How to Respond to a Business Lawsuit in New York

Receiving a summons and complaint is a high-stress moment for any New York business owner. Whether it involves a contract dispute in Manhattan or a partnership row in Brooklyn, the actions you take in the first 72 hours often determine the financial outcome of the case. New York's legal system is rigorous, and missing a single deadline can result in a total loss by default.

What are the most common types of business lawsuits in New York?

Business litigation in New York frequently involves breach of contract, shareholder or partnership disputes, and employment-related claims. Because New York City is a global financial hub, the state courts-specifically the New York State Unified Court System-handle a high volume of sophisticated commercial matters ranging from non-compete violations to complex intellectual property thefts.

Common litigation triggers for New York businesses include:

• Breach of Contract: Claims that your business failed to deliver goods, pay for services, or adhere to the specific terms of a signed agreement.
• Partnership and Shareholder Disputes: Often called "business divorces," these involve allegations of breach of fiduciary duty, waste of corporate assets, or freeze-outs of minority owners.
• Employment Practices: Lawsuits involving New York's strict wage and hour laws, discrimination claims, or disputes over restrictive covenants and non-compete agreements.
• Commercial Tort Claims: Actions involving tortious interference with business relations, unfair competition, or fraud.
• Class Action Risks: New York businesses are frequently targets for consumer class actions, particularly regarding data privacy or digital accessibility (ADA) compliance.

What is the difference between a Summons and a Complaint?

The Summons is the official notice that you are being sued, while the Complaint outlines the specific legal allegations and the "prayer for relief" (the amount of money or action the plaintiff wants).

What should you do immediately after being served with a lawsuit?

The moment your business is served, you must stop all routine document destruction and notify your legal counsel and insurance providers. Ignoring a lawsuit will not make it go away; instead, it allows the plaintiff to seek a default judgment, which grants them the right to collect money from your business bank accounts or seize assets without a trial.

Follow these critical steps within the first 48 hours:

1. Verify Service Details: Note exactly how, when, and to whom the papers were delivered. New York has specific rules for "service of process" on corporations and LLCs.
2. Contact Your Insurance Broker: Provide a copy of the summons to your insurance company. Your policy might include a "duty to defend," meaning the insurer pays for your lawyer and the costs of litigation.
3. Issue a Litigation Hold: Send a formal internal memo to all relevant employees instructing them not to delete any emails, Slack messages, or files related to the dispute.
4. Secure an Attorney: Engaging a New York litigation lawyer early allows them to evaluate the strength of the claims and potentially negotiate a resolution before the first court filing is due.
5. Avoid Social Media: Do not post about the lawsuit or the opposing party on LinkedIn, Twitter, or company blogs. These posts are discoverable and can damage your credibility in court.

How can a litigation hold protect my company?

It prevents "spoliation of evidence" sanctions, where a judge may punish your business or assume your company is guilty because files were deleted after the lawsuit began.

What are the key New York deadlines to answer a lawsuit?

In New York, the deadline to respond to a lawsuit is generally 20 days if you were served in person within the state, or 30 days if served by other means. These timelines are governed by the New York Civil Practice Law and Rules (CPLR) and are strictly enforced by the courts.

Response windows depend on the method of service:

• Personal Service: 20 days from the date the papers were handed to you or an authorized agent.
• Substituted Service (Mail/Delivery): 30 days after the proof of service is filed with the court clerk.
• Secretary of State Service: If the plaintiff serves the New York Secretary of State as your agent, you generally have 30 days from the date of service.

If you cannot meet the deadline, your lawyer can often request an "extension of time to appear or plead" from the opposing counsel. If the plaintiff refuses, your attorney must file a formal motion with the court to ask for more time.

What happens if I miss the deadline?

The plaintiff can file for a default judgment. If granted, the court accepts all their allegations as true and enters a judgment against your business, which can lead to frozen bank accounts and liens on property.

How do you preserve evidence and communicate safely during a dispute?

Preserving evidence is a legal requirement that begins the moment you reasonably anticipate litigation, even before a lawsuit is officially filed. In New York, failing to preserve relevant data can lead to a judge giving the jury a "missing evidence" instruction, which suggests your business destroyed documents because they were unfavorable.

