People initiate lawsuits for an array of different reasons. Breach of contract, personal injury, defamation, and injury to business relationships are just some of the types of lawsuits. Plaintiffs seek money damages in all kinds of civil lawsuits, but mostly to recover for some sort of injury or damage.
Some damages are considered physical like when someone has been hurt by another person and has medical bills they need to be compensated for. There are also purely economic damages. For example, when a person fails to perform specific duties stated in a contract, the other person in the contract may lose money on a sale or exchange that was dependent on the prior contracting being fulfilled. Other injuries include damage to one’s reputation, property, lost wages, pain and suffering, and emotional distress.
The fundamental aim of a lawsuit is to make the complaining party whole, which is easier said than done. Often, both sides of a dispute have legitimate arguments. Legal disputes are almost never good guy versus bad guy, and they never look as cool in real life as they do on television. What the movies don’t show is that lawsuits can be a drag for everyone involved.
The Anatomy of a Lawsuit
Lawsuits are initiated by the filing of a summons and complaint. The party that is served with a lawsuit only has a limited amount of time to respond to each pleading or request made by the other side, which is why it important to notify an attorney or an insurance carrier once an incident that you may be liable for has occurred.
Often, the original damage to the complaining party is a significantly lesser sum than the cost of litigation. Litigation expenses include filing fees, costs to retain counsel, court administrative fees, and expert testimony. To avoid spending hard earned capital on expenses that can be prospectively eliminated, it is important to know what kinds of situations can bring about the damages described above.
Litigation can surface information that may not be beneficial to the good will of a business or to the reputation of an individual. In Discovery, the other party can get tax information, personal income statements, text messages, emails, and business accounting information. The other party can also take depositions, which is an informative question and answers session that the party must answer under oath. The information produced in discovery and depositions is subject to being a part of the case’s public record, meaning that private information could be disclosed for anyone to see as well as becoming a topic of dispute before the court.
Mediation is a form of alternative dispute resolution in which both parties allege their grievances in front of a neutral mediator (often times, a lawyer). The mediator’s job is to sort out the claims and defenses of each party and explain to both sides whether or not their claims and defenses would be successful. The goal of the mediator is to resolve the dispute without the involvement of the court and it allows for courts to free up their dockets for disputes that cannot be amicably resolved.
For businesses, employee conduct or lack thereof could cause a business to be liable for injuries that have occurred to a 3rd party or to the employees of the business while on the premises of the business.
Product Liability for Businesses
Businesses can be held liable in products liability for breaching warranties. Businesses can be sued in warranty if a product fails to function or appear as warranted. This would allow the aggrieved party to win economic damages associated with the cost of the product and any subsequent damages cause by the function of the product in its nonconforming state.
Strict liability can be used for other products liability claims, if it has manufactured a product that causing injury or does not function in the manner that is described by the seller. Liability can also come from the disclosure of private information given to them by their customers as well as interfering with the business practices of other businesses.
Minority shareholders can be oppressed by majority shareholders when majority control is used to prevent minority shareholders from participating in, claiming dividends / distributions when the company is profitable, and removing minority owners from the board or management positions of the company.
All shareholders have rights. Majority shareholders have a fiduciary duty to run the affairs of the company, which means that they cannot favor their own interest over the best interest of the company and the minority shareholders. Courts review the oppression and make a case-by-case determination based on “various factors which may be indicative of oppressive behavior.”
Shareholders have the right in South Carolina to inspect the financial books of the company, as well as meeting minutes and written communications sent to other shareholders. Shareholders can assert these rights through a South Carolina Court of Equity, which would issue an injunction ordering the company to turn over the items mentioned above for the claimant shareholder’s inspection.
Derivative actions can be brought by shareholders that select a singular plaintiff who adequately represents the best interest of the corporation and who has been a shareholder at the time the alleged injury to the corporation occurred. In this action, a plaintiff would need to prove an attempt to obtain appropriate relief from the corporation or explain why no attempt occurred prior to the suit. Injuries to a shareholder that are “separate and distinct from that of the corporation” have to be tried in an individual action.
Tort Liability to 3rd Parties
Businesses who are aware of personal injuries and property damage sustained by 3rd parties on their premises, should notify their premises and business liability insurance carrier within the first day the business has knowledge of the claim. The business should attempt to provide the adjuster of the liability insurance carrier of the names and contact information of any potential witnesses, video footage of the scene, maintenance records and requests, and information relating to how the business was notified of the condition that caused the injury.
