“It Looks Like This Might Get Ugly”
There is a point in time leading up to business disputes where you may find yourself saying the above quote. This dispute could be with a business partner, an employee, a vendor or customer, or another entity with whom your company may have an agreement. While you may not have been served with a complaint, or decided if you are going to file a lawsuit against your potential adversary, there are important steps to take and critical pitfalls to avoid. The period of time leading up to the “pot boiling over” is critical in the successful outcome of future litigation.
Here are 10 tips that will help you prepare for a lawsuit:
1. Limit written communications with the other side.
Of the ten items I’ve listed in this article, this is undoubtedly the most difficult. The time period leading up to a potential future lawsuit is the time in which the parties are often trying to convey their issues and hopefully work things out. Keep in mind, lawsuits involve discovery and the production of documents. The rules of evidence in state and federal courts provide that anything you put in writing is almost automatically admissible as evidence as an “admission” of a party opponent. This means anything you put in writing (especially electronic mails) can be used in trial against you. Be cautious of what you put in writing. To the extent you believe a dispute is going to likely go to litigation, you should cease all written communications with the other side that are not first reviewed by your attorney.
2. Preserve evidence.
Lawsuits involve a period where the parties are entitled to discovery. This means that documents that relate to the dispute must be turned over to the other side. Most jurisdictions (especially federal courts) specifically direct that all parties maintain all evidence. This is especially true with electronic data, such as electronic mail. The parties are under a direct obligation to preserve Electronically Stored Information (ESI). A significant problem can occur in the event a party permits information (including ESI) to be destroyed (intentional or not). Legal authority in most jurisdictions provide for what is called an “adverse inference.” This means that if you permit information to be destroyed (even if this information is harmless and the destruction was innocent), it will be presumed that the information was damaging to your case. This adverse inference is often very difficult to overcome.
3. Don’t create evidence.
In the same vein, do not create any new documents. This includes emails or any internal reporting that could subsequently be turned over in the discovery stage of any litigation. In most instances, the fewer documents you are required to turn over the better. Creating documents may only serve to limit the positions you are able to take once the litigation commences.
4. Limit verbal communications.
As with written documents, the parties are also able to “discover” the content of verbal communications. Accordingly, it is important to limit verbal communications both with your potential adversary and any internal verbal communications with your own employees. The parties are entitled to take depositions of witnesses, including these employees. It’s important to limit any verbal communications with employees who are not within your control group (meaning those who are not officers or owners of your company). Employees can have different levels of recollection regarding things that are said in meetings. Additionally, someone sitting in a meeting overhearing verbal communications regarding a dispute one day may not be your friend 18 months later when his deposition is being taken in a future lawsuit. It’s best to avoid these potentially conflicting recollections by limiting any verbal communications regarding a dispute.
5. No “mea culpa.”
“Mea culpa” is a Latin phrase that translates into English as “my mistake” or “my fault.” The “mea culpa” communication to your soon-to-be adversary is a common mistake that parties make. In an effort to try to work things out, parties sometimes will admit some level of fault with respect to the dispute. The “mea culpa” will certainly be used against you in a future litigation and should be avoided.
6. No “nasty-grams.”
The opposite of the “mea culpa” is where you make aggressive statements against the party with whom you are having the dispute. Although it is understandably difficult to control your emotions during a business dispute, it is important to keep the dialogue as civil as possible. Unlike fine wine, name calling and foul language are two things that do not age well. Months or years later, when the offending document is put into evidence at a trial, you will regret coming across as uncivil (even if the other side deserved it).
7. No self-serving internal memoranda.
Attempting to pepper a file with favorable documents usually fails. This mistake is made when parties realize a lawsuit is about to commence and start drafting self-serving documents that the parties believe will be used as evidence at a future trial. This rarely works. Indeed, often times these types of self-serving documents will backfire.
8. Try to lower the temperature.
In order to try to avoid a dispute and come to some type of workable arrangement, try to take a step back. It’s far better to work out a dispute early than spend money on attorneys litigating a matter.
9. Understand the attorney/client privilege.
In most instances, communications between an attorney and a client are privileged. This means that this information typically will not be subject to discovery and will not have to be shown to the other side. Before relying on this privilege, it’s important to understand its components. Communications between an attorney and client where there is a third-party present are not subject to the attorney/client privilege. This means that these communications may be subject to discovery requests by your adversary. Additionally, written communications between an attorney and a client that are later shown to third-parties outside of the attorney/client relationship will also have to be turned over to the other side. Once privileged communications are given to someone that is not within the privilege, the attorney/client privilege is waived. There are many other nuances to the attorney/client privilege that should be understood in determining those documents and communications that may be protected and those that are subject to discovery.
10. Reach out to your attorney.
This is perhaps the most important advice. It’s never too soon to contact your attorney when you sense a business dispute is brewing. A quick communication with your trusted advisor to measure the equilibrium of the situation and plot out strategy is critical.
The opinions expressed in this article are for general information purposes only and are not intended to provide specific legal advice or recommendations.
Robert A. Burke is an active trial attorney who has tried cases to verdict in six different jurisdictions. His practice is focused on complex commercial and estate and trust litigation. This includes trial and appellate work in federal, state and international courts. He regularly presents matters before alternative dispute resolution panels and frequently lectures on trial tactics, practice and procedure. Bob can be reached at 610-840-0211 or [email protected].