Free Defending a Business Lawsuit Worksheet

The judge or jury will decide the amount of damages, if any, that the plaintiff will receive. In proving the damages, the plaintiff must be prepared to explain how they "mitigated" their damages, i.e., how the damages were kept to a minimum. There are two types of damages:

Actual Damages
Actual damages are awarded in an attempt to restore a party to the condition they were in before the problem arose. Actual damages can consist of:

1. Repair or replacement costs for damaged property.
   
2. Lost job income in the past.
   
3. Loss of future income (future income is projected on the basis of a person's age, education and job history).
   
4. Hospital, medical and pharmacy bills (these bills include prosthetic devices, wheelchairs, nursing care, etc.).
   
5. Pain and suffering (which includes fright, grief, shock, humiliation and/or indignity).
   
6. Physical impairment or disfigurement.
   
7. Increased living costs (for example: costs associated with remodeling to accommodate a physical handicap or for custodial care).

Punitive Damages
Punitive damages are damages meant to punish the defendant for conduct that is determined to be willful, malicious or reckless. They are designed to let the defendant know that the judge or jury disapproves of their malicious or reckless conduct and are generally only granted in extreme cases. In most states, punitive damage awards are unlimited. However, some states limit the amount of punitive damages that the plaintiff can receive or require that a portion of the punitive damage award go into a state fund instead of being paid to the plaintiff. Also, some types of cases predetermine the size of the punitive damages award.

When a party is sued, a notice of the lawsuit is formally delivered by sheriff or process server to the business, the business's registered agent, or the officers or directors. The notice will state the name and address of the plaintiff(s) and the type of complaint filed.

If you receive notice that you have been sued, you MUST ANSWER BY A DESIGNATED DATE. You should also notify your insurance carrier immediately. If you fail to answer the lawsuit, the judge may enter a "judgment" against you for all money or property claimed by the plaintiff(s) and require you to pay all court costs. A judgment is an official court order which may be enforced by garnishment of money owed to you or your bank account or by having the Sheriff seize and sell your property. You can attempt to have the judgment "set aside" (voided) if you do not receive proper notice, but this happens infrequently; other excuses are usually ignored.

Even after the suit has been filed, the defendant has an opportunity to settle the dispute out of court. All parties may save both time and money by resolving the case prior to a court hearing. The defendant should contact the plaintiff and offer to discuss the dispute, possibly offering a settlement. If an agreement is reached, a "release" will have to be prepared and signed by both parties, and filed with the clerk of court. Once it is filed with the court clerk, both parties will be required by law to obey it. The plaintiff should also "dismiss" the action, to remove the suit from the court system.

After considering the plaintiff's claim, the defendant may determine that some third party owes all or part of the amount being claimed by the plaintiff. In that event, the defendant should file a "cross claim" to bring in the additional party. Also, a "counterclaim" against the plaintiff may be filed by the defendant, asking for damages from the plaintiff to offset or exceed the claim made by the plaintiff.

Some possible defenses available to the defendant are: "lack of jurisdiction," "failure to state a claim," "statute of limitations," "comparative negligence," "assumption of risk," and "failure to mitigate damages."

The case will be heard by a jury if the suit was filed in the type of court which allows for a jury and either party demands a jury. For example, no jury is allowed in a court of Equity, which is a court that grants relief in the form of personal decrees instead of money damages.

Lawsuits can be filed in federal court (instead of state court) if at least one of the following is true:

1. the suit is between citizens of different states AND the amount of the claim is over $75,000;
   
2. a federal law provides the plaintiff with a cause of action and a remedy; or
   
3. the plaintiff is alleging a violation of a patent, copyright, or trademark.

The Trial
In federal district court, as in state court, the parties involved in the dispute go to the court at a pre-assigned time and present their witness testimony and evidence to the judge or jury. The plaintiff has the burden of proving that there is liability on the part of the defendant, that the defendant caused the damages suffered by the plaintiff, and the amount of the damages. The plaintiff therefore presents his or her evidence first, followed by the defendant. The losing party is allowed to appeal the judgment.

A general partnership is like a sole proprietorship, except that the partnership is owned and managed by more than one owner. Each partner is personally liable for all of the debts and expenses of the business. That is, a partner's liability is "unlimited."

A partnership terminates when a partner withdraws from the partnership or dies, unless the remaining partners agree to continue the business. Most states have specific statutes that govern partnerships, which become particularly important in the absence of a partnership agreement. If the partnership uses a trade name, the owner may be required to register the trade name with the appropriate state and/or county officials.

The partnership form of business is most often used for small, low risk businesses whose owners want to avoid the tax consequences that result from corporate ownership, and are willing to accept personal liability.

The defendant's insurance carrier should always be promptly notified of the plaintiff's claim, even if the defendant doubts that the insurance policy provides coverage for the type of claim filed. If the defendant fails to promptly notify the carrier, he/she usually forfeits the right to have the carrier defend him/her, even if coverage would have been available.

