My Company Has Been Sued – Now What?

When your business is either sued, or simply faced with the prospect of litigation, your businesses records will likely come under scrutiny during the process. Most small to mid-sized businesses focus on the daily operations of their business, as they well should, but simple policies and procedures can protect you in the event the dreaded lawsuit arrives at your door. Think about the 4th generation business – a mid-sized company doing well with records going back to the 1970’s. If that business does not have a records retention and/or document destruction policy in place, and finds it easier to simply pile filing cabinet after filing cabinet in the “back room” the prospect of producing decades of documents can threaten the very health of such a company.

Once litigation is either threatened or has been initiated, both sides in any dispute must immediately cease the routine destruction of any documents that may be relevant to the issues at stake. This means employees cannot delete emails, clean out files, clear hard drives, or destroy paper documents. If you have a server that routinely cleans out archived documents and email, having a clear and simple document destruction policy in place for your business is just the first line of protection. It is likely that once litigation is commenced, your attorney and/or opposing counsel will send you a “litigation hold notice” which explains the obligations your business has to protect information relevant to the dispute. Failure to do so has a significant negative impact, such as the Court sanctioning the offending party including a presumption that what your business may have innocently and unknowingly destroyed contained documents proving your opponent’s case. This is, of course, fatal to your claims or defenses.

So now imagine that same 4th generation business is served with document requests including “all corporate minutes and financial information going back 10 years.” Unfortunately, you still have those records, which means your business will not only have to pay to have them copied and coded electronically, it will have to pay the company’s attorney to review them and properly produce relevant documents.

This task alone could mean this otherwise successful business will not make it to the 5th generation.

Now imagine that same business has a records retention policy requiring all financial information to be destroyed after 7 years, and all non-financial information be destroyed every 24 months. Once litigation is commenced all the record destruction would cease, regardless of the companies’ destruction policy, but it leaves a manageable mountain of information to sort through and resolve the dispute.

No small or mid-size business owner wants to think about litigation – but they should. Simple preventative measures can mean the difference in winning or losing your case. For most small businesses, even minor litigation can quickly become a “bet the company” case. Take precautions and have a document destruction policy in place. Educate your employees about the terms of your policy. Prevention is the best way for a business to survive litigation of any size. Bergmann & Good can craft a simple yet effective policy not only tailored to your business, but to your industry as well.

Call us if you would like more information