New Hampshire Bar Association
About the Bar
For Members
For the Public
Legal Links
Online Store
Vendor Directory
NH Bar Foundation
Judicial Branch

Clio is the most widely-used, cloud-based practice management system in the world.

Order with big business buying power.
New Hampshire Bar Association
Lawyer Referral Service Law Related Education NHBA CLE NHBA Insurance Agency
Member Login
Member Portal

Bar News - December 17, 2014

Business Law and Business Litigation: Why an Early Litigation Hold Is Critical for Your Client


Bob is a corporate lawyer in private practice. One of his clients is Sales Corp., a New Hampshire business that sells specialized machine parts used in various manufacturing processes. One day, the principal of Sales Corp., Linda, calls Bob to report that that one of Sales Corp.ís employees, Jim, has been accused of supplying misleading information to a customer, Machine Corp., about the proper use of the parts.

Machine Corp. has complained about being misled and is claiming that its business has burned to the ground as a result. If Jim misled customers, then Linda suspects that other customers will experience problems with their use of the parts as well, though she doubts that any misleading information provided by Jim could have been the cause Machine Corp.ís fire.

Bob identifies his immediate task as damage control. Perhaps damage to other customers can be avoided, but litigation with Machine Corp. may be unavoidable given the extent of the damage that it has reported. Bob will meet with Linda before referring the matter to a litigator.

One of the first items on Bobís checklist of issues to be addressed immediately by Sales Corp. is the preservation of potential evidence. The duty to preserve evidence arises before litigation is initiated, and even the accidental destruction of evidence can lead to harsh consequences in litigation.

Courts across the country have made clear that halting the routine destruction of electronic records is a legal requirement imposed on all businesses from the moment that legal action can reasonably be anticipated. See, e.g., NH Ball Bearings Inc. v. Jackson (2009) and Super. Ct. Civ. R. 25(b).

Failure to halt the routine destruction of documents and other materials can lead to spoliation of evidence (failing to preserve, destroying, or substantially altering it), which in turn can lead to court sanctions such as fines and/or adverse inference instructions, which tell the jury that they may presume that a partyís failure to produce a requested piece of evidence was because the evidence would have been harmful to that partyís case. See, e.g., NH Ball Bearings, Inc.; Murray v. Developmental Services of Sullivan County Inc. (2003); Rodriguez v. Webb (1996); Testa v. Wal-Mart Stores Inc. (1st Cir. 1998); see also New Hampshire Civil Jury Instruction 4.10; Super. Ct. Civ. R. 21(d).

Failure to halt the routine destruction of information and materials can also expose a party to prosecution for criminal contempt and expose counsel to liability for malpractice and disciplinary action.

Bob will undoubtedly talk to Linda about preserving everything relating to the transaction between Sales Corp. and Machine Corp. If Bob asks the right questions of Linda, he will learn that the majority of Sales Corp.ís business records are electronic Ė electronic customer files, email systems, electronic calendars and task management systems, etc. He will also learn that Sales Corp. has a practice of permanently deleting, on a nightly basis, all electronic records that are more than six months old, except customer files, which are retained and backed-up indefinitely. Thus, Linda and Bob may think that a copy of all potential evidence concerning the Machine Corp. dispute will be preserved.

However, unbeknownst to Linda, Jim does not routinely copy his email correspondence into the electronic customer files as Linda assumes, so Jimís communications regarding Machine Corp.ís use of the parts are not in the customer file. Jim began communicating with Machine Corp. about the parts about six months ago. Each day, some of those emails are being automatically and permanently deleted by Sales Corp., if the company does not halt its routine destruction of those emails.

There is also a risk that Jim will intentionally delete incriminating emails with Machine Corp., in an effort to cover up any misleading information he may have provided. To make matters worse, Sales Corp. is the only party in possession of these critical emails, as Machine Corp. did not maintain an offsite backup of its computer systems, and any records it may have had of Jimís emails to Machine Corp. were destroyed in the fire.

Even if it is not yet apparent to Bob or Linda, preservation of Jimís emails might be critical to ensuring that Sales Corp. can adequately defend itself against potential future litigation by Machine Corp.

Linda was also unaware that Jim often uses Tony, his friend in accounting, to transmit information to Jimís customers when Jim is not in the office. Tony emailed information to Machine Corp. but never put those communications in the customer file. Tonyís emails will also be deleted each night unless preserved. Tony may ultimately be identified as a potential witness, but it may be after months of his emails to Machine Corp. have been deleted.

Bob didnít think to ask, and Linda didnít think to mention, that there is a parts manual that is available on Sales Corp.ís website. Had Bob asked, he would have learned that the parts manual had not specified whether the parts could be used as they had been used by Machine Corp., and that the parts manual is already being revised to specifically state that the parts should not be used in that manner.

Tomorrow, Sales Corp.ís technical writer will replace the prior version of the parts manual with the new version on Sales Corp.ís website, and will delete the prior version from Sales Corp.ís server. Sales Corp.ís web content is backed-up daily, but the prior dayís backup is overwritten each night.

If Sales Corp. does not preserve a copy of the old manual, the only copy will be destroyed tomorrow night. Its destruction could form the basis of an adverse inference instruction suggesting that the manual specified that the parts could safely be used as Machine Corp. used them, which could be devastating to Sales Corp.ís defense.

The hypothetical scenario Bob faces demonstrates only a small subset of the many preservation issues that might need to be addressed with a client.

In some cases, a clientís Outlook calendar, tasks, contacts, and/or text messages might be relevant to potential litigation, and their routine alteration and destruction might need to be halted.

A clientís proprietary systems might also need special attention. If the clientís employees use more than one device to communicate or store electronic data (a desktop, laptop, tablet, thumb drive, camera, smartphone, etc.), preservation of information on these various media will need to be addressed. Paper documents and other tangible things may also be at risk of loss or destruction if immediate measures are not taken to preserve them.

Any delay in discussing the preservation of evidence with a client who is possibly facing litigation can have harsh consequences. A lawyer should include the litigation hold in any initial conversation with a client about a potential dispute.

It is also important to remember that the litigation hold is not a one-time action. Steps must continue to be taken to ensure that records are preserved by monitoring, refreshing, and revising the litigation hold on an ongoing basis, even after litigation is initiated, as more information is learned about the dispute. It is a good practice for business lawyers to remind their clients of their preservation obligations periodically, even before any specific litigation might be anticipated, because the duty to preserve evidence will fall upon management as soon as they could reasonably anticipate the potential for litigation, which will sometimes happen before they have contacted their lawyers for advice.

Thomas J. Pappas

Jennifer Turco Beaudet

Thomas J. Pappas and Jennifer Turco Beaudet are members of the Litigation Practice Group at Primmer Piper Eggleston & Cramer.

NHLAP: A confidential Independent Resource

Home | About the Bar | For Members | For the Public | Legal Links | Publications | Online Store
Lawyer Referral Service | Law-Related Education | NHBA•CLE | NHBA Insurance Agency | NHMCLE
Search | Calendar

New Hampshire Bar Association
2 Pillsbury Street, Suite 300, Concord NH 03301
phone: (603) 224-6942 fax: (603) 224-2910
© NH Bar Association Disclaimer