Joe Dye Culik
When Should You File a Motion to Dismiss a Lawsuit Against Your Business (and When Shouldn’t You)?
No business owner wants to be sued, so if you become subject of a lawsuit, you may wonder how to try to get rid of it as soon as possible. Oftentimes, that’s exactly the right thing to do, and Rule 12 of the North Carolina Rules of Civil Procedure give you a way to do it.
Under Rule 12, you have the right to file what is aptly named a “motion to dismiss” before you even have to respond to the allegations against your business in the lawsuit. This post explains what the standards are for dismissing a lawsuit under Rule 12. This post also explains when that might not be the right strategy.
Keep Calm and Think it Through
Remember any time your business is the subject of a lawsuit, it is best to stay calm and think it through. The vast majority of lawsuits are either settled or dismissed so, statistically, you probably won’t be sitting in front of a jury any time soon. Together with your attorney, and other advisors like your insurance company, you’ll have backup when handling the case. Sometimes a lawsuit is based on a misunderstand with an employee, a vendor, or another company, and can be easily resolved. Other times, a case may take longer to go through the legal process. And other times – the subject of this post – the case can be dismissed by filing a motion under Rule 12.
Consider the Procedural Background
First, some procedural background. When someone files a lawsuit against your business (the person who files the lawsuit is called the plaintiff), they first file the initiating document, the Complaint, with the appropriate court. The plaintiff then arranges to have the lawsuit served on you, usually by the county sheriff where your business is located.
When you receive the Complaint, you have 30 days (or more, if you ask the court for an extension) to file your response to it. Your response can be either of two documents: 1) an Answer, where you either admit or deny each of the allegations in the Complaint; or 2) a Motion to Dismiss under Rule 12.
In many cases, a Motion to Dismiss is the better option. It puts the plaintiff back on their heels and forces them to explain why the lawsuit should be allowed to continue. There are many bases for filing a Motion to Dismiss, the most powerful of which is a Motion to Dismiss for Failure to State a Claim. Rule 12(b) itemizes all the defenses that may be made in the form of a Motion to Dismiss, stating as follows:
12(b) How Presented. - Every defense, in law or fact, to a claim for relief in any pleading, whether a claim, counterclaim, crossclaim, or third-party claim, shall be asserted in the responsive pleading thereto if one is required, except that the following defenses may at the option of the pleader be made by motion:
(1) Lack of jurisdiction over the subject matter,
(2) Lack of jurisdiction over the person,
(3) Improper venue or division,
(4) Insufficiency of process,
(5) Insufficiency of service of process,
(6) Failure to state a claim upon which relief can be granted,
(7) Failure to join a necessary party.
Seven Grounds For Dismissing a Lawsuit
Thus, there are seven grounds for having a lawsuit against your business dismissed without having to respond to the Complaint. These are explained in order below.
Rule 12(b)(1) allows you to dismiss a lawsuit for lack of subject-matter jurisdiction. Lack of subject-matter jurisdiction is when the court does not have power of the issue raised by the plaintiff. This may occur in a number of situations, such as if the issue may only be raised under federal law, where other laws preempt the claim against your business, where another court has jurisdiction.
Rule 12(b)(2) applies when the court does not have jurisdiction over your business, called personal jurisdiction. This may occur when your business has not been properly served, or if your business did not operate within the jurisdiction of the court system that you are being sued in. This defense is often applicable in inter-state lawsuits where your business is sued in a state in which you did not operate.
Rule 12(b)(3) applies when you are sued within the wrong division of the court system. For instance, in North Carolina, a business may only be sued in certain courts as specified in the venue statutes at G.S. §§ 1-76 through 1-84. These statutes mandate that in certain types of cases, lawsuits must be filed in certain courts. A common requirement is that a defendant-business may be sued where its primary place of business is located.
Rules 12(b)(4) and 12(b)(5) related to procedural defects in the manner in which your business is notified of the lawsuit. Certain forms like the Summons must properly apprise you of the nature of the lawsuit, and must be served on you in accordance with the applicable law. If this is done incorrectly, the plaintiff must remedy the defect or the case will be dismissed.
Rule 12(b)(6) governs a Motion to Dismiss for failure to state a claim, which is probably the most common type of motion to dismiss and has been called “the first line of defense” against lawsuits. The allegations in a lawsuit against your business must, if the allegations are assumed by the court to be true, state that something unlawful occurred. A lawsuit against your business must describe in sufficient detail what exactly was unlawful. It may be surprising to hear that many plaintiffs file lawsuits for activity they dislike – but which is nevertheless perfectly legal. Other times, a plaintiff will forget to include an essential element of the claim, which also permits dismissing it.
When there are unsettled legal issues being litigated – legal issues to which there is no clear answer – a Motion to Dismiss gives the court an opportunity to decide whether or not the issue is valid. This permits the court to dismiss a baseless claim early on, before significant resources are invested.
There are an infinite number of situations that a Motion to Dismiss for failure to state a claim might apply to, but a few examples are as follows: when the statute of limitations is passed; claims of fraud; claims of nuisance; breach of contract; breach of non-compete agreements; and, abuse of process. A Motion to Dismiss for failure to state a claim under Rule 12(b)(6) is the true test of a lawsuit and filing such a motion puts them on defensive.
Finally, Rule 12(b)(7) allows for dismissal for failure to join a necessary party. The court rules require that all people who “are united in interest” must be joined to the lawsuit. This is a relatively uncommon motion to file and courts often allow necessary parties to be joined later on.
As you can see, there are many grounds for a business owner to try to dismiss a lawsuit. Of these grounds provided for under Rule 12, the most powerful and most common one is for a Motion to Dismiss under Rule 12(b)(6).
Sometimes, a Motion to Dismiss is not a good use of resources. In a Motion to Dismiss, the court must assume that the plaintiff’s allegations are true, so it’s not the time to get into factual disputes, i.e., disputes about what actually happened. If the case involves factual disputes, the best route is to go through discovery (exchanging information with the other side) and to file a Motion for Summary Judgment. A Motion for Summary Judgment is filed pursuant to Rule 56 and allows you to submit the evidence that you have and that you obtained from the other side. This will be addressed in detail in another post.
Dye Culik PC is a Charlotte, North Carolina small business and franchise law firm. Our attorneys represent business owners in lawsuits and business transactions with efficiency and professionalism. If you have a question about your business, contact us at 980-999-3557 to see how we can help.