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Home » Legal Articles » 7 Steps To Take When You Are Sued

7 Steps to Take When You Are Sued

In today's litigious society, if you have not already been sued, you probably will be. Knowing the initial steps to take when you are served with a summons and complaint (the documents that begin any litigation) can help to assure ultimate victory and reduce the stress and anxiety that accompanies lawsuits. Following are seven steps to undertake when you are served with a lawsuit.

1. Immediately Inform Your Lawyer – You have 20 to 30 days to respond to a lawsuit once you are served with the summons and complaint. Many people will procrastinate informing their lawyer and will sit on the complaint until a few days before the deadline to respond. A lawyer's range of actions is severely limited when he receives a complaint with only a few days left to respond, or worse, after the date for responding has passed. Indeed, if you fail to respond on time you may be prevented from defending the action altogether because a default has been entered against you. While a default can most likely be set aside, it requires the preparation of a motion and attendance at a hearing by the lawyer—these activities result in unnecessary legal fees which are better spent actually defending the action on the merits. When served with a summons and complaint, it should be your policy to note the date and time of service and then to immediately contact your attorney.

As a side note, you should ensure that your agent for service of process is always current. Businesses will often move locations and fail to update the address of the agent for service of process which is kept on file with the Secretary of State. This generally results in a default if you are ever sued. Once the plaintiff has attempted to serve you at your agent's registered address, and failed because the business or agent is no longer at that address, he can serve a summons and complaint upon you via service upon the Secretary of State—and the Secretary of State has no requirement to inform you of any such service. Thus, if you fail to update the address of your agent for service of process there is a chance that you could be validly served with a summons and complaint and yet be completely unaware.

2. Locate All Insurance Policies – There is a chance that the allegations contained in the complaint are covered under an insurance policy which you have already purchased. It is in your best interest to gather all insurance policies (including any insurance purchased by third parties for your benefit), make copies of the policies, and give those copies to your lawyer so that he can determine any potential for coverage. If there is potential for coverage, your lawyer can prepare letters to the insurance company regarding the lawsuit. An insurance company might be required to pay for attorneys' fees and costs of defending the lawsuit based only on the chance that the allegations of the lawsuit are covered claims under the insurance policy. However, an insurance company is only responsible for legal fees incurred as of the date of the tender letter. Therefore, locating your insurance policies to determine coverage as early as possible can result in less out of pocket expenses for legal fees, and in many circumstances, complete coverage for the alleged acts contained in the complaint.

3. Understand The Allegations Of The Complaint – Anyone served with a complaint should understand its allegations as early as possible—your lawyer should explain the allegations and all ramifications in terms that you can understand. Once you are aware of the allegations and the facts and evidence that will be relevant to a defense, you are in a position to assist the lawyer in achieving ultimate victory or, at least, a satisfactory resolution (see steps #4 and #5). Oftentimes, if you are aware of the allegations, you will be able to assist the attorney at an early juncture in locating key documents and evidence (as opposed to the attorney trying to locate the relevant information on his own)—thereby saving on the cost of attorneys' fees.

4. Locate and Preserve Evidence – Evidence is often the center of your lawsuit. Whether it is timecards in a wage and hour lawsuit, emails in a breach of contract lawsuit, non-disclosure agreements in a trade secrets theft lawsuit, or incident reports in a slip-and-fall lawsuit, it is imperative that all evidence be preserved in a safe place—thus, any document retention policies that require the systematic destruction of documents should be suspended temporarily. All documents should be preserved, both those that support your case and those that weaken your case. Any intentional destruction of documents will likely be discovered and the penalties for such destruction can be severe. Do not destroy evidence—aside from being unethical, it is also illegal.

With the increasing use of technology in the workplace, computers have become an important source of evidence. Indeed, email and other information stored on an employee's computer can form the lynchpin of a good defense; you should assure that none of it is accidentally lost due to an employee deleting the information, or a document retention policy causing a purge of the information. Upon being served with a lawsuit, if it is apparent that computers being utilized in the ordinary course of your business will contain key evidence (talk to your lawyer), you should consider making mirror-image copies of your computers' hard-drives. This will ensure that key evidence is preserved, and has the added benefit of making it less time-consuming for the lawyer to conduct searches to locate the key evidence and other important documents.

5. Identify Witnesses – You must identify as many witnesses to the incidents alleged in the complaint as possible, both good and bad. Your lawyer will want to interview all key witnesses to which he has access as part of his overall strategy development. A comprehensive list of witnesses and their roles will assist the attorney in this endeavor and will reduce the legal costs incurred if the lawyer is forced to do it on his own.

