Written By David Karl Gross
The civil court system acts as a mechanism to resolve disputes. Because of the prevalence of conflicts in the United States, most people will be on the receiving end of a lawsuit at least once in their lives. The most common types of lawsuits are complaints arising out of car accidents, slip and fall lawsuits, the commencement of divorce proceedings, product liability cases, and disagreements over the provisions of a contract. No matter what the reason for the lawsuit, there are a number of things that you should consider. Here are top ten things to do when a lawsuit has been filed against you.
(1) Do not ignore it. Once, when my daughter was driving from Denver to Seattle, her “engine light” came on. Instead of seeking out the assistance of a mechanic, she took a piece of electrical tape and covered up the flashing light. “Out of sight, out of mind.” Needless to say, that strategy didn’t work out, as her car conked out in the middle of the Great Salt Lake. This same strategy is also ineffective when dealing with lawsuits. When someone receives a complaint, there is a natural tendency to want to ignore it. The thought is that if you ignore it, the problem will go away. However, just like my daughter’s engine light, that is not the case. If a complaint is not answered within the timeframe required by the law or civil rules, the party bringing the lawsuit can obtain a default judgment, which basically declares them the prevailing party due to the defendant’s lack of participation. In other words, the plaintiff will be declared the winner by virtue of the defendant’s failure to answer the complaint. While there will be some rare situations where a default judgment makes sense, in general, having a default judgment entered against you results in a negative outcome. Therefore, if you receive a complaint, it is important not to ignore it, but to deal with it head on.
(2) Stay cool. While no one ever wants to get sued, and while it is only natural to feel a sense of anger that you are being hauled into court, it is important to stay cool and not to let your emotions dictate your response. More and more, lawsuits are simply a part of doing business and a reality of our complicated society. The best approach to a lawsuit is to view it as an opportunity to tell your side of the story and to refute what the other side is claiming. The more you can approach the lawsuit with a detached point of view, the better off you will be.
(3) Do not discuss the lawsuit with others. In just about every cop show there is that moment when a police officer reads the accused their Miranda rights, which starts with, “you have the right to remain silent.” While a lawsuit is a civil matter and not a criminal case, this warning applies with equal vigor. When a lawsuit has been filed against you, it is always best not to make any public comments about the matter, as anything you say “can and will be used against you.” This is especially true when it comes to texting or social media. You do not want your posts to come back to haunt you, so it is always best not to say anything at all.
(4) Figure out the deadlines – because deadlines matter. Depending on what court you are in and what rules apply, there will be different deadlines for filing an answer to the complaint. It will be important for you to figure out when the answer is due. By understanding the deadlines involved, you will have a better understanding of the urgency the matter.
(5) Preserve the evidence. One of the lessons routinely revisited by celebrity and political scandals is that it is often the attempt to cover something up that gets you in trouble, as opposed to the original event. After a lawsuit is filed, one of the first things that happens is “discovery,” which is the process of each side disclosing the relevant evidence. If evidence goes missing, the court can enter a number of sanctions against the party that destroyed it. The sanctions can range from a monetary fine to a finding that the party that destroyed evidence is liable. The court can also instruct the jury that when evidence is destroyed, there is a presumption that the evidence would have been detrimental to their case. In extreme cases, a party can actually be held independently liable for the tort of “spoliation of evidence,” which allows for the award of damages against a party that destroyed evidence. With all of this, the court system is well equipped to punish a party that either does not preserve evidence or intentionally destroys evidence. Either way, it is almost always better to just preserve the evidence.
(6) Look for available liability insurance. Most people and businesses have insurance that will cover a wide spectrum of liabilities. For example, in most states, it is mandatory that all drivers purchase automobile liability insurance. When a car accident occurs, the insurer will hire a lawyer for the responsible driver and pay up to a certain amount (policy limit) to resolve the claim. Most businesses have what is called commercial general liability insurance, which will provide coverage for a number of liabilities, including when a person suffers an injury while on the property belonging to the business. Other insurance policies include directors and officer’s coverage, cyber-risk insurance, and professional liability insurance, also known as errors and omissions. The language in each policy will dictate what the insurer will and will not agree to cover, but there is always a chance that you will be covered. Therefore, even if you doubt there is insurance coverage available, it is always a good idea to investigate the issue, particularly as you may have an obligation to notify the insurance company within a specific time frame.
(7) Evaluate whether bankruptcy might be an appropriate option. While many tend to shy away from filing for bankruptcy, there are certainly situations when filing for bankruptcy protection makes the most sense. This would include a situation where a business just needs a “time out” from creditors in order to allow the company to reorganize. If a party is going to consider this option, it is best to make this decision at the beginning of a case. Again, bankruptcy is a tool that is available to businesses and individuals and should be considered when a lawsuit has been filed.
(8) Review any related agreements or documents for an arbitration clause. Since the 1990s, more and more contracts have arbitration clauses. These provisions require that any dispute be resolved not in a court, but before a neutral arbitrator. The idea behind an arbitration clause is that an arbitration is far less costly than a court proceeding and a resolution can be accomplished in a matter of months, as opposed to years. If there is an arbitration clause that applies, it is important to recognize this on the front end of a case, as there are some court decisions that state that if a person does not promptly demand arbitration, but instead, allows the court proceeding to carry on for a period of time, the arbitration clause is waived, meaning that the dispute cannot be arbitrated because of the delay. With this in mind, it is important to identify the existence of an arbitration clause and demand that the dispute be arbitrated promptly.
(9) Try to avoid litigation. One of the things that everyone can agree upon is that litigation is enormously expensive. It is not unprecedented for it to cost in excess of a $1 million to take a case to trial, especially if the trial requires expert testimony. Therefore, both sides will often benefit from an early settlement. In a situation where both sides are well aware of the applicable facts, it is often best to settle even before a lawsuit is answered. Therefore, when a lawsuit is received, consider whether it is possible to settle, including whether the parties would be willing to engage a mediator to assist the parties in coming to a resolution. By doing so, the parties can save time and energy, as well as the cash that will be needed to litigate the matter.
(10) Contact a lawyer. In many respects, this should be number one on this list. No matter what the situation, it is always a good idea to get the advice and recommendations of a person experienced in defending lawsuits. A lawyer will be able to help you navigate the maze of the legal system and provide you with insight that is critical when defending a lawsuit.
If you ever find yourself facing a lawsuit, keep these ten items in mind. Of course, if you want to consult with a lawyer to determine if you would benefit from the services of a lawyer, the dedicated and experienced lawyers at Birch Horton Bittner & Cherot are ready and willing to assist. If we are unable to assist you, we will be able to point you in the direction of someone who can.