Breathe, Don't Panic, Your Business Got Sued. Now What?

Hi there, dreamers & dynamos,

Welcome to Business Lawsuits 101.

Grab a coffee, my friend, and let’s talk about something that’s as comforting as a pair of too-tight skinny jeans: finding out your business has been sued. 

A little context: We live in a litigious society. People sue over crazy things and anyone, absolutely anyone, can file a lawsuit about absolutely anything. So being sued does not mean that you did something wrong or even that your business is going to lose. Given how random lawsuits can be there is very little, but not nothing, that can be done to prevent them. So we’ll focus on what to do if you do get sued but also touch on a few things you can do to help prevent it from happening in the first place.

An ounce of prevention is worth a pound of cure.

Use a lawyer-drafted contract for all business agreements.

If you’re being proactive and want to protect your business from a potential lawsuit, one of the very best and most important things that you can do is to have a rock-solid client contract in place. You want to be sure it fully covers your scope of services and spells out the nuances of your client relationships, including what remedies are available if a client is unhappy. Now, your contract may not prevent a lawsuit, because remember anyone can sue, but it should at a minimum set you up to win (even if that by having their case quickly dismissed!). 

Second, you are going to want to be choosy about who you work with.

I know this can be difficult for new business owners because you just want to help everyone but you are not for everyone. You need to take the time to vet your potential clients and make sure that their goals are aligned with your business’s value. This will greatly reduce the odds that you will have an unhappy customer and happy customers don’t sue, they just don’t (said in my very best Elle Woods voice). You can pre-qualify through your marketing copy, emails, sales calls, client applications, but you definitely need to find a way to make sure your potential clients are good matches for your business.

Play by the rules of your state.

Third, make sure that what you're doing is inside the legal lines. Few people set out to offer illegal services but it can happen by mistake. Are the services you provide regulated by the state? If so, do you meet the qualifications to provide those services? 

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So, What Can I Do If I Get A Summons?

Now, I know the instinctual reaction might be to freak out just a bit (or a lot), but let me assure you, losing your cool is about as useful as a glass hammer.

So, first things first. Do. Not. Panic.

I’m not going to pretend it’s not a big deal, sure it is, but freaking out isn't going to help.

Picture it this way: It’s like riding a bike downhill with no brakes. The last thing you want to do is grab your phone and start medley-texting an immediate reply. Why? Well, nerves are bad advisors, my friend. You could end up saying something in the heat of the moment that could be harmful to your case down the line. So take a breath and DO NOT reply to the letter/email or try to contact the unhappy client/customer/other business owner. You typically have about 30 days to respond, so take a deep breath and deep dive into information gathering first. No lawyer shoes on just yet, let's strategize first my friend.

Also, do not do nothing.

Even if you suspect that the summons or complaint is a joke or not serious. If there is any potential for legal consequences, you must take it seriously ASAP.

Contact your business insurance STAT.

Instead, step numero uno is to contact your business insurance provider. Don't dawdle on this one. You've paid those premiums for a rainy day, and well, now it's pouring.

There are often strict deadlines for reporting a lawsuit to your insurance company, so skip the snooze button. Losing coverage is a bad sequel to getting sued. If you have business insurance, and you should, they will assess the complaint and if the issue is covered under your policy, they will provide you with an attorney and pay the legal costs. So let them know ASAP. If you don’t know how to do that, check the Notice provision of your policy which normally spells this out for you.

Review your contract and provide a copy to your attorney.

Next on your to-do list: Grab your contract and give it a good once-over. Now, I know what you're thinking. "A contract? Now?" I get it, but trust me, knowing the ins and outs of your contract can be a major key in your defense strategy. Your contract isn't just your rulebook, it's your armor. Once you've skim-read, send a copy of it to your business insurance attorney. They'll thank you for it and it could be essential to getting your case quickly dismissed.

Get organized and document everything.

Now, this next tip is going to sound boring, (unless you’re an organized nerd like me which, to that I say, welcome to the club), but it might just be your saving grace. You, my friend, need to document all your client communications. The good, the bad, the ugly, it all could be gold. It's time to go through your files, emails, notes, text messages, coffee-napkin scribbles, anything, and everything relating to your client needs to meet your business insurance attorney. And, remember, do not be tempted to try to contact your unhappy client yourself. 

But, what if I don’t have business insurance?

Now, if you don’t have business insurance, you are going to want to contact a local small business attorney immediately. He or she can represent you and you’ll need to provide them with all the same paperwork and information discussed above. You’ll have to pay out of pocket, which can be expensive, but you don’t want to mess around with self-representation at a time like this.

Conclusion: What to do if your business is sued

Look, getting sued is no picnic. It's super stressful and, frankly, a bit of a buzzkill. But remember why you're here in the first place. You're hustling, building something awesome, and not every day is a cakewalk. Realize that this is just a part of the business roller-coaster and not the end of the world (or your business!).

Lastly, once the dust settles, it's time to reassess and reassemble. Regardless of the outcome, there's always a lesson learned. Post-trial, partner up with your lawyer to understand what went wrong and how to prevent such incidents in the future. Use this a chance to refine your contract language and to up your client vetting process. Then, dust off and bounce back like you always do!

And one more thing to remember: You've got this. High-five, deep breaths, and let's tackle this thing head-on

THIS ARTICLE IS NOT A SUBSTITUTE FOR LEGAL ADVICE AND IS OFFERED FOR INFORMATIONAL PURPOSES ONLY. EVERY SITUATION IS UNIQUE AND YOU SHOULD CONSULT A LOCAL ATTORNEY FOR ADVICE ON YOUR PARTICULAR CIRCUMSTANCES.