So You've Been Sued—What Now?

It all starts when someone enters your business and hands you a sealed envelope stating, "You are served." Unfortunately, lawsuits are a part of doing business. Don't panic—here are several things to keep in mind if your business is being sued:

Do not ignore the lawsuit. Never ignore the claim—no matter who makes it or where it comes from—act immediately. If you fail to defend against a lawsuit in the time mandated, the other party can take a default judgment against you. A default means you lose the lawsuit.

Contact an attorney. Don't hesitate to call your attorney, or if you don't have one, find one quickly. Typically, an attorney will have roughly 30 days to respond to all claims, leaving little time for delay.

Organize information. You'll need to gather all relevant documents, write a detailed statement of your position and be careful not to destroy any documents, including electronic records, related to the case.

Work with your attorney. Don't just turn matters over to your attorney. Stay on top of the case and work closely with your lawyer so you are involved with decisions on how to proceed.

Formulate a plan. Unless you are fortunate and have an insurance company to pick up the tab on defense fees, your defense may depend on what you can afford. Ask your attorney for an estimate on fees and expenses, and then decide on settlement possibilities and legal strategies.

Elizabeth Gaudio
Senior executive counsel
National Federation of Independent Business Legal Foundation