6 Things To Do If Your Business Gets Sued


If you’re a small business owner, you may have experienced a recurring nightmare that one day becomes a painful reality—you’ve been sued. Here are six essential steps you’ll need to take to survive the process.

1. Review the Paperwork with an Attorney

You may be tempted to panic the minute that formal-looking document crosses your desk, but keep your wits about you and get in touch with your attorney. It may not be as bad as you think. Generally, a demand letter or a cease and desist letter will be the first document you will receive if someone is interested in suing you. So, if that’s what you have, then you haven’t been sued yet, and an attorney can help you decipher where you are in the process and perhaps resolve the situation.

If you are sued, you will receive a complaint laying out the facts of the case as the plaintiff (the person suing you) sees them. After reading the facts, you may be tempted to ignore the suit because you don’t believe the facts are accurate, but it’s crucial that you don’t delay in getting an attorney to respond to the lawsuit. There is generally a fairly short deadline for you to respond to the complaint, and if you fail to respond in the allotted time, a judgment could be entered in favor of the plaintiff. You may also be tempted to contact the plaintiff when you first get the complaint. Avoid that temptation. It is too late. The only individual who should be in contact with the plaintiff is your attorney. You don’t want to have something you’ve said to the plaintiff be used against you.

2. Contact Your Insurance Company

The next thing you will want to do is inform your insurance company of the complaint. Many insurance companies require notification within a few days of being served. Depending on what you are being sued for, your insurance may or may not cover your expenses. Don’t assume your insurance will cover defending the lawsuit, but do that notification so that you don’t waive coverage.

3. Determine Goals

You must set aside time to make sure you understand what is at stake for you and your business and consider what your goals are in this matter. Do you know the nature of the claims against your company and the potential liability? Have you considered the cost of litigation to your business? Are you trying to protect your business reputation? Do you just want the lawsuit to go away? Are you trying to set a precedent in your business field? If you have a clear understanding of what you want to achieve at this end of this experience, it will make it easier for you to move forward. Your attorney should help you work through these goals and decide steps to take based on a cost-benefit analysis to you and your business.

4. Get Retainer Funds

Most attorneys require a retainer to begin work on a lawsuit. Make sure you’ve thoroughly considered what you can afford to spend on litigation. Start to set money aside for legal expenses. At a minimum, there will be some significant legal expenses to answer the complaint and start discovery. Most cases eventually settle. When you plan to settle and for how much will also drive the costs of litigation.

5. Keep Your Records

Any documents that may be relevant in the lawsuit should be preserved in a safe place. Documents include paperwork, emails, texts, voicemails—basically, any form of communication. Any documentation that is relevant to the case, even if potentially detrimental to your case must also be retained. Destruction of pertinent documents, while a lawsuit is pending, could be illegal. You must also stop your regular document destruction practices, such as deleting emails routinely, for anything related to the matter.

6. Consider Settlement 

Consider settling the matter out of court. It is difficult to predict the outcome of a lawsuit. You may believe you are in the right, but that doesn’t mean the judge will agree with you, so there is always a risk of losing. After you factor in the cost of going forward with litigation, you may determine that settling is the best option for you and your business. But sometimes it is necessary to litigate the case partway to position yourself well for settling. Your attorney can help you work through these practical and strategic decisions.

Because of the generality of the information on this site, it may not apply to a given place, time, or set of facts. It is not intended to be legal advice, and should not be acted upon without specific legal advice based on particular situations