What Steps To Take When Facing a LAWSUIT (And How to Sue Someone)

Jason: Of course, very excited to be here with you, Toby.

Toby: All right, and I’m just going to set the plate. I want to make sure that we’re hitting on a few different things. You get sued, what does that look like? What’s the worst that could happen? Let’s just do that. What’s the worst case scenario if you’re looking at a lawsuit? What is the anatomy look like?

What if I’m suing somebody? What is that anatomy look like? And then number four, is how long they take? What’s a typical lawsuit? What’s the timeline? What could they expect from that 10,000 foot view? Are you game?

Jason: Love it. Let’s dive right in.

Toby: You have somebody show up and you service a process. (1) Should that be the way that it happens? (2) What do you do if that does happen?

Jason: Absolutely. In fact, that’s the only way that it happens. That’s one of the really important first things. You haven’t been sued, unless you’ve been served. Often litigation, there are lots of threats beforehand, demand letters, email exchanges, all of this beforehand.

It is important to be careful in how you communicate beforehand, because anything that can be documented, that’s going to be used as evidence when you actually get to the trial. But you’re not actually sued until you’ve received Service of Process. Somebody that is unrelated to the litigation comes in and drops the paperwork.

Toby: Somebody sends me a demand saying, pay me $25,000, you did this, that, and the other. I can literally just tear that up.

Jason: You can, probably shouldn’t in most cases, because that’s generated from something unless it’s truly frivolous. If you talk to an attorney and they say, oh, this is garbage, yeah, you don’t even need to respond. Force them to actually make the expense of hiring an attorney, getting service process done to show that you’re serious. But in reality, a demand letter is just that, it’s a letter. It’s letting you know, hey, there’s a potential problem out there, this is what I think that you should pay.

Toby: Talk to your counsel, and then determine whether there’s validity. But if it’s garbage, treat it like garbage, right?

Jason: Yup, and you regularly see that. Especially recently, we’ve been running into lots of our clients on the platinum portal. They get to reach out to us, talk to the attorneys, run things by us. We’ve been getting a lot of copyright and trademark, just garbage litigation coming in saying, hey, I used this name one year ago in this small town, and here’s my pity little evidence of that. And you have to pay me $5,000. But you know what, I’ll settle for $1,500 just to be done.

It’s this tactic that sends out a letter to scare people. They pay the $1500. But if you just tear it up, they’re never actually going to sue you, because it’s going to cost them more than that if they even have a claim.

Toby: They’re just fishing at that point. Let’s go through the anatomy of it. Somebody sends you a demand note, your first call is to your lawyer to see whether or not you need to respond. If you get sued, you need to respond. I know that there are situations where they serve, and they haven’t filed the lawsuit yet. And then they have a period of time where they have to, but you still have to respond, right?

Jason: You have to respond. At this point, if you’ve gotten that summons, the service of process, you’ve been sued. If you don’t respond, you are automatically found liable. It’s called Default Judgment. It’s ridiculous, but it forces that both sides to have their say.

This is another reason why it’s really important to have a good registered agent, because if you miss that, if it doesn’t show up, if it never gets to you, if it was properly served to your registered agent, whether or not it eventually ends up to you, that’s when the clock starts ticking for default judgment. It’s one of the reasons we offer really good registered agent services, it makes such a difference to get that in a timely manner.

Toby: Personal service. You’re talking about if somebody sues an entity, and hopefully you’re not putting your home address as a registered agent of your own entity. Then you’re going to have that person knocking on your door during your kid’s birthday party trying to serve you and harass you, or embarrass you. You’ve been served.

Jason: It’s totally deliberate to push you, to get you emotional, to get you angry or nervous, and to pressure you into an early unfavorable settlement, for sure.

Toby: But if you’re an entity, they can’t serve you at home. They have to serve the registered agent of that entity, which you should not be your own registered agent for this precise reason if you want it to be served not between nine and five and a business address, where somebody just collects it for you, scans it, and sends it over saying, hey, there’s a service of process.

