You run a small business.

You open your storefront one day to find a nondescript man waiting. He asks your name and hands you an envelope. The envelope is filled with official looking papers — one of which announces in capitalized, bold letters:

YOU HAVE BEEN SUED.

Your stomach sinks, you sit down and read.

You are able to decipher that a former disgruntled employee has alleged that you fired him based on discrimination and that your business was a hostile work environment.

You recall the man, he was consistently late for his shift, he performed poorly and he did not get along with other employees. He was fired after several warnings about his conduct. Your mind races as you think about how this will reflect on your business and about how angry you are that anyone would dare say you have a hostile work environment.

You panic about what to do next.

This article is meant to provide you with some crib notes as to what you should (and should not) do if you are sued.

Don’t Panic

This is easier said than done. If you are in business, you accept risk every day and, while being served with a lawsuit is very unpleasant, it is really not the end of the world, and it’s likely not a threat to the existence of your business. 

Many small business owners, who are used to wearing multiple hats, try to take care of a lawsuit by themselves. The knee-jerk reaction to simply call the person who sued you directly and tell them why they are wrong is not a good move.

The right move is to take a deep breath and call your attorney.

He or she will likely ask you to send them the documents and schedule a meeting to talk about the events described in the lawsuit (which may or may not have actually happened). Lawsuits, like many other things, should be met with a well thought out, deliberate plan.

Don’t panic but do get your attorney involved quickly.

When you get sued you will be served with a Summons and Complaint. It will provide the deadline for responding to the lawsuit and will lay out the allegations against your company. In most Minnesota cases you will have 20 days to provide a formal response to the lawsuit.

This is called an “answer.”

If you do not serve that answer within 20 days you expose yourself to the very real danger that a court will simply award what is requested in the lawsuit. The sooner you get an attorney involved the more time you will have to provide a thoughtful answer AND be able to look at options for you to return the favor by making your own claims against the person that sued you.

You will not win or lose the lawsuit based on your answer or counter claims but you will lose the lawsuit if you do not respond.

Be Honest

Throughout a lawsuit you will have many opportunities to fudge the truth. Resist this urge! The best way to make sure there are no surprises is to be honest from the get-go. Attorneys know that lawsuits are rarely a slam dunk and any attorney worth his or her salt would rather know the warts of a case up front, rather than pretend they don’t exist.

Part of the process of a lawsuit is called “discovery.”

It is the process where each of the parties gets to take depositions and request relevant documents and statements from the other side. It is also the lawsuit’s most expensive phase. You do not get to pick and choose what you send to the other side or say during a deposition; doing so can lead to monetary sanctions.

And, having represented parties in hundreds of lawsuits, the truth always comes out. If your attorney knows about a piece of evidence that will hurt your case ahead of time, he or she can develop a strategy to minimize the damage. It is a bad idea to let your attorney get caught off guard by a fact that hurts your case.

Be honest with your attorney so that he or she can fully develop a strategy for the lawsuit.

Settlement

In Minnesota, alternative dispute resolution is required in all cases. In most cases, that means hiring a mediator who works with the parties to try and find a solution that avoids the costs of a trial. Mediation is a great process for several reasons:

1) you will hear the mediator’s honest opinion of your case;

2) the other side will hear the mediator’s honest opinion of his or her case;

3) the mediator and your attorney can talk to you about making a business decision and resolving the case; and

4) settling is a way for YOU to decide how the case ends instead of a judge or jury who may have their own agendas or biases. Typically, when both sides walk away from a settlement unhappy it was a good settlement. Everyone has to give a little bit too much away.

Expect the Best!

Lawsuits are not set-it-and-forget-it. Adequate representation requires near constant communication between an attorney and client. You have every right to know what is going on every step of the way. Far too many clients ask far too few questions during the process.

If you are not getting adequate answers or your attorney fails to respond to your phone calls or emails, talk to a different attorney. You are paying your attorney to advocate for you; you are the customer.

In business it is not a question of if you will be involved in a lawsuit, it is a question of when.

There is no sugar-coating it. Lawsuits are a major irritant and they will distract you from your best and highest purpose at your company. They can be a drain on the company’s energy and finances but, unfortunately, it is a risk you take on as a business owner.

If you don’t have a corporate attorney who also has litigation experience do not be shy about asking your fellow entrepreneurs who they use. It is better to know who you will seek advice from before you encounter a lawsuit than to have to make a hasty decision under the pressure of a deadline.

Lawsuits fall under the adage “this too shall pass,” but the more prepared you are the faster you can make that happen.