Enduring Your Company’s First Lawsuit

If your company grows to any sizable amount and people around you have some reason to believe you’re making money, it’s safe to assume that you may be the target of a lawsuit at some point.  If you’re operating a successful business, you’ve probably already been sued, maybe even more than once.  One of the hardest aspects of having money is preventing other people from trying to take it from you.  This is just the way of our world and the best way to protect yourself is to be prepared.

If you have some reason to believe that you are about to be served with a lawsuit, don’t waste your time trying to hide.  Ditching the server may slightly delay the inevitable but they will catch up with you sooner or later.  Don’t lash out at the server.  He’s just doing his job and has no involvement in the lawsuit other than giving you the papers and making you aware of the action.

Promptly notify your attorney about the papers you’ve been served and allow him/her to lead you through the proper steps.  Your attorney has a limited amount of time to respond.  If you don’t have an attorney, you may want to consider interviewing several before deciding on who should represent you.  It may be a tough call to decide whether to use your regular corporate lawyer or an attorney that specializes in litigation.

From a business owner’s perspective, I can say that there are two different types of lawyers that I’ve encountered.  Some that are good at paper law and some that are good at trial law.  You may come in contact with a lawyer who you think can properly defend you because they seem to know what they’re talking about but when they finally get in front of the judge and jury, they choke up.  After interviewing some lawyers, you may want to consider seeing them in action.  Ask when the next time they will be in court and see how they perform.  Some lawyers know the law very well but just don’t have the charisma to effectively win over a jury or handle the judge.  Some litigation lawyers have even been known to take acting classes so they can improve upon their presentations in court.

Court is a hostile environment and whatever the dispute is about, there’s a good chance that it could get ugly.  Unfortunately, our judicial system has flaws and the outcome of many court cases can be unjust.  Many lawyers will confess that they have won cases they should have lost and lost cases they should have won.  How could this be?  Well, the lawmakers in this country have made rules that aren’t particularly lucid and can be interpreted in different ways. 

The judge has complete autonomy over the courtroom and can make any call he or she wants.  Many judges have developed somewhat of a God complex in the sense that what they say goes and they are always the boss of the courtroom.  I’ve seen judges disregard laws and make things up as they go.  Good luck trying to get an appellate division to rule against one of their fellow judges if you decide to appeal your case.  Unfortunately, in many circumstances, the fate of your lawsuit is dependent upon the judge who gets assigned to the case and how egotistical and opinionated he might be.  If he likes your case, regardless of who is right or wrong, you will have an advantage.  If he doesn’t like your case, you will be hard pressed to win him over.

Before you start transferring all of your assets into your relative’s name, it is recommended that you consult with your lawyer about asset protection.  If you lose the lawsuit and there is a resulting judgement against you, it could be determined that the transferring of your assets to divert seizure was fraudulent. There may be some legal measures you could take to protect yourself, such as establishing a trust, etc.

In the days leading up to the trial, it’s always a good idea not to discuss the details with anyone other than your lawyers.  Just like evoking your Miranda rights, remember that, “anything you say, can and will be used against you in a court of law.”  Even if you have a burning desire to absolve or vindicate yourself from whatever accusation the lawsuit suggests, it’s better to allow the process to run its course without you inadvertently saying something that will damage your case.  Such an admission can make you lose the batter before it even begins.

 If your company is registered as a corporation or limited liability company, you won’t have to worry about any of the company’s liabilities being passed along to you on an individual capacity.  However, if you are operating as a sole proprietor, you may want to discuss this with your attorney in an effort to mitigate your personal liabilities.

Many people have compared Sun Tzu’s book, “The Art of War” with business tactics.  In many cases, business is war.  Our competitors are our enemies and our employees are our soldiers.  Rather than bombing your office, one of your competitors may consider suing you as a strategic way of conquering you.  In order to survive this attack, you must respond strategically, utilizing your lawyer as your war general.