In many cases, by the time you are served with a lawsuit, many months and perhaps years have passed since the incidents alleged in the lawsuit occurred—as a consequence, many favorable (and not so favorable) witnesses may have moved on to other jobs. Thus, as part of your overall business policy, it is imperative that you collect contact information for each employee who leaves your employment (email addresses are invaluable because they do not change as often as telephone numbers and home addresses). Lawsuits can be lost because key witnesses who have left your employment cannot be located. Another benefit of compiling your list of witnesses early is that you can contact former employees and offer to represent them for the purpose of any deposition noticed by the opposing side—this will prevent the opposing side from communicating with your former employees except at the deposition.

6. Be Careful About Who You Speak With Regarding The Lawsuit – When served with a summons and complaint, there is sometimes an impulse to call the opposing party in an attempt to resolve the dispute without the expense of a protracted lawsuit, or to vent to someone else about the fact that the opposing party has sued you—avoid this temptation. Call your attorney instead. Communications with your attorney are privileged and opposing counsel has no right to inquire into any such communications. (In fact, you should tell your attorney everything you know—if you withhold any information that later comes up in court, it might catch your attorney unprepared and cast doubt on your defense.) On the other hand, any communications among officers or partners of your business, or anyone else, are not necessarily privileged and could potentially be discovered by the opposition. You should also assume that any statements made to employees will be communicated to customers, and statements made to customers will be communicated to the opposition. Limit discussions regarding your case to conversations with your attorney. If after discussing the lawsuit with your attorney, you still feel compelled to approach the other side, you can discuss the context of such a conversation with your attorney—your attorney can instruct you on what to say and, more importantly, what not to say.

7. Remain Calm – A lawsuit is not the end of the world. Oftentimes, the lawsuit can be handled with no disruption to the business operations. Do not go into denial mode. Early discussions with your attorney will assist in preparing a proactive strategy to defend against the claims—even in cases where the allegations are probably true and you fear liability for the damages alleged, a good defense strategy can limit the amount of those damages.

By following these steps at the outset of litigation you may achieve a substantial savings on legal fees, increase your chances of obtaining a positive result, and decrease your anxiety and stress level.

And here is another random article you might be interested in...

FSBO Closing Costs

What Are Closing Costs?

When selling your home "For Sale by Owner" (aka FSBO), your lender usually prepares a "Good Faith Estimate" of closing costs. You are entitled to receive this estimate no later than three business days after you apply for a loan. Because it is an estimate of the costs you may incur, it may not contain all potential costs. The lender will not know what all of the costs are going to be. The "Good Faith Estimate" will be an estimate based on previous experience. Actual closing expenses usually exceed the estimate. To avoid problems, go prepared to pay more than the amount listed on your estimate.

If you are comparing two lenders, look only at the costs charged by the lender. Lenders can only make educated guesses about the charges made by others.

You will receive an itemization of costs you may have to pay when you buy your home. The costs are listed in the order that they should appear on a Good Faith Estimate you obtain from a mortgage lender.

There are two broad categories of closing costs. Non-recurring closing costs are items that are paid once and you never pay again such as loan origination fees, recording fees, survey fees, etc. Recurring closing costs are items you pay again over the course of home ownership, such as property taxes and homeowner's insurance.

Closing costs are usually made up of the following:

1. Attorney's or escrow fees (yours and your lender's if applicable)
2. Property taxes (to cover tax period to date)
3. Interest (paid from date of closing to 30 days before first monthly payment)
4. Loan origination fee (covers lender's administrative costs)
5. Recording fees
6. Survey fee
7. First premium of mortgage insurance (if applicable)
8. Title insurance (yours and your lender's)
9. Loan discount points
10. First payment to escrow account for future real estate taxes and insurance
11. Paid receipt for homeowner's insurance policy (and fire and flood insurance if applicable)
12. Any documentation preparation fees.

On closing day, you'll present your paid homeowner's insurance policy or a binder and receipt showing that the premium has been paid. The closing agent will then list the money you owe the seller (remainder of down payment, prepaid taxes, etc.) and then the money the seller owes you (unpaid taxes and prepaid rent, if applicable). The seller will provide proofs of any inspection, warranties, etc.

Once you're sure you understand all the documentation, you'll sign the mortgage, agreeing that if you don't make payments the lender is entitled to sell your property and apply the sale price against the amount you owe plus expenses. You'll also sign a mortgage note, promising to repay the loan. The seller will give you the title to the house in the form of a signed deed.

You'll pay the lender's agent all closing costs and, in turn, he or she will provide you with a settlement statement of all the items for which you have paid. The deed and mortgage will then be recorded in the state Registry of Deeds, and you will be a homeowner.

At closing, you will get:

1. Settlement Statement
2. HUD-1 Form (itemizes services provided and the fees charged; it is filled out by the closing agent and must be given to you at or before closing)
3. Truth-in-Lending Statement
4. Mortgage Note
5. Mortgage or Deed of Trust
6. Binding Sales Contract (prepared by the seller; your lawyer should review it)
7. Keys to your new home

Your Settlement Costs are going to consist of the following:

1. Sales/Broker's Commission: This is the total dollar amount of the real estate broker's sales commission, which is usually paid by the seller. This commission is typically a percentage of the selling price of the home.

