What Should I Do if My Business is Sued?

What Should I Do if My Business is Sued?

As any business owner knows, operating a company poses many risks and rewards.  Facing litigation, unfortunately, is one such risk—and no company is immune Irrespective of your industry, or even how long you have been in business, you may face lawsuits from multiple parties—including employees, vendors, customers, clients, and other businesses.  

For many businesses, it's not a matter of if they will be sued, but rather a question of when. And it is common and normal for business owners to have an initial emotional reaction upon learning about a lawsuit. Avoiding unreasonable and potentially damaging behavior is crucial, but you also must take swift action to protect yourself and your business. Knowing what to do in these situations and taking the proper steps can lay the groundwork for the best possible resolution to a case.

Contact an Experienced Business Attorney

Having an experienced business attorney review your case should be your top priority. Business litigation can be quite complex, and taking a chance on representing yourself is not advisable. Depending on your business's structure and assets, you might have a lot at stake. In virtually every situation, it will be in the best interests of you and your business to hire an attorney to represent you.

When interviewing a potential business attorney, be sure to ask several questions, including:

·      Have you handled a case like mine before?

·      What is your hourly rate?

·      Do you have any experience appearing before the judge assigned to the case?

·      What sort of exposure do I face—both in terms of potential damages, as well as legal fees and costs?

·      Where do you see this lawsuit heading, or where might it go?

A business attorney can help you understand the severity and scope of the lawsuit and develop an effective defense strategy to reach the best possible outcome in the case. The sooner you hire one, the more they will be able to do to help you.

Notify Your Insurance Company

Don't respond to the lawsuit without speaking to your insurance company or attorney. If your business has an active insurance policy covering the type of lawsuit you are facing, the insurance carrier is typically legally obligated to provide you with an attorney who will defend your company against legal action.

For example, suppose you are being sued by a customer who claims that he or she slipped and fell on ice outside your business and broke an ankle. In that scenario, and assuming you have liability insurance coverage for their bodily injury, your insurance company should handle your legal representation.

But if your business doesn’t have insurance covering the type of allegations made in the complaint, or you are unsure if it does, it is imperative that you contact an attorney with experience in business litigation as quickly as possible.

Avoid Direct Communication with the Plaintiff

Don't directly communicate with the filing party, known as the plaintiff, or their attorneys, as this might only make your situation more difficult. Anything you say to them could be used against you in the lawsuit and in any settlement negotiations, and it even could jeopardize your company. Although it may be tempting to call them and discuss the lawsuit, trying to resolve matters amicably on your own is unlikely to succeed.

Rather than calling the other side directly, all communication should go through your attorney. If the plaintiff is someone you must communicate with during the normal course of business, such as a current employee, client, or another organization with whom you have an ongoing relationship, clearly state that you will not discuss the ongoing lawsuit with them—and this is important, but stick to that promise.

In addition, it's also best not to discuss any ongoing litigation with anyone besides those who need to know, such as your attorney and insurance company.

Preserve All Case-Related Documents and Evidence

It's only natural to feel overwhelmed and indignant when you first learn about the lawsuit and the facts are being reviewed. Whatever you do, don't attempt to hide or destroy any evidence or data concerning thelawsuit, such as any documents, video footage, pictures, emails, textmessages, policies, or manuals.

Even if you don't think what you are destroying could hurt your case, do not take any steps with regard to potential evidence until speaking with an attorney. If you hide or destroy important evidence pertaining to the case, the court could find that you “spoliated” evidence, making it even more challenging to defend your business against a lawsuit and opening the door to other adverse findings in court. And not only are you obligated to retain this evidence when served with a complaint, do not forget that your attorney may be able to use some of this evidence in your favor.

Take the Lawsuit Seriously

A business lawsuit is unlikely to go away on its own. Avoiding or ignoring it or acting on your emotions only stands to make the situation worse and puts your company at more risk. Lawsuits come with deadlines that you must adhere to or face various consequences. For example, the plaintiff can obtain a default judgment if you fail to respond within the legal deadline. Then they can take various avenues to collect on that judgment, including foreclosing on company property and freezing business bank accounts or other assets.

Being sued can have severe implications for your bottom line, reputation, and standard of living. The best way to show you take the lawsuit seriously is to seek legal help immediately and follow your attorney's advice and instructions.

Lawsuits are one of the most stressful situations a businessowner can face. No matter who the plaintiff is, there could be many negative implications arising from this situation. So while it may be tempting to try and handle the matter yourself or ignore it with the hopes it will go away on its own, your best course of action is to reach out for legal help.

Photo credit: Photographs in the Carol M. Highsmith Archive, Library of Congress, Prints and Photographs Division.

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