What to Do After the Sheriff Leaves: Key Decisions at the Onset of Litigation
Authors: Neal R. Devlin and Richard A. Lanzillo
Originally published in October 2013
Copyright © 2013 Knox McLaughlin Gornall & Sennett, P.C.
Litigation, perhaps more than any other aspect of modern business, often results in immediate and, at times, emotional reactions. The natural tendency of many individuals to engage in reactionary conduct when sued is compounded by the fact that many medium and small sized businesses do not have an established relationship with litigation attorneys. These realities often collide in decisions made by the business owner and his other advisors that can result in problems later on in litigation.
Key Issues in Service
Almost all litigation begins through some type of formal service. The purpose of serving the initiating documents in litigation is to provide formal and, hopefully, obvious notice that the defendant has been sued and must take certain actions to protect its rights.
What is Served
In Federal Court, lawsuits are initiated by serving two documents on a defendant: a Summons and a Complaint.
The Summons is a form document that is issued by the court and is intended to inform a defendant that it has been sued, and that it has a specific period of time to respond.
The Complaint is the substantive document that is intended to give the defendant notice of the claims that the plaintiff is bringing against it. The Complaint will begin with a caption, which includes:
- the court in which the lawsuit was brought;
- the name of the plaintiff;
- the name of the defendant; and
- often, the name and contact information for the plaintiff’s attorney.
The majority of the Complaint is then broken into numbered paragraphs. While the substance of these paragraphs differ significantly based on the claims that are being made and the style that the plaintiff’s counsel chooses to employ, they usually cover several key issues:
- a formal identification of each party, including its full name, its address and the state in which it is a resident;
- the basis for why the plaintiff claims the court can hear this matter (Subject Matter Jurisdiction);
- the basis on which the plaintiff claims that court can exercise jurisdiction of the defendant(s) (personal jurisdiction);
- a summary of the factual basis of the plaintiff’s claims; and
- an identification of the claims that are being brought.
After the numbered paragraphs, which usually also include broken out “Counts” or “Claims,” the Complaint will include what is referred to as an ad danum or “whereas” clause. This is the paragraph that identifies the relief being requested by the plaintiff and may include a monetary amount that is sought and/or non-monetary relief that the plaintiff is seeking the court to impose.
In Pennsylvania State Court, there are two ways to start a lawsuit: through Writ of Summons or through a Complaint.
A Writ of Summons is a one-page form by which a plaintiff can inform a defendant that it is commencing litigation against that defendant. The Writ of Summons does not usually include any detail regarding the basis of the suit or even the relief that is being sought. The Writ of Summons also does not require a response by the defendant (although, as briefly discussed below, there is a mechanism by which a defendant can force the plaintiff to file a formal complaint and thereby advance the litigation).
Generally, a Writ of Summons is used by plaintiffs when their claims are nearing the expiration of a statute of limitations or other time deadline. The filing and proper service of a writ of summons stops the running of most deadlines for filing suit.
A Pennsylvania State Court Complaint is very similar to the complaint seen in Federal Court, with one substantive difference. A complaint in Pennsylvania usually includes more factual detail than does a complaint in Federal Court because Pennsylvania requires a plaintiff to include sufficient facts in its complaint to show a right to relief. In Federal Court, the factual allegations need only give the defendant notice of the claims being brought against it.
How a Complaint Can Be Served
In Federal Court
Practical point: Most plaintiffs will hire a professional process server to carry out personal service. These individuals are usually relatively inexpensive and generally handle service in a professional way.
By waiver of service: The Federal Courts also have a formal way in which a plaintiff can waive service of process. When a plaintiff chooses to use this approach, it will generally mail the complaint, summons and waiver form to the defendant. The defendant then has the option to waive service of process, which then increases the time to respond to the complaint (generally 60 days rather than the normal 21), and the plaintiff can simply file the waiver form as proof of service. If the defendant refuses to waive service, then the plaintiff must formally serve the defendant, but the plaintiff can ask the court to require the defendant to pay the costs of that formal service.
In any manner permitted by state law: In addition to personal service and waiver of service, the Federal Rules of Civil Procedure also allow a plaintiff to serve a defendant in any manner that the plaintiff could serve under state law. In Pennsylvania, this results in one key expansion to the permitted methods of service.
