverage is so vital. If you need support in getting the right insurance coverage, contact us, your Personal Family Lawyer®  with business planning expertise for an insurance audit.

04 - Hire an experienced business lawyer

Unless the case involves small amounts of money and can be resolved in small claims court, you should hire a lawyer to represent you. Whether it's to settle the conflict outside of court or to litigate on your behalf, having the right lawyer on your team can make all the difference in the outcome of the case—and how stressful and costly it will be for you. If handled properly, a lawsuit can even provide an opportunity to shore up gaps in your business systems and grow your business.

If you aren’t already working with us to help you proactively stay out of court and conflict and you get threatened or hit with a lawsuit, you can call us for support, and we’ll do our best to help you. But it’s far better to work with us in a strategic advisory capacity well before things reach this point. 

The potentially ruinous effects of a lawsuit can be far more damaging to small businesses than larger ones, which often have in-house legal teams defending them. When you work with us, your Personal Family Lawyer® with business planning expertise, you’ll have your very own trusted legal counsel on your side to proactively keep you out of court and conflict and help you find the right counsel, if you or your business is ever sued or threatened with a lawsuit. 

Whether it’s investing in the right insurance coverage, reviewing and updating your legal agreements, or helping you navigate the complexities of employment law, us, your local Personal Family Lawyer® with business planning expertise has you covered. Contact us today to learn more.