Your Arizona business has been sued. Normally these lawsuits are handled in Arizona, where the business is located. However, what happens if the company is sued in another state? What if it is in a state that your company does not even do business in?
You own a company in Arizona that was just sued in California. The first thing to do is consult with an experienced Arizona business lawyer who will determine what the lawsuit is about and why the company was sued in another state, in this case, California. There are two main reasons why this might occur:
- The Arizona company is actually “doing business” in another state. Even if a company is based in Arizona, it may be considered doing business in another state. The company may provide services or products to residents of several states including California, so your customer may be able to sue you in the state where they live. This is especially true for on-line businesses. With the ease of internet shopping, companies based in Arizona may ship products throughout the United States. Another example, is an Arizona company that manufactures chainsaws. The company ships those chainsaws to a distributor in Northern California where they then are re-sold to customers. A customer is injured by a chainsaw and they allege it was a defect or error in the design or manufacture of that chainsaw. The Arizona company could now be facing a lawsuit in California. The law is very specific on when a company can be sued in another state under this theory. It is important to consult with an attorney as soon as you are notified of or receive the lawsuit.
- The Arizona company signed a contract that allows a lawsuit to be filed in another state. This typically occurs when a company is signing a contract with a large company such as cellular service provider. Some contracts contain a “venue” provision clause, which allows a lawsuit brought under the contract to be filed in a specific state, usually the home state of the company who created the contract. Many commercial lenders chose to have any litigation brought in the state where the lender is most comfortable litigating in, where their headquarters are located, or where they have an established relationship with lawyers. For example, a commercial lender may make loans in many states, but choose to have any lawsuits involving those loans be brought in Colorado, where the lender is headquartered. That means that an Arizona business, even one that does no business in Colorado, can be sued in Colorado court under that contract.
It is important to understand that there may be legal defenses that allow the company to move the litigation to Arizona. An experienced Arizona business lawyer can help you determine if there is a way to move the lawsuit to Arizona. Additionally, there may be viable defenses to the claims made in the lawsuit or even counterclaims. These defenses and counterclaims must be raised very early in the lawsuit. If not, they may not be able to be used later. Therefore, it is important to consult with your Arizona attorney early in the process to make sure you know your legal rights.
When consulting with an Arizona business lawyer, they can also discuss the potential risks and benefits of attempting to move the lawsuit to Arizona courts as well as the cost involved in defending a suit in state other than Arizona. If that is not feasible, they may be able to provide a referral to attorneys in the state that your company was sued in.