It’s a painful but unavoidable reality: If you run a business, you’re bound to occasionally run into problems and the threat of litigation.
Whether that threat comes from a disgruntled former employee, an ex-partner, a supplier, a vendor or a customer, you need to understand precisely what a litigation hold means for you and how to implement one. Otherwise, you could quickly find your legal troubles compounded.
You have a legal duty to preserve anything that might be evidence in litigation
It doesn’t matter if the likelihood of litigation is merely unclear or very slim – at the first indication that a civil lawsuit may develop, the defendant in a case has a legal duty to carefully preserve any evidence related to the case. This includes both the evidence that tends to favor your position and the evidence that doesn’t.
This typically means that you need to be very conscious about any events that could trigger litigation. For example, if a customer alleges that they fell in your parking lot because the lighting was bad and the lot was full of potholes, that’s a triggering event. If an electronic data breach occurs and customer data is revealed to some unknown hacker, that’s a triggering event (even if the customers are unaware of the issue).
For most situations, that means taking action to:
- Secure paper documents and photos in a safe place.
- Isolate digital devices and make backups of their hard drives for examination later.
- Restricting access to the evidence or devices to a limited number of people.
- Keeping an inventory of all the evidence you’ve preserved and how it changes hands.
What happens if you fail to do this? In many cases, the court can and will presume that your failure was deliberate, and that’s called spoliation of evidence. As a consequence, the judge or jury may even be allowed to assume that the evidence would have negatively affected your case. That’s a big price to pay for a simple mistake.
If the threat of a lawsuit against your business is keeping you awake at night, it may be time to seek legal guidance about the situation.