If an individual is hurt by an action of an employee who was acting in the scope of his or her employment, then the business should provide to an insurance carrier any and all records contained in the employee’s employment file. Businesses should also provide any inspections or subsequent statements that were taken by the employee and supervisors of that employee concerning the specific incident.
Forwarding all of this information to an insurance carrier, allows for the adjuster assigned to the claim to fairly calculate the liability that the business has been exposed to in the incident. Once the adjust has attempted to resolve the claim with an offer of compromise to settle the claim, the individual making the claim has the choice to take that settlement offer and release the insurance carrier and business from liability on that incident. If the claimant chooses to pursue litigation on the claim, the insurance carrier will select an attorney to defend the case, which takes the burden off of the business for retaining their own counsel. Once the case is filed, the attorney can instruct the business further on the information that is needed.
Business Liabilities in Breach of Contract
When one party fails to perform an obligation as promised in the contract, the non-performing party is liable to the complainant party for the damages sustained from the breach. Both parties must first have a contract that explains the rights and obligations of the parties in the agreement. The aggrieved party must also show the failure to perform as promised as well as some damages sustained from the failure to perform. These damages can range from: collateral contracts / obligations, expenses used to procure other goods, the market price of the good or services, and any other damages sustained from relying on the breaching party’s performance.
If your business is unable to perform under a contract, the first step is always to reach out to the other party to see if they are willing to modify the contract. If a modification in regard to time, quantity, or method of performance is accepted, then your business will not be held liable under breach of contract theory. If the other party is unwilling to modify the contract and your business is unable to perform, retain counsel immediately. Provide your attorney with all contracts, information on existing conditions of the contract, and all evidence showing your attempt to modify the agreement.
Sharing all this information with your attorney will help him or her assess the level of liability that you will be held to in the contract. Because the non-breaching party will have a duty to mitigate their damages, you may not be held liable beyond the difference in the value listed in the contract and the value actually given. Once an attorney has enough information to review the claim for breach, the attorney will reach out to the business and let it know what information or damages can be disputed to continue through litigation.
Business Liability for Workers’ Compensation Claims
Employers fall subject to workers’ compensation claims when employees are injured within the scope of their employment. Workers’ compensation is a no-fault system that is an exclusive remedy for employees to be compensated for workplace injuries. What this means is that if an employee is hurt on the job, and the employee elects to use the workers’ compensation scheme to recover for medical expenses, the employee cannot later sue the employer in tort (negligence) for the incident.
Typically, employers have workers’ compensation insurance with adjusters who are dedicated to making sure that an employee’s medical bills and lost wages are paid out under the policy. Where disputes tend to arise is when an employee claims their injury lasts beyond the point of maximum medical improvement. This is where it is the insurance carrier’s responsibility to either attempt to settle the claim based on the medical evidence of permanent impairment or to allow the claim to get filed. Once a claim has gone into litigation the insurance carrier will retain counsel to defend the claim similar to the personal injury and property damage claims of 3rd parties described above.
For any time, you think that your business may be susceptible to a claim, notify your insurance of any and all information you have about the claim. Your insurance carrier will be your first line of defense until the claim proceeds to litigation.
Personal Liability in Tort
Specific people can have liability that are similar to the liabilities faced by businesses. Personal liability can be pursued in tort as well as contract. An example of tort liability for an individual would be a car collision. The at-fault driver in a car collision is liable to the injured driver in negligence. Because the at-fault driver had a duty to drive reasonably based on the road and traffic conditions, the at-fault driver will be responsible for compensating the injured driver for their medical treatment and the pain and suffering the accident caused.
As you can imagine, the damages in tort cases can have a large price tag based on the ability of the injured party to seek extensive medical treatment and assign value their suffering that makes sense to the injured party. It is important in this circumstance to retain an attorney who can challenge the value associated with the suffering of the other party and can determine whether or not the car accident was the only cause of the injury.
Personal Liability in Contract
Individual people can also be liable in contract. For example, if a property owner fails to pay a roofer the final payment under the contract, the roofer can file a statutory lien on the property. The lien would encumber the sale or re-financing of the property, which could prevent the owner from selling the property. In this example the roofer would also ask the court to order the property owner to pay the attorney’s fees and court costs that the roofer incurred seeking the payment under the contract. These expenses quickly add up and make the cost of the dispute larger than the cost of the original grievance.
Lawsuits can be costly. If you lose in court, the court will make you disclose all of your assets, which means you may lose property as well as money. The attorneys at Henderson & Henderson, LLC are committed to making sure that you are protected from any claim that may arise. If you need legal advice in regard to a claim that has been brought against you personally or your business, give our office a call at 843.212.3188.