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The Most Common Reasons Your Small Business Will be Sued in Southern California

Posted by John Marshall | Jun 30, 2021 | 0 Comments

Lawsuits can be a huge source of stress for small business owners—with good reason, as they can be serious matters. When you find your company mired in litigation, it's critical to have experienced, tireless advocates on your side.

While lawsuits can crop up for a variety of reasons, some are more common than others.

Faulty Contracts or Breaches of Contract

You may not have reviewed a contract before you signed it, or you may have only scanned it without really knowing what you were agreeing to. This is a common scenario with vendor and leasing agreements, and you may find yourself in a dispute over the details.

Perhaps you have been unhappy with a vendor and decide to terminate the relationship, assuming there won't be any repercussions. This could potentially put you in a position of liability or on the hook for contractual responsibility. Having a skilled lawyer to assist in negotiations can help extricate your company from a situation like this, or at the very least, minimize the impact.

Flawed Customer Agreements

In an effort to limit costs, you may have decided to draft your own customer agreements—involving terms and conditions or agreements appended to purchase orders—rather than hire a lawyer.

By doing so, you may have omitted important language that could have protected your company in the event of a dispute with a customer. This could leave you with obligations you never intended to create.


While most torts—defined as occurrences when wrongful conduct by a person or business causes financial harm to another business–are covered by a business's general liability insurance, intentional tort claims represent major risks for businesses.

In the state of California, intentional torts seeking punitive damages are alarmingly common. Because these torts are typically excluded from insurance coverage — and because they often present aggravated liability and damages exposure — they must be defended vigorously at every stage of litigation.

Human Resource Issues

This is without a doubt the greatest source of litigation for small businesses. The claims tend to fall into three categories.

Employment discrimination and wrongful termination suits. This is the most common type of claim, with employees making accusations of discrimination associated with matters including Title VII of the Civil Rights Act (which prohibits employment discrimination based on race, color, religion, sex, and national origin), pay equity issues, age discrimination, and pregnancy discrimination.

Because small businesses typically have a small HR department (or none at all), they may not be aware that some of their administrative and management practices can result in discrimination—even if it's completely unintentional.

Discrimination suits brought by vendors, suppliers, clients/patients, and others outside the business. This is about not just how ownership and management, but employees and third parties hired by the company, interact with people and entities outside the business. Ultimately, whatever people you've hired do, you as a business owner are responsible for their work-related behavior.

Wage law violation lawsuits. Wage and hour laws in California are known to be the most stringent in the country, and employers are required to comply with the regulations that are most generous to employees.

Wage law violations are claims that the business has paid employees incorrectly. Even if this is an honest mistake on the employer's part, that doesn't diminish the obligation of the business owner to be compliant with applicable wage, overtime, and vacation regulations.

Should you find yourself embroiled in a lawsuit, you will need a skilled attorney to protect your company. Reach out to John Marshall, Attorney at Law, at 949-724-1116.

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