Lawsuits are an unwelcome, but virtually inevitable reality in today’s business world.
Although it’s a scary prospect, the key is not to panic. Like any other business decision, take calculated steps to successfully protect your company’s interests.
Regardless of whether your company is involved in a lawsuit, every business should set up a chain of command in the event a lawsuit arises. Registered agents and any employees who may be served with a summons and complaint must be informed as to who within the company should receive those papers.
In turn, that internal point person should be responsible for contacting your company’s legal counsel.
If your business is named in a lawsuit, consider taking the following steps:
1. Consult your attorney immediately.
The law only gives your company a limited number of days to respond to the other side’s complaint. Failing to respond in time can result in a default judgment being entered against the company. Also, Wisconsin law requires that if your business is a limited liability company or corporation, the company cannot litigate “pro se” and therefore must retain an attorney to appear in court on its behalf.
2. 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 cannot defend a lawsuit it does not know about and many policies require prompt notice.
3. Gather and preserve key documents.
In civil litigation, both sides are responsible for sharing relevant information so the court can decide the case based on all the evidence. Accordingly, it is vitally important that documents are preserved.
All potentially relevant documents (which include emails and other electronic communications) should be kept in their original condition as they would be in the ordinary course of business. It usually makes sense to distribute a “litigation hold” memo to all employees advising them of the need to save all documents relating to the dispute. Operation of any regular document retention/destruction policies should be suspended pending the completion of the lawsuit so that relevant evidence is not destroyed.
If your company destroys or deletes any relevant documents, the court can sanction your company by allowing a jury to infer that the missing documents would have been damaging to your case, or even enter judgment against it.
4. 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. Have the key players also write memos to your attorney because people tend to forget details, and the litigation process is often lengthy.
5. Exercise discretion.
Resist the urge to discuss the lawsuit. It’s understandable that you and your colleagues will be upset about being sued. Employees and co-workers – including management – must be instructed not to publicly discuss or speculate about the case, particularly over email, which could potentially create a damaging paper trail.
6. Think about potential counterclaims.
Did the other side breach the contract? Do they owe you money? Has anything the plaintiff done caused damage to your company? Once a suit is filed, it often makes sense to file a counterclaim. Sometimes, a counterclaim will end up being larger than the underlying claim. Filing a counterclaim turns the tables and helps get all the issues between you and the plaintiff resolved. By exposing the other side to liability, a counterclaim also encourages settlement.
7. Be realistic.
Think about the case from the other side’s perspective. Are there any smoking guns they might know about, or will possibly learn about, during the course of discovery? Lawsuits must occasionally be fought to the bitter end. Yet failing to consider settlement may expose your business to greater liability and possible demoralization. Set goals, and try not to lose sight of them. Don’t let it get personal, and don’t let emotions trump reality. Make decisions based on sound financial considerations.
8. Stay involved.
Keep on top of the case. Work closely with legal counsel. Your company’s defense and counterclaims, if any, will be most effective when your attorneys understand all the nuances of the dispute.
Each case is different, and it is impossible to predict whether your company will prevail. By following these eight steps, however, your business can avoid common pitfalls and greatly increase its chances of achieving its litigation goals.
