In the fast-paced world of business and finance, legal disputes can arise unexpectedly. Understanding the legal process and how to respond to a lawsuit is critical for protecting your company’s interests, reputation, and future.
When Does a Lawsuit Begin?
A lawsuit begins when the initiating party, called the plaintiff, files a complaint, also known as a petition or lawsuit, with a court and services it along with a summons to you, the defendant. Under Massachusetts Rule of Civil Procedure 4, the summoning documents will outline the plaintiff’s claims against your business and the compensation or remedies they are seeking. This can range from monetary damages to specific actions they want your business to take or refrain from taking.
Once served, the party being sued, called a defendant, has a strict deadline to respond. In Massachusetts this is typically 20 days (including weekends and holidays), though the summons itself with provide a firm deadline. Failing to respond within this timeframe can result in an automatic loss, called a “default judgment.” You may gain additional time by submitting a request to the court, or through cooperation with opposing counsel. If you want to defendant against the lawsuit, it is crucial to respond before the deadline ends.
What Happens if My Business is Sued?
The first step is to hire a lawyer. While individuals may represent themselves in court in Massachusetts, corporations and LLC’s are considered business entities and are required by well-established case law to have a licensed attorney represent their interests in judicial proceedings in Massachusetts. This means that an officer, manager, owner, shareholder or employee is not allowed to file any pleadings or appear in court on behalf of a corporation or LLC unless they are an attorney that is licensed to practice law in Massachusetts.
An exception to this rule is that a corporation does not need an attorney to represent its interests in small claims cases in Massachusetts. In Massachusetts, the small claims court deals exclusively with cases where the claim at issue is $7,000 or less.
The next step is to read the complaint carefully. After engaging an attorney, they will review the complaint with you and will discuss each and every factual allegation contained in the complaint. Your attorney will also evaluate liability, and advise you on the most appropriate response. In accordance with Massachusetts Rule of Civil Procedure 12, you will need to file an answer to the complaint, either admitting or denying the allegations. As part of this process, a lawyer may advise you on filing a counterclaim or even a motion to dismiss the complaint when warranted. Your attorney will also start developing a long term defense strategy.
Can a Dispute be Resolved Out of Court?
Taking a case to trial is a lengthy and costly process. Though Massachusetts is not a “mandatory ADR state,” the legislature provides alternatives to going to court. Alternative Dispute Resolution (ADR) can help parties resolve issues outside of the courtroom, and usually involves a neutral third person to settle a case. Under Massachusetts’s Uniform Rules of Dispute Resolution, the state has court-connected ADR services for civil and criminal cases in every department of the Trial Court, Supreme Judicial Court and the Appeals Court. These methods are often faster and less expensive than litigation, but fees vary widely.
Mediation and arbitration are the most common methods under the Massachusetts court-connected ADR. In mediation, a neutral third party called a “mediator” helps the disputing parties negotiate toward a mutually agreeable solution. Similarly, arbitration involves a single arbitrator (or, in some cases, a panel of arbitrators) issuing a binding decision that the parties agree to accept. Many business contracts in Massachusetts require arbitration of disputes. Therefore, it is important to understand who is suing you and why.
Lawsuits In Massachusetts State Courts
Which court your case will be heard largely depends on the amount of money at stake and is determined prior to filing suit. In Massachusetts, disputes under $25,000 generally proceed in the District Court or Boston Municipal Court. For disputes that exceed $25,000, parties typically proceed in the Massachusetts Superior Court.
Massachusetts also has a specialized business court called the Business Litigation Session (BLS). The BLS is a statewide court that handles complex business and commercial disputes. Examples of cases that heard by the BLS are shareholder derivative claims, business torts, intellectual property and insurance coverage disputes, and claims arising from the sale of assets, corporate mergers, and restrictive covenants in employment agreements.
The BLS also has the advantage of a smaller caseload coupled with a dedicated court clerk for each session and a staff attorney. This allows for scheduling of motions on short notice, judicial responsiveness to discovery disputes, and timely, well-reasoned rulings on substantive matters.
Lawsuits In Massachusetts Federal Courts
In some cases, lawsuits may be brought in federal court. The United States District Court for the District of Massachusetts can hear cases involving federal statutes, like copyright and trademark disputes, or high-value conflicts (over $75,000) between parties from different states. If your business is involved in a multi-state contractual dispute or is facing a federal regulatory issue, you will likely be sued in federal court. This will significantly impact how the case proceeds, as federal courts follow the Federal Rules of Civil Procedure and sometimes apply different laws than state courts. When litigating in U.S. courts, it is important to have an attorney who is experienced in federal proceedings.
Conclusion
Facing a lawsuit can be daunting for any business owner. They distract you from running your business and drain your business’s limited resources. But with the right approach you can navigate the process efficiently. Acting quickly, retaining experienced legal counsel, and considering all available options are essential for preserving your interests. If you have questions about litigating in Massachusetts, please reach out to a member of our team.
Contribution to this blog by Michael Touma.
Photo by Headway on Unsplash
