L I T I G AT I O N I N S I D E R
7 Steps to Surviving a Lawsuit
By Kurt Schlichter, Esq, Attorney at Law
A
s the economy worsens,
more businesspeople find
themselves being sued.
Getting sued is no fun even in
the best of times. You are mind-
ing your own business when some
vaguely disreputable gentleman
steps up and hands you a batch of
papers, announcing that you have
been served. Reading the “Com-
plaint for Damages,” you do not
recognize yourself. The facts are all
wrong and many of the allegations
are outright lies. The “plaintiff ” has
accused you of all sorts of misconduct and claims everything you
did was part of some deliberate scheme designed to defraud him.
Welcome to the world of business litigation. Now what?
Understand first and foremost that lawsuits are about money; you
need to look at litigation from a business perspective. The key to
coming through litigation with the optimal outcome is to under-
stand the process and to make smart, well-reasoned business deci-
sions at each of the seven critical steps.
Step One: Stop, Think and Lawyer Up
You have read the complaint and you are furious. Your first idea is
to reach for the phone and give your opponent a piece of your mind.
Or maybe you think that once you explain what really happened, he
will drop the suit. These are bad ideas.
Plaintiffs tend not to sue unless they are serious about their objec-
tive. You are not going to talk your opponent – or his lawyer – out
of the lawsuit. You are more likely to just say something that will
come back and haunt you.
You need professional help – not only for the technical legal mat-
ters, but because you are emotionally involved, and emotional deci-
sion-making is bad business. Unless you think do-it-yourself sur-
gery is a good idea too, you need a lawyer (and if your company is
a defendant, you must have a lawyer). Litigation is a harrowing,
frustrating process, so you need to pick a lawyer who is not only
technically proficient but one with whom you can relate. Talk to
several. Find one whose personality suits you. If you are chatty
and need hand-holding, do not hire a ringer for Mr. Spock. If you
think General Patton was a little restrained, do not retain Mr. Rog-
ers, Esquire.
And do not delay. The clock starts running once you have been
handed the papers. You would be shocked at the number of intel-
10 S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e
ligent businesspeople who are served with a lawsuit, put it in an “in”
box and do nothing until the notice of default arrives in the mail.
Step Two: Determine Your Budget
You have settled on a lawyer. Now you need to figure out how to
pay for her.
The best defense is one where someone else pays the bill. Your in-
surance policies might provide a legal defense as well as pay a judg-
ment against you. Tell your lawyer about your insurance coverage
– business, auto and even home. Insurance usually covers claims in
which you are accused of doing something unintentional, like caus-
ing an accident. It typically does not cover intentional wrongs, like
fraud or claims that you breached a contract. If there is even the
most remote possibility that the insurer will “accept your tender,”
make your claim. Yes, it may make your premium go up a couple
hundred dollars a year, but considering that many business lawyers
charge north of $300 per hour, you may as well use your coverage.
Your ability to pay for your defense is key to determining your
initial strategy, just as finances are key to your routine business de-
cisions. Even a mid-sized case can cost $50,000-$100,000 in legal
fees through a verdict. If you are paying the fees yourself, you will
need to put a substantial amount down as a deposit and then pay
the monthly bill. Ask for an estimate, understanding that the final
total will likely end up higher. If you cannot afford to defend your-
self, you need to know that when evaluating your options.
If you win, the other guy has to pay your attorney fees, right? Sor-
ry. Except where the dispute is on a contract with a provision for
the recovery of legal fees, parties generally bear their own attorney’s
fees. All you get back if you win is a judgment for some of your out-
of-pocket costs, like filing fees.
Step Three: Responding
Sometimes the best response is no response. If you have no as-
sets and no way to fund a defense, perhaps it makes sense to let the
other side take a default judgment. A judgment that cannot be col-
lected is no judgment at all. Similarly, if the claim against you is big
enough – and does not involve fraud or similar wrongs – you might
consider bankruptcy, which could discharge the entire claim against
you along with many of your other obligations. Sometimes talking
is the best plan – perhaps your lawyer can settle the case early for a
reasonable amount.
Usually, you will end up responding to the lawsuit. The most com-
mon response is an “answer.” This is a document that essentially
denies everything the complaint says and asserts various defenses.
Another option is a “demurrer.” A demurrer is a motion that es-
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sentially says that even if everything in the complaint is absolutely
true, the plaintiff is not entitled to win. Demurrers rarely kill a case
completely; they are best in more complex cases for cutting down
the number of theories against you. They are also expensive, but
where appropriate they are invaluable.
Step Four: Discovery and Motions
Much of the time spent in litigation is in the “discovery” process,
where your attorney gathers evidence by demanding documents
from the other side, sending them written questions and taking
“depositions” – interviews of parties and other witnesses with law-
yers and a court reporter present. Discuss discovery strategy with
your lawyer to ensure you are getting the most bang for your buck
– weigh the costs versus the benefits of each step in your lawyer’s
discovery plan.
The other side will also do discovery on you. You will be verifying
your discovery responses (which your attorney drafts) under pen-
alty of perjury, so be truthful and complete. Eventually, the plain-
tiff will take your deposition. Remember to provide truthful, clear
answers and avoid saying snarky things that will reflect poorly on
you should the transcript be read to the jury. Take your discovery
obligations seriously – if you fail to respond in time or truthfully,
the results can be disastrous.
Your attorney may suggest making a “Motion for Summary Judg-
ment” (“MSJ”). An MSJ is different from a demurrer in that you
can use some of the evidence you have gathered to ask the court
to rule in your favor because all the basic facts of the case are un-
disputed. Contract cases where there are a lot of documents are
often good MSJ candidates; cases where the evidence is primarily
the contradictory testimony of the parties are bad MSJ candidates
because the facts are disputed.