Under Pennsylvania law, a plaintiff can serve a defendant who is a resident of another state by any form of mailing that requires a signature by the recipient.
How Much Time Does a Defendant Have Once They Are Served?
In Federal Court, if you are served by any means other than waiver of service, you have 21 days to file a response. After that 21 day period, a default judgment can be entered without any further notice or opportunity to defend.
In Pennsylvania, you have 20 days to file a response to a Complaint after being served. If you fail to respond during that period of time, the plaintiff must mail you an “Important Notice,” which is a form that informs you that you failed to respond to the Complaint and, if you do not do so within 10 days of the date of the Notice, then default can be entered
Common Questions and Issues with Service
1. Is there any advantage to making service more difficult on the plaintiff?
Generally, no. In the vast majority of cases in which the defendants are known entities, service is a formality that becomes irrelevant once accomplished. The law is very clear that if a defendant attempts to frustrate service, then the Court has a number of options that are generally detrimental to the defendant.
2. A sheriff just showed up and served my receptionist, is that enough?
Probably. Under Pennsylvania Law, a person that is then in charge of a business’s premises can be served on behalf of that business. In general, a sheriff or process server will simply ask for the manager or person that is then in charge of the business and try to serve him or her. If the person serves the receptionist, that will generally be enough.
Pa.R.C.P. 423(3). Partnerships and Unincorporated Associations: Service of original process upon a partnership and all partners named in the action or upon an unincorporated association shall be made upon any of the following persons provided the person served is not a plaintiff in the action:…(3) the manager, clerk or other person for the time being in charge of any regular place of business or activity of the partnership or association.
Pa.R.C.P. 424(2). Corporations and Similar Entities: Service of original process upon a corporation or similar entity shall be made by handing a copy to any of the following persons provided the person served is not a plaintiff in the action:…(2) the manager, clerk or other person for the time being in charge of any regular place of business or activity of the corporation or similar entity[.]
3. I just got notice of a lawsuit being filed against me by a lawyer/friend/ industry group. Is my response deadline active?
No. There is almost always a lag of at least a few days, and at times a few months, between when a lawsuit is filed and when it is served. Even the most aggressive plaintiffs have a hard time accomplishing service on the same day a lawsuit is filed, especially when the plaintiff has to serve via sheriff. However, most lawyers and many industry groups subscribe to various publications that give daily lists of newly filed cases. Because many cases are now electronically filed, it is relatively easy for a lawyer or industry group to notice that a business has been sued, and to get a copy of the complaint. Simply being made aware that you have been sued by some third party is not service and does not start any response deadlines.
4. I was just emailed a legal document from a lawyer claiming to represent someone who is suing me. Because I was not served by a person or by mail, can I simply ignore it?
No. It may well be that this is nothing more than advance notice of a lawsuit prior to being served. However, the formal service rules that apply to Complaints and starting lawsuits are significantly relaxed if a plaintiff is seeking some type of preliminary or special injunction. In those cases, in which a plaintiff is claiming some immediate threat if the court does not intervene, then the service rules are very flexible and simply providing notice of the claim to a defendant along with an indication of when the motion seeking relief will be presented is often sufficient to allow the court to act. Formal service is still generally required after the prelimnary proceedings, but by that point significant relief could have been awarded. Thus, if you receive a copy of any type of legal complaint or motion in which you are named as a defendant, it is important to treat it as if it requires prompt action until you and your litigation counsel carefully review it.
Removal - Having a Say in Where You Litigate
Once a defendant is served with a lawsuit, one of the first items it needs to address is whether it is going to attempt to move the fight to another Court. The most common issue on this point is when a defendant is sued in state court outside of its home residence. In such a situation, the defendant may have the right to “remove” the lawsuit to Federal Court.
What is removal and how does it work?
Removal is that act of transferring a case from the state courts in a given state to the Federal Court in that state.
Removal exists because Congress determined that out-of-state defendants should have the right, in certain circumstances, to have cases heard before federal judges who are not locally elected or appointed. In essence, it is aimed at avoiding any “home team” advantage to being sued in the plaintiff’s home state.
What cases can be removed?
While there are a number of exceptions and nuances that make removal more complex than might be expected, in general you can remove if you satisfy the following elements:
- You are being sued in a state in which you are not a resident; and either:
- You are being sued under a federal claim (e.g. employment claims, discrimination claims, RICO claims, federal securities claims, etc.) or
- You and the plaintiff reside in different states and the plaintiff is suing you for more than $75,000.
