You’ve been served: What to do (and not to do) when your business is sued
November 21, 2019
When a business is formed as a legal entity, the application process requires the identification of a registered agent, a person or corporation listed with the state Secretary of State as the proper agent for the service of a lawsuit against your company (“Registered Agent”). This could be you, another individual, or it could be a company you have hired to act as your Registered Agent. A lawsuit may be served on your business at its offices or it may be served on the Registered Agent.
What do you do when you receive a document which begins the lawsuit process, the Summons and Complaint, or the Registered Agent informs you that, yes, a lawsuit has been commenced against you and your business has been served?
Before we dive into proactive measures you should take, here are five things you should not do:
- Do not ignore it. As soon as the Complaint and accompanying Summons reaches you directly or your Registered Agent, the clock starts ticking and a response is required in a short amount of time – generally 21 days in federal court and 30 days in state court. Deadlines may be shorter in other venues.
- Do not contact the person or company suing you, or contact their lawyer. Although there may be an opportunity down the road to resolve the matter through negotiation, that time is not immediately after a lawsuit has started. Any such contact with the person or company suing you, or their lawyer is very risky and can backfire spectacularly, damaging your ability to properly defend your business.
- Do not attempt to create your own document (an “Answer”) to file with the court to respond to the Complaint before the deadline. Without knowing it, you will make mistakes and those can be very damaging to your case.
- Do not destroy or attempt to hide any documents, emails, or electronic data which are relevant to the case. If you do this, it may be deemed “spoliation” by the court and will damage your ability to properly defend your case.
- Do not hide the existence of the lawsuit from employees or others who have information about the subject matter of the case. They need to know that the case exists so that: (1) they do not mistakenly destroy any needed documents; and (2) they know not to respond to any inquiries about the case without talking to you or your attorney.
Instead, here are five things that you should do immediately:
- Talk to an attorney as soon as possible. Generally speaking, you or any other company official may not represent your company in court without an attorney. If you have a relationship with an attorney and have used a particular attorney in the past, call them. Although that attorney may not be a litigator, he or she will know whom to call for help. At Forrest Firm, we have attorneys who handle multiple aspects of representing you and your company in the context of your business, including handling litigation matters.
- Work with your attorney to determine whether you should contact your insurance agent. Assuming that you have liability insurance (you should), there is a chance that the lawsuit filed against your company is covered or, at least, the insurance carrier is required to defend you in the case. Business owners are often reluctant to contact an insurance carrier with a lawsuit, worried that it will affect insurance premiums in the future. Litigation can be extremely expensive, and your insurance coverage, if applicable, may limit the financial burden of litigation on you and your company. If you and your attorney believe that the defense of the lawsuit may be covered, report it to your insurance carrier.
- Preserve any and all documents (including emails) immediately that could conceivably relate to the case. Depending on the case this could mean ending automatic deletion of email from your servers, or gathering all paper documents into one location. Similarly, do not make any mention of the subject matter of the case, or the case itself, on any social media. If there are employees who know about the case, instruct them of the same. Do not attempt to argue your case on Facebook, Snapchat, Instagram, or Twitter.
- Refer all inquiries regarding the case, from the opposing party, media, or anyone else, to your attorney. Do not even say, “No comment.” Just refer the inquiry to your attorney. Instruct any relevant employees to respond the same way.
- Keep a business perspective on the situation. Company owners and employees may feel like the lawsuit is a personal attack, but the reality is that litigation happens and is part of the wider business universe. Treat it accordingly. This is even true when you and/or another employee are sued individually in the business context.
Here at Forrest Firm, we have attorneys who would be happy to meet with you to not only explain the litigation process to you thoroughly and work with you if you’ve been served with a lawsuit, but also to work with your business to proactively identify the biggest risks and operational issues that could result in a lawsuit against your company.
By implementing a review of your contracts, your employment practices, as well as other policies and procedures, you may be able to take actions that minimize the risk of a lawsuit and save your business from the stress of a lawsuit in the future.