Kara Sears
Companies can be sued for a variety of reasons, including shareholder lawsuits, consumer protection lawsuits, and environmental lawsuits. When suing a company, it is important to ensure that the correct legal entity is being targeted and that the company has been properly served with the lawsuit. In some cases, companies that have been sold can still be sued, but the specifics of these cases can be complicated and vary depending on the state. It is important to have solid proof of any claims against a company, as making fraudulent claims can result in the company suing you in return.
| Characteristics | Values |
|---|---|
| Can a company be sued? | Yes |
| What are the reasons to sue a company? | Securities fraud, breach of fiduciary duty, negligence, product liability claim, wrongful death, personal injury, etc. |
| What are the challenges of suing a company? | Companies can draw out the case to increase costs, possibility of appeal, higher chance of a strong defense, etc. |
| What are the steps to sue a company? | Determine the exact legal name and structure, file a complaint, serve process, ensure compliance with legal and regulatory requirements, etc. |
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What You'll Learn
Shareholders can sue for breach of fiduciary duty
There are four elements to a breach of fiduciary duty:
- Breach of Duty: The defendant must have breached their fiduciary duty to the plaintiff, failing to fulfill their obligations.
- Fiduciary Relationship: The defendant must have been in a fiduciary role, acting in the best interests of the plaintiff.
- Damages: The plaintiff must have suffered measurable damages as a direct result of the defendant’s breach.
- Causation: The defendant’s breach of fiduciary duty must have directly caused the damages suffered by the plaintiff.
If a breach of fiduciary duty is suspected, it is important to consult an experienced attorney. To file a lawsuit, three conditions must be satisfied:
- A fiduciary relationship must have existed with the defendant.
- The defendant must have violated a fiduciary duty owed to the plaintiff.
- The plaintiff must have suffered damages as a direct result of the breach.
Many types of fiduciary relationships can arise in a business context, including attorney-client, principal-agent, and trustee-beneficiary. In the case of a corporate officer diverting an opportunity from the company, for example, a lawsuit for breach of fiduciary duty could result in the officer being made to compensate the company or shareholders for lost money due to the diverted opportunity.
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Product liability claims
There are three types of product liability claims: defective manufacture, defective design, and failure to warn or instruct. A manufacturing defect is the most common cause of product liability claims. A product liability lawsuit based on a manufacturing defect alleges that the original design of the product is completely safe, but something occurred during the manufacturing process to make the product unsafe. A product with a manufacturing defect will not perform as safely as its intended design would have performed.
In a design defect case, a product's faulty design makes it dangerous or defective. A design defect claim alleges that because of a flaw in the way a product was designed, the entire line of products is inherently dangerous. This design problem makes the product unsafe for ordinary use even though it was made according to the manufacturer's specifications.
Failure-to-warn or failure-to-instruct claims would include a product that does not have sufficient warnings about hazards associated with its use. For example, an electric tea kettle without sufficient warnings about its oddly positioned steam valve. As with all product liability claims, you bear the burden of showing that your injury was caused by the warning or instruction defect.
Product liability actions are quite complex, and establishing legal fault often requires the assistance and testimony of experts. Your product liability attorney may file suit based on breach of warranty claims or a violation of the implied warranty of merchantability. If that's the case, you will file your case under contract law. Under contract law, you must show that the express and implied warranties existed, and the defendant didn't honour their promises.
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Company negligence
Shareholders can sue a company for breaching its fiduciary duty, i.e., when the company's management fails to act in the best interests of the shareholders. A company can also be sued for securities fraud, which involves making false statements or omitting important information that misleads investors.
In the case of employee negligence, a company can be sued by its employees for intentional injury or negligence causing significant harm. This could lead to a personal injury lawsuit, where the employee seeks maximum compensation. Employee negligence can include theft, breach of contract, or disclosing trade secrets, all of which can potentially cause significant harm or damage to the company.
To avoid negligence lawsuits, companies should focus on proactive safety protocols, including regular safety training and providing proper safety equipment. Additionally, companies should regularly review and update their policies to prevent future negligence. Ensuring compliance with industry requirements and regulations is crucial.
Furthermore, companies should be mindful of their promises and commitments to clients to avoid lawsuits claiming damages based on a lack of care. Maintaining detailed records of actions and communications can help protect the company's interests in the event of a lawsuit.
