- Know When To Hold'em - When Do You Have A Duty To
- "Litigation Holds" - A Quick Primer And
- Accident Reconstruction Experts Can Offer Opinion On
Vehicle Speed After Recent Change To North Carolina Evidence
- Marketing And Advertising: Express Warranty Or
KNOW WHEN TO HOLD'EM - WHEN DO YOU HAVE A DUTY TO PRESERVE EVIDENCE?
The duty to preserve evidence may seem obvious once a lawsuit is filed or you receive a subpoena or notice of a government investigation.1 The duty to preserve may arise before that point, however. Courts have ruled that the duty to preserve arises when you can "reasonably anticipate" litigation or the request for information. What does that mean?
Unfortunately, determining when the duty to preserve is triggered cannot be reduced to an objective checklist that will apply under all circumstances. The question will depend on the facts of each situation. This article will outline some guidelines to assist in that fact-intensive determination.
Are You Anticipating Initiating Litigation,
Or Are You Aware Of A Credible Threat That Your Company
Will Become Involved In Litigation? If you
are anticipating initiating litigation, you should have a
good sense of when you have reached a point at which the
litigation is "reasonably anticipated." If
you have decided, for example, to send a demand letter or a
"cease and desist" letter, you have probably
reached a point at which you have a duty to preserve
information relevant to the dispute.
On the defense side, determining when a threat of litigation is "credible" may be more difficult. A mere possibility of litigation does not necessarily make litigation likely. Even if a "threat" has been made, it may not be credible, because of:
- The nature of the threat;
- Your organization's past experience regarding
that type of threat;
- Your knowledge of the person who made the threat,
- Other factors.
For example, if your company has received threats in the past from a particular individual who has never followed through with actual litigation, you could reasonably conclude that there is no credible threat of litigation. In that situation, you have no duty to preserve relevant evidence at that point.
Your response to a demand letter may also impact the duty to preserve. For example, if your company receives a letter demanding that you stop using a trademarked slogan in your advertising, and you comply with the demand, you may not anticipate litigation.
The same reasoning applies to potential government investigations. For example, suppose you learn from a reputable news report of a likely government investigation of a particular issue involving your company. At that point, the duty to preserve has probably arisen, because a government investigation, and perhaps litigation, can reasonably be anticipated.
- The nature of the threat;
What Is The Likelihood That Data Relating To The
Claim Or Investigation Will Be Lost Or
The reasonableness of your conduct in taking steps to preserve evidence may depend in part on factors relating to the relevant data. The factors courts may consider include:
- The likelihood that relevant data will be lost or
- Whether relevant data is being retained for some
- The burden of preserving data
For example, if it would not take much effort to preserve information relevant to a dispute possibly leading to litigation, courts will be more inclined to find that you had a duty to preserve that information. On the other hand, if a vague threat of litigation would require an extensive and expensive search and preservation effort, the court would more likely rule that the duty to preserve does not arise until the threat is more credible or the litigation is more clearly anticipated.
- The likelihood that relevant data will be lost or destroyed
Do You Have A Process For Reporting And
Evaluating Threats Of Potential Litigation?
In organizations, particularly large organizations, the individuals who will ultimately make decisions about litigation may not know about threats of litigation in time to evaluate the threat and decide whether to preserve evidence. A process for notifying the decision makers about disputes that may lead to litigation will help you demonstrate to the court that you have taken reasonable steps to preserve evidence when necessary. The procedure should be simple and practical, so that individuals within the organization will follow it. The procedures will vary, depending on the size and nature of the organization and what practices work best for that group.
For example, a small company with a dozen employees may have routine staff meetings. The staff meeting could include as a regular agenda item any threats of litigation against the company. The CEO or some other designated individual could then follow up to evaluate the threat and determine if the duty to preserve evidence has been triggered. On the other hand, in a large organization with a legal department, there could be a procedure for reporting disputes and potential lawsuits to the legal department or to certain individuals in that department to determine whether and when to preserve evidence.
These factors are not exhaustive. Again, the duty will be evaluated based on circumstances of each situation. A good rule of thumb to follow is to err on the side of preserving evidence, unless it would be unreasonably burdensome to do so.
"LITIGATION HOLDS" - A QUICK PRIMER AND PRACTICAL TIPS
When a lawsuit is filed or you receive a subpoena or notice of a government investigation2 , one of the first things on your "to do" list is to preserve evidence. Your lawyers can assist with that process. The steps should include the following.
