If your business dispute seems headed to litigation, you need to take immediate steps to ensure that relevant evidence is preserved. Having the right staff to back you up may help your case. Make sure to consult Parsippany Commercial Litigation professionals prior to your case.
The obligation to preserve evidence applies to both plaintiffs and defendants in commercial litigation. Failure to preserve evidence puts you at risk for adverse rulings in court or sanctions from the judge.
The best way to avoid this risk is by consulting with a Parsippany commercial litigation attorney to assess your company’s legal obligations as soon as litigation appears likely. There are three critical, preliminary action items regarding preserving evidence that you and your attorney need to consider.
First, Know the Rules
The rules governing preservation and disclosure of evidence may vary depending on if you are in federal or state court, but the overarching obligations are generally similar. Under N.J. R. 4:18-1(a) and N.J. R. 1:9-2, litigating parties and parties served with discovery requests or subpoenas must respond by producing documents and primarily, electronically stored information (ESI). If you are in federal court, the Federal Rules of Civil Procedure (FRCP) govern how information is exchanged. FRCP 26 requires the parties, as an initial matter, to describe what ESI is in each parties possession and what ESI may be used in the case to either support its claim or defense. There are other statues, such as Sarbanes-Oxley, that impose a duty to preserve ESI whenever litigation or a government investigation is reasonably anticipated. Confer with your attorney about how particular government regulations can affect the methods of disclosure preparation. You should also discuss with your attorney any specific local rules or industry-specific regulations that may affect your obligations to preserve evidence.
Whether you are in state or federal court, failing to adhere to the rules of procedure or proper preservation of evidence may result in the court imposing sanctions. For example, under FRCP 37(e), sanctions can result in the court instructing the jury to presume the lost information was unfavorable to the company, dismissal, or a default judgment. Fortunately, often ESI can often be recovered with technical expertise and therefore having robust IT support can improve your ability to comply with your obligations.
Second, Preserve the Evidence Immediately
If you believe a lawsuit is imminent or you have been served with a lawsuit, you should initiate a litigation hold throughout the company. A litigation hold means that all employees must preserve relevant records and ESI (e.g. emails or social media posts). When to initiate a litigation hold is based on your circumstances, but if you receive a subpoena, file a complaint in court, or receive a complaint where you are a named party then the obligation to preserve evidence is readily apparent. Still, if you have a reasonable belief that you are going to be involved in a lawsuit or investigation (e.g. you receive a document request from a government agency or a credible letter threatening suit), then a court will likely determine you have an obligation to initiate a litigation hold.
The pitfall here is that data is routinely deleted. Notably, emails incidentally often include document attachments and images that are also discoverable, but are often deleted. Under the New Jersey Rules of Court however, if records and ESI are destroyed “as a result of the routine, good faith operation of an electronic information system” you may be protected from violating obligations to preserve evidence although destroying evidence after you know or should reasonably know a lawsuit is imminent will most likely subject you to costly sanctions.
Complying with your obligations to preserve evidence begins with carefully crafted records management policies and procedures. These policies and procedures should be documented and distributed to all employees. Distributing the policies and procedures however is insufficient to effectively integrate those policies and procedures. Training, in collaboration with your attorney, on how to preserve relevant data will further enforce those policies and procedures and consequently alleviate the possibility of inadvertently destroying discoverable information. Most importantly, you should confer with your attorney to ensure your policies and procedures comply with federal and state laws.
Depending on your IT infrastructure, it is also prudent to have data backup implemented for all business units, particularly the accounting department. If you have the in house technical resources, assembling an e-discovery team can be helpful even before a threat of litigation exists. This e-discovery team is generally made up of attorneys, IT professionals, and administrative staff (e.g. data archiving personnel). Your attorney can work with your IT and HR professionals to preserve ESI and consequently adhere to the law.
Third, Prepare for Legal Proceedings
Prepare for the discovery conference as you will be required to disclose ESI in various stages. Usually, within three to six months after a lawsuit is filed, the parties meet to develop a plan that they will submit to the court. Central to this plan is how the disclosure and preservation of ESI has and will be addressed by each party. You will be expected to discuss what ESI is at your disposal and where it resides (e.g. on-premises servers or cloud platforms). Naturally, the discussion will also focus on what notice and action has been taken to preserve ESI. If you have taken the proper precautions to enable your attorney to guide you through evidence preservation, it can not only protect your interests, but also increase the likelihood of a favorable result.
Consult a Parsippany Commercial Litigation Attorney
If you are involved in a business dispute and anticipate litigation, call a Parsippany commercial litigation attorney at Snellings Law LLC at 973.265.6100. Whether you are an individual entrepreneur, small business owner, large corporation, shareholder, or a real estate developer or owner, we are prepared to offer you skilled, aggressive, and cost-effective representation.