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 serves it along with a summons to you, the defendant. Under Texas Rule of Civil Procedure 99, 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 Texas this is usually 20 days (including weekends and holidays), though the summons itself will give you 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 defend against the lawsuit, it is crucial to respond before the deadline ends.
What Happens if My Business is Sued?
The first step is to read the complaint carefully. Many important details can be lost in legal jargon, so it is advisable to consult with an experienced attorney. They can review the complaint with you, evaluate liability, and advise you on the most appropriate response. In accordance with the Texas Civil Practice and Remedies Code, you’ll 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 a motion to dismiss. They will also start developing a defense strategy.
Can a Dispute be Resolved Out of Court?
Taking a case to trial is a lengthy and costly process. Fortunately, Texas law provides alternatives. Texas is what’s known as a “mandatory ADR referral” state. This means that individuals and businesses are required to attempt Alternative Dispute Resolution (ADR) before proceeding to trial. By referral on its own motion or at the request of any party, the court can order the parties to attempt mediation or another form of alternative dispute resolution. These methods are often faster and less expensive than litigation, but fees vary widely.
Mediation and arbitration are the two most common ADR methods under the Texas Alternative Dispute Resolution Act. 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 Texas require arbitration of disputes. Therefore, it is especially important to understand exactly who is suing you and why.
Lawsuits In Texas State Courts
Which court your case will be heard in largely depends on the amount of money at stake and is determined prior to filing suit. For disputes under $20,000, you might find yourself in a small claims court, formally known as a Justice Court in Texas. The County Courts are responsible for handling cases between $20,000 and $250,000.
As of September 2024, the state of Texas has created a specialized Business Court system for complex commercial litigation. This court can hear cases involving publicly traded companies or for claims greater than $5 million. Business Court provides a unique process for disputes and offers a variety of benefits. Business Court judges are especially experienced in commercial matters. Moreover, the court has a significantly lower case load at present, which may allow for faster resolution of disputes. If your business is already involved in a suit, your attorney may be able to file a motion to transfer your lawsuit to this court.
Lawsuits In Texas Federal Courts
In some cases, lawsuits may be brought in federal court. United States Courts 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 Texas, please feel free to reach out to a member of our team.
Contributions to this blog by Alon Sanders.
