Better Call Saul: What to Do When Threatened With a Lawsuit

Here’s your worst nightmare, only it’s happening to someone else: “I am a licensed general contractor being sued by a homeowner,” writes the anonymous California general contractor at JustAnswer.com.

The writer goes on to describe his situation: As the job approaches completion, the homeowner suddenly begins supplying list after list of things that dissatisfy him. The contractor writes: “Naturally I do have an attorney but am given the advice just go bankrupt which does not sit well with me. My contractor's license is at stake which is my livelihood. My 30 years in the business have provided for ethical workmanship and I've never encountered this.”

Chances are that if you’ve been in business any length of time, sooner or later you'll be threatened with a suit. And even if you are the plaintiff rather than the defendant—that is, you sued your client—the lawsuit experience is called, with good reason, one of the most stressful an individual can go through. The only one who’s having fun is the lawyer wracking up billable hours.

Served With Papers

And while your immediate reaction will likely be emotional—screaming, swearing, hurling objects across the room—don’t let emotion govern your subsequent behavior. That’s the advice from Digital Media Law Project. The site advises that if you receive notice of a suit, resist whatever impulse arises and “do not contact the person who has brought the suit against you.” It’s way too late to pick up that phone. Instead, “your goal at this point should be to thoroughly understand your position and gather all the information you can.”

Start with a clear understanding of the time frame. If you’ve received a “complaint,” which initiates a civil action, the complaint will explain the reason for the lawsuit. It will also be accompanied by a summons stating the date by which you need to file an “answer” or other response.

Consider the options that are available to you and how much time you have to make up your mind about what to do. In some states, such as Louisiana, “you have anywhere from 10 to 60 days to respond,” says the Construction Law Monitor.

As far as options go, you can 1) hire an attorney, 2) represent yourself, or 3) do nothing. If you hire a lawyer, which isn’t cheap, he or she as your legal representative should be able to provide you with strategic choices. For instance, clearly the attorney representing the letter writer to JustAnswer.com was not the sharpest pencil in the box. “A good lawyer,” says the site, “will tell you whether the amount and nature of your dispute are worth fighting over. Many times it’s a better business choice to work out a deal and move on with making money.”

If you are a sole proprietor, you can represent yourself. Corporations and limited liability companies, on the other hand, “are juridical entities which cannot be represented in court unless by an attorney,” the site notes. So best to start looking, and look for an attorney who specializes in construction defects.

No-Shows Lose Big

What you don’t want to do, says the Civil Law Self-Help Center website, is to ignore the suit and do nothing. Ignoring the complaint won’t make it go away. When you default—file no response and fail to show up in court—you enable the person suing you to “ask the court for a money judgment,” the site says. Instead, the Civil Law Self-Help Center site urges, prepare a response, (known in legalese as “an Answer”), file your response with the court, give the plaintiff a copy, and know what to expect next.

A judgment is nothing more than a decision by a court that has entered into the public record. But it can cost you plenty.

Most company owners—at some point in their business—are either threatened with a lawsuit or consider filing a suit themselves