Legal Question in Business Law in California

Re: Should I continue or drop off from the lawsuit?

Responding to a question like this is as tough as telling a poker player whether to bet or fold based upon seeing his hand but knowing nothing about the other player's cards, the previous betting, the size of the pot, and how many hungry children the bettor has at home.

Are you the only defendant? If not, how deep are the other defendants' pockets? Are they more likely or less likely to be found liable? How much is at stake? Are punitive damages being requested? What have you got to lose?

You may have heard about corporate veil-piercing or alter ego liability. Yours is not a situation where that, strictly speaking, should be an issue. However, there are analogous risks where an after-formed corporation is sued for a pre-incorporation liability of a founder. The outcome sometimes goes against the corporation, so the date of your corporation's formation is not a guarantee that it won't be held liable. If the corporation is liable, I guess it has relatively few assets and your concern is not for the corporation but for a subsequent veil-piercing attempt. These usually don't work if the corporation was halfway decently operated. Further, as a general matter at least, a default judgment cannot be asserted against a "Doe" defendant corporate owner which wasn't sued by name initially and who didn't appear.

So, there are some factors pointing in the direction of dropping the defense and letting the almost-worthless corporation take the rap, but there are unknown risks in taking the advice of any lawyer who hasn't had full access to the entire round of poker.

Further, there are major questions around why you weren't sued personally in the first place, whether you could still be added as a Doe defendant before trial and judgment, where matters stand as to the statutes of limitations, why your corporation's lawyer didn't file and win a motion for summary judgment or demurrer, whether there have been settlement talks, and on and on.

You might want to try to get an initial free consultation with a products-liability defense attorney in your city. This is more of a torts law question than it is business law per se.

Re: Should I continue or drop off from the lawsuit?

If the plaintiff loses one defendant, he can look for others - you - and add you to the suit if he has facts showing your involvement or responsibility. Before making any such decision, consult with experienced counsel to discuss all the facts and benifits of having him handle the case. Feel free to contact me for that purpose.