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How to Defend your Contracting Business from Meritless Lawsuits

Meritless lawsuits are filed every day in our court system.  Any lawsuit, whether it has merit or not, takes time and money to defend.  Proper practices before the meritless lawsuit is filed can limit the time and money spent defending the lawsuit.  If a meritless lawsuit is filed against a business that has practiced the following tips, the time in court will be limited, and the potential of winning an award of attorney’s fees against the other party will be increased.

Contracts

Having solid contracts will give added protection against meritless lawsuits.  The contract should provide clear guidance and expectations for all parties to lessen the chance of a dispute.  If either party raises a dispute, the contract will be the first thing the court reviews to assess fault.

Contracts can also dissuade lawsuits by having provisions for attorney’s fees.  These provisions can include requirements for the losing party in a lawsuit to pay the other party’s attorney’s fees.

For some businesses, having a contract that specifies the damages if the contract is broken can be beneficial.  These damages are called “specific performance” provisions and can limit what each side is allowed to seek out of a lawsuit.

Record Keeping

Along with a solid contract is good record keeping.  Many lawsuits are won and lost by simple record keeping.  Memories fade, but the records do not change.  Records such as payments, work completion, work status, etc., can provide the court with proof that the lawsuit levied against you is meritless.

In today’s digital world, we have constant access to cell phones, and video/photographs are great evidence for a lawsuit.  Take photos and videos when necessary and be sure to date and time stamp for authenticity.  Camera/phone settings can be configured so that each video and photo is automatically set to show the date and time it was taken.

Our digital lives also include communication through text, emails, cell phone calls, electronic payments, etc.  All of these, and many other, actions can easily be stored for solid record keeping.  Having a business attorney evaluate your records will also help the small business develop a records retention policy that will provide policy and practices for good record keeping.

Insurance

Proper business insurance will provide you with another layer of protection.  So long as the allegation of the lawsuit is covered by your policy, the insurance company will have a duty to defend you and provide coverage.  There are many “umbrella” or “excess liability” policies that can be purchased relatively cheaply.

Experienced Lawyer

An experienced business lawyer can assist in all areas of lawsuit mitigation, from drafting contracts to advising on areas of risk for insurance coverage to proper record keeping.

Having an experienced litigation lawyer gives your business the expertise to get meritless lawsuits dismissed early and potentially with an award of attorney’s fees.  Colorado law requires that attorney’s fees be awarded if the lawsuit or claim was substantially frivolous, groundless, or vexatious.

  • Substantially frivolous means the lawsuit has no rational argument of support based on evidence or the law.
  • Substantially groundless means there is no credible evidence to support the allegations.
  • Substantially vexatious means the lawsuit was filed in bad faith.

Having a litigation attorney who is familiar with the procedure in requesting attorney’s fees and who knows the evidence needed to be successful on an attorney’s fees claim will give you added protection and place you on the offense against meritless lawsuits.

An attorney can also help determine what areas of risk are involved in your particular business.  This analysis will provide key areas for insurance coverage, what type of contracts are needed, and what contract provisions best fit the business’s needs.  The business attorneys at Burnham Law are standing by to completely evaluate your business and provide the protection where it is most needed.

Business Entity

Forming a business entity, such as a corporation or LLC, will provide added protection for your personal assets.  So long as you properly conduct business and separate personal from business activities, your personal assets will not be at risk.  Even if the business is years into its operation, it is never too late to form or change the entity.

Take the Lawsuit Serious

Even if the lawsuit is completely baseless and meritless, take it seriously. Judges do not know the background of any case; they simply read what has been put on paper and then follow court procedure.  In every lawsuit, there are certain deadlines that must be met.  Failure to meet a deadline can result in a default judgment entering.

Whether it be fighting in court to have the meritless lawsuit dismissed or developing risk mitigation specifically designed for your business, Burnham Law wants to see its business clients succeed.  Let Burnham Law develop a mitigation plan so you can concentrate on growing your business.

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Ashlee
Hoffmann

Senior Associate - Civil Litigation

Boulder

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