Whatever business you own or are responsible for, there may come a time when you face being sued. The following article is a brief guide to what to expect and what you should do in the event of a business lawsuit. Note that under Massachusetts law, unless you are an individual business owner, all LLCs and corporations must use a licensed attorney to represent them in any business litigation case, with the only exception being when your corporation is being sued in a small claims court. If you have received a summons from a party which has filed a lawsuit against your business, you should contact an attorney with business litigation experience as soon as possible.
How a lawsuit is initiated in MA
There is a formal process for any business lawsuit in Massachusetts. It is important to understand the process and the timeline involved. Failure to respond to a summons in a timely manner could mean that the claim is decided in the plaintiff’s favor, known as a “default judgment”.
The party filing a complaint against your business, known as the plaintiff, initiates the lawsuit by filing the complaint or petition with a court. The plaintiff also issues a summons to you, the defendant, with documentation outlining the reasons why they are suing you as well what compensation, monetary or otherwise, they are claiming from you. The non monetary component of a lawsuit may include actions which the plaintiff wants your business to take to remedy the complaint.
The summons will specify the time frame in which you must respond to the complaint, typically 20 days in Massachusetts. This time includes public holidays and weekends. You may be able to extend the deadline by submitting a request to extend to the court or the defendant’s legal counsel.
Next steps after receiving a summons
Unless you are an attorney yourself, it is important to contact a business litigation attorney as soon as possible after receipt of a summons. The attorney will examine the summons and accompanying documentation thoroughly and ask questions about the content and its validity. The attorney will then advise you whether you have grounds to defend the claim or whether to admit it and what steps should be taken next. Whatever you and your attorney decide to do, you will need to file an answer to the complaint according to Massachusetts Rule of Civil Procedure 12. If you decide to defend your business against the complaint, your attorney may advise you to dismiss the complaint altogether or file a counterclaim. A defense means that a suitable strategy must be devised to improve your chances of success.
Does every lawsuit involve going to court?
There are alternatives to going to court and your attorney will advise you whether these should be explored first. A trial can become expensive for both plaintiff and defendant, with court costs and additional legal fees involved.
In some states, Alternative Dispute Resolution (ADR) in business litigation cases is mandatory. This is not the case in Massachusetts, but it is still a recommended alternative to going to court. Massachusetts provides ADR services for civil litigation cases in each level of state court (Trial Court, Supreme Court and Appeals Court).
The two main forms of ADR are mediation and arbitration. You may find that arbitration is stipulated as the form of resolution to be used in the event of a dispute in the business contract you have with the plaintiff.
Mediation involves a neutral third party, called the mediator, who brings the disputing parties together in order to try and come to a resolution of the complaint without having to go to court. Mediation, unlike arbitration, is not binding and either party may decide to disagree with any recommendations made.
Arbitration is a more formal process, in which an arbitrator, or an arbitration panel, hears both sides of the dispute and makes a binding decision which the two parties must accept.
Going to court
The majority of lawsuits that eventually end up in court involve state courts. As has been mentioned already, claims of $7,500 or less are normally dealt with by the small claims court. In fact, most claims under $25,000 will be held in a state District Court or the Municipal Court in Boston. Any claims greater than $25,000 are handled generally by the Massachusetts Superior Court.
The other state court that may be used in certain circumstances is a specialized one. This is the Business Litigation Session or BLS. Generally, the BLS is used only for particularly complex disputes. These include:
- business torts;
- corporate mergers;
- intellectual property disputes;
- disputes due to sale of assets;
- shareholder derivative claims;
- insurance coverage disputes;
- employment coverage agreement disputes.
Use of the BLS has some advantages over the use of District and Supreme Courts. They have a lighter case load with specially appointed case attorneys and court clerks allowing the BLS to hear appropriate cases sooner than other courts with a more speedy resolution procedure.
Federal courts may be used whenever there are multi-state contract disputes, or when federal law is involved in the dispute or in cases when the dispute involves claims of more than $75,000.
If you are being sued in a federal court, it is imperative that you use an attorney with experience in federal litigation procedure.
Legal expertise and timely responses are essential in most business litigation cases
A drawn out business litigation exercise can drain your energy and that of your business, negatively affect your business’s financial status and its reputation. It is important to respond quickly if anticipating litigation or receiving a summons. An experienced business litigation attorney can help assess a demand for compensation and help to resolve the dispute as judiciously as possible.
For more information, visit our website or contact us for a free initial legal consultation today.