Jurisdiction: Where Can Your Business be Sued?
If you have a business, especially a large one that does business nationally (or globally), you probably anticipate that you will be sued. What you may not have given a lot of thought to is where you can be sued.
Why Jurisdiction is Important
The question matters for a number of reasons. Being sued somewhere inconvenient for you is more than inconvenient: It can be very very expensive.
You could find yourself having to travel every time there is a court hearing or deposition. You may find that the business lawyers that you normally use and have a relationship with, are not available to you—you need to use business lawyers that are located where the lawsuit is filed. Aside from cost, this can make it inconvenient to speak with your lawyers or drop by their offices whenever you want.
Where You Can be Sued
As a general rule, any state in which your company does business, you can be sued. If you have a headquarters there, make sales there, contract there, place ads there, you can be sued there. As a general rule, you can ask yourself whether your business has derived some benefit, some profit, or some other advantage, through or in a state, and if so, you likely can be sued in that state.
Questions like this can be difficult. Let’s assume that you manufacture a part that goes into a car. You sell your product to a car manufacturer whose plant is in Michigan. Surely, you anticipate being sued in Florida (where your company is headquartered) or in Michigan (where your parts or product is being purchased).
But your part goes into the manufacturer’s car, and those cars are sold everywhere. You potentially can be sued anywhere.
With online commerce being everywhere, it potentially means that you could be sued anywhere (although the mere fact that your business is on the internet does not by itself subject you to being sued anywhere in the United States).
Minimum Contacts
Does your business have enough contact with a state to anticipate being sued there (often called “minimum contacts”)? That depends. Aside from sales and profit, does your business have offices (temporary or permanent) in a given state? Have you paid taxes in or to a given state? Do you have employees or contractors there?
Even if there is a separate business, but your business owns, controls, or manages that business, you can be sued in whatever state that business is in. That means that doing something like setting up a company in, say, Virginia, that’s different than yours, but which your company actually runs, staffs, manages, or operates, won’t insulate or protect you from being sued in Virginia.
Limiting Exposure
You can limit your ability to be sued in different states, with contractual provisions that say you can only be sued in a given state. These provisions, if drafted properly, are enforceable, and can protect you from having to travel across the country to defend yourself in a lawsuit.
Call the West Palm Beach business litigation lawyers at Pike & Lustig to help with your business law problems, or if you or your business are being sued.