Now you can very easily handle it, as opposed to if you’re at home and somebody serves an adult there, I can’t remember whether it’s kids or anybody at that house, you could have effective service, even if they don’t know what it is. They go put it in a pile of paper somewhere, or worse yet throw it away. They don’t know what to do with it, so they just toss it. You may actually find yourself in a bad position as a result, right?

Jason: Especially, because there are so many attorneys out there that love that shotgun approach. We’re going to throw everything at you. This is a $25,000 damage case, we’re going to put $250,000 in there just in case any of it sticks. If you don’t respond, that default judgment is for that $250,000, which is just gross.

Toby: We used to see that. I used to clerk, and we used to see the entry of default. The secondary was the judgment, you have to have an offer approved with it, which shows here’s the facts. But again, there’s nobody on the other side saying this is true or untrue. They’re taking everything from the moving party as though it’s valid if they can back it up. Within the realm of reasonable, they’re going to get it.

Let’s talk about the worst thing that can happen. If somebody gets sued, do I really need to be worried? Are they going to take my house? Are they going to take my retirement plans? Is this something that actually happens?

Jason: A hundred percent, absolutely. The worst case scenario for a lawsuit is that it happens before you’ve gotten with Anderson. Shameless plug here, I apologize. But if you’re working with us, we set it up so that each of your assets is separated out. When a lawsuit comes, it has to be targeted at the owning entity of the property. If that entity only owns the one property, the lawsuit can only affect the equity of the value of the one property.

In that case, worst case scenario is I lose that property, I have to foreclose, I have to sell that property, and pay whatever judgment comes out of that. That is the very clear box where the lawsuit starts and ends. But if you’ve got everything under your own name, or even everything under one company, everything’s in that box, everything can be affected, and litigation is just such a crapshoot.

You’re rolling the dice, where it could be that they file a lawsuit, and it takes three years and $100,000 paid to your attorney, and then you get a judgment for $500,000 or $5 million, depending on what the judge or jury had for lunch that day. That’s, at the end of the day, what’s going to decide the liability in that particular case.

There are really scary looking cases that end up settling for pennies on the dollar. They’re really innocuous looking cases that something comes up in discovery, that all of a sudden it blows up and becomes this nightmare of a lawsuit that really can legitimately threaten your whole financial way of life.

Toby: Without making this about me, I actually had a case. One of my first cases as a practitioner was a landlord that was a friend of mine. It was a friend of mine’s dad, I should say. Long story short, we were able to get a judgment against a tenant who had damaged the home intentionally. They never had this conversation with their attorney, because if they had they would have behaved much differently, but they gave us the bird, so to speak, and were pretty aggressive.

During discovery, it came out that they had intentionally done something in retaliation to the client having them evicted or removing them. Anyway, long story short is intentional acts don’t get bankrupted. Stick around, and we garnished for close to 12 years, every paycheck. The guy worked for Boeing. She thought she had bankrupted away and that she could walk away. This stuff could stay with you for decades, right?

Jason: Yeah. Again, anecdotal, but like Bowman, I’m a little bit of a recovering litigator. Before, we had a case where it was fraud, plain and simple, and almost a class action. I was one of, if I remember right, it was 17 different plaintiffs against this guy. At the end of the day, the judgment we got, they’re going to be collecting on for the next 40 years. There’s no time limit on the one that we got. Again, that roll of the dice.

Other anecdotal evidence on a happier side, I know lawyers, we love our scary stories, but the happy ones are nice too, occasionally. But when a plaintiff attorney starts doing their due diligence, a good one looks deep in before the suit is filed. They get their ducks in the row.

I’ve talked to some of my big law friends, my plaintiff attorney friends. Whenever they see Nevada, Wyoming, Delaware, unless the client is paying in cash upfront, they just know, oh, this is going to be miserable. Honestly, we’re probably not going to take it. If we do, again, it’s not contingency. You’re paying up front, and we’re letting them know that this is going to be a dragged down fight to get to whatever it is, if we find anything.

