The 10 Things Small Businesses Should Do If They Get Sued

The 10 Things Small Businesses Should Do If They Get Sued

The United States is a litigious society.  Whether you consider that a good thing or a bad thing is irrelevant for business owners–it just is.

The longer you are in business the greater your odds of getting sued.  For small businesses, the most common types of lawsuits are breach of contract, employee/employer suits, and debt collections suits. So what should you do if a process server has handed you a lawsuit or the mailman has delivered a certified mail package with a lawsuit? Here is a handy 10 point checklist.

  1. Don’t Panic.  Take a deep breath.  Sit down. Then take 10 more deep breaths. Pace around if you like, but continue taking deep breaths.  The world is not ending, your business will go on, focus on that thought.
  2. Read the summons and complaint.  The summons is the official document that tells you when you have to respond to the complaint.  Pay close attention to that summons, you need to respond by that date or you could be faced with some dire consequences.  The complaint is the document that describes the claim and the damages being sought.
  3. Begin collecting information.  Start looking for documents, contracts, emails, letters, notes, other documents that may be of benefit. When you talk to your lawyer for the first time, it is helpful to have some information to give her.  Your lawyer will then guide you on what else to begin collecting.
  4. Whatever you do, do not destroy anything!!!! From the time you receive the summons and complaint, you are on notice of a suit and destruction of evidence – even if done accidentally – is very much frowned upon.  If you have a document destruction policy, suspend it immediately until such time as you talk to a lawyer (who should tell you to stop destroying anything).
  5. Contact a lawyer.  This is not just a self-serving statement, if you are an LLC or incorporated, you likely have to be represented in court by a lawyer. Additionally, the time to respond to a complaint is limited but can vary depending on the court and the size of the claim (usually between 15 and 30 days).  But the time to respond can be extended pretty routinely by the plaintiff’s lawyer and by the court, if the request for an extension is made before the deadline passes.
  6. Contact your insurance carrier(s).  If you are sued, your insurance companies may be required to help defend you in certain situations. Even if your carrier is going to defend your case, having your lawyer preserve your rights by extending the deadline for responding to the complaint is vital.
  7. Talk to your staff.  Your staff may have information to help with the suit.  Your staff may get contacted by the Plaintiff and/or Plaintiff’s attorney.  The people who work with and for you should know that there is a suit and that any questions or encounters with the Plaintiff’s side should be referred either to you or your lawyer.  Additionally, determine if there were there any employees who have left the company, for whatever reason, who may have information about the events contained in the complaint?
  8. Talk to your accountant.  Lawsuits are expensive and defense lawyers rarely, if ever, defend a case on a contingency fee.  That means you are going to need to budget for the expense.  Talking to  your accountant can help you begin the budgeting process.
  9. Talk to your family.  Lawsuits are stressful events in anyone’s life.  Small businesses are susceptible to added stress because the small business is personal to you and involves your family even if they are not involved day-to-day in your business.  Talk to your family because it is always comforting to have someone in your corner who you are not paying.
  10. When all else is done, refer back to Item #1.  Don’t panic.  More than 95% of all cases filed in court get settled and chances are yours will settle as well.  Focus your day-to-day energies on your business.

When a small business gets sued, it is personal for the owner and I believe many lawyers forget that aspect.  However, small business owners should not get consumed by the litigation or allow it to dictate every decision or action taken.  Litigation can be expensive in terms of time and money, but it does not need to be.  The single most important action you can take, that you can control, is your own reaction to the event.