e-Lessons Learned

When I was a kid, every year at Hanukah, my mom had a one in one out policy for toys. If I got a new Transformer, I had to donate an old toy to Goodwill. It taught me two important lessons: always think of those less fortunate and try to keep the clutter in your home to a minimum.

My fiancé cannot bear to part with anything. About five years ago she lost weight and went from a size 14 to a size 8. Today, half of her closet is filled with clothes that are 6 sizes too big for her.

Which one would you rather have for a client?

In Gallagher v. Crystal Bay Casino, LLC et al., 2010 U.S. Dist. LEXIS 124421 (D. Nev. Nov. 8, 2010), the court held that my fiancé was a good client, but my mom would likely suffer some serious adverse consequences in trying to defend herself in a lawsuit.

In Gallagher, the plaintiff lost two Compact Discs whose metadata would have likely contained important evidence about the timeframe in which those CDs were burned. Defendants brought a Motion for Sanctions due to spoliation of evidence at issue in this case. Specifically, defendants asked the court to dismiss the plaintiff’s case in its entirety as penalty for the spoliation. The court declined to dismiss, but gave the defendants leave to file a new Motion for Sanctions seeking other, less severe, penalties.

The court found that dismissal is only warranted when “Plaintiffs acted with willfulness, fault, or bad faith…” Since defendants had made no showing of willfulness, fault, or bad faith, dismissal is not warranted in this case. The court did, however, indicate strongly that other sanctions seemed appropriate given that plaintiffs failed to secure the evidence and apparently lost it. (Absent proof to the contrary, the court seems opposed to a finding of bad faith.)

Ok, we have the legal meaning of this case, but how does it break down for an average company who does not consult a lawyer until they are in trouble and it may be too late? All companies, big and small, should plan to be involved in a lawsuit at some point. Have good record keeping. Keep detailed human resources files. Keep ledgers and accounting records as long as is feasible, not for only as long as is statutorily required. In the day an age of computers, a business does not need large amounts of physical storage to keep records. Scan them into PDFs and store them electronically. The retrieval will be faster and it is certainly cheaper and less cumbersome than storing original documents. This is the safest route.

Even if a company does not keep everything, every company needs to consult a lawyer and draw up guidelines for when to trigger an in house litigation hold to preserve evidence for a potential lawsuit. The attorney and management should endeavor to identify possible litigation triggers that would necessitate preserving evidence.

Whether a company keeps everything, or waits until a trigger to begin preservation, they should consult a lawyer to develop the proper plan for their company.

Article posted on April 23, 2011 at 9:37 AM |              More... 
Tagged as: Good Faith, Legal Hold/Preservation, Sanctions, Spoliation.
View more articles implicating: In-House Counsel, Information Technology Professionals, Owners/Executives
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