How is a case removed?
Removal is a fairly straight forward process that involves filing notices with both the state and Federal Courts. The most important issue that a party and its advisors need to address with regard to removal is timing – you must remove a lawsuit within 30 days of being served with it. This is a hard deadline that cannot be extended by agreements of the parties. Thus, even if you and the plaintiff agree to a period of time greater than 60 days to respond to a complaint, you still must seek removal within 30 days of service, or you will be prevented from removing the case.
Why would I remove a case?
There are several reasons why Federal Court may be a better option than state court.
- In general, Federal Courts move their cases more quickly than state courts.
- In general, Federal Courts have more established case management procedures that allow for an expected sequence of events in the case.
- Federal judges are appointed by the President for life, and thus, are not subject to reelection or reappointment. Therefore, there is less of a perception that they are influenced by whether a local plaintiff is a large employer or significant political force.
- Federal Courts generally have more law clerks and deal with more sophisticated issues. Thus, for certain cases that are complex, federal courts are often a better venue.
- Many Federal Courts now require early efforts at settlement which, as a defendant, is often an opportunity to attempt to resolve cases before incurring significant expenses (ADR Website for Pa District).
- If you are sued in another state’s court, you are often required to have lead counsel from that state, which can result in higher rates and less of a personal relationship than the client has come to expect. However, in Federal Court, the rules are largely the same throughout the country, and Federal Courts are far more accustomed to having out-of-state lawyers practicing before them. In Federal Court, out of state lawyers are usually able to handle the cases with minimal assistance from local counsel, thus lowering the cost of litigation and maintaining continuity with the client’s existing professional team.
Providing prompt notice of a lawsuit to any potential insurers is essential. As soon as a client receives notice of a lawsuit, whether or not the client has been formally served, it should send copies of that lawsuit to its insurance agent and ensure that notice is given to any carriers that may owe it a defense or coverage.
In claims made insurance policies (those policies that cover based on when a claim is made, rather than when the conduct that lead to the claim occurred), prompt notice is vital and failure to give it can prevent coverage even if the carrier was not prejudiced by late notice.
Whether or not coverage exists is an increasingly complex issue that often takes a significant period of time to address. Issues such as whether you are being sued in tort or for contract actions, what damage occurred, and the nature of the claims all factor into coverage analysis. Thus, providing notice to all potentially responsible insurers is key.
Kvaerner Metals v. Commercial Union Ins. Co., 908 A.2d 888 (Pa. 2006). A commercial general liability (CGL) policy generally covers an “occurrence,” which can be simply defined as an “accident.” Thus, a CGL policy may cover bodily injury or damage to another property caused by an insured’s faulty workmanship, “but not in cases where faulty workmanship damages the [insured’s] work product alone. To permit coverage in such instances would convert CGL policies into performance bonds, which guarantee the work, rather than like an insurance policy, which is intended to insure against accidents.
It is also important to get complete copies of all insurance policies that may apply. Coverage disputes early in cases are becoming more complex, and being able to review the actual policy provisions with litigation counsel early is very helpful in creating a strategy.
The 21st Century's Dirty Word - E-Discovery
E-Discovery has become one of the most frightening aspects of litigation for many clients, for a number of reasons:
- The fact that almost all businesses now use technology that stores and processes information in ways that most people do not understand;
- The marketing efforts of technology providers to sell businesses increased data storage and data organizing products; and
- The lack of control over data.
When individuals talk about E-Discovery, they generally refer to the federal rules governing the preservation and exchange of electronically stored information:
F.R.C.P. 34. Producing Documents, Electronically Stored Information, and Tangible Things, or Entering Onto Land, for Inspection and Other Purposes.
In General: A party may serve on any other party a request within the scope of Rule 26(b):
(1) to produce and permit the requesting party or its representative to inspect, copy, test, or sample the following items in the responding party’s possession, custody, or control: (A) any designated documents or electronically stored information – including writings, drawings, graphs, charts, photographs, sound recordings, images, and other data or data compilations – stored in any medium from which information can be obtained either directly or, if necessary, after translation by the responding party into a reasonably usable form; or (B) any designated tangible things; or
(2) to permit entry onto designated land or other property possessed or controlled by the responding party, so that the requesting party may inspect, measure, survey, photograph, test, or sample the property or any designated object or operation on it.