2. Items Payable in Connection with Loan: These are the fees that lenders charge to process, approve and make the mortgage loan.

3. Loan Origination: This fee is usually known as a loan origination fee but sometimes is called a "point" or "points." It covers the lender's administrative costs in processing the loan. Often expressed as a percentage of the loan, the fee will vary among lenders. Generally, the buyer pays the fee, unless otherwise negotiated.

4. Loan Discount: Also often called "points" or "discount points," a loan discount is a one-time charge imposed by the lender or broker to lower the rate at which the lender or broker would otherwise offer the loan to you. Each "point" is equal to one percent of the mortgage amount. For example, if a lender charges two points on a $80,000 loan this amounts to a charge of $1,600.

5. Appraisal Fee: This charge pays for an appraisal report made by an appraiser.

6. Credit Report Fee: This fee covers the cost of a credit report, which shows your credit history. The lender uses the information in a credit report to help decide whether or not to approve your loan and how much money to lend you.

7. Lender's Inspection Fee: This charge covers inspections, often of newly constructed housing, made by employees of your lender or by an outside inspector.

8. Mortgage Insurance Application Fee: This fee covers the processing of an application for mortgage insurance.

9. Assumption Fee: This is a fee which is charged when a buyer "assumes" or takes over the duty to pay the seller's existing mortgage loan.

10. Mortgage Broker Fee: Fees paid to mortgage brokers would be listed here. A CLO fee would also be listed here.

11. Interest: Lenders usually require borrowers to pay the interest that accrues from the date of settlement to the first monthly payment.

12. Mortgage Insurance Premium: The lender may require you to pay your first year's mortgage insurance premium or a lump sum premium that covers the life of the loan, in advance, at the settlement.

13. Hazard Insurance Premium: Hazard insurance protects you and the lender against loss due to fire, windstorm, and natural hazards. Lenders often require the borrower to bring to the settlement a paid-up first year's policy or to pay for the first year's premium at settlement.

14. Flood Insurance: If the lender requires flood insurance, it is usually listed here.

15. Title Charges: Title charges may cover a variety of services performed by title companies and others. Your particular settlement may not include all of the items below or may include others not listed.

16. Settlement or Closing Fee: This fee is paid to the settlement agent or escrow holder. Responsibility for payment of this fee should be negotiated between the seller and the buyer.

17. Abstract of Title Search, Title Examination, Title Insurance Binder: The charges on these lines cover the costs of the title search and examination.

18. Document Preparation: This is a separate fee that some lenders or title companies charge to cover their costs of preparation of final legal papers, such as a mortgage, deed of trust, note or deed.

19. Notary Fee: This fee is charged for the cost of having a person who is licensed as a notary public swear to the fact that the persons named in the documents did, in fact, sign them.

20. Attorney's Fees: You may be required to pay for legal services provided to the lender, such as an examination of the title binder. Occasionally, the seller will agree in the agreement of sale to pay part of this fee. The cost of your attorney and/or the seller's attorney may also appear here. If an attorney's involvement is required by the lender.

21. Title Insurance: The total cost of owner's and lender's title insurance is shown here.

22. Lender's Title Insurance: The cost of the lender's policy is shown here.

23. Government Recording and Transfer Charges: These fees may be paid by you or by the seller, depending upon your agreement of sale with the seller. The buyer usually pays the fees for legally recording the new deed and mortgage (line 1201). Transfer taxes, which in some localities are collected whenever property changes hands or a mortgage loan is made, can be quite large and are set by state and/or local governments. City, county and/or state tax stamps may have to be purchased as well

24. Survey: The lender may require that a surveyor conduct a property survey. This is a protection to the buyer as well. Usually the buyer pays the surveyor's fee, but sometimes this may be paid by the seller.

25. Pest and Other Inspections: This fee is to cover inspections for termites or other pest infestation of your home.

26. Lead-Based Paint Inspections: This fee is to cover inspections or evaluations for lead-based paint hazard risk assessments.

27. Total Settlement Charges: The sum of all fees in the borrower's column entitled "Paid from Borrower's Funds at Settlement" is placed here. This figure is then transferred to line 103 of Section J, "Settlement charges to borrower" in the Summary of Borrower's Transaction on page 1 of the HUD-1 Settlement Statement and added to the purchase price. The sum of all of the settlement fees paid by the seller are transferred to line 502 of Section K, Summary of Seller's Transaction on page 1 of the HUD-1 Settlement Statement.

Don't be overwhelmed by all of the fees and charges. Your closing agent will go over each item one line at a time.