You hoped it would never happen, but in the back of your mind, you knew it could: Your small business is being sued. Whether it has been filed by a current or ex-employee, client, vendor or even another business, a lawsuit against your company will likely cost you a lot of money… whether you win or lose. It’s normal to feel overwhelmed, upset, and indignant, but if you want to keep your business and it’s reputation intact during this time — it’s important to handle every step of the process carefully.
Call Your Lawyer
The very first call you should make is to your lawyer. They will almost immediately be able to tell you what to do next. As a general guideline, here is what a lawyer would normally expect you to do:
- Gather all information together in a logical order
- Make a list of current telephone numbers and addresses of interested parties and witnesses
- Prepare a written statement of your position
- Make photocopies of everything and offer originals or photocopies to your lawyer
- Share all information with your lawyer
- The absolute worst thing you can do for your case is to fail to give key facts to your lawyer.
Tender An Insurance Claim
Even if it appears that there is no coverage under any of your insurance policies, ask your insurance agent to tender a claim. Depending on the nature of the claim, this is something that your attorney may end up doing, as insurance coverage issues can lead to separate legal disputes.
You may be upset at having been sued and will want to talk to people about the matter. However, the less said, the better. Let your lawyer be your mouthpiece.
You may have a duty to investigate. For example, if an employee brings a sexual harassment lawsuit, the employer will generally have a duty to investigate the claim. This is something that should be coordinated through legal counsel.
Assess Your Potential Liability Exposure
Before you can figure out how to respond to a lawsuit, you need to work with your lawyer to assess the potential liability exposure on a case:
- What are the amounts claimed?
- Are there any smoking guns that the other side knows or could find out about?
- Is there any chance of additional recoveries such as punitive damages?
- Could the other side recover attorneys’ fees?
- What do you think the chances are that the person suing you will win the lawsuit?
- How much will it cost to defend the lawsuit?
- Is it going to cost more to defend the lawsuit than to settle the lawsuit?
Formulate A Plan Of Defense
Don’t just turn the matter over to your attorney. Stay on top of the case and work closely with your legal counsel in deciding how to respond to the matter. Decide on strategies — such as whether or not to counter-sue. Unless you are fortunate enough to have an insurance company to pick up the tab on defense fees, your strategies may depend on what you are willing or able to afford.
Consider The Practical Consequences
Recognize that a lawsuit will drain your resources, other than just your money. You may be required to turn over documents and other information that could be damaging to your business. There may also be adverse publicity. Lawsuits can also become all-consuming to the point that you can lose your perspective.
Strive For Settlement
Do your best to make good business judgment calls to resolve the litigation.
A lawsuit sometimes has to be fought to the bitter end, but don’t keep fighting just over the principal of the matter. Try to keep the emotions out of it and weigh relevant factors solely from a financial perspective.
Chances are that you will be dollars ahead by offering up a settlement at some point rather than continuing to pay for the costs of defense while bearing the risk of a judgment being entered against you if the matter goes to trial.
Questions For Your Attorney
- If my business has been sued, should I suspend the regular destruction of documents?
- If my business has been sued, can I tell my employees not to talk to the opposing party and the opposing lawyer?
- What is the best time in a lawsuit to make a settlement proposal?
How A Lawyer Can Help
If you’re like most successful people, you want a legal and business guardian to protect your business and help you flourish. John Alexandrov understands the life and business challenges of entrepreneurs. He’s only a phone call away when you are facing your most pressing business challenges. For more detailed, specific information, please contact John by clicking here.