A business lawsuit is a type of legal dispute that can be filed in civil court. A business lawsuit may arise when a business violates the law or is engaged in a disagreement over a business-related matter with other parties.
Business lawsuits can touch upon a wide variety of legal issues, ranging from breach of contract violations to debt collection disputes. Business lawsuits may also involve multiple parties. For instance, a business can sue or be sued by a consumer, a client, an employee, a government agency, its shareholders, or by another business.
Nearly every aspect of a business poses some amount of risk, making businesses particularly susceptible to legal liabilities. This is why it is so important for business owners to hire an attorney to review legal documents, such as business contracts, internal company policies, and certain business transactions (e.g., selling a company).
In addition, you can increase your odds of avoiding a business lawsuit by hiring a business attorney and other specialized professionals to oversee your business operations. On the other hand, if your business is the one that wants to file a business lawsuit against another party, a business lawyer will be able to further assist you with this process.
What Kinds of Legal Issues Do Business Lawsuits Involve?
As previously discussed, business lawsuits can cover a broad range of legal issues. Some common legal issues that may serve as the basis of a business lawsuit include the following:
- Breach of contract issues;
- Environmental law violations;
- Infringement of intellectual property rights;
- Unfair competition and antitrust lawsuits;
- Issues with the sale, transfer, or dissolution of a business;
- Debt collection disputes;
- Products liability lawsuits; and
- Business defamation claims.
Recently, companies have also been facing business lawsuits involving COVID-19 issues. For instance, many small businesses are suing their insurance companies for financial losses caused by government-issued shutdowns and the pandemic itself.
One example of a COVID-19 issue that keeps showing up in such lawsuits is whether an insurance company must reimburse a business for economic damages as a result of COVID-19 exposure.
Another example of a business lawsuit involving a COVID-19-related issue is whether an insurance company must cover financial losses for damaged products. For instance, if a business sells perishable items, but everyone had to evacuate and leave things as is because of the government mandate.
In addition, many of the legal strategies being employed to handle COVID-19 and insurance issues are also being applied to handle similar cases involving business contracts. For instance, businesses in dispute over shipping contracts may need to be flexible and willing to renegotiate terms.
Finally, businesses that are being sued for issues involving COVID-19 and the pandemic should contact a lawyer immediately for further guidance on these matters. This is especially true in cases that involve businesses in multiple states and for class action lawsuits.
What are Some Ways to Protect Against a Business Lawsuit?
While there are no foolproof methods available to protect against business lawsuits, there are some general practices that a business can use to decrease its chances of being sued. Generally, the longer a company is in business, the greater its risk is of facing some sort of legal challenge.
Some basic steps that a business can take to protect against business lawsuits include:
Purchasing insurance: There are many different kinds of insurance that a business can purchase. Ultimately, a business should buy the type of insurance that is best suited to their industry or company needs. For example, if a business is frequently sued for products liability, then that business will need an insurance policy that covers consumer injuries.
- In such a scenario, the insurance company would then need to provide some financial support in the event that the business is sued. This can also prevent the business from going bankrupt due to a lawsuit.
- Implementing compliance programs: Compliance programs are intended to keep businesses in line with federal and state laws. Oftentimes, these programs can be used as evidence that a business is actively complying with current laws. Some business compliance programs may also provide protection from criminal liability (e.g., a corporate compliance program).
- Creating solid company policies: Similar to compliance programs, company policies should be drafted in accordance with the applicable laws. Company policies can also be tailored to fit a business’s needs and to avoid being held liable for the actions of their employees. Businesses should have a business attorney review its company policies to ensure compliance with the law and to mitigate the risk of future legal disputes.
- Performing due diligence: Businesses should be cautious when entering into contracts with other businesses, consumers, and/or employees. Businesses can avoid lawsuits by performing due diligence checks like making sure another business has a good reputation and pays its bills. The same rule applies when a business is acquiring or merging with another business. Businesses should also run background checks on prospective employees.
Businesses should consult a business attorney before drafting any of the above documents. This can help businesses to avoid costly errors and can prevent legal disputes from arising in the future. A business may also need to hire an attorney if their business is, was, or could be affected by the pandemic. This is because there are many new federal and state laws being passed since COVID-19. Thus, not every business may be aware of these new regulations.
In addition, some insurance companies are considering the effects of the pandemic on businesses and are amending business insurance policies accordingly.
What are Some Common Remedies in a Business Lawsuit?
In many instances, a party will often file a business lawsuit to recover a monetary damages award or to obtain an injunction. Briefly, an injunction is a type of court order that enjoins someone from taking a particular action. Alternatively, an injunction can also be used to compel a party to perform a certain action. The type of injunction issued will depend on the remedy that a petitioning party is seeking.
Monetary damages awards refer to money or funds that are paid to the prevailing party in a lawsuit. In a business lawsuit, these awards are typically used to reimburse the injured party for any financial losses suffered. The injured party, however, will first need to prove that the business caused them to lose money before they can recover the award.
Some other common remedies that a court may issue in a business lawsuit include:
- Ordering the parties to modify existing contracts or to create new ones;
- Instructing the business to replace faulty products or services at no cost;
- Compelling a business to enforce its policies or to develop new ones; and
- Ordering a business to undertake the actions that are specifically requested by the prevailing parties and approved by the court.
In addition, a prevailing party may also be able to recover statutory and punitive damages. However, these types of damages will only be available in certain situations.
How Has COVID-19 Affected Business Lawsuits?
Due to the unprecedented effects that COVID-19 has had on businesses around the world, several novel legal issues have started appearing in business lawsuits. These issues are also beginning to be incorporated in federal and state laws, as well as are continued to be studied by various U.S. legislatures. Thus, some business lawsuits involving COVID-19 issues may be difficult to resolve since not every issue may have a clear answer yet.
However, parties to business disputes that involve COVID-19 issues have been consulting their business contracts and/or other related agreements as a form of guidance. While some of these issues can be resolved by a court, a larger percentage of such issues are forcing businesses and opposing parties to renegotiate terms or to create new contracts that address COVID-19 issues.
COVID-19 has also prompted many businesses to use informal negotiation tactics, mediation, arbitration, and other forms of dispute resolution, as opposed to going to court. This is because courts in many areas were shut down due to the pandemic. Although some courts were providing online services, many of them were backlogged and still have full dockets.
Should I Hire a Lawyer Before I am Faced with a Business Lawsuit?
As discussed above, some issues will require you to hire a local business lawyer to help with a business lawsuit. This is especially true in cases where a business is a party to a lawsuit that involves COVID-19-related issues or believes it is about to be sued due to complications resulting from the pandemic.
Even if your business lawsuit has nothing to do with COVID-19, you should still consider contacting a local business lawyer for further legal advice on business disputes. This not only shows your business cares about compliance, but it is also good business practice to consult trained professionals when an issue arises that is outside of your expertise.
Aside from ensuring that your business is in compliance with the law and company policies, your lawyer can also draft, review, and amend new and/or existing business contracts. Additionally, your lawyer can assist you in building a case against another business or in defending your business against a business lawsuit.
Finally, your lawyer will be able to provide legal representation for your business in court and can handle negotiations for your business during a settlement conference. If you and the opposing party decide to use mediation or arbitration to resolve your business dispute, your lawyer will be able to guide your business through either of these processes as well.
