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7 Steps to Surviving a LawsuitBy Kurt Schlichter, Esq, Attorney at Law

ligent businesspeople who are served with a lawsuit, put it in an “in” box and do nothing until the notice of default arrives in the mail.

Step Two: Determine Your BudgetYou have settled on a lawyer. Now you need to figure out how to

pay for her.The best defense is one where someone else pays the bill. Your in-

surance policies might provide a legal defense as well as pay a judg-ment against you. Tell your lawyer about your insurance coverage – business, auto and even home. Insurance usually covers claims in which you are accused of doing something unintentional, like caus-ing an accident. It typically does not cover intentional wrongs, like fraud or claims that you breached a contract. If there is even the most remote possibility that the insurer will “accept your tender,” make your claim. Yes, it may make your premium go up a couple hundred dollars a year, but considering that many business lawyers charge north of $300 per hour, you may as well use your coverage.

Your ability to pay for your defense is key to determining your initial strategy, just as finances are key to your routine business de-cisions. Even a mid-sized case can cost $50,000-$100,000 in legal fees through a verdict. If you are paying the fees yourself, you will need to put a substantial amount down as a deposit and then pay the monthly bill. Ask for an estimate, understanding that the final total will likely end up higher. If you cannot afford to defend your-self, you need to know that when evaluating your options.

If you win, the other guy has to pay your attorney fees, right? Sor-ry. Except where the dispute is on a contract with a provision for the recovery of legal fees, parties generally bear their own attorney’s fees. All you get back if you win is a judgment for some of your out-of-pocket costs, like filing fees.

Step Three: RespondingSometimes the best response is no response. If you have no as-

sets and no way to fund a defense, perhaps it makes sense to let the other side take a default judgment. A judgment that cannot be col-lected is no judgment at all. Similarly, if the claim against you is big enough – and does not involve fraud or similar wrongs – you might consider bankruptcy, which could discharge the entire claim against you along with many of your other obligations. Sometimes talking is the best plan – perhaps your lawyer can settle the case early for a reasonable amount.

Usually, you will end up responding to the lawsuit. The most com-mon response is an “answer.” This is a document that essentially denies everything the complaint says and asserts various defenses. Another option is a “demurrer.” A demurrer is a motion that es-

As the economy worsens, more businesspeople find themselves being sued.

Getting sued is no fun even in the best of times. You are mind-ing your own business when some vaguely disreputable gentleman steps up and hands you a batch of papers, announcing that you have been served. Reading the “Com-plaint for Damages,” you do not recognize yourself. The facts are all wrong and many of the allegations are outright lies. The “plaintiff ” has

accused you of all sorts of misconduct and claims everything you did was part of some deliberate scheme designed to defraud him.

Welcome to the world of business litigation. Now what?Understand first and foremost that lawsuits are about money; you

need to look at litigation from a business perspective. The key to coming through litigation with the optimal outcome is to under-stand the process and to make smart, well-reasoned business deci-sions at each of the seven critical steps.

Step One: Stop, Think and Lawyer UpYou have read the complaint and you are furious. Your first idea is

to reach for the phone and give your opponent a piece of your mind. Or maybe you think that once you explain what really happened, he will drop the suit. These are bad ideas.

Plaintiffs tend not to sue unless they are serious about their objec-tive. You are not going to talk your opponent – or his lawyer – out of the lawsuit. You are more likely to just say something that will come back and haunt you.

You need professional help – not only for the technical legal mat-ters, but because you are emotionally involved, and emotional deci-sion-making is bad business. Unless you think do-it-yourself sur-gery is a good idea too, you need a lawyer (and if your company is a defendant, you must have a lawyer). Litigation is a harrowing, frustrating process, so you need to pick a lawyer who is not only technically proficient but one with whom you can relate. Talk to several. Find one whose personality suits you. If you are chatty and need hand-holding, do not hire a ringer for Mr. Spock. If you think General Patton was a little restrained, do not retain Mr. Rog-ers, Esquire.

And do not delay. The clock starts running once you have been handed the papers. You would be shocked at the number of intel-

L I T I G A T I O N I N S I D E R

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Understand first and foremost that lawsuits

are about money; you need to look at litigation

from a business perspective. The key to coming

through litigation with the optimal outcome is

to understand the process and to make smart,

well-reasoned business decisions at each of the

seven critical steps.

sentially says that even if everything in the complaint is absolutely true, the plaintiff is not entitled to win. Demurrers rarely kill a case completely; they are best in more complex cases for cutting down the number of theories against you. They are also expensive, but where appropriate they are invaluable.

Step Four: Discovery and MotionsMuch of the time spent in litigation is in the “discovery” process,

where your attorney gathers evidence by demanding documents from the other side, sending them written questions and taking “depositions” – interviews of parties and other witnesses with law-yers and a court reporter present. Discuss discovery strategy with your lawyer to ensure you are getting the most bang for your buck – weigh the costs versus the benefits of each step in your lawyer’s discovery plan.

The other side will also do discovery on you. You will be verifying your discovery responses (which your attorney drafts) under pen-alty of perjury, so be truthful and complete. Eventually, the plain-tiff will take your deposition. Remember to provide truthful, clear answers and avoid saying snarky things that will reflect poorly on you should the transcript be read to the jury. Take your discovery obligations seriously – if you fail to respond in time or truthfully, the results can be disastrous.

