How to Handle a Small Business Lawsuit

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Lawsuit form an a desk with pen and calculator

So, your small business is being sued. Although you hoped this would never happen, court cases are a reality for many companies, and an unfavorable outcome doesn’t necessarily spell disaster for your reputation.

However, you do need to know how to respond in the first few weeks after a lawsuit has been filed against you. Reacting professionally and proactively will prevent long-term damage to your business and minimize financial fallout from the case.

A lawsuit can be long and stressful, but it’s essential that you deal with the process professionally and don’t let it impact your long-term goals. To help you make the right decisions, here’s how to handle a lawsuit against your small business.

Understand the Financial Repercussions

Whether your business wins or loses the case, a lawsuit is going to cost you money. Understand that in some scenarios, winning a case could be more expensive than settling, so don’t let pride affect your decision-making. Before you despair completely, contact your insurance provider, as general liability insurance often covers third party injury claims or client allegations. Forward your suit papers to your insurance company straight away, as there may be a time limit to your claim.

Hire An Attorney Straight Away

Although it’s important to hire the right attorney to defend your case, you don’t want to waste any time. It’s tempting to take time to “think it over” or spend the weekend licking your wounds, but the only way to deal with a lawsuit is by seeking immediate legal counsel. If you already have a business lawyer in place, contact him or her immediately. If you don’t have already one, you will need to hire a business attorney through recommendations and research.

 

Preserve Your Documents

Forget your document destruction policy: during a lawsuit, you need to preserve all business records that are remotely relevant to the case. Know that documents, emails, web pages, videos and voice messages could all become evidence. Don’t try to hide anything from your attorney: your plaintiff’s lawyer has the right to access your files through an electronic discovery process, so it’s far better to be honest from the outset to avoid weakening your defense.

Respond in Writing

After you’ve received your lawsuit papers, you are required to submit a written response, usually within 30 days. Your attorney will help you compose your reply, but bear in mind that it will need to cover the following: your admittance or denial of the allegations against your business; your defenses and counter-cross claims; and whether you want to go to trial or opt for an out of court settlement. If you don’t respond to the suit within the allocated time frame, the court will enforce a judgment against you, and the plaintiff could win by default.

Be Transparent

There’s no point trying to cover anything up, as dishonesty will only hurt your defense when the case goes to trial. Be honest with your lawyer about the allegations and stick to the facts. Your attorney is there to help you win the case, not to judge you.