Toby: Yeah. I will say this. If you’re being sued, you can’t go do all those things. They’ll do a fraudulent conveyance, and the lawyers will actually be on the hook. There was a great case that just came down of moving assets after the liability, and they found the lawyers responsible for the judgment as well, because they were committing fraud.

When you have a fraudulent conveyance, it is fraud. It can’t be bankrupted, and you can become a party to it. But if you do these things ahead of time, they’re absolutely effective. That’s the sad part. I’m preaching to the choir, obviously, because we’re in the same firm, we do the same type of work, but you have to do these things ahead of time.

The difference is, one side pays the other side doesn’t. Literally, that black and white, they’re limited. They come after a business. They can even suck the oxygen out of a business. When you think about real estate, somebody gets hurt on a piece of property, sues the property owner, they get the property. They get the equity in the property.

If you suck the oxygen out of that property, and there’s no equity, then there’s nothing. They’re stuck to the insurance, which is where we really want them to stay. We don’t want someone to go away if they’re legitimately harmed. There should be some recovery. What you don’t want is someone following you around the rest of your life garnishing everything you make.

Jason: We don’t want emotion to come into the equation. We don’t want them angry at you and then sticking it to you forever, because there’s nothing to stick to, and their attorney will be the one to tell them that instead of us. They say, hey, you’re throwing good money after bad, let’s take the insurance, and everybody move on with their lives. It’s exactly it.

I do want to add in, don’t forget the importance of funding. Setting up the LLC is very important. Fund them. Get the property deeded into the LLC. Get the assets assigned to the safe asset holding company and make sure everything’s funded. Again, that timing is so critical, having it done beforehand.

Toby: All right, let’s shift gears a little bit. We know that you’re getting sued. Now you know whether you’re not you’re really looking at it individually. Hey, am I going to be on the hook? Or is this going to be limited to just a business? But what does it look like to be responding anyway? What do I have to do? Once we get there, then let’s talk about flipping this around. What if you’re going to be the person who sues?

Jason: Yes, absolutely. The first thing is take a deep breath. Especially if you’ve prepared, it sucks. It certainly could be a bit of a period in your life where there’s lots of stress, but take a deep breath, calm down, and call your attorney. If you don’t have one. martindale.com is a really great resource to find litigators to find people who practice this. They practice it day in day out. They know what they’re doing, they’re going to walk you through the process.

First thing you do is you get service of process. You find out who has been served and why. If they come and they try to sue you, Toby, for your property that’s in your LLC, they’ve messed up. Your attorney can turn that around. You still have to respond to avoid that default, but we’ve already done that probably a dozen times this year. We talked to clients and helped them throw it out, because they serve the wrong person, because they don’t know what’s going on.

That case is entirely thrown out. Whether they even file again is a huge question. If they do, the judge already knows you’re in a great spot. You’re in a strong negotiating position. But if they’ve sued the right party, then you respond. You provide your evidence. You provide it, it’s called an answer to the claim. If you have any counterclaims, let’s get those on record too if they participated in the injury.

For example, we had one recently. Actually just earlier this week, the client was talking to me. An old lady was in his property and had fallen down a set of stairs. It turns out, she had let her washing machine run and run and run, it overflowed. It went over out the door over the stairs. It’s soapy, it’s messy, it’s wet. And that’s what caused the fall. That’s what we call contributory negligence.

Essentially, you fell because of what you did. Your claim that we’re 100% at fault, that’s not really fair. That’s all going to come into part of the answer. You want to make sure to get your attorney, get them to respond, get them all the facts, document, document, document, pictures, emails, phone calls, texts, anything that you have related to this. And I do mean everything.

Your attorney is going to help suss out, okay, this is good for us, we want this forefront. This is maybe not great for us. We’re going to try to hide, we’re going to try to keep this on the down low as much as possible. We have to disclose in certain cases, but we can downplay it.

