When a business is sued, the lawsuit is usually filed in the state where the business is located. But sometimes a South Dakota business can find itself being sued in another state - and it may be in a state where you don’t even do business.
There are two primary reasons why your South Dakota business could find itself getting sued in another state:
Reason #1 - You Do Business In Another State
Even if your business is based in South Dakota, it may be considered to be doing business in other states. For example, if your business supplies products or services to customers or companies in other states, your customer may be able to file a lawsuit against you in the state where they live. Also, if you have an Internet-based business you likely ship products all over the nation. If you have a manufacturing business and sell through distributors based in other states, you may also be vulnerable to out-of-state lawsuits. Finally, if a customer is injured by one of your products, they can sue you if they believe the injury was caused by a design or manufacturing defect or error.
Reasons #2 - You Agreed To A "Forum Selection Clause"
Your business signed a contract with another company that allows for a lawsuit to be filed in another state. Many contracts contain a "forum selection clause" that allows a lawsuit to be filed in the home state of the company that created the contract. Out-of-state companies may decide to have claims against them litigated in the state where they are based or where they feel most comfortable litigating. The courts typically enforce forum selection clauses unless there is no substantial or reasonable relationship with the state named in the clause.
If you receive notice that a lawsuit has been filed against your company in another state, you should contact a business litigation attorney before you do anything else. Your attorney can then decide whether or not it is proper for your business to be sued in that state. If your company does not have a sufficient connection to that state, you may be able to pursue a dismissal of the lawsuit.