MSJs are an invaluable tool for defendants because they have the
capacity to kill a case outright without going to trial, but they are
hard to do correctly because of the many procedural rules. MSJs
are also expensive, though not nearly as expensive as a trial.
Step Five: Settlement
The fact is that 97 percent or so of cases never go to trial. Some
are dismissed voluntarily – yes, occasionally plaintiffs just abandon
their lawsuits. Others are defeated by demurrers or MSJs. The
majority, however, are settled.
Settlement is not exactly a step, but a process. You can settle at
any time. Figure out early on what you would pay to settle your
case. Paying on a claim you know has no merit is galling, but your
monthly legal bills will dramatically demonstrate that principle
comes with a hefty price tag. Again, in business litigation, the wis-
est decisions are business decisions.
The courts love settlement – it clears their dockets – and order
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formal settlement talks in almost every case. Sometimes this takes
the form of a settlement conference in front of a judge. There are
also professional mediators. The judge or mediator will work with
the parties, point out weaknesses in their cases and try to create a
compromise. You will need to be personally present, along with
your lawyer. Sometimes you will feel pressured to settle – perhaps
even by your own lawyer. That is not necessarily bad; they might be
telling you something. However in the end, the decision to settle
is always yours.
Abraham Lincoln started his career as a lawyer – nobody’s perfect
– and urged his fellow lawyers to try to settle:
“Discourage litigation. Persuade your neighbors to compromise
whenever you can. Point out to them how the nominal winner is
often a real loser -- in fees, expenses, and waste of time.”
—From Abraham Lincoln’s Notes for a Law Lecture, dated July 1,
1850.
Of course, Lincoln is less famous today for his willingness to
compromise than for his steely resolve as he led the United States
through its bloodiest war to the unconditional surrender of its op-
ponent.
Step Six: Trial
The laws of probability dictate your case is unlikely to be tried to
a verdict. But some cases cannot and should not be resolved. You
need to be prepared to be one of that three percent.
First, decide whether or not you want a jury. The parties can “waive
a jury” and let the judge act as the finder of fact instead of only rul-
ing on issues of law. Juries are often best where your case has a
large emotional component. Consider a judge when you depend on
a clear but perhaps nitpicky application of law.
Trial preparation is an expensive endeavor. Expect that your at-
Continued on page 25
Understand first and foremost that lawsuits
are about money; you need to look at litigation
from a business perspective. The key to coming
through litigation with the optimal outcome is
to understand the process and to make smart,
well-reasoned business decisions at each of the
seven critical steps.
S o u t h B a y B u s i n e ss I n s i d e r M a g a z i n e 1 1
ate meaningful “global governance” without
marginalizing national sovereignty in the Continued from page 11
stated areas of jurisdiction. And what area torney will spend one or two hours preparing for every hour actually in the court-
of jurisdiction is more important to nation- room. This includes writing briefs and evidence motions, preparing exhibits, and
al sovereignty than domestic banking and reviewing testimony and discovery.
monetary policy? The United Nations in Trial usually begins with a conference with the judge over procedural details.
its current form is “global government lite” Next are arguments on “motions in limine” – these are vital, as they determine what
compared to what Zoellick just described. evidence the jury can and cannot see. Sometimes the case is won or lost on these
What Zoellick calls for is global govern- motions.
ment jurisdictions centered on banking Jury selection is next. The judge and both attorneys question the potential jurors
and monetary policy with real authorita- and try to strike from the panel those they feel will be unfavorable. Once a jury
tive power. In this world, whoever controls (usually of 12) is selected, the lawyers give their opening arguments, plaintiff first.
money ultimately controls everything else. The plaintiff must prove his claims “by a preponderance of the evidence” by show-
ing that his claims are more likely than not true. The plaintiff puts witnesses up
That’s why these folks don’t need to micro-
first, and the defense then gets to cross-examine them. When the plaintiff “rests,”
manage everything to influence the outcome
the defendant presents his case. After the defense “rests,” the plaintiff gets a short
of just about every decision we make. They
chance to put on rebuttal evidence.
know this well and they rely on the fact The lawyers then argue the case to the jury, and then the jury deliberates. The
most of us are unaware of their agenda and court will “instruct” the jury--that is, read largely pre-written explanations of the
tactics. The only way for citizens at large to key issues of law applicable to the case. The jury’s verdict requires a 9-3 or better
protect themselves and their nations from vote on each issue.
this closely guarded insider power is to The winning party will then have a judgment in her favor. Note that having a judg-
keep their nations sovereign and to make ment against someone is not the same as collecting a judgment from someone. If the
their governments truly accountable to the judgment debtor has no assets, there is nothing to collect. If the judgment is against
people—something they have not been for
Continued on page 29
a very long time.
It’s as crucial for governments operating
Business litigation is a long, complex process that
by the consent of the people to keep their
monetary system under their control just takes considerable time and money. The key is to
as they would control the military. We
don’t want central banks issuing currency think about your business goals and resources at
for profit any more than we want the mili-
tary starting wars for profit. Fiat money is every step in the process, and to work with a legal
an instrument of law, and we get on dicey
ground when we empower a privately- professional who understands your needs.
owned institution to originate law from
which it profits.
This means the agency entrusted to issue
currency should be a genuine government
agency and no secondary layers of interest
or debt should be tied to the money supply
itself. This would ultimately be better for
honest chartered banks, the business com-
munity and citizens at large. And if we do
this, the rest of the world will stop rolling
their eyes when we espouse our republican
values with each imperial directive. n
David Whitehead is the Publisher of Busi-
ness Insider Magazine. He can be reached by
email at Publisher@BusinessInsider.us.

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