Your attorney may suggest making a “Motion for Summary Judg-ment” (“MSJ”). An MSJ is different from a demurrer in that you can use some of the evidence you have gathered to ask the court to rule in your favor because all the basic facts of the case are un-disputed. Contract cases where there are a lot of documents are often good MSJ candidates; cases where the evidence is primarily the contradictory testimony of the parties are bad MSJ candidates because the facts are disputed.

MSJs are an invaluable tool for defendants because they have the capacity to kill a case outright without going to trial, but they are hard to do correctly because of the many procedural rules. MSJs are also expensive, though not nearly as expensive as a trial.

Step Five: SettlementThe fact is that 97 percent or so of cases never go to trial. Some

are dismissed voluntarily – yes, occasionally plaintiffs just abandon their lawsuits. Others are defeated by demurrers or MSJs. The majority, however, are settled.

Settlement is not exactly a step, but a process. You can settle at any time. Figure out early on what you would pay to settle your case. Paying on a claim you know has no merit is galling, but your monthly legal bills will dramatically demonstrate that principle comes with a hefty price tag. Again, in business litigation, the wis-est decisions are business decisions.

The courts love settlement – it clears their dockets – and order

formal settlement talks in almost every case. Sometimes this takes the form of a settlement conference in front of a judge. There are also professional mediators. The judge or mediator will work with the parties, point out weaknesses in their cases and try to create a compromise. You will need to be personally present, along with your lawyer. Sometimes you will feel pressured to settle – perhaps even by your own lawyer. That is not necessarily bad; they might be telling you something. However in the end, the decision to settle is always yours.

Abraham Lincoln started his career as a lawyer – nobody’s perfect – and urged his fellow lawyers to try to settle:

“Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser -- in fees, expenses, and waste of time.”

—From Abraham Lincoln’s Notes for a Law Lecture, dated July 1, 1850.

Of course, Lincoln is less famous today for his willingness to compromise than for his steely resolve as he led the United States through its bloodiest war to the unconditional surrender of its op-ponent.

Step Six: TrialThe laws of probability dictate your case is unlikely to be tried to

a verdict. But some cases cannot and should not be resolved. You need to be prepared to be one of that three percent.

First, decide whether or not you want a jury. The parties can “waive a jury” and let the judge act as the finder of fact instead of only rul-ing on issues of law. Juries are often best where your case has a large emotional component. Consider a judge when you depend on a clear but perhaps nitpicky application of law.

Trial preparation is an expensive endeavor. Expect that your at-Continued on page 25

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ate meaningful “global governance” without marginalizing national sovereignty in the stated areas of jurisdiction. And what area of jurisdiction is more important to nation-al sovereignty than domestic banking and monetary policy? The United Nations in its current form is “global government lite” compared to what Zoellick just described. What Zoellick calls for is global govern-ment jurisdictions centered on banking and monetary policy with real authorita-tive power. In this world, whoever controls money ultimately controls everything else. That’s why these folks don’t need to micro-manage everything to influence the outcome of just about every decision we make. They know this well and they rely on the fact most of us are unaware of their agenda and tactics. The only way for citizens at large to protect themselves and their nations from this closely guarded insider power is to keep their nations sovereign and to make their governments truly accountable to the people—something they have not been for a very long time.

It’s as crucial for governments operating by the consent of the people to keep their monetary system under their control just as they would control the military. We don’t want central banks issuing currency for profit any more than we want the mili-tary starting wars for profit. Fiat money is an instrument of law, and we get on dicey ground when we empower a privately-owned institution to originate law from which it profits.

This means the agency entrusted to issue currency should be a genuine government agency and no secondary layers of interest or debt should be tied to the money supply itself. This would ultimately be better for honest chartered banks, the business com-munity and citizens at large. And if we do this, the rest of the world will stop rolling their eyes when we espouse our republican values with each imperial directive. nDavid Whitehead is the Publisher of Busi-

ness Insider Magazine. He can be reached by email at Publisher@BusinessInsider.us.

torney will spend one or two hours preparing for every hour actually in the court-room. This includes writing briefs and evidence motions, preparing exhibits, and reviewing testimony and discovery.

Trial usually begins with a conference with the judge over procedural details. Next are arguments on “motions in limine” – these are vital, as they determine what evidence the jury can and cannot see. Sometimes the case is won or lost on these motions.

Jury selection is next. The judge and both attorneys question the potential jurors and try to strike from the panel those they feel will be unfavorable. Once a jury (usually of 12) is selected, the lawyers give their opening arguments, plaintiff first.

The plaintiff must prove his claims “by a preponderance of the evidence” by show-ing that his claims are more likely than not true. The plaintiff puts witnesses up first, and the defense then gets to cross-examine them. When the plaintiff “rests,” the defendant presents his case. After the defense “rests,” the plaintiff gets a short chance to put on rebuttal evidence.

The lawyers then argue the case to the jury, and then the jury deliberates. The court will “instruct” the jury--that is, read largely pre-written explanations of the key issues of law applicable to the case. The jury’s verdict requires a 9-3 or better vote on each issue.

The winning party will then have a judgment in her favor. Note that having a judg-ment against someone is not the same as collecting a judgment from someone. If the judgment debtor has no assets, there is nothing to collect. If the judgment is against

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Business litigation is a long, complex process that

takes considerable time and money. The key is to

think about your business goals and resources at

every step in the process, and to work with a legal

professional who understands your needs.