(1) Contents of the Request. The request: (A) must describe with reasonable particularity each item or category of items to be inspected; (B) must specify a reasonable time, place, and manner for the inspection and for performing the related acts; and (C) may specify the form or forms in which electronically stored information is to be produced.
(2) Responses and Objections. (A) Time to Respond. The party to whom the request is directed must respond in writing within 30 days after being served. A shorter or longer time may be stipulated to under Rule 29 or be ordered by the court. (B) Responding to Each Item. For each item or category, the response must either state that inspection and related activities will be permitted as requested or state an objection to the request, including the reasons. (C) Objections. An objection to part of a request must specify the part and permit inspection of the rest. (D) Responding to a Request for Production of Electronically Stored Information. The response may state an objection to a requested form for producing electronically stored information. If the responding party objects to a requested form – or if no form was specified in the request – the party must state the form or forms it intends to use. (E) Producing the Documents or Electronically Stored Information. Unless otherwise stipulated or ordered by the court, these procedures apply to producing documents or electronically stored information: (i) A party must produce documents as they are kept in the usual course of business or must organize and label them to correspond to the categories in the request; (ii) If a request does not specify a form for producing electronically stored information, a party must produce it in a form or forms in which it is ordinarily maintained or in a reasonably usable form or forms; and (iii) A party need not produce the same electronically stored information in more than one form.
Nonparties: As provided in Rule 45, a nonparty may be compelled to produce documents and tangible things or to permit an inspection.
Getting Control of Your E-Discovery Early in a Case is Key
Getting control of your e-discovery early in a case is key for two reasons:
- To avoid discovery trouble; and
- To fully understand and evaluate your case.
Avoiding Discovery Trouble – A Short Primer
In general, the key to avoiding e-discovery problems is to take prompt and appropriate actions to make sure that information that may be relevant to a lawsuit is not deleted or altered. The key steps that are generally followed to accomplish this are:
- Reviewing all existing electronic data policies to determine retention periods, automatic deletion protocols and litigation hold procedures. If these policies are compliant with the federal rules, they should be followed. If these policies either do not exist, or are not compliant, then they should be considered, but additional efforts should be made to ensure preservation of key information.
- Identifying the sources of potentially relevant information. This will usually include: (1) Individuals who may be custodians of email, electronic documents, hard copy documents or other data that may be relevant to the lawsuit; (2) Hardware that houses such information; and (3) Back-up tapes.
- A litigation hold notice should be prepared and issued to all individuals that may control relevant data. Your litigation counsel can assist in preparing that notice, which must be designed to inform the recipients that they must not delete any relevant information, must disable any automatic deletions and may potentially need to take steps to preserve data that could be altered.
Evaluating Your Case
Modern discovery usually involves reviewing significant numbers of emails and electronic documents to discover the facts underlying a case. One would be hard pressed to find a litigation attorney who does not have at least one “war story” in which they handled a case in which the defense prospects were high until, several months into discovery, one or more problematic emails or electronic documents surfaced that fundamentally changed the case. Knowing early on whether such documents exist allow defendants to design their litigation approach around those facts.
Who should be involved in early e-discovery efforts?
- A decision maker for the defendant: It is important to have someone at a high enough level on the organizational chart who can understand the need to pro-actively address E-Discovery issues and make appropriate investments and decisions regarding those issues.
- Litigation Counsel
- Employed IT personnel or any outside personnel who are engaged to manage a defendant’s IT.
- Most small to mid-size businesses will involve vendors of their primary technology to determine the capabilities to search, store and secure information.
- Outside Consultant: The cost of involving outside consultants to assist in identifying, searching and preserving relevant information is becoming more approachable for small and mid-sized businesses. Often, if a case involves less than 10 email custodians and information that is housed on a centralized server and a small number of local devises, an outside expert can obtain appropriate images of that data for preservation purposes with limited disruption. While not all cases require this level of work up front, it should be considered if the E-Discovery requirements appear to be either disruptive or beyond the capabilities of a defendant’s current staff.
Authors: Neal R. Devlin and Richard A. Lanzillo
Originally published in October 2013
Copyright © 2013 Knox McLaughlin Gornall & Sennett, P.C.