Occasional disputes that evolve into litigation are something to be expected in almost any industry.
Generally speaking, a company is typically expected to preserve evidence that might be related to any lawsuits. This duty is triggered not only when there is an actual legal dispute but also when the company becomes aware of the potential for litigation.
What are some examples of some triggers?
Essentially any situation that raises the specter of a lawsuit triggers your duty to preserve relevant evidence. Some common situations include:
- Customer complaints: If a customer falls in your parking lot or slips on a wet floor, it’s critical to preserve a record of the events, surveillance footage and anything else that might be relevant to their claims.
- Employment issues: Did a disgruntled employee threaten to sue you for discrimination? Even if you know that their allegations are false, you should consider yourself “on notice” that a lawsuit may be forthcoming.
- Government investigations: If the Securities and Exchange Commission (SEC) or another government body initiates a regulatory compliance or criminal investigation, that’s definitely a time to take steps to preserve all important documents.
- Demand letters: Did you get a demand letter or a cease-and-desist letter from someone who claims that you’re infringing on their intellectual property rights? Even if you’re initially willing to comply with their demands, you should still anticipate future litigation.
What happens if you fail to preserve the evidence? That’s called spoliation of evidence, and it’s treated very seriously. The court may decide that the missing evidence should automatically be interpreted in the light most favorable to the other party, and that can heavily damage your case.
These days, documentation is the key to success in just about every sector of business – especially when there’s litigation involved. Coming up with a solid document preservation plan well before it is required can help you avoid painful (and expensive) consequences for failures in that area down the line.