- Implement A "Litigation Hold" Program
To Identify, Preserve And Maintain Relevant
Information. Companies that face litigation
should have a process in place to identify, collect and
preserve relevant information as soon as litigation is
reasonably anticipated. The process will be more
efficient and effective if it is in place before you need to
preserve evidence for a specific matter.
- Issue A "Litigation Hold" Early And
Often. Issue a litigation hold at the outset
of litigation or as soon as it is reasonably
anticipated. Also, periodically reissue a
litigation hold to be certain that new employees are
aware of it, to remind others that the litigation is ongoing,
and to inform everyone about any new issues or any changes to
the scope of what must be preserved.
Suspend All Routine Destruction Of Relevant
Information. Many companies have document
retention policies for hard copies and automated deletion
of e-mail, voice mail and other electronically stored
information. The litigation hold must suspend
those deletion policies immediately to preserve relevant
information. One approach is to apply an
electronic/automated hold on all e-mail of individuals who
may have relevant information. Once that hold is in
place, that individual's e-mail (and probably the
electronic calendar) is electronically preserved, even if
he hits "delete." Be aware, however, that
the electronic hold may not preserve documents or any
information other than e-mail.
Consult with your Information Systems department about the most effective way to suspend existing document retention policies, and be sure you do it right away. In today's business world, information is created and deleted rapidly. You may face sanctions if you do not act quickly enough to suspend routine destruction.
Determine The Scope Of Relevant
Information. This analysis covers two
fronts: (a) substantively, what topics may be at
issue in the dispute, and (b) technically, how is that
information generated and maintained.
- Substantively, identify the topics likely to be at
issue and where the relevant information may be
maintained. You and your lawyer together can
determine what subjects will be relevant to the
dispute. Sources of that information often include
files of people involved in the transaction and,
depending on the issue, files from accounting, human
resources, payroll, purchasing, research and development,
risk management, claims, etc.
- Technically, identify the manner and
"places" in which the relevant information is
generated and maintained. This often includes hard
copy files, desktops, servers, backup tapes and possibly
home computers and personal devices (PDAs, Blackberries,
You must determine all of these sources to devise a reasonable plan for preservation.
One potential glitch to be aware of: Preserve application software necessary to view information. If you and your lawyer concluded it is necessary to preserve the information, you should also preserve the software necessary to access it. By the time litigation arises, the software may no longer be available on the market.
- Substantively, identify the topics likely to be at issue and where the relevant information may be maintained. You and your lawyer together can determine what subjects will be relevant to the dispute. Sources of that information often include files of people involved in the transaction and, depending on the issue, files from accounting, human resources, payroll, purchasing, research and development, risk management, claims, etc.
Be Specific In The Litigation Hold.
The litigation hold should:
- Describe the matter in dispute;
- Provide specific examples of the type of information
to be preserved;
- Identify potential sources of the information;
- Inform recipients whom they should contact if they
- Describe the matter in dispute;
Document The Litigation Hold Process For Each
Case. The effort to preserve relevant
information may be challenged, and you may need to
demonstrate to the court that the effort was
reasonable. The documentation of the process should
- The date the hold was implemented, and by whom;
- The scope of information included in the initial hold
and in any subsequent hold;
- The dates when reminders or revised holds were
- The list of persons contacted and individuals and
systems involved in the preservation effort;
- The list of who produced (or preserved) documents and
- The date the hold was implemented, and by whom;
Monitor The Preservation Effort. The
preservation effort must be monitored. The
documentation outlined above will help you demonstrate
reasonable monitoring efforts. Also consider:
- Written confirmation from each recipient of the
- Periodic reminders; and
- Notices of any development in the litigation that may
change the scope of relevant information to be
- Written confirmation from each recipient of the litigation hold;
- Implement Procedures To Release Or Destroy
Information After The Litigation Is Concluded.
At the close of the litigation, determine whether you have
any business reason or regulatory obligation to maintain the
information. If not, communicate to each recipient of
the litigation hold that the information may be
destroyed. Any routine or automated
retention/destruction process that has been suspended should
Finally, if you have any questions about litigation holds, particularly as they relate to electronic discovery issues, it is best to seek counsel.
