What happens if you get sued?

I own a business and was recently served papers that say I’m being sued. What should I do?

Being sued is the worst. It’s time-consuming, expensive, and really stressful. Taking certain steps can improve your business’s chances of coming out relatively unscathed.

First, pay attention and be proactive. If someone sends you a cease-and-desist letter or a letter threatening litigation, don’t ignore it. People often stick their heads in the sand in hopes that problems will go away. They won’t.

If you’ve already received a demand letter and ignored it, and have now been sued, find an attorney immediately. There are deadlines that you must comply with if a lawsuit has been filed against you.

Ask potential attorneys how much time they think your case will take, approximately how much a defense will cost, and what experience they have with similar disputes. A good attorney will consult with you and give you some potential outcomes and scenarios.

Your attorney will ask you to gather all potentially relevant documents, which will depend on the type of dispute. If it’s an employment issue, you’ll want to make sure you have your employee’s personnel file, timecards and copies of any pertinent written communications with the employee. You have a duty to preserve any evidence that may be used in the case.

Your attorney may also want to interview people who have information about the situation. It’s best to conduct these interviews quickly, while the facts are still fresh.

Second, consider contacting your insurance provider if your business carries insurance. Some insurance policies cover a wide variety of claims against businesses. Your insurance provider may even insist that you use their attorneys to represent you.

The next big step is to try to work it out. Your attorney may recommend that you make a settlement offer. Many businesses are afraid of “copycat” claims after a settlement, but it’s usually a very good idea to pursue early resolution. Litigation can drag on for a long time.

When developing an offer, try to consider what the other side really wants. Disputes are usually not just about money.

Typical options for settlement are paying the full amount alleged, paying some of the amount alleged as a reasonable settlement, either in installments or a lump sum, or even raising counterclaims. You should expect some back-and-forth negotiations — most settlements happen somewhere in the middle.

Settlement negotiations are usually inadmissible as evidence in court, but any offer should include a disclaimer that the offer cannot be used as an admission of liability.

Mary Luros is a business law attorney with Hudson & Luros, LLP, in Napa, and can be reached atmary@hudsonluros.com or 418-5118. The information provided here is not intended as legal advice, nor does it form an attorney-client relationship with the author. The author makes no representations as to the reliability or accuracy of the above information. In a perfect world we wouldn’t need disclaimers — or attorneys.