We've been sued! Now that? A guide to handling business litigation.

• Author: Cherry, William S. III
• Position: LAW JOURNAL 2012

A 2010 litigation trends survey warns, "Companies Expect More Litigation." Federal statistics indicate that the number of employees suing employers rose 35% from 2007 to 2011. A study conducted for the U.S. Small Business Administration in 2005 found that on average 45,000 civil cases are filed nationwide against businesses each year involving 65,000 companies.

It is generally assumed that if you own a business long enough you will be sued. The more successful your business, the more likely your business will be sued. If your business has never been sued, what are you going to do when the first lawsuit arrives? If you are one of the many businesses that have previously been sued, what can you do next time to make the litigation process smoother?

Handle a lawsuit proactively

Whatever you do, don't ignore the lawsuit. It's not simply going to go away. A business that is sued and fails to respond to the lawsuit within 30 days can have a default judgment entered against it. The judgment might stay with the business for 20 years or more. It is the rare occasion in which failing to respond is the appropriate action.

Like any other roadblock faced in business, a lawsuit should be attacked head-on in an organized way that makes the most strategic sense for the business. Yes, litigation is unfortunately a part of business and should be approached and handled like all other business decisions.

The first step to take if your business is sued is to contact your attorney and insurance company. In North Carolina, a business entity such as a corporation or a limited-liability company cannot represent itself in state district court, state superior court or in federal court. A company can represent itself in small-claims court, where the jurisdictional limit of recovery for the plaintiff is $5,000.

Since a business served with a lawsuit has only 30 days to respond to the allegations, it is important to retain an attorney as soon as possible after receiving the complaint so there is sufficient time to begin developing a litigation strategy. If you do not have an attorney you should begin searching for one as soon as possible. If your claim is covered by insurance, your insurance company will likely retain an attorney for you.

Develop a strategic plan

A business and its attorney should promptly identify the key factual issues and applicable legal defenses that can be critical to the success of a defense. Similarly, business litigation is often complex and may...