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Securities fraud
A company can be sued for securities fraud, which involves allegations that the company made false statements or omitted important information that misled investors. This is a type of class-action lawsuit, where investors who have suffered economic losses due to fraudulent stock manipulation or violations of securities laws represent a larger group of affected investors.
To initiate a securities fraud lawsuit, one or more investors, known as "Lead Plaintiffs," file a complaint with the court. This complaint alleges that the company made untrue statements or omitted material facts, which artificially inflated the value of its stock during the "class period." The class period is the timeframe during which the fraud occurred and typically starts when the company makes an untrue statement and ends when the truth is fully disclosed.
To have standing to sue, a plaintiff must be able to trace their shares to the registration statement in question and prove that there was a material misstatement or omission. Shareholders can also sue a company for breaching its fiduciary duty, which is the legal obligation of a company's management to act in the shareholders' best interests.
It is important to note that there are specific procedures to follow when filing a lawsuit against a company. This includes determining the exact legal name and structure of the company and ensuring compliance with all procedural requirements to avoid a dismissal on technical grounds. Additionally, all litigants are required to keep the court and other parties informed of any contact information changes.
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Procedural steps and costs
The procedural steps and costs involved in a company suing over a lawsuit vary depending on the specific circumstances and the jurisdiction in which the lawsuit is filed. Here are some key points to consider:
Procedural Steps:
- Determining Legal Standing: To sue a company, you must establish legal standing, which means demonstrating that the company's actions have directly impacted you, resulting in harm, financial loss, or injury.
- Identifying the Correct Entity: It is crucial to determine the exact legal name and structure of the company you intend to sue. Suing the wrong entity can lead to delays or dismissal of your case.
- Pre-trial Process: The pre-trial stage involves discovery, where both sides exchange evidence, and it may also include negotiations for a potential settlement. Settling outside of court can often save time, costs, and stress, providing quicker compensation.
- Filing a Complaint: To initiate a lawsuit, a complaint, petition, or motion must be filed with the court. The court provides standard forms for drafting the complaint, which must comply with specific rules and requirements, such as the Federal Rules of Civil Procedure.
- Serving the Summons and Complaint: Once the summons is issued, you must follow the procedures outlined in the applicable rules of civil procedure to properly serve the summons and complaint to the other party.
- Legal Representation: Depending on the state, a company may be required by law to have legal representation. Even if not mandatory, consulting with a business lawyer or an experienced business law attorney is advisable due to the complexity of the legal process.
- Court Proceedings: The process for court proceedings will vary depending on whether the lawsuit is filed in small claims court or civil court and the specific rules of civil procedure in the relevant state.
Costs:
The costs of a business lawsuit can vary significantly depending on the nature and complexity of the case. According to statistics, the median costs for a liability suit start at $54,000, while contract disputes can reach a median of $91,000. If the company loses the case, they may also incur additional costs in the form of damages. It is important to note that contract disputes are typically limited by the value of the contract itself.
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Frequently asked questions
There are myriad reasons why one might sue a business. For example, sustaining an injury from a slip and fall on their property, suffering from food poisoning due to contaminated food, or experiencing harassment or wrongful termination as an employee. Shareholder lawsuits can also be filed against a company, often involving allegations of securities fraud or a breach of fiduciary duty. Consumer protection lawsuits involve claims that a company violated laws designed to protect consumers, such as false advertising or violation of privacy rights. Environmental lawsuits can be brought against companies that violate environmental laws and regulations.
Victims suing a company not only have to deal with going to court but also any personal issues that led to the lawsuit, such as an injury or illness. Cases can be drawn out, and even if the victim wins, the company may appeal the decision, as seen in the case of Monsanto and its product Roundup. Big companies will sometimes make it harder for plaintiffs and draw out the case as they have the money to provide a better defense. Companies can also sue individuals for fraudulent claims, so it is important to have solid proof of your claims.
First, you need to figure out whether the company is incorporated. If it is, you need to identify the company's registered agent in your state, who is authorized to receive legal notices on behalf of the company. Once your registered agent has been served with process for your company, they must notify and forward the legal documents to the appropriate contact within the organization, and a response must be filed within 20 days. To start a lawsuit, you must file a complaint, petition, or motion, and submit it to the Pro Se Intake Unit, along with filing fees or an application to waive fees.
