If you own a business, or find yourself in a situation where you may have evidence related to a potential dispute, you may have a duty to preserve that evidence. It is important to understand your obligations and the steps you should take. The obligation to preserve evidence arises when (1) you have notice that the evidence is relevant to a dispute or (2) you have reason to belief that the evidence may be relevant in the future to a dispute or litigation. As it is with most legal situations, the court will make an analysis on a case by case basis; however, it is important to understand the severe implications that may arise if a party fails to comply with its duty to preserve evidence.
If you are a business owner, one of the best ways to ensure that your employees comply with the duty to preserve is to send them a litigation hold letter. A litigation hold letter directs a party to protect and/or segregate certain documents from destruction. These letters can be sent to one particular person, entity or a group of individuals. However, it is important to send the letter to anyone who may come in contact with the material that must be preserved. The litigation hold letter does not need to be complex it just needs to explain the subject matter that is at issue, the nature of the litigation or potential litigation and also explain that all documents and/or data, whether it is electronic or in paper form MUST be preserved.
All litigation hold letters should also explain the risk of noncompliance. Depending on the specific litigation and the evidence that is destroyed, the consequences may be severe. Courts have come down with large monetary sanctions on companies that failed to take the requisite steps to preserve the relevant documentation.
It is important for the litigation hold letter to explain that there will be follow up, and that the company or its attorney will be checking in with any employee who has a duty to preserve to ask what steps have been taken to preserve the protected material. It is also important to explain in the letter that the company’s representatives are available for any questions and/or concerns.
The duty to preserve is not just a duty that is placed on large companies or conglomerates. The duty to preserve is placed on small businesses and individuals as well. Due to the importance of complying with the duty to preserve, and the potential consequences of failing to preserve, we strongly suggest all businesses and/or individuals that find themselves in a situation where they think they may have a duty to preserve to consult with legal counsel to ensure compliance.
