Finding out that your business is the focus of a lawsuit is enough to make any small business owner feel sick. A lawsuit can make you feel like everything you've worked so hard to build could be swept away all at once.
Unfortunately, this is no time to fall apart. More than ever, you can't afford to make mistakes when a lawsuit is pending. Even before you reply to the lawsuit through legal means, there are several steps you should take:
1. Call your insurance agent
If you have business insurance, you want to find out if your policy covers these particular allegations. If so, you may be eligible for benefits that will cover your attorney fees and any settlement you make.
2. Take steps to preserve evidence
You need to make certain that no records that pertain to the lawsuit are accidentally purged. If they are, it could be disastrous to your case. Juries are allowed to draw negative inferences about what was contained in any destroyed evidence.
3. Halt all communication with the plaintiff
Do not attempt to call or email the plaintiff to reason with him or her. At this point, all communication should go through the attorneys involved.
4. Pay attention to the deadline
The papers you've been served will tell you exactly how long you have to respond. That's important. If you fail to file a response in an appropriate amount of time, you'll automatically lose the lawsuit by default -- which could be very costly.
5. Decide on your goals
This is something that has to be handled on a case-by-case basis. Under some circumstances, it may be cheaper to settle the case rather than engage in litigation. On the other hand, that could give your business the reputation of being a "pushover," which would hurt it in the long run.
Finally, stay focused. You have a business to run. An occasional lawsuit from a disgruntled employee or unhappy supplier is something that often goes with the territory, so don't give it any more emotional energy than necessary.
Source: Business News Daily, "You're Being Sued: A Guide to Handling a Business Lawsuit," Marci Martin, accessed June 14, 2018