In order to succeed in court, the plaintiff must be able to prove that the defendant is legally responsible ("liable") for the damages. Not all damages suffered by the plaintiff can be recovered from the defendant. In some cases, the law does not hold the defendant responsible under the facts of the case. In other cases, the plaintiff fails to prove all of the legal elements necessary for that responsibility to attach to the defendant.

The limited liability company (L.L.C.) is a form of business entity which represents an attempt to combine the "limited liability" feature of the corporation with the more favorable tax consequences of the partnership. Similar to a corporation, L.L.C. statutes provide that the owners ("members") of an L.L.C. have limited liability for the debts and expenses of the L.L.C. The L.L.C. form of business entity is used primarily by small businesses that want limited liability, the tax benefits of a partnership, and the ability of the members to take part in the management of the business.

A limited partnership is a form of business entity that is designed to cure one of the primary disadvantages of a general partnership, i.e., the "unlimited liability" problem. A limited partnership has one or more of both "general" and "limited" partners. The limited partners share in the profits and losses, but their liability is limited to their respective capital contributions to the partnership because they are not permitted to have any management responsibilities. However, the general partner has unlimited liability.

Most states have specific limited partnership statutes that govern the formation and operation of limited partnerships. In such cases, it is usually a requirement that a certificate of limited partnership be filed with the Secretary of State in a manner similar to the requirement that a corporation file articles of incorporation. Limited partnership statutes usually require that the partnership name include the words "limited partnership" or the abbreviation "L.P."

The limited partnership form of business is most often used for specific projects, for which a developer (the general partner with technical and management expertise) wishes to attract investors (limited partners) who do not want the risk of personal liability and are comfortable in allowing someone else to manage the project.

The plaintiff should plan what he or she will say at the hearing (trial) and assemble the necessary evidence. All of the facts concerning the case must be presented to the judge in a simple, logical manner. Start at the beginning and tell the story to the end. It is a good idea, if your schedule permits, to observe another hearing prior to your own to get an idea of how Small Claims Court operates. The judge will make his or her decision based upon the evidence presented and/or the credibility of the witnesses.

The plaintiff may also want to go to a law library and do some homework in order to better understand the legal issues. Usually your county courthouse or public library has books available containing the state's laws.

The state where an entity is incorporated does not necessarily have to be its principal place of business. The principal place of business is usually where a substantial portion of the entity's business is transacted and where the centralized supervision of all of its business is conducted. For example, it is the place where the executive officers are located, and where the accounting books and receipts are kept (usually corporate headquarters). The location of the "principal place of business" is important to determine whether the lawsuit is being brought in the correct court.

A "Registered Agent" is a person who is designated by a business for the specific purpose of accepting service of legal documents in a particular state.

1. The Defending a Lawsuit - Business Worksheet is not a legal document and does not require any signature, witnesses or notarization.

2. The information contained in the worksheet should be given to a lawyer before the specified response deadline has come. The information in the worksheet will assist the lawyer in preparing a defense. If the case is brought in small claims court, the defendant may choose not to hire a lawyer. In that case, the worksheet can be used by the Defendant to organize the information and prepare the defense.

3. Certain information may not be available at the time that the worksheet is created. If information is omitted, the program will print blank lines, and the information can later be written on the printed documents. Or, to print an updated document, open the saved document and enter the missing information.

Most states have set up a small claims division of District Court in each county to provide an inexpensive and speedy method to settle most civil disputes involving money or personal property valued at several thousand dollars or less. Each state has set its own maximum value of a dispute that may be brought into small claims court. The procedures of the court are informal, and while some states allow a lawyer to appear with the plaintiff, Small Claims Court is designed to let the plaintiff represent him/herself. The personnel at the courthouse are there to serve and will be glad to answer questions about various procedural matters. The plaintiff should remember, however, that the clerks and the judges cannot give legal advice.

Ceilings on Amounts Claimed and Filing Fees
The amount that may be sought in Small Claims Court varies from state to state. The amounts range from $1,000 to $15,000. (See Jurisdictional Amounts for a state-specific list of maximum amounts.) The basic filing fees generally range from $25 to $50, and the judge or hearing officer may order that these costs be paid by the party who loses the case.

The Court Hearing Process
In Small Claims Court, the two parties involved in the dispute go to the court at a preassigned time and each party tells their side of the story to the judge with the plaintiff going first. The plaintiff has the burden of proving that there is liability on the part of the defendant, that the defendant caused the damages suffered by the plaintiff, and the amount of the damages. The judge makes a decision based on the law as applied to the facts presented. No juries are used in Small Claims Court. Most states allow the losing party to appeal a small claims judgment.

A sole proprietorship is an unincorporated business owned and managed entirely by one person (except to the extent that the owner may delegate management responsibilities to an employee). A sole proprietorship is the simplest form of business. The owner is personally liable for all the debts and expenses of the business. That is, the owner's liability is "unlimited."