To ensure safe communication and evidence preservation:

• Centralize Communication: Direct all inquiries regarding the lawsuit to a single point of contact, such as your General Counsel or a designated executive.
• Attorney-Client Privilege: Only communications with your legal counsel are generally protected from disclosure. Discussions about the case between employees or with third-party consultants may be discoverable by the plaintiff.
• Forensic Imaging: In complex cases, have an IT professional create "images" of hard drives and cloud storage to ensure metadata remains intact.
• Do Not "Clean Up" Files: Never attempt to edit or clarify existing documents after a lawsuit starts. Original documents must be produced in their native format.

Should I try to call the plaintiff to "work it out" myself?

No. Without a lawyer present, you may accidentally admit liability or provide the plaintiff with information that strengthens their case. All settlement discussions should be handled by counsel to ensure they are "inadmissible" under New York law.

Should you negotiate a settlement or fight the case in court?

The decision to settle or litigate depends on a "cost-benefit-risk" analysis conducted with your attorney. Most New York business lawsuits-roughly 90%-settle before reaching a jury trial because litigation is expensive, time-consuming, and carries the risk of a public verdict.

Consider these factors when choosing your strategy:

• Litigation Costs: A full trial in the New York Supreme Court can cost hundreds of thousands of dollars in legal fees and expert witness costs.
• Confidentiality: Court filings are public records. A private settlement agreement can include a confidentiality clause to protect your business reputation.
• Arbitration Clauses: Check your contracts. If they contain a mandatory arbitration clause, you may be able to move the case out of public court and into a private forum like the American Arbitration Association (AAA).
• The "Nuisance Value": Sometimes it is cheaper to pay a small settlement to end a frivolous lawsuit than it is to pay a lawyer to win a dismissal.

Is mediation a good option for New York businesses?

Yes. New York courts often encourage or even mandate "Alternative Dispute Resolution" (ADR) where a neutral third party helps both sides find a middle ground without the expense of a trial.

Common Misconceptions About New York Business Lawsuits

Myth 1: "If I didn't sign a written contract, they can't sue me." In New York, oral contracts are often enforceable, and "implied" contracts can be formed through the conduct of the parties. Furthermore, plaintiffs can sue for "unjust enrichment" or "quantum meruit" even if no formal agreement exists.

Myth 2: "Being an LLC protects my personal assets from any lawsuit." While an LLC provides a "corporate veil," New York courts may "pierce the veil" if the owner commingled personal and business funds or used the company to commit fraud. In these cases, your personal house and savings could be at risk.

Myth 3: "If the lawsuit is baseless, the judge will dismiss it immediately." Dismissing a case via a "Motion to Dismiss" requires proving that even if everything the plaintiff said was true, there is no legal basis for a claim. This is a high bar, and many meritless cases still proceed through months of "discovery" (evidence sharing) before they can be challenged again via a Motion for Summary Judgment.

FAQ

How much does it cost to defend a business lawsuit in New York?

Legal fees vary widely. A simple defense against a small claim might cost $5,000 to $15,000, while a complex commercial litigation involving discovery and experts can easily exceed $100,000. Many lawyers charge hourly, but some may work on a flat fee for specific phases of the case.

Can I represent my own business in court?

In New York, corporations and LLCs are generally required by law to be represented by a licensed attorney in court. Unlike individuals, businesses cannot appear "pro se" (representing themselves) in most civil proceedings.

What is the New York Commercial Division?

The Commercial Division is a specialized branch of the New York Supreme Court designed to handle complex business disputes. It has its own set of rules and judges who specialize in commercial law, often leading to more efficient and predictable outcomes for businesses.

When to Hire a Lawyer

You should consult a New York litigation attorney the moment you receive a summons, a "cease and desist" letter, or a formal demand for payment. Business law in New York is exceptionally complex, and the procedural rules (CPLR) contain traps for the unwary. A lawyer is essential if:

• The amount in dispute exceeds the limits of Small Claims Court ($10,000 in NYC).
• The lawsuit involves claims of fraud, breach of fiduciary duty, or intellectual property.
• You have been served with a "Notice of Motion for Summary Judgment" in lieu of a complaint.
• You need to "implead" or bring in a third party who is actually responsible for the plaintiff's damages.

Next Steps

1. Secure the Papers: Scan and save the summons and complaint immediately.
2. Date Everything: Document exactly when you were served.
3. Find Your Insurance Policy: Look for your "Declarations Page" and "Policy Terms" to check for coverage.
4. Consult Counsel: Schedule a strategy session with a New York-admitted litigation attorney to review your response deadlines.
5. Stop Communication: Ensure no one in your company speaks to the plaintiff or their legal team until your own lawyer is involved.