An introduction to how lawsuits are commenced in New York, and the steps you should take if your business is sued
Lawsuits are becoming an ever-increasing presence in the business landscape. In one study, 43 percent of small business owners reported that their company had been engaged with, or threatened with, a civil suit. Other research suggests that nearly 90% of all businesses will be involved in some form of litigation.
In the event of a lawsuit, it is important to know the right steps to take.
Lawsuits in the State Courts of New York City
Smaller suits, of $5,000 or less that do not involve federal law, must be filed in smalls claims court. Cases filed in the New York City Civil Courts have an upper limit of $25,000. When the amount at issue exceeds $25,000, the suit is filed in the Supreme Court.
Certain commercial disputes may be filed in the Supreme Court’s Commercial Division. These matters typically involve complex business disputes. The current monetary threshold to file a case in the Commercial Division for New York County (Manhattan) is $500,000, while the monetary threshold for lawsuits before the Commercial Divisions for Kings (Brooklyn), Queens and Westchester Counties are much lower. The Commercial Division may also hear certain other corporate disputes which fall below these thresholds, including those requiring the dissolution of a corporation, partnership, limited liability company and shareholder derivative actions.
Lawsuits in the Federal Courts of New York
A case may also be filed in federal court if certain requirements are met. New York City has two federal district courts: the U.S. District Court for the Southern District of New York and the U.S. District Court for the Eastern District of New York. Most cases filed in federal court involve the alleged violation of a federal law (such as the Copyright Act, the Lanham Act, or U.S. labor law) or a dispute that exceeds $75,000 and is one which none the plaintiffs are from the same state as any of the defendants. There are other situations in which a federal court may be able to hear a dispute and an attorney can advise you concerning those situations.
The Nitty Gritty
In most instances, a litigation is commenced when a defendant is served with a summons and a complaint. A complaint is a document that specifies the facts and circumstances of the plaintiff’s claims against the defendant. An example of a common cause of action in a business dispute is breach of contract. The complaint also states the relief sought by the plaintiff. This can include financial compensation but it may also include equitable remedies, such as forcing the defendant to transfer property to the plaintiff.
Once the defendant is served with a complaint, they must file a formal document with the Court in which they respond to each allegation contained in the complaint and assert any available defenses. This document is called an answer. The timeframe to file an answer is short. If the defendant fails to file a timely answer, they will usually be considered in default and may lose the case by having a judgment entered against them. While certain circumstances exist that permit a defaulting defendant to vacate a judgment, defendants are best served by filing a timely answer.
When a defendant files a timely answer, a court date will be set for the parties to appear in court. At this initial appearance, a schedule will be set for the rest of the case. If the parties are unable to reach a settlement, the lawsuit will proceed according to these deadlines, unless these deadlines are later modified.
Fighting it out in court is not inevitable
It is important to understand that there are valuable mechanisms for settling a dispute before a suit is even filed. These include settlement negotiations between attorneys of the parties and mediation.
Parties to a dispute often prefer to settle out of court because settlement avoids expensive and prolonged court proceedings that can range in length from months to years. If the parties to a dispute cannot come to an agreement taking the case to court might be the only remaining resort.
Steps to take if your business gets sued
Understanding the legal process will help you achieve a more favorable outcome. Here are strategies for ensuring that you are putting your best foot forward:
1. Consult an attorney
If your business is sued, your initial instinct might be to contact the plaintiff. However, it may be best to avoid direct communication with the plaintiff after a lawsuit is initiated. Reviewing a summons and complaint with an attorney before responding can help you access the strength and weaknesses of the case, as well as any counterclaims you may possess. To prepare for your meeting with an attorney, gather as much information as you can about the dispute, such as contracts and communications between the parties, the complaint and the summons.
2. Notify your insurance company
You will need to notify your insurance company. Hopefully, your business’s general liability policy will cover the type of claims that your business is facing.
Many businesses opt for umbrella policies that provide far more coverage to protect the organization from large judgments. If your business is in an industry where lawsuits are common, this is a smart, proactive option.
3. Figure out how to respond
You will need to fully understand the claims as well as the liability that your business may face. You can admit or deny the allegations, make counterclaims, assert defenses or attempt to settle.
Different attorneys and law firms have experience in different areas of the law. Find a lawyer who specializes in the subject area of your dispute.
4. Be diligent and prompt in any action you take
Failing to provide your attorney honest and complete answers to questions may get your business into deeper trouble and hamper possible defenses. If you have made a mistake, talk to your lawyer about the best way to handle it.
This openness comes with an important caveat: Your instinct may be to defend your business from the rooftops, or online, especially if claims have attracted unwanted publicity. However, you should never directly contact the plaintiff or communicate publicly about the details of the suit, including your defense, until you have consulted with your attorney. Doing so can severely harm your position.
5. Try to be patient
Lawsuits are always challenging, and you may feel severely threatened by being sued. Try to keep an open mind about the outcome and approach the process with diligence and determination. Anger, resentment or panic will not serve your business well. Cases often take a long time, so it is important to focus on what is good for your business.
Make sure to work with an experienced attorney who you can trust to handle the case in the best interests of you and your business.
At Romano Law, we are more than just attorneys. We are trusted advisors, and we focus on building meaningful relationships with our clients. Get in touch with our team today.
This Blog is made available by Romano Law PLLC for general informational and educational purposes only, not to provide specific legal advice. By using this Blog you understand that there is no attorney client relationship between you and Romano Law PLLC or any individual contributor. You should consult a licensed professional attorney for individual advice regarding your own situation.