TMCnet Feature
April 13, 2020

What to Do When Your Business is Subject to a Commercial Litigation Lawsuit



Facing commercial litigation is a serious matter that requires a serious response. Defending your company effectively is the only way out, and inaction can have significant negative repercussions. Once your company has been sued, you need to respond, and you need to do so effectively in order to protect your company’s shareholders, employees, and bottom line.



How Do You Effectively Defend Your Company in Commercial Litigation?

But, how do you respond effectively? How do you strategically mitigate your company’s risk and get in a position to take control of the litigation? How do you decide whether considering a settlement is in your company’s best interests, and how (and when) do you make the decision to fight the plaintiff’s claims at trial?

None of these questions are easy to answer, and none of them have a single “right” response. Yet, answering them the right way within the context of your company’s lawsuit is critically important. Respond to the lawsuit effectively, and you may be able to save your company from substantial outlays and liability. Respond ineffectively, and your company’s reputation and ongoing viability could be in jeopardy.

Let’s start at the beginning.

What Happens When Your Company Gets Sued?

You were just served with a complaint. Your company is being sued. Whether you were anticipating the possibility of a lawsuit or the complaint came entirely out of the blue, it is here, and now you have to deal with it.

The first step upon receiving a commercial litigation complaint is to have it reviewed by your company’s legal counsel. You can (and should) read it, too, but there are several reasons why you need to have it reviewed by an attorney.

First, companies cannot represent themselves in litigation. The company itself is its own legal entity (a corporation is considered a “person” under U.S. Supreme Court precedent), so any representation by its non-attorney owners, board members or executives would amount to the unauthorized practice of law. Thus, the right to pro se representation is inapplicable in the corporate context. Your company needs legal counsel in order to defend against the lawsuit; and, for the reasons we discuss next, your company’s defense attorney (or attorneys) will need to begin work as soon as possible.

Second, your company only has a very limited amount of time to respond. In commercial litigation in federal district court, the deadline to file an answer to the plaintiff’s complaint is 21 days from the date of service. While three weeks may sound like plenty of time, it isn’t, and any delays in engaging legal counsel could have lingering repercussions for the remainder of the litigation.

Third, complaints in commercial litigation tend to be lengthy and complex. While there are a number of different strategies, plaintiffs will often assert numerous legal claims based on a variety of different sets of underlying facts. They also tend to rely on general, repurposed language that may have not fully been rewritten or reconsidered for years. As a result, simply determining the allegations against which your company needs to defend itself can be a challenge—as can determining your company’s total potential exposure based on the claims alleged.

Once you engage legal counsel to review the complaint, the process of defending your company begins almost immediately. Your company’s defense counsel will begin work on preparing an answer and any preliminary motions; and, in doing so, it will need to work closely with your company’s key personnel. As a result, your company’s defense counsel will work with you to assemble an internal team with clear roles, responsibilities, and communication channels, and at this stage counsel will be heavily reliant on you to identify the correct people in the correct roles to play an active role in the litigation process.

This is where one of the biggest misconceptions about commercial litigation comes into play. When your company gets sued, you cannot simply throw the case over the fence to your company’s attorneys. Presenting an effective defense in high-stakes commercial litigation requires collaboration between the company’s attorneys and key stakeholders; and, while legal counsel can handle the litigation aspects of the dispute independently, your company’s decisionmakers and subject matter experts will need to continue to play active roles in various aspects of the case.

So, with that aside, at this point your company’s defense attorneys have reviewed the complaint, and you have worked with your company’s lawyers to assemble the internal team that will be responsible for assisting with the litigation. What’s next?

Building a Defense Strategy Focused on the Facts and the Law

From the company’s perspective, at this point, it is all about the facts. While your company’s defense lawyers will be busy analyzing the plaintiff’s legal arguments and formulating and stress-testing potential defense strategies, your internal team will be tasked with supplying the information needed in order to dispute the plaintiff’s allegations and bring your company’s defenses to life. Just as the plaintiff’s allegations need to be based on verifiable facts in order to justify claims for damages, so too do your company’s defenses and counterclaims.

Yes, counterclaims. Oftentimes in commercial litigation, the best defense will be a strong offense. If your company has claims that it can assert against the plaintiff, then bringing these claims into the litigation can provide important leverage for working toward a settlement or balancing the scales at trial. You will want your company’s defense counsel to evaluate the possibility of bringing relevant third parties into the litigation as well, as warranties, indemnification clauses, and other contractual and statutory provisions will often shift liability to third parties in commercial lawsuits.

With the facts at hand and all possible defenses, counterclaims, and third-party claims on the table, your company’s defense counsel can respond to the plaintiff’s complaint. This response will be made in the form of an answer filed with the appropriate court; and, depending on the circumstances and your company’s defense strategy, your company’s lawyers may file one or more motions in response to the plaintiff’s complaint as well.

Using the Discovery Process to Your Company’s Advantage

Now, let’s talk about discovery. Discovery is a huge part of commercial litigation, and it is where many cases are won and lost. When the plaintiff filed its complaint, it may have also served discovery requests in order to apply pressure (discovery requests have strict response deadlines as well); or, it may have strategically chosen to wait to serve discovery.

In either case, responding to the plaintiff’s discovery requests, preparing your company’s own requests, and reviewing the plaintiff’s production will account for a substantial portion of the pre-trial litigation process. It is not unusual for discovery to involve hundreds of thousands of electronic records produced by both sides—in addition to written answers to interrogatories and deposition testimony from multiple company representatives.

Given the voluminous nature of discovery in commercial litigation, discovery management is a key component of the process. Your company’s designated records custodian will need to work closely with your company’s defense counsel during the production process, and counsel will need to utilize various tools and resources to efficiently digest the plaintiff’s (and any third parties’) produced documents. Putting the pieces together from documents, written answers, and deposition testimony requires meticulous scrutiny and a clear understanding of all of the pertinent facts, and your company’s legal counsel will need to have the capability to do this effectively within time constraints of the litigation.

Managing the Commercial Litigation Process

Speaking of time, commercial litigation requires a lot of time. This is especially true during the discovery phase, but it carries over to subsequent steps in the process as well. Your company’s defense counsel will be busy, and the personnel on your company’s internal team will need to be able to effectively manage their litigation-related responsibilities while also maintaining their respective roles in your company’s day-to-day operations.

As the commercial litigation process moves forward, your company’s decisionmakers’ and subject matter experts’ day-to-day roles in the process will change. While much of the early part of the commercial litigation process focuses on factfinding and assessment of the claims on both sides, as things progress, your company’s leadership team will need to work with its defense counsel to make strategic decisions about next steps.

For example, when (if ever) should you consider raising the notion of a settlement? Settlement negotiation is a process in itself that involves its own unique considerations and strategies, and timing can be absolutely crucial. How aggressive should your company be in utilizing pretrial procedures (i.e. motions to compel and motions to dismiss) to apply pressure? A tactful approach can reap huge benefits, while indiscriminate aggression may only serve to ramp up hostilities and frustrate the judge.

Ultimately, achieving a favorable result in commercial litigation requires diligence, patients, and the ability to strike at precisely the right time. By taking a proactive approach under the guidance of highly-experienced commercial litigation defense counsel, companies that are targeted in high-exposure lawsuits can protect their shareholders, their employees, and their bottom lines in an efficient and cost-effective manner.



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