7 Tips to Prepare for Business Litigation

In the year ending March 31, 2022, 402,409 cases were filed in U.S. federal district courts (down from 543,733 from the prior year). Of these, 309,102 cases were civil. 

While we can’t isolate how many of these lawsuits were commercial disputes, organizations have noted an uptick in commercial litigation, with both the median number of lawsuits against them and the cost of outside counsel rising during 2021. With the average business spending $1.2 million fighting commercial litigation each year, organizations are inundated with legal claims. 

Here are seven tips for how businesses can better prepare for lawsuits over business disputes—and how they can save time and money while doing so. 

Contents:

What is business litigation?
What are the most common types of business litigation?
7 best practices to help you prepare for business litigation
1. Talk to your in-house legal team and hire outside counsel if necessary
2. Notify your insurance carrier of the business dispute
3. Halt the destruction of potentially relevant information
4. Identify custodians with potentially responsive information
5. Locate and collect potentially relevant data
6. Limit communications
7. Set a strategy
Proactive eDiscovery is essential for successful business litigation 

What is business litigation? 

Business litigation is any dispute involving a business entity, such as a corporation, partnership, or other registered business. Typically, commercial disputes are civil in nature. However, there are certainly instances where businesses and their executives have been charged with financial crimes, fraud, obstruction of justice, and other criminal offenses. 

What are the most common types of business litigation? 

Sometimes commercial litigation involves businesses suing each other, such as for breach of contract and intellectual property matters. Other times, individuals sue corporations for violations of the law, as with securities lawsuits and consumer class actions. In recent years, hot areas for civil business disputes have included environmental, social, and governance concerns; cybersecurity and data protection; diversity, equity, and inclusion; and regulatory matters. 

Regulatory agencies may also file lawsuits against organizations for breaking the rules. For example, the Federal Trade Commission and Department of Justice may file a lawsuit against a company for antitrust violations, identity theft, privacy infractions, or fraud. And the Occupational Safety and Health Administration may sue a company that fails to provide a safe work environment for employees. 

Seven best practices to help you prepare for business litigation 

If you’re facing the prospect of commercial litigation, time is of the essence. Here are seven best practices that can help you contain litigation costs and avoid losing critical evidence. 

1. Talk to your in-house legal team and hire outside counsel if necessary 

If your company has internal lawyers, they should be your first call when you receive a formal complaint or a warning that litigation is on the horizon. If you don’t have inside counsel, or