When the constable knocks on the door, the natural inclination is to escape out the back door. SBOs seem to think that if they ignore a problem it will go away. This is not at all true. Problems need to be quickly identified and strategies developed to deal with them. When the constable comes by, invite him in and offer him a cup of coffee. After all, he is just the messenger and has no animosity towards you. You need to treat him nicely because if he ever comes by to execute on a judgment, you may need him to cut you some slack.
Lawsuits are usually long-term problems. They generally drag on for months or years. They’re normally not an immediate threat to you if you hire an attorney immediately and answer the lawsuit. So take the citation and call your attorney immediately. In Texas you have about three weeks to answer a lawsuit (the first Monday that comes after 20 days from date of service). This doesn’t mean you have to actually go to court on this date, but simply that an answer must be filed before that date arrives.
If you don’t file an answer, then a default judgment will be taken against you and, essentially the plaintiff will automatically get whatever relief he has asked for. Don't ever let this happen, get and attorney and answer the lawsuit. If you can’t afford an attorney, you can answer the suit yourself, but the answer must be in writing and delivered to the court clerk. For a few bucks, the attorney you can’t afford to have represent you might show you how to answer the suit Pro Se. Answering Pro Se is what it is called when an individual answers a lawsuit without an attorney. An individual always has the right to answer a lawsuit himself. If you are a corporation or partnership, you might have to get an attorney to answer. It is best to check with the individual court, as different courts have different rules.
If all else fails, go to the library or a bookstore and you can usually find a form book with the proper format for filing an answer. It’s actually very simple. But get the lawsuit answered. Some people think just because the facts in the suit are a pack of lies that they don’t have to worry about the lawsuit. This is not true. Those pack of lies will be considered the truth by the court if you don’t answer the lawsuit!
After the lawsuit is answered, you will have some time to breathe. Litigation is a slow process, so use this breathing spell to find an attorney you can afford. Nobody likes to pay attorneys but sometimes you have to bite the bullet and get one. If you absolutely can’t afford an attorney, call the local bar association and get a list of legal service agencies that provide services to the poor. If you are in business for yourself, this might be difficult as free legal services are designed for those without a job or any means of support.
Once the suit has been answered and you have an attorney articulating your position, you can relax. The vast majority of lawsuits settle and never go to court. This will probably happen in your case. Litigation is expensive and most plaintiffs don’t want to bear the expense of litigating through trial. Settle your case and get it over with. It’s better to pay out a little so you can refocus on operating your business.
If the lawsuit is one that can’t be settled and threatens your ability to do business, then you may have to consider Chapter 13 or 11 to stay in business. Don’t give up. There are almost always ways to get out of trouble. You just need to weigh your options with a good attorney and come up with a viable game plan. Many successful business owners have only achieved their success after failing more than once at making a business work. Often only experiencing defeat can make you wise enough and strong enough to be successful.
There are a few types of lawsuits that will require your immediate attention and response: garnishments, injunctions, attachments, and executions. These are extraordinary legal maneuvers which can immediately threaten your ability to operate your business. An attorney must be immediately retained because these actions are highly complex, and an individual without legal training couldn’t possibly deal with them effectively.
A garnishment is the legal process where a creditor seizes one of your assets being held by a third party like a bank. The IRS uses this tactic a lot to take money from your bank account. This can be very disruptive because you usually don’t know about the garnishment until after it has happened. By this time, checks are bouncing and your business is in serious jeopardy. Garnishments can also be used to freeze assets that belong to you but others have in their possession. For instance, if a customer owes you money, your creditor could garnish that money, forcing your customer to pay that money to them rather than to you.
