Can I Be Sued If…? Some Basics of Litigation, Part I

Many of the recent headline-grabbing claims of threatened lawsuits by, between and among politicians brought to mind one of the most common questions I was asked when in private practice. The question was roughly this: if I do a certain action, can I be sued? 

The issue might arise during contract negotiations or during the implementation of a contract. It also arose when the question was whether the parties had in fact entered into a binding agreement. Sometimes it was asked in connection with a planned marketing program making large claims.

The answer was always the same: Yes, but with the qualification that the suit might not hold up to early challenges to its validity. Such challenges may take several forms, but all of them can lead to a quick (a relative term, I remind you) resolution. In this column I will try to explain this very complicated legal subject at the treetop level and out of the weeds below, using as little legal jargon as possible.

First, anyone can exercise the privilege of filing a lawsuit to demand relief from a court of law. Some courts require by a corporate entity to be made by a licensed attorney, which may serve as a check against the filing of frivolous claims (but no guarantees). Individuals generally can represent themselves and file any claim if they are willing to pay the filing and other fees.

If you receive a copy of a lawsuit, you should never ignore it, no matter how preposterous you believe the claim to be. Failing to respond to a properly filed and delivered lawsuit will lead to a “default judgment,” which means you lose automatically and a “judgment” will be entered against you. If you don’t pay the judgment, or otherwise settle the matter, the party who filed the suit can “execute” the judgment, which could involve the seizure of your property, taking some of your wages or securing a lien that could interfere with your disposition of property and your ability to take out loans.  

You definitely do not want to default on a filed claim. Consult an attorney immediately. Don’t wait and don’t take unilateral action by talking directly with the complaining party. Everything you say can and will be used against you.

A common related question is whether, before filing the complaint with the court, the claiming party must send a “demand letter” stating the claim and demanding payment or other satisfaction. The usual answer is no. If a party reasonably believes it has a claim, it may simply file suit. While we always hope that the attorney for such a party would make a demand first, so that litigation costs may be reduced or avoided, there is generally no rule requiring such a prior demand. If, however, you get such a letter, you should not ignore it either. Consult counsel immediately about your options. A claimant who believes he is being ignored often becomes more difficult to deal with than one who believes his demands are being respected, even if a legal battle is likely to ensue.

A complaint has been served
Let us now assume that a complaint has been filed against you and you have been properly served with a copy. Let’s further assume that the claims are indeed weak or even frivolous. Three options are normally available. 

First, you can try, through counsel, to explore settlement. This is almost always better than fighting out the claim in court. Settlement talks can also be a good way to gather information without having to go through formal “discovery,” in which each party has the right to interrogate the other under oath and to compel the production of documents. 

Second, and this is the most common practice, if the suit cannot be settled at the outset, you may file a “motion to dismiss for failure to state a claim.” The phrase in quotes has a special meaning. Such a motion is treated, temporarily, as admitting the facts stated in the complaint and raises the legal question whether those facts, if proved, establish a valid legal claim. If the court finds they do, then the case proceeds; the complaining party still must prove those facts with evidence. If the court finds that the facts as pleaded, even if true, would not, as a matter of law, result in liability, then the judge will dismiss the case.

Here is a simple example. A competitor opens a branch office in an economically depressed part of town. At an industry conference, you overhear him proudly telling other agents what a great rent he got on the lease. You say to another group of agents, “that was a dumb move and I think it’s likely to hurt his business badly.” The other agent learns of your comments and sues you for slander. Your attorney would almost certainly move to dismiss on grounds that the allegedly slanderous facts were clearly just your opinion, the statement of which is constitutionally protected. He would argue that even if you said exactly what was alleged, you cannot be held liable because there is a privilege to utter statements of opinion. Case dismissed. 

If there is a dispute about the facts regarding what you said, the court will still take the claiming party’s allegations as the correct version for purposes of ruling whether a valid claim has been stated. If the court finds that a valid claim has been asserted, the litigation moves on to the next stage. You have lost on the motion but not on the lawsuit itself.

Next month we’ll consider what happens next.