My Business Has Been Sued, Now What?

If you are a business owner, you probably have been sued, threatened with a lawsuit or fretted over the potential for a lawsuit. In our increasing litigious environment, it is not a matter of if you will be sued; it is a matter of when. For the fiscal year 2011, there were nearly 300,000 civil lawsuits filed in federal district courts in the United States. For the fiscal year 2010-2011, there were over 125,000 lawsuits filed in the chancery and circuit courts in Tennessee. This is the latest data as the statistics for the fiscal year 2011-2012 have not yet been released. Also, this data does not include the thousands of suits filed in the general sessions (small claims) courts in Tennessee each year.

Many businesses often find themselves mired in collection disputes with customers, contract clashes with vendors, and employment quarrels with current or former employees. While these are some of the more common types of disputes leading to lawsuits against small businesses, some industries are more exposed to litigation, such as the construction industry and the medical fields. Knowing what to do when you find your business faced with a lawsuit may significantly impact the outcome of the lawsuit.

The following are five important tips to remember when dealing with a new lawsuit:

1. Stay calm: After being served with a lawsuit, do not let your emotions control. The circumstances leading to a lawsuit are often emotional for all of those involved in the dispute. Understandably, you will be upset, but try to prevent emotions from taking over rationale thinking about the situation. The business of your business is what is most important, so do not allow a lawsuit to distract from carrying out your business.

2. Carefully review the lawsuit: Read the papers and understand the claims brought against you. Determine who has been sued, whether there are other entities or persons that are named, where the action is pending, what the allegations are against you and what the other party is seeking though the lawsuit.

3. Do not ignore the lawsuit: You must respond. One of the most important things to remember is that you can lose a lawsuit by default. That is, the party suing may be entitled to all of the relief sought if you fail to timely respond. Be proactive and aware of the deadlines to respond. Remember that your attorney will likely need time to conduct investigation and research prior to responding to the lawsuit. The deadline for responding often depends on where the action is pending. For example, most civil actions in Tennessee state trial courts require a response within in 30 days of service while most civil actions in federal court require a response within 20 days of service.

4. Gather relevant information and documents: Documents and information concerning the dispute will be essential for your lawyer to understand the lawsuit and to provide advice as to your options in dealing with the lawsuit. Also, you should act to preserve pertinent documents and electronic information, as you may be required to disclose this information during the pendency of the lawsuit.

5. Contact an attorney: Your very first call should be to your lawyer. A competent business litigation attorney can create a strategic defense plan to confront the lawsuit head-on and work to resolve the dispute.

As a business litigator who has extensive experience resolving disputes in a wide range of industries, from financial institutions to construction companies, I work hard to understand the clients’ business goals in order to deliver excellent results, whether through trial, mediation, litigation or negotiation. I also regularly work with our business clients to identify and manage risks and develop strategies to avoid lawsuits.