ACCIDENT RECONSTRUCTION EXPERTS CAN OFFER OPINION ON VEHICLE SPEED AFTER RECENT CHANGE TO NORTH CAROLINA EVIDENCE CODE
A recent amendment to Rule 702 of the North Carolina Rules of Evidence specifically authorizes accident reconstruction experts to offer an opinion on vehicle speed at trial without having actually witnessed the accident. This is a major change in North Carolina law, which for years excluded non-eyewitness testimony concerning the speed of a vehicle.
The addition of Paragraph (i) to Rule 702 was one of several legislative changes found in the Motor Vehicle Driver Protection Act of 2006 ("MVDPA"). Although the MVDPA was designed to update the statutes related to DWI prosecutions, the Rule 702 amendment also applies to civil cases. The new rule applies to accidents occurring after December 1, 2006. Since the statutes of limitation for wrongful death and personal injury claims accruing on that date expire on December 1, 2008 and December 1, 2009 respectively, we are seeing an increase in the number of cases in which this new rule of evidence will be applied.
We have always stressed to our clients that early investigation and consultation with an accident reconstruction expert is important in the defense of a motor vehicle accident claim. This new rule of evidence makes early investigation even more vital. Plaintiffs' attorneys will increasingly retain their own accident reconstruction experts to testify about vehicle speed. The defense must be able to rebut those opinions and provide opinions of its own.
Parker Poe has an accident response hotline for our trucking and transportation clients. The number is (919) 890-4150. You can call any time, day or night. You will reach a Parker Poe attorney who is ready to respond to your emergency anywhere in the Carolinas and coordinate with an accident reconstruction expert to begin the investigation.
MARKETING AND ADVERTISING: EXPRESS WARRANTY OR PUFFING?
Claims arising from the breach of an express warranty are common causes of action in product liability lawsuits today. Not surprisingly, manufacturers and sellers carefully craft the written warranties associated with their products. While these efforts can serve to limit liability, manufacturers and sellers of goods must remember that express warranties can also arise from their marketing and advertising efforts.
Under the Uniform Commercial Code, which governs sales of goods, any "affirmation of fact or promise relating to the goods which becomes the basis of the bargain" creates an express warranty. Therefore, everything from photographs and statements on a website to the sales pitch delivered on the showroom floor can potentially expose the manufacturer or seller (and in certain situations their licensors) to liability for personal injury arising from the use of the product.
Of course, not every statement or representation made during the course of a sale creates an express warranty. The key distinction is whether the representation is one of fact or opinion. A salesperson's statement of her opinion of the product's value is known as "puffing." Statements and representations which are merely puffing normally do not create express warranties.
Theoretically, this distinction is easy to make. Practically, separating representations of fact from puffing can become quite difficult. For example, if an online used car dealer advertises that a particular used car is "in good shape," has the dealer expressly warranted that the car will perform adequately on the road? What if the website claims that the used car is "mechanically A-1?" While determining whether a statement is fact or puffing often requires careful examination of the relevant facts, the following examples help define the outer boundaries of each category.
Statements and representations of particular scientific and technical information normally are representations of fact which create express warranties. ("This truck can haul 20,000 pounds.") Similarly, specific statements and representations regarding the safety of a product usually are considered factual. (A photograph of a child taking a particular cold medicine likely would create an express warranty that the medicine was safe for children.)
On the other hand, generalized statements about the product's worth normally do not create express warranties. A salesman's pitch is usually simply puffing. ("Give these golf clubs a try and you will be driving the ball like Tiger Woods.") Vague and exaggerated statements about a product's quality are also normally merely puffing. ("This drill will never let you down.")
Marketing and advertising are necessary components of sales, and manufacturers and sellers of products should not be afraid to aggressively promote their products. On the contrary, by understanding that express warranties are often more than the pieces of paper in the box, manufacturers and sellers can maximize their marketing efforts while limiting their potential liability.
1. Tips for how to preserve evidence effectively are outlined in "Litigation Holds" in this issue of Liability Alert.
2. The duty to preserve may arise before suit is filed or a subpoena is received, because the duty arises when you can reasonably anticipate litigation. See "Know When to Hold 'Em" in this issue of Liability Alert.
This Client Alert is intended to inform readers of recent developments in the field of tort and insurance law. It should not be considered as providing conclusive answers to specific legal problems.