Injunctions also require your immediate attention and response because they are court orders prohibiting you from taking certain actions or requiring you to do something. They initially start out as temporary restraining orders (TROs), then may mature into a temporary injunction, and finally they may become a permanent injunction. If you don’t pay attention to this type of court order, you can be found in contempt and fined or thrown in jail. The most common TROs that you will likely run into involve divorce actions. If a spouse of an SBO decides to file divorce she will likely get a TRO that prohibits the SBO from doing anything out of the ordinary course of business. If this happens, you need to consult an attorney immediately to be sure you don’t violate the TRO.
TROs can also be used in conjunction with other lawsuits such as partnership dissolution. I have had several cases in which partners are disgruntled and want to prohibit other partners from using partnership money or from taking certain action. The courts will often issue a TRO to preserve the status quo and prevent any one partner from taking advantage of the other partners in breach of the partnership business.
Attachments and executions usually occur when a creditor gets a judgment against you. Once property of an SBO is attached, control over that asset is gone. If you don’t get an attorney’s assistance immediately, you may lose that asset. If the attachment or execution is the result of a default judgment taken against you, you may be able to stop it by filing a motion for a new trial or putting up a bond while you appeal the judgment.
What you can’t afford to do is sit around moaning and groaning about how you’ve been victimized by the legal system. You have to get an attorney and fight for your rights. If you don’t, your creditors will win and you will be out of business. If you thought being a SBO was going to be easy, well now you know that preconception was wrong. If you don’t want to fight, then go to work for someone else.
Assuming you are in a normal lawsuit, once you have filed an answer, the discovery period commences. This is basically a time when each party can require the other to provide information that might help your case. This exchange of information is done by requests for disclosure, interrogatories, requests for admissions, deposition, and requests for production.
In Texas we have a pleading called "request for disclosure" which requires each party to disclose to each other certain basic information such as: the correct identity of the parties, who the witnesses are, what legal theories they plan to invoke, and if they have obtained any witness statements. This is information that parties almost always need, so the law requires they provide this information automatically if the other side requests it.
Interrogatories are used to obtain additional information not provided in the request for disclosure. Each side can ask each other questions which must be answered in writing under oath within 30 days. This is useful in getting specific information such as the identity and location of documents, dates, explanation of events, and background information on the parties.
Requests for production allow each party to require the other to let them look at all the records that might relate to the case. This is often critical to determine the facts necessary to prove a case. These documents must be produced and made available for copying by the other side so that each party will have time to analyze the documents and use them at the time of trial.
Depositions of parties and witnesses can be taken. This is a formal face to face confrontation in front of a court reporter, attorneys, and the parties involved. The witnesses appear by agreement or under subpoena. Witnesses can be made to bring documents by attaching a subpoena duces tecum specifying the items desired.
Finally, each side can send requests for admissions which are questions the opponent must either admit or deny. They are designed to save time at trial by determining uncontested issues in advance so the focus at the time of trial can be on the contested issues.
Once the discovery is complete, the court will usually order mediation. This is a great time to settle your case and avoid a costly trial. The mediation usually takes place at a neutral site and begins with an opening session. The purpose of the opening session is to allow the mediator to explain the process, have each attorney summarize their case, and then let the parties explain their positions.
This is your opportunity to tell your opponent what you think about their case. It’s a good time to vent and let our your frustration and anger so that meaningful negotiations can take place.
After the opening session, each party goes off to a separate room and the mediator shuffles back and forth taking offers of settlement between the parties. During this time the mediator points out strengths and weaknesses of each parties’ case and, hopefully, a settlement is finally reached.
It’s important that you have an open mind at mediation and negotiate in good faith. Remember anything can happen at trial. No matter how good your case is, you could lose at trial and suffer a devastating blow to your small business. It’s always better to stay out of the courthouse if at all possible and avoid total defeat. Remember you are a business owner and should be driven by the bottom line, not emotions and pride.
If you don’t settle and do end up in the courthouse, don’t be surprised when your attorney wants a large retainer before the trial begins. The reason for this is that if you lose, your legal bill for the trial will be the last thing you ever want to pay. Remember your attorney is in business too, so he has to consider his bottom line just like you do.