A sole proprietorship ends automatically when the sole proprietor dies. No organizational formalities are required for a sole proprietorship. If the business uses a trade name, the owner may be required to register the trade name with the appropriate state and/or county officials. The sole proprietorship form of business is most often used for small, low risk businesses that have only a few employees and no need for more than one owner.

Filing a lawsuit in State "District Court" is more expensive, and usually a slower method of resolving disputes than using small claims court. The amount of time that it takes to resolve a dispute in court, from the time the complaint is filed to the time the court issues a judgment (not including any post-judgment collection proceedings) depends upon the nature and complexity of the lawsuit, as well as the condition of the court's "docket" -- how many cases are awaiting action at the same time. Some courts allow simple cases to be heard ahead of more complex cases, even though the latter were filed first.

The procedures of state district court are more formal than in small claims court. Parties should be prepared to go through a process of "discovery," which includes responding to written questions and requests for documents, and participating in "depositions" where testimony is recorded under oath even before the trial.

Settlement/Mediation
A state district court lawsuit can take months or even years to resolve, which is expensive in terms of time and money. Therefore, at any stage in the dispute -- before the lawsuit is filed, after discovery begins, or before (or even during) the trial -- the parties should consider making further attempts to settle the matter through negotiation or mediation. Negotiation takes place between the parties or their attorneys. Mediation involves an impartial third person who listens to both sides and suggests a settlement.

The Trial
The parties involved in the dispute go to the court at a pre-assigned time and present their witness testimony and evidence to the judge or jury. The plaintiff has the burden of proving that there is liability on the part of the defendant, that the defendant caused the damages suffered by the plaintiff, and the amount of the damages. The plaintiff therefore presents his or her evidence first, followed by the defendant. The judge or jury then decides which version of the facts is the correct version. The judge also makes rulings based on the law governing the issues presented. The losing party is allowed to appeal a judgment if a good faith argument can be made that an error occurred in the initial proceeding.

The following are examples of the types of lawsuits which can be brought, provided that all of the legal elements can be proven to establish liability on the part of the defendant and resultant loss to the plaintiff:

Breach of Contract
The defendant has breached an oral, written or implied contract. The elements of a binding contract are offer, acceptance (or collectively, an agreement on the part of both parties) and consideration (something was given in exchange for something in return). The consideration can be a promise to do something in the future.

Negligence
The defendant acted negligently. The elements of negligence are:

1. a duty on the part of the defendant to act reasonably under the circumstances;
   
2. breach of that duty; and
   
3. the breach caused the plaintiff's injuries or property damage.

Intentional Act
The defendant acted intentionally to cause injury or damage to the plaintiff. Here, punitive damages may even be recoverable. However, if suit is brought in small claims court, punitive damages must be allowed in that court and, if so, the amount must fall within the small claims court maximum amounts.

Defective Product
The defendant's product was defective and caused bodily injury or property damage.

Breach of Warranty
The defendant's product failed to live up to the seller's oral, written or implied warranty, and the defendant has refused to repair or replace the defective product.

Statutory Right Violation
The defendant has violated a statutory right held by the plaintiff; for example, the plaintiff bought goods from the defendant's door-to-door salesperson and the defendant refused to allow the plaintiff to return the goods for a refund within the time frame provided by law.

Copyright, Patent, or Trademark Infringement
The defendant has violated a copyright, patent or trademark held by the plaintiff.

Workers' Compensation
The defendant has denied the plaintiff workers' compensation benefits even though the plaintiff worked for the employer and was injured on the job.

Discrimination
The defendant has discriminated against the plaintiff because of the plaintiff's age, race, creed, color, sex, national origin, religion, or disability. Discrimination can occur if the plaintiff is either an applicant for a job or an employee of a business.

Some states prohibit certain categories of parties from suing in Small Claims Court, such as: a person or organization in the business of lending money at interest, a collection agency or collection agent, or a person or organization with an assigned claim.

A parent or legal guardian must appear in Small Claims Court on behalf of a minor or a person adjudged mentally disabled.

Number of Plaintiffs and Claims
There can be multiple plaintiffs ("co-plaintiffs") if the claim arises out of a common contract or event, where more than one plaintiff was damaged. For example, if Husband and Wife were each injured in an automobile accident which was negligently caused by the defendant, the husband and wife can sue the defendant together as co-plaintiffs. Keep in mind, however, that the total damages claimed in the lawsuit must not exceed the maximum amount allowed in the small claims court.

Some states limit the number of claims (for example, 25) that any single plaintiff may bring in any one calendar year in the Small Claims Court.

Corporations and Small Claims Court
Some states prohibit a corporation from suing in Small Claims Court. Others require that if the plaintiff is a corporation or partnership, the person who comes to the trial/hearing must be:

1. an officer of the corporation,
2. a person regularly employed in a managerial capacity by the corporation or partnership, or
3. a lawyer acting on behalf of the corporation.