Toby: If they ask. We’re not a prosecutor, we’re not required to turn it over. You’re responsive to the discovery. If they never asked, certainly don’t provide.

Jason: Exactly, right.

Toby: It’s going to be a while too. A lot of people are like, blow this out of the water. I want to be like Matlock. I saw this happen on TV. Within an hour, that case was gone. Is that going to happen here?

Jason: It cracks me up. To be fair, I don’t know if you’ve seen Suits. Fantastic. Fantastic storytelling in Suits. Not reality, though. We are looking at minimum. Even just this very initial phase of service of process, answer and response, is usually at least one to two months long. And that’s just the very first stage.

We’ve talked about probate cases, the same is true of litigation. On average, you’re looking between a year and a half and three years to actually get to trial of any sort of case. But especially, anything involving real estate, involving contracts, those tend to be the more complicated. There’s more he said, she said. The facts are going to matter as much as anything else. It goes long.

I will say, when I was a practicing litigator, about 80% of the cases that we filed, that we served, were in the end, negotiated, mediated, and settled between the parties. If you get a good attorney, they’re going to help weigh the case. They’re going to get your response in. They make sure you don’t get a default.

They’re going to help push forward the documents that really put you in a great light, and then sit down with the other side and say, okay, let’s not ruin lives over this. Let’s see what we can come to an agreement. Let’s mediate, let’s get a third party in, to weigh in on the strengths and weaknesses of our case, and come to something that we can both live with. In my experience, a good settlement is one that both of them feel like, okay, I’ve been a little put up on, but I can live with this.

Toby: And you’re out, and the lawyers are no longer getting paid. That’s the end all be all. If you’re in court, there are always two winners, and they are the respective attorneys on either side.

Jason: It’s not the plaintiff or the defendant, it’s the attorneys that are the winners, especially if you’ve gotten all the way to trial.

Toby: Clint’s grandfather was an attorney. He said, I never lost a case. Clint was like, oh, my god, he must be the greatest litigator. He goes, no. My clients have lost some cases, but I haven’t.

Jason: I got paid on everyone.

Toby: He never lost, he always won. All right, what if you need to be the one that sues? What if you need to pursue your rights? What does that look like comparatively?

Jason: Yup, you’re just on the other side now. You still need to get your attorney. You need all of your ducks in a row, documents wise, evidence wise, put together your best case scenario, and you’ll get your attorney. You need to do though, just like we get things thrown out, don’t let yours get thrown out. Make sure that it is the manager of the LLC that’s filing the case. The LLC itself is the party.

If you’re working with the trust, it’s the trustee. Those need to have the proper credentials to file suit. If you’re filing suit in Wyoming, you need a Wyoming LLC, or at least one that’s registered there. Texas, Nevada, Florida, wherever it may be. Make sure you have the standing, we call it, to go ahead and sue and that it’s the correct party.

Certainly, reach out to us if you’re working with entities. Often we have clients reach out and have their attorneys saying, hey, a trust is a little bit different here, and we can help coordinate what the proper party is again. We don’t practice actual litigation, but we’re always willing to help walk through, which is which when it comes to actually filing the case, getting the notices out, handling your discovery and deposition, et cetera, and moving forward with the suit so that you look like the sophisticated one, you can be in the position of strength now that you’re the one suing for, whether it be eviction, damages to your property, et cetera.

Toby: Yup. You want to make sure it’s the right party and in the right court. Let’s say you need to have the right lawyer to make sure that those things are done correctly. With anything, your expectation. Just know that it does take a long time to do very basic things in court, because there’s timelines in everything.

If I serve you, you might have 20 days to respond. As soon as the lawyer comes on, and they ask for a continuance or they say, hey, give me a month, you can’t say, no, really. There are some folks that are out there that say no sometimes just because they want to put it upon the other side, but don’t expect the judge to appreciate that.

Jason: Often the judge will just say, no, this is a professional courtesy. I’m going to approve it, and then your attorney looks like you know what for the rest of that case.

