Facing Your First Lawsuit? Here Are the First Two Steps You Need To Ge

Facing your first lawsuit as a business owner can throw you into emotional turmoil and fear, understandably. Suddenly you are faced with extraordinary costs and uncertainty.

Even worse, the lawsuit may be reflected back to you your greatest fears about yourself and perhaps even about the work you do. But a lawsuit doesn’t have to spell the end of your business, nor the collapse of your dignity. Instead, it can be a big opportunity to see something that you otherwise couldn’t see about where you need to shore up holes and create systems to be able to grow your business.

If you haven’t already read it, my mentor wrote a Manifesto about the more than $1,000,000 mistakes she made when growing her business, including more than one lawsuit, and you can read that here, so you don’t have to make the same mistakes she did.

In the meantime, here’s what you should do if you are served with a lawsuit.

Do Not Ignore It!

You may be tempted to ignore a lawsuit, especially if you think it has no merit. Ignoring a lawsuit is the worst thing you can do because if you ignore it, the person suing you will get a default judgment against you, meaning that they win, no matter what. And, even if you did nothing wrong, if you ignore a lawsuit, you will have to pay the resulting judgment against you. Not fair, perhaps. But that’s how it is.

Get a Great Lawyer

So, if you are served with a lawsuit, before you do anything else, you want to get advice from a lawyer. Finding a good lawyer to advise you can be a challenge, so here are some of our best tips on how to find the right lawyer to advise you:

 1. Contact Your Insurance Company

 If you carry the right type of insurance, your insurance company will provide you with a  lawyer. Insurance paid for a lawyer has been always your first line of defense.

2. Contact Us, Your Creative Business Lawyer or Family Business Lawyer

If you are working with us in a strategic advisory capacity, contact us, so we can help you find the right lawyer, or perhaps even be able to negotiate a resolution for you without going to court at all.

3. Ask For Smart Referrals

If you do not have insurance, and you do not have a pre-existing strategic advisory relationship with us, you’ll need to ask friends or family, or colleagues for a referral to a lawyer.

This is the least good option because it means you need to disclose the lawsuit details to your friends, family, and colleagues to get the referral. In addition, people are notorious for giving bad referrals because they don’t actually know how to vet and refer professional advisors properly. For example, we’ve seen many examples of people referring their “great lawyer” to their friend to handle a business lawsuit when that great lawyer was their divorce lawyer -- two totally different specialties. You definitely do not want a divorce lawyer handling your business litigation.

A smart referral is to a lawyer who has handled a matter for a friend, family member, or colleague that is of the exact same type as your matter. So if your lawsuit is related to your business, you want a referral to a lawyer who handled and resolved a business lawsuit for your friend, family member, or colleague.

Choosing the right lawyer has a significant impact on the outcome of your lawsuit, and how stressful and costly it will be for you. In next week’s article, I’ll share some things to look for when choosing the right lawyer to handle a business conflict or lawsuit on your behalf.