by Evan C. Pappas
For community banks, involvement in civil lawsuits is becoming a regular cost of doing business these days. Legal actions are initiated for any number of reasons, but all lawsuits share common elements and pitfalls that require close attention and quick response. Failure to take the right action within the required timeframe could mean that important rights are lost or squandered.
Some of the best defenses to a lawsuit are developed before the lawsuit is filed. For example, if a customer sues a financial institution and alleges that his or her money was handled negligently or a payment processed improperly, certain documents will naturally be relevant to vindicating the bank, including account records and the bank’s operations manual. Therefore, all banks must ensure that these documents are regularly updated with the assistance of counsel to ensure that they are thorough and accurately reflect the bank’s policies regarding accounts and payments. It is important to ensure that your employees are made aware of every procedure and expectation that exists so that they act consistently with these policies and procedures.
Although this ounce of prevention is key, legal problems arise even for the most responsible community bank. The first and most obvious step you should take is to call your attorney as soon as you receive the Complaint. It is usually unwise to contact the plaintiff or the plaintiff’s attorney until contacting the bank’s counsel. After being served with the Complaint, very strict timelines for responding are already in place and, if missed, can cause your adversary to win the case before the merits are heard by a judge. In addition to helping you understand deadlines (and possibly negotiating an extension of deadlines), the bank’s attorney will initiate important discussions to determine what defenses exist to the plaintiff’s allegations. Too often, companies delay discussing matters with counsel until deadlines are imminent or have already passed. Seeking legal advice immediately allows the bank’s attorney to provide necessary perspective from an early stage in the lawsuit.
Read the full article in December’s issue of Transactions Magazine. Aren’t a subscriber? Call PACB at 717-231-7447 to start receiving the magazine.