You’ve been served with a summons and complaint, naming you or your business as defendants in a lawsuit. It’s a scary prospect, but the key is not to panic and to keep your emotions under control. To successfully defend a lawsuit, you must take measured steps to protect your interests. The actions you take today could have big implications down the road.
Here are nine things you should do when you are facing a lawsuit.
If you’re going to consult with an attorney, do so immediately.
The law only gives you a limited number of days to respond to the complaint. If you do not respond within this time period, you automatically lose. Judgment can be entered against you for whatever damages the plaintiff is seeking. Contacting your attorney right away provides a head start on your case, giving your legal counsel the time required to craft an effective response. In some cases, your attorney may be able to file a motion dismissing the case altogether.
Call your insurance company.
You may have a liability insurance policy that will pay at least part of your legal fees and damages, but the insurance company can’t defend a lawsuit it doesn’t know about. And the insurance company won’t pay defense costs if your notification isn’t timely. So, even if you’re not sure whether your policy covers this type of lawsuit, you should still notify your insurer right away. And even if the insurance company initially denies coverage, your attorney can negotiate with the agency on your behalf.
Gather and preserve
key documents.
Don’t throw anything out! It is vitally important that you preserve any and all relevant documents. Keep these documents in their original condition as you would during the ordinary course of business. In civil litigation, both sides are responsible for sharing relevant information so the court can decide the case based on all the evidence. If you destroy or delete any relevant documents, the court can sanction you by entering judgment against you, even if the documents were not important to the dispute. It may make sense to distribute a bulletin to all employees directing them to save all documents relating to the dispute. In this case, any normal document retention/destruction policies should be suspended pending the completion of the dispute, so that relevant evidence is not destroyed.
Write an outline and narrative of events to assist your attorney.
Draft a memo to your attorney listing important facts, dates and individuals likely to have knowledge about the lawsuit. Ask key players to do the same. This is very important, because people may forget details during the litigation process, especially a lengthy one.
Exercise discretion.
Resist the urge to discuss the lawsuit. It is understandable that you will be upset about being sued. But keep in mind the adage that "loose lips sink ships." You do not want individuals who aren’t decision-makers divulging information or speculating about the case.
Consider potential counterclaims.
Did the other side breach the contract? Do they owe you money? Has anything the plaintiff done caused damage to you? Once a suit is filed, it often makes sense to file a counterclaim. Sometimes a counterclaim will end up being larger than the original claim. Filing a counterclaim turns the tables and helps resolve the issues between you and the plaintiff. Exposing the other side to liability also encourages settlement.
Be realistic.
Think about the case from the other side’s perspective. Are there any smoking guns they might know about, or possibly learn about during the course of discovery? Lawsuits must occasionally be fought to the bitter end. Yet, failing to consider settlement may expose you to greater liability and possible demoralization. Don’t lose sight of your goals. Don’t let it get personal, and don’t let emotions trump reality. Make decisions based on sound financial considerations.
Stay involved.
Keep on top of your case and work closely with your legal counsel. Your defense and counterclaims, if any, will be most effective when your attorney understands all the nuances of the dispute.
Don’t lose perspective.
In today’s business world, lawsuits are common. Take the lawsuit seriously, but keep a positive attitude. Be confident that your attorneys will do everything they can to settle the dispute favorably.
Attorney Mark E. Schmidt is a member of the Litigation Practice Group at the Milwaukee office of Godfrey & Kahn S.C.
June 24, 2005, Small Business Times, Milwaukee, WI
