Before you are Sued
Often times, before being sued you will receive a demand letter. A demand letter is a formal notice demanding that the recipient performs an alleged legal obligation such as rectifying some identified problem, paying a sum of money or acting on a contractual commitment. Most demand letters will include a deadline for action. Demand letters are not actually lawsuits. At this stage, you should consult your lawyer in order to decide how to respond. At times, you may be able to show the writer that you did nothing wrong or you may be able to reach a settlement agreement. By taking these necessary measures, you could avoid being sued all together.
Once a Formal Complaint Has Been Filed
If the matter is not resolved through a demand letter or settlement, you will receive a formal complaint. A formal complaint can be delivered by a sheriff, mailed to your company or given to whomever your company indicated as the “agent for service of process.” Accompanied with the complaint is a “summons.” A summons indicates that you have been sued, states the claims being made, tells you how long you have to respond, and identifies the appropriate court.
The following is a list of steps you should consider in response to the summons:
- Call your lawyer. Speak with your lawyer before you attempt to contact parties or witnesses, solicit advice from any non-lawyers, or respond to the legal action. Be honest with your lawyer and collect all relevant documents.
- Refrain from discussing the issue with anyone other than your lawyer. Do not speak with the opposing party under any circumstances, and do not provide a recorded statement without your attorney’s consent.
- Review the Papers Promptly and Act Quickly. In most courts, you are only allotted 20 – 30 days to respond to a complaint. A hearing can sometimes be set within of 3 – 10 days. A lawyer will need the time to learn the facts and prepare a response. Putting it off or ignoring the complaint can be costly. Failure to file an answer to the lawsuit within the time allotted can lead to a default judgment against your business. A default judgment can award the plaintiff full damages sought in the complaint, and force you to make payments to satisfy the judgment promptly.
- Notify your insurance company. Because defending lawsuit can be very expensive, it is important to verify your business and homeowner’s insurance. Check your current and older policies. Confirm that you are covered by the insurance of a trade association, your landlord, or policies brought by suppliers, vendors or others that may consider your company insured. Converse with your lawyer and insurance agent to find out what kind of insurance you possess so that you can obtain help to resolve your claim.
In our culture, it’s just a reality that every business owner has a high likelihood of being sued at some point. Taking these actions can help ease the tension of being sued and help you obtain the best result.