Unfortunately, these days anybody with a crayon and a piece ofpaper can file a lawsuit against your credit union.

Being a defendant in a lawsuit is a no-win situation; however,the negative effects can and should be mitigated. Every lawsuit isdifferent and needs to be treated uniquely. With that being said,there are certain strategies that are essential to the defense ofany lawsuit.

Our justice system rarely reflects or inspires actual justice.The lawsuit filed against your credit union may very well includenumerous allegations that range from creative to outright false.This is quite a common practice and should not cause you alarm.

It is best to remain emotionally detached from the allegationsin order to prevent a desire for revenge and making decisions basedon emotions. Defending a lawsuit based upon emotions, principles ofright and wrong, or a desire to prove one's innocence is costly andoften results in a disappointing outcome. At this point it is vitalto protect your membership and make informed and reasoned businessdecisions.

Litigation Hold

Once on notice of a lawsuit or potential lawsuit, you have anaffirmative obligation to ensure that no potential evidence is lostor destroyed. This duty includes electronically stored informationor ESI. Courts can and do impose drastic sanctions if a party losesor destroys evidence, referred to as spoliation, even when it isnot intentional. Immediately collect and preserve all potentialevidence, and ensure that all routine data and document destructionpolicies have ceased until you are absolutely certain that allpotentially relevant evidence has been preserved. Consult anattorney on this.

Never Admit You Are at Fault

In addition to circulating an internal litigation holdmemorandum amongst your employees, it is also important to directall management and employees to not discuss the litigation ordispute – either internally or externally. The last thing you wantis an employee discussing the lawsuit or transaction in an email orby any other means, which could lead to the portrayal of wrongactions taken by your credit union. This happens all too often,innocently.

Retain Counsel

Once sued, do not delay in retaining legal counsel. Every courtin the country imposes deadlines, and every defendant has a limitedamount of time to respond to a lawsuit. In most jurisdictions adefendant is only provided 20 or 30 days to respond. If you missthe deadline to respond, a default judgment could be enteredagainst you. So you must act promptly, and immediately retaincounsel to represent you in the lawsuit. Find an attorney who hasexperience in this type of litigation, and choose somebody whom youwill be comfortable working with over an extended period of time.If you do not already have a relationship with an attorney or firmthat is suitable, seek referrals from your credit union peers thatyou trust.

Review, Repair and Assess

Once you have retained an attorney as discussed above, it isimperative to speak with them about determining what you should doto reduce the risk of additional similar lawsuits. Do not fear thatby implementing these measures it will imply guilt that could beused against you in a court of law. Legal rules of evidence preventthat from happening and such measures can be monumental in reducingpotential liability down the line. Additionally, you will work withyour attorney in reviewing relevant documents and evidence relatingto the lawsuit, and try to determine the strengths of the claimsagainst you and your defenses as well as your possibleliability.

We do recommend taking an aggressive approach and attacking thelawsuit on the merits. We believe this can be done in line with thebest business decisions and for the benefit of your members. Aneffective and proper defense is the only way to mitigate the damageto your credit union and its members.

Michael M. Bellis an attorney and counselor for Howard & Howard Attorneys. Hecan be reached at 248-723-0493 or [email protected].