How Does a Business File a Lawsuit

Sometimes, deals go bad, intellectual property is stolen and business partners don’t meet their end of a contract. Ideally, businesses can solve all of their problems without turning to litigation — but sometimes a lawsuit is necessary.

This is how businesses typically file lawsuits, and concerns that you may want to consider when seeking legal advice from a business attorney.

Who Can File a Lawsuit?

To begin, this post is not legal advice. If you are seriously considering filing a lawsuit, you should seek the services of a business attorney. Every business owner should understand the basics of business litigation, however, and how to prepare for disputes.

Common types of business litigation include breach of contract, breach of fiduciary duty, partnership disputes and insurance disputes. 

Lawsuits can be filed by individuals, employees, vendors, clients and entire businesses. 

As a business owner, you can file a lawsuit as a business, as an individual or both. Whether or not you have standing to file the lawsuit, however, may vary. If you file a lawsuit without standing to sue, or if you file in the improper jurisdiction, the case may be thrown out. 

In the event of property damage, for example, you should consider whether it was personal property or business property that was damaged. If someone damaged your personal property, you may have standing to sue as an individual. If the business’s property was damaged, it may make more sense to sue as the business.

Your relationship with the party being sued may also matter. If a business partner or customer caused you damage, suing as a business may be the right option.

You can also file the lawsuit under both your name and your business’s name. This is called a joinder of plaintiffs or a joinder of claims. Depending on your claim, however, this may not always be a practical or effective option.

What to Consider Before Filing a Business Lawsuit 

A lawsuit needs to sue one or more specific people or organizations. If you don’t have that person or organization’s address or full name, it may be difficult or impossible to serve the lawsuit or summons. 

The rules and requirements of business litigation mean that even apparently simple cases can drag on for years — costing all involved parties significant time and money. The outcome isn’t always the expected one, either, and it’s not unusual for all parties involved to walk away disappointed.

You should also consider the expected payout. Lawsuits are expensive, and if you don’t expect to win much from the suit, you may want to consider an alternative method of resolving the dispute. 

You’ll also have to think about how you will collect from a customer, client or business in the event that you win. Most business owners understand that attorney’s fees will shrink any judgment they win, but they should also know that the cost of collecting may further reduce that sum. 

Many businesses opt for arbitration. This is a legal alternative to litigation that involves both parties and an arbitrator, a legally trained professional who will hear the dispute and issue a written decision. This decision can be entered into a court of law as a judgment if necessary. 

The arbitrator may also handle the process of collecting from the other party.

In practice, this approach can be much simpler than a lawsuit.

Mediation is another option. Like arbitration, it’s a way of resolving disputes that does not involve litigation. It’s a much more informal process than arbitration, however, and may not follow rules as strictly. A mediator, who plays a similar role to the arbitrator, also may not have legal experience, unlike an arbitrator. 

Like decisions reached in arbitration, however, mediation agreements signed by both parties will be binding. 

The Process for Filing a Lawsuit 

Lawsuits begin with the plaintiff filing a complaint. In numbered paragraphs, the plaintiff will lay out jurisdiction, venue, claims and damages — what court has the power to hear the case, where the lawsuit may be filed, the specific counts and what the plaintiff wants from the defendant. 

Common venues for business litigation include courts like bankruptcy court and small claims court.

If the plaintiff wants a jury trial, they will request a jury in this complaint.

Now, the defendant must respond to the lawsuit within a deadline set by law. If the defendant does not respond, the plaintiff can request that the default be entered into the court record, which gives the plaintiff the right to a default judgment.

The defendant’s response will be in the form of an answer. This answer admits or denies each of the claims in the original complaint, and also lists defenses or counterclaims. The defendant may also request a jury. 

In lieu of an answer, the defendant may also file a motion that requests the dismissal of some or all of the complaint. The judge can grant or deny this motion, requiring the defendant to answer the complaint. All parties to the lawsuit may appeal a judge’s decision on this motion.

Next, the judge will issue a scheduling order that includes important deadlines related to the case.

The discovery process, in which both parties start gathering evidence and records and begin taking depositions, comes next. 

Both parties can file motions, which serve a variety of purposes — like requesting information or a change of venue.

Finally, the case will come to court at an appointed date. The judge or jury will hear the case and render a decision. Both parties can appeal the decision to a higher court if they have a good reason to question the verdict.

The Basics of Business Litigation

Business litigation can be an involved process, no matter how simple your case appears to be. You’ll also need the services of a business lawyer who can help guide you through the process.

Before trying litigation, you may also want to consider alternatives like mediation and arbitration, which can be both faster and simpler than a lawsuit.

By Eleanor Hecks

Eleano is editor-in-chief at Designerly Magazine. She was the creative director at a digital marketing agency before becoming a full-time freelance designer. Eleanor lives in Philly with her husband and pup, Bear.