When Your Business Has Been Sued

Your business has just been served with legal papers. Now what?

Call Your Lawyer

The very first call you should make is to your lawyer. He or she will 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 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.

Shut Up

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.

Investigate

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?

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 Based on Sound Business Judgment

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.

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