What to do when you get sued
The most important thing to do is not panic. Lawsuits happen every day, and they aren’t the end of the world-even if they are unpleasant.
You need to move quickly to get on top of things and position yourself for success. The first step is to make sure to preserve every document, even if it only tangentially relates to the lawsuit, the parties or any issue in the lawsuit.
Most people do not take this directive literally, to their detriment. Eliminating documents can be problematic for two reasons. First, if a judge later determines the documents were relevant, the judge may sanction the party. Those sanctions can include prohibiting the offending party from introducing key evidence, which can result in losing the case. Second, the documents that at first blush seem irrelevant may turn out to be very relevant and determine an issue.
Case study
For example, in one suit the parties had done business together for years. For most of that time, they acted on verbal agreements and only began documentation near the end of their work together. Eventually, the parties began feuding and got into a lawsuit. The plaintiff produced a document that seemingly destroyed the defendant’s position, but the defendant was adamant that the document was a forgery.
Fortunately for the defendant, his team found an e-mail from the plaintiff dated a year after the allegedly forged document. This e-mail made a passing reference to the fact that there were no documents. Based on this short statement in a single, irrelevant e-mail, the defendant was able to uncover evidence proving that the damning document was forged.
The second step when being sued, which should also be taken immediately, is to cut off communications with the opposing party, and, frankly, anyone about the suit. This can be hard if you have an ongoing relationship with the other side, feel very emotional about being sued, or you just like to talk things through.
Everything changes once a suit begins. Speaking to the other side is a major problem because parties often say things they regret, bargain against themselves, or admit things that are not true simply to make the lawsuit go away.
The third step you should take is to determine if you have insurance coverage for this suit and if you want to use it. If you do, the most common way to do this is to provide a copy of the summons and complaint to your insurance agent or to whoever is specified in your policy. Of course, tendering the defense to your carrier may cause your premiums to rise or could result in the insurer declining to renew your policy. You may not want to use your insurance if the total claim is roughly the amount of your deductible or if it’s likely that your insurance won’t cover the suit.
The fourth step assumes there is no coverage or you choose to not tender the defense to your carrier. In that case you need to retain an attorney quickly. In Minnesota, you only have 20 days to answer the complaint unless an extension is obtained. If you fail to act in time, the plaintiff can get a judgment against you without being required to prove his or her case. Therefore, it is critical to move quickly to find an attorney and submit an answer.
It’s important to have a skilled professional prepare the answer and not attempt it yourself. An answer that is not done correctly can easily result in you losing the lawsuit, even if it is done in a timely fashion, because it is easy to accidentally make an admission you don’t intend or fail to preserve a defense. In addition, a business typically cannot act through the owner when it comes to a lawsuit but must use an attorney.
Strange experiences
The fifth and final step is to develop realistic expectations. Lawsuits are strange experiences. They move at a glacial pace for most of the time, and then they move extremely quickly and need immediate action. Right now, the Minnesota courts have a goal of trying to get most cases finished within a year. Based on that, you should expect that your suit will probably take the better part of a year.
You often hear about the cost of litigation, but few people are actually prepared for the cost when they first get sued.
Many people who get sued for the first time think their attorney will take the case on a contingency. Contingencies are actually very much the exception and not the norm. They only make sense for attorneys in a few types of cases, and defending a lawsuit is not usually one of those few cases. You should expect that you will immediately shell out thousands of dollars and will do so for many months.
There are steps you can take prior to any lawsuit to limit your costs and your liabilities. The most important thing is to never mix your personal funds with your business funds. Making this mistake can easily result in you being personally responsible for a business obligation.
Perhaps equally important is to make sure that you use well-written contracts. A good contract can limit your risk in litigation, control the costs of the case, and possibly prevent a lawsuit. For example, your contract may mandate mediation before a suit may be filed. This means that you and the other side must attempt to resolve the case with the help of a mediator, and typically with the help of attorneys as well, as a precursor to suit.
Mediation is often very helpful in settling a case. In fact, because mediation is so successful at settling disputes, the courts typically require mediation after the suit has been filed.
Getting sued is not a pleasurable experience and one that I honestly hope none of you ever experiences. Unfortunately, it is sometimes an unavoidable fact of life and business. While the steps above will not guarantee a good result, they will increase your odds of having the case go your way.
Daniel Reiff,
Reiff Law Office:
651.636.6784
www.reifflawoffice.com
