Getting Sued? Lawsuit Survival

You Got Sued…now what?

Getting sued is like a punch to the gut. You are going about your normal day and then WHAM! you “get served” or receive some sort of legal demand letter or complaint. All of a sudden, your day turns horrible as you contemplate Lawsuit Survival.

As a small business owner you have enough on your plate trying to run a business, as well as managing your clients and employees. A legal complaint can change everything in minutes. I wrote an article earlier this year, entitled How to Avoid a Lawsuit that touches on some of the more common lawsuits and ways to avoid them. In this article we will discuss lawsuits and responses in more depth. Now please bear in mind that this article cannot explain the ins-and-outs of litigation, nor is it legal advice. Let’s talk about Lawsuit Survival.

Are You Sure You’re Being Sued?

First, realize that just because you receive a letter from a lawyer does not necessarily mean you have a lawsuit. In other words, the first step of Lawsuit Survival is figuring out if you are actually being sued. Lawyers typically issue you what is called a “Demand Letter” or “Cease and Desist Letter” before a lawsuit. This letter will usually spell out some of the facts (from their side), their demands, and the consequences of not heeding their demands. They are generally seriously phrased and official looking, causing recipients to go into a tizzy. If this is what you received from a lawyer or law firm, you haven’t been sued (yet).

Second, a lawsuit filed in almost every jurisdiction in the United States starts with what is known as “a complaint.” This is a formal document that contains the name of the parties and the court at the top. If a Demand Letter does not produce the desired results, lawyers usually file a complaint with the court. If you receive such a document, make sure the court has stamped it. Often a complaint will include some sort of rubber stamp on the first or last page of the document, with the word “filed” or “entered” or “submitted” with a date and a filing (or entry) number. You can call the court clerk in the court where the complaint is allegedly from, to verify whether the complaint has actually been filed. It’s a common tactic for lawyers to draft a complaint and include that complaint in their initial demand letter. It goes something like this: “We’re lawyers. We’ve been hired by so-and-so to sue you. We’ve drafted a complaint and are prepared to file it, unless we receive some form of satisfactory response from you addressing our concerns.” If the complaint you received from the lawyer’s office hasn’t actually been filed, you haven’t been sued (yet).

Third, in spite of the seeming commonality of lawsuits, suing someone is very expensive, time-consuming and requires lots of compelling evidence. Suing someone means taking time and resources (including paying an attorney) away from your business to pursue the lawsuit. Therefore, suing is generally (but not always) a last resort.

The Lawsuit

If you have been sued (a complaint has actually been filed with the court and an answer from you is due), then follow these steps for Lawsuit Survival:

• Don’t Panic – These things happen. Stressing out will only make you act rashly.
• Don’t Delay – For most lawsuits, you will have approximately 30 days to respond. Lawsuit Survival depends on time. You need to give your attorney as much time as possible to form a proper response. To form a proper response, your attorney will need to review any and all information and documents involved in the matter, talk to the opposing attorney, perhaps interview other people, and form a reasoned response. There may be a number of court documents that need to be filed or responded to. DO NOT WAIT UNTIL THE LAST POSSIBLE MINUTE!
• Don’t Contact The Party Suing You – Seriously, don’t do it. Resist the urge to call them and give them a piece of your mind. It doesn’t matter if they are an employee, ex-employee, family member, neighbor or customer, calling them could only hurt your case. Legal cases are won and lost on the most arcane application of the facts to the law, laws that you are untrained in dealing with or may not even know exist. You could inadvertently lose your case by saying or doing something antithetical to your case. Let your lawyer deal with the opposing side, and he or she may be able to win a settlement for you that would be FAR CHEAPER for you, then you taking matters into your own hands. Don’t be your own worst enemy in Lawsuit Survival.
• Identify Your Goals – Do you just want the lawsuit to go away? Do you want to set a precedent? Are there other issues that could come into play? Do you need to protect sensitive information or your company’s reputation? What budget can you make available to this lawsuit? Is insurance a factor?
• Pull Together Retainer Funds – For litigation, almost all attorneys will require a retainer (even Law 4 Small Business). There are practical and ethical obligations around retainer fees. If you read a previous article of ours entitled, Do You Have a Line of Credit (LOC) Yet??!? and followed it, this would be a good time to dip into those funds. Make sure you talk with your attorney and get a good idea of a cost estimate and how funds will be handled so you can budget accordingly.
• Find an Attorney to Represent You – Yes, you will need to hire a lawyer. But don’t hire just any lawyer. In spite of the pressure you feel, it pays to shop around for a lawyer. Ideally, you can find a lawyer that fits your budget and specializes in the area of your lawsuit.
• Don’t Try to Handle Things Yourself – Don’t try to handle the lawsuit (or even settlement) yourself. Please hire that lawyer you found. You are dealing with professionals. You have no idea what you are doing. THIS IS NOT A TIME TO BE CHEAP! You may paint yourself into a corner, and you will not know what it takes to prevent the opposing side from ever suing you again. I’ve seen it many times in the past: Our clients thought they settled, but they didn’t do it right, and even worse, they acknowledge one or more facts that come to haunt them in another cause of action later. Hire a lawyer and let that lawyer put this lawsuit to rest once-and-for-all.
• Contact Your Insurance Carrier – Most insurance carriers require notification within a few days of receiving notification of a lawsuit. Depending on the nature of the claim, and the nature of your insurance, your carrier may or may not defend you. Some carriers will opt to pay for your defense, but with stipulations or conditions depending on certain factual circumstances. Get your insurance involved. It could save you big.

Settling and Surviving

There are a few things you should keep in mind when dealing with a lawsuit. First, most lawsuits settle without ever going to court. Those that do go to court usually settle before there is a final judgment from the court. Therefore, there are lots of opportunities to settle.

Second, lawsuits are very expensive. Unless you are filthy rich, check your emotions at the door and make decisions based on economics. Economics may not be easy to calculate if you’re dealing with a lawsuit that impacts your company’s reputation or future earnings but do your best to keep the emotions out of any decisions. Paying a plaintiff more than they deserve to make a problem go away may be the wisest business decision you can make.

Finding an Attorney You Can Trust

When you seek an attorney to represent you in a lawsuit, choose a lawyer that fits (i) your pocketbook, (ii) your personality, and (iii) you can trust to really meet your needs. This third point bears some further comment. What does it mean to find an attorney you can trust to really meet your needs? Define what your needs are.

Does your case involve arcane financial information or technology, an allegation that has potential criminal implications, or otherwise involve some sort of complicated situation? It helps to find an attorney that has some experience with that case and subject matter.

Will it benefit your business to establish some sort of precedent (i.e. because there’s the possibility of similar lawsuits from other parties?) or do you simply need this lawsuit to go away and you don’t care how? If the former, a larger law firm with strong resources to really counter-attack the opposing side may be in order. If the latter, you may be better served with an older attorney who has been around the block many times and personally knows the opposing counsel and may have a stronger ability to settle with his former law school buddies.

Know that lawyers and law firms have their own unique personalities. Some are scorched-earth sharks who love troublesome lawsuits; but are very expensive, demand exorbitant amounts of time and resources, and focus exclusively on the win versus what’s best for your business. Find a lawyer whose personality matches your goals.

Remember that it is very difficult to predict the outcome of a lawsuit, so trust your lawyer and lean on your lawyer to help you meet whatever long-term goals you set out for this litigation and stick to it.

Law 4 Small Business. A little law now can save a lot later.