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What To Do If Your Business Is Facing A Lawsuit

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Ignoring a lawsuit won’t make it go away. Instead, your business can prepare well and defend itself to save time, money, and brand reputation.

Although litigation is a rational exercise, its outcome tends to be unpredictable, even when the parties are clear about the law regarding the dispute.

Moreover, have you ever heard of a quick lawsuit? If so, it’s unusual as they take a long time. Plus, it can take months, if not years, for a resolution or a judgment to be passed. Even the most reputable organisations get sued, so don’t fall into the trap of believing your business is failing if it’s facing a lawsuit.

While avoiding all conflicts is impossible, their volume can be minimalised when your business invests time and energy into building positive relationships and collaborations with trusted and respected organisations and individuals.

With changes in societal attitudes, even the best intentions can go awry; as such, anyone is a potential litigant. If you’re facing a lawsuit, don’t hide your head in the sand; take immediate action to present your position and defence in the best way possible. This business blog article first looks at some of the most prevalent types of commercial litigation. Plus, it provides some suggestions on how to prepare should your business face a lawsuit, including:

  • Limiting communication with the other side
  • Hiring legal counsel
  • Preserving relevant case information
  • Contact your insurance provider
  • Settle or go to court

Litigation Explained

What Are the Most Common Types of Business Litigation?

In litigation, a plaintiff seeks a remedy for what they perceive as a wrongdoing. Usually, the plaintiff is after monetary compensation from a defendant they believe is responsible for the damages caused. One example of a common lawsuit is businesses suing each other for breach of contract. For example, Elon Musk vs Twitter.

Performance failure

If one of the parties fails to perform as agreed, the other can file a lawsuit and ask for compensatory, consequential, incidental, and liquidated damages.

There are many reasons for performance failure, including unintended delays, financial issues, and other unexpected events can prevent a party from fulfilling its obligations. If you find yourself in breach of contract, you can defend yourself by filing an answer to the lawsuit.

Other times, individuals sue corporations; however, many protect themselves with ‘fine print’ terms that many consumers don’t read or agree to but don’t understand. Workers also sue employers for employment contract breaches, including unfair dismissal and harassment.


Over the years, lawsuits have increased, with complaints that employers don’t take reasonable steps to fulfill their obligations to prevent risks to staff members. The smaller the business is, the more likely it is to face litigation.

Compensation is designed to redress the wrongdoing done to the plaintiff via financial help from the defendant. Losing means having to pay for the damage you’ve caused. If you want a better understanding of liability risks, please do your homework. Failure to comply with legal requirements is a costly mistake.

Prepare To Answer The Lawsuit

Take action, prepare to answer the lawsuit

Should you or your business face a lawsuit, take action right away. If you do nothing, the person or entity suing you can ask the court for a judgment against you. The complaint will explain why you’re being sued, and the amount claimed. Tempting as it may be to ignore the lawsuit, doing so won’t make it go away. How can you take action to make the lawsuit go away? Let’s look at what you can do in response to a lawsuit.

Limit Communication With The Other Side

If the lawsuit makes it past the initial stages, you and the other party will undergo a period of discovery involving identifying information not publicly disclosed or readily available. Anything you say can be used against you in court, meaning that communications, such as email messages, can be used as evidence. Hence, it’s best to reduce communication as much as possible, whether by text, email, etc. Reaching out to your potential adversary isn’t a good idea unless your lawyer approves. As a rule, you shouldn’t share information about your case with people not involved.

Legal Representation

Contact your in-house legal team & if required, also hire outside counsel.

Chances are that your company has an in-house legal department to ensure compliance with company law, shareholder agreements, etc.

Your internal lawyers should be your first call when litigation is imminent, as they can negotiate a favorable settlement and spare you the expense of going to court. As the saying goes, time is of the essence, so don’t waste time and do whatever it takes to resolve the conflict. Be honest with your legal team about the good and bad parts of the case. Legal professional privilege prevents them from disclosing the details of your case, so you should feel comfortable telling the truth.

If you don’t have inside counsel, retain the services of a legal professional with proven lawsuit experience as soon as possible. Choosing an attorney can be challenging depending on your locale,  so ask your trusted advisors or business partners for a referral. Never go it alone; always seek legal guidance before responding to the other party. Be prepared to respond as recommended by your legal team. To work things out, you might admit fault concerning the dispute. It’s’ the biggest mistake you can make.

Preserve Evidence

Gather all relevant information about the lawsuit and do it at the outset of the dispute.

Whether your business is the plaintiff or the defendant, preserving relevant information, such as a letter demanding a settlement or a document from a regulatory agency, is essential.

Failing to preserve important information can open your company to claims of destruction of evidence. The adverse effect is difficult to overcome. All documents and communications must be identified and saved. Examples include but aren’t limited to contracts, invoices, emails, reports, and so on. If the other party claims that you lost or destroyed the evidence, this will be detrimental to your case.

Contact Your Insurance Provider

Many types of lawsuits are covered by insurance. Seek to understand if the lawsuit against your business is covered by your insurance provider. General liability, theft, slander, and copyright infringement are usually covered by insurance.

Response Decision

Before investing too much time and money, decide whether to settle the case or take it to court.

While you may be confident you’ll triumph in court, settling the case may be more practical. For example, if you settle, you’re in many ways controlling the outcome, so your fate won’t lie in the hands of a judge or a jury. For a business, the unknown is the biggest threat. Settling the case eliminates uncertainty and enables you to move forward. Protect your enterprise’s wallet and reputation. If the dispute goes public, even if false statements are made about your business, you’ll become a pariah. No business or client will want to work with you.

Nevertheless, there are times when you need to make an appearance in court. A trial is the best course of action if the plaintiff isn’t willing to reduce their demands, the investigation finds no signs of negligence, or the alleged damages aren’t directly related to the incidents. The decision ultimately depends on the circumstances of your case. If you can achieve the same goal without the effort and cost of going to trial, you should consider settling.

Summing Up

Your business facing a lawsuit is not necessarily a sign it’s failing, as most successful organisations and entrepreneurs face lawsuits regularly.   Make sure you have insurance and professional legal representation and work to resolve the lawsuit quickly, ideally with an out-of-court settlement.  Learn from the event by actioning the tasks needed to transform your business to prevent reoccurring lawsuits for the same reasons.  Our tips are just that and are not to be considered advice. Always seek professional legal representation.