Now that your company has been sued, what are you going to do? Notify your defense insurance liability carrier? Call your attorney? Shift your company's assets to Swiss bank accounts? Skip the country?
After having considered all these possibilities, you're ready to do battle, right? Maybe not. If you do not send immediate notice to your employees that the company has a duty to retain digital data relevant to the lawsuit, sanctions for destruction of evidence may be in your company's future.
Plaintiff's attorneys are becoming increasingly savvy about digital data, and unless your company has a policy for retention of digital data, you could find yourself in a discovery predicament regardless of how good your defense might be. In a case where your defense is rock solid, the last thing you want to do is pay a settlement simply because you inadvertently failed to retain relevant digital data and thus are facing possible sanctions.
For instance, relevant e-mails might exist when your company is served with a lawsuit. Those e-mails might be in employee in-boxes, sent items boxes, or even delete boxes. If your employees do not know about the duty to retain relevant information, they might purge these e-mails from their hard drives or your network forever. If the plaintiff has a copy of one of those purged e-mails, the plaintiff can show it to the court and argue that your failure to produce the e-mail in discovery shows your company destroyed relevant evidence after having been on notice of the duty to retain.
You, of course, would argue that destruction of the e-mail was inadvertent, and it would be unfair to impose sanctions based on an accident. Courts, however, have awarded sanctions for destruction of evidence, even if inadvertent.
So, upon being sued, you notify your employees of the duty to retain relevant e-mails, and you're safe, right? Probably not. Does your company back up its e-mails? If so, you need to notify the entity responsible for those backups that relevant e-mail backups must be preserved.
Many companies back up not only their e-mail, but also their servers generally. It is absolutely critical that a company's attorneys be familiar with these backup procedures.
Oftentimes, backup tapes are rotated. In other words, once a set of backup tapes becomes full, the tapes are overwritten with new information. If such an overwrite occurs after your company has been sued, your company could be in deep digital you know what.
Moreover, an overwrite might not cover an entire tape. If it does not, then even after an overwrite, old data might still exist at the ends of the tapes. Do you know whether your company does complete or partial overwrites? If not, you better find out.
One final note: Some courts have held that the duty to retain might arise even before a lawsuit is filed if the company knows that the lawsuit is imminent. As soon as you become aware that a lawsuit is probable, the prudent approach is to call a lawyer who specializes in digital discovery issues to walk you through the steps that will protect you from sanctions in the future.