Business does not always go to plan. If you are around long enough, you will likely face problems with another party at some point.
A lawsuit can throw a significant spanner in the works, causing you stress and taking up a considerable amount of your time and resources.
It can be hard to step back and get a clear perspective when someone accuses you of something or threatens to take you to court, yet that is what you need to do.
Designate a team to handle it
However crucial it is to attend to the issue, business needs to carry on as usual. By selecting a few team members, perhaps including yourself, to deal with the matter, you allow the rest of your staff to carry on as usual. It also reduces the chance that you worsen your situation because one of your staff members with insufficient knowledge of the case made a comment that the other party can use against you.
Did what the other party says happened occur? If so, was it precisely as they say, or are they exaggerating or misunderstanding. You need to handle your quest for information in a way that encourages staff to tell the truth. If someone stepped out of line or made an unforgivable mistake, you can deal with them later, but first, you need to encourage people to be honest. You cannot construct your defense without the facts.
Review your contracts
Once you have all the information, you need to understand your legal options. You need to know how likely you are to succeed if the case were to go to court. While sometimes it pays to stand your ground, winning can come at a cost to relationships and reputation. Sometimes, the best thing for all involved is to seek a compromise that resolves the situation amicably and preserves your working relationship.