Dangers of Failing to Preserve Electronically Stored Information Upon Notice of Potential Litigation

If you run a successful business, the chances are that it has faced the threat of litigation. Notice of potential litigaiton often begins with the receipt of a demand letter, and receipt of the letter can be overwhelming, especially for a business that has never been sued previously. In addition to placing your insurance carriers on immediate notice of the potential litigation and starting to investigate the facts underlying the alleged wrong committed by the company, there is an immediate need that often goes unnoticed.

A business threatened with litigation must take immediate action to preserve not only the paper documents that might be relevant to the anticipated litigation, a business is required to preserve electronically stored information (ESI) maintained by the company. Electronically stored information, for the purpose of the Federal Rules of Civil Procedure, is information created, manipulated, communicated, stored, and best utilized in digital form, requiring the use of computer hardware and software

If electronically stored information is not preserved by the company, then when the lawsuit is filed, a spoliation of evidence claim will likely be asserted where the opposing party claims that the company intentionally destroyed relevant documents that would have demonstrated the veracity of the opposing party's claims. The party will argue that because of the spoliation, the court should instruct the jury to presume that the documents would be adverse to the company. Even if a spoliation charge is not ultimately submitted to the jury, but the company is determined to have acted negligently in allowing ESI to be destroyed, the company may still be sanctioned by the Court, which could range from a monetary sanction to an inability to present evidence to defend the allegations being made against it.

For a business that has never been sued before, or one that has never been on the receiving end of threatened litigation, it would certainly be prudent to contact an attorney with experience in business litigation that can guide the business in determining what information constitutes electronically stored information that needs to be preserved. In turn, it may become necessary to retain a computer specialist that can compile and image all the company's ESI so that it can later be produced, if necessary, in the anticipated lawsuit. In short, if litigation is anticipated, a business should take immediate efforts to preserve ESI, or face potentially losing the war before the first battle is fought.

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