Toby: If they don’t make them pay. Sometimes they’ll say, hey, you got to pay for the other side’s motion. That was unreasonable. There was no rationale besides other than just being a turd. It depends on the courthouse, depends on the judge. You never know.

That’s why you use the local attorney, who is good in that courthouse that has a relationship with the judges and the other counsel so that usually, you can glean, this is what happens in this courtroom. We do not want to be in this courtroom, this is why we’re going to go over here. We’re going to file on this court instead if you can actually form a show.

Jason: Absolutely, don’t underestimate the value of that either. One of my last cases before shifting over to Anderson, we had the opportunity to file either in Utah, Illinois, or Delaware, we immediately elected Delaware, because the laws there are just so crystal clear. It’s less of a he-said-she-said and more of these are the laws under these variety of circumstances that we already know and are set in the statutes and the jurisprudence. It’s a much clearer picture of exactly how things are going to go.

Toby: All right. Now you’ve been sued, or now you’re going to be in a suit. You already gave us a little bit of a timeline, but what are we talking about? What type of monies? What is discovery? What’s my involvement? Am I going to be working this case day in and day out for the next three years? Or is it spots, where there’s a little bit of activity, long periods of waiting? What does it look like?

Jason: Clear truth, if you’ve ever heard the phrase, it’s so applicable to litigation, hurry up and wait. It’s just absolutely true. We have the initial stages of the complaint, the answer, the counterclaim. Each of those, again, depending on your jurisdiction, it’s going to be two weeks to a month for each of those for proper responses. Even those can be extended based on professional courtesy as needed, if more investigation.

After that, you get to the initial discovery phase. This is one of the most important, but also one of the most boring. This can last, again, six months to a year alone for discovery. You’re doing depositions, which is where the attorney sits down and essentially tries to get you to admit to wrongdoing.

Essentially, they’re getting out the facts, but what they’re really trying to do is get you to admit to stuff. Don’t worry. Your attorney is going to depose them, but they’re going to have their attorney. There are lots of rules involved.

It’s a very structured environment, but you’re going to go through all those details. You have written discovery. Hey, send us every document you’ve ever smelled for the last 37 years. They’re going to be very genuine in how they request, but your attorney is of course just completely unrelated.

Toby: Push it back down, make it narrow. This is for relevant discovery only, you can’t go out on fishing expeditions.

Jason: Exactly, yup. Each of these stages is going to look something like that for the different. We’ve got initial, we’ve got discovery, we’ve got motion practice, and that’s often combined with any expert witnesses needed, we’ve got the actual trial, and then we’ve got post judgment discovery. Essentially, I finally got something against you. Now, what do I get to collect against? And then trying to pursue and getting collections, garnishment, wages, et cetera.

Toby: Believe it or not, there are people that will go through a complete litigation, they have no idea what’s on the other side. They’ll spend all that money, and then they’ll have a judgment that’s worth nothing. It may as well be toilet paper. They can’t collect on it, they can’t do anything.

Most attorneys, before they even take a case, they want to see if somebody on the other side has assets so that they can collect against, because it’s a whole other lawsuit. Not only the effort is to improve liability, but you get to go through supplemental proceedings to see if you can even collect.

By the way, we see this all the time, especially in more liberal jurisdictions, where lawyers routinely divulge all your financial information as part of a lawsuit. If you’re a defendant and you don’t do that, you hold back on everything that’s not relevant to the case at hand. You don’t give them the ability. Why would I turn that over? To this day, I just dealt with it about two weeks ago on somebody where the attorney was like, oh, we really should turn this over. I was like, no. They don’t get to know your financial condition.

Jason: What does that have to do with the cause of action, the damages? If it’s unrelated to what happened, what’s being sued about? You don’t say. You mentioned it earlier, but the only reason you would want to do that is to encourage early settlement by showing I’ve got nothing. Don’t sue me, because it’s going to be a waste of both of our time and money. If you’re going to establish that without lying, 99.999% of the time, it’s just a bad idea to over disclose.

Toby: Very, very bad idea. That’s what they have supplemental proceedings for. The most famous case in my lifetime that we saw was the OJ Simpson case. They ended up with a civil judgment for tens of millions of dollars against OJ, and then they went through the supplemental proceedings, and they couldn’t find any of the assets. It’s like, hey, where’s your Heisman trophy? I don’t know.

Would the Goldmans have liked to have known that long before? Yeah, but they couldn’t. They actually had to wait until they got that judgment. It was horrible in years and just horrible circumstances. They finally get their judgment, and then they’ve been trying to collect on it ever since. They have gotten when he was trying to write a book, things like that.

Every now and then, they haven’t [inaudible 00:25:36]. What they do is they shut it down and make sure he doesn’t get more money, but they can’t touch certain assets, the NFL players’ pension and some of the real estate assets that were exempt under state law in Florida. This makes it very, very difficult.

If you’re on the other side, if you’re the defendant, what you don’t do is just start handing over all your financial information. Just because somebody asked for it, and your lawyer sometimes doesn’t push back hard enough, you just say, I really don’t want to turn that over. It has nothing to do with whether I was negligent when I was driving, or it has nothing to do with whether or not I was negligent in the maintenance of a property that somebody fell down the stairs. My financial condition isn’t something that’s relevant.

Jason: Completely irrelevant, which brings up the important point of being involved. You mentioned the attorney is going to do the bulk of the work. They’re going to go through the documents. They’re going to really help craft the strategy. They’re going to be the ones filing in court. But don’t be passive right along here. Be involved.

Ask the attorney and say, okay, let me know what we’re submitting. Ask questions and understand the process. You don’t have to be the one writing the brief, writing the motion, but know what’s going on so that you can help with your education and your knowledge from that perspective on, and especially, most importantly, I would say what is being disclosed.

Toby: They may not like it. The fact of the matter is that attorneys sometimes don’t like the question. They want to be able to do what they’re going to do, but it’s your case, and you need to be involved. You just don’t want to be passive on these things. Push back a little bit and just say hey, I’m one of those guys that asked questions.

If this is a problem, make sure they know right and write it right away. If they say it’s a problem, then you probably want to switch counsel. You just say, hey, come highly recommended, but you need to be involved. Too many cases have gone awry because of something the attorney does. The attorney doesn’t pay the price, the client does. It’s your pocketbook. You need to be the one who’s responsible for it, so you need to be pushing on these guys.

Jason: You’re paying them, they’re not paying you. Be involved.

Toby: Absolutely, 100%. Jason, this was informative, educational, and interesting. Is there anything you want to throw out there before we let these folks go?

Jason: Just a reminder to take that deep breath. It’s more important than you know. It can feel so stressful. The unknown is obviously always stressful, much less unknown that’s literally attacking you, or forcing you to attack something. Take that deep breath. We’ve been through it.

We at Anderson, your attorney does it day in day out. We’re going to help things work out. Especially if you’ve planned and prepared beforehand, it’s not something that’s going to destroy your entire life. It’s going to affect that one thing. Move on with your life. Keep having dinner with your family, with your kids, with your loved ones. It’s going to work out.

Toby: Yup, and stay away from courtrooms.

Jason: Whenever possible.

Toby: Whenever possible. I don’t care whether you’re the plaintiff, you’re the defendant. Your whole goal is, let’s stay out of the courtroom. Do economic analysis, listen to your attorney, and get out of that courtroom. Nothing good happens in that courtroom. It’s bad for you. Bad Bad, bad, bad, bad, so stay out of it.

All right, Jason, I really appreciate you coming on. Thanks. You’ve been very informative. Hopefully people take this to heart. If you know of anybody that’s going through this or has questions about lawsuits, share this video with them for sure. If you have any questions, just reach out to us. We’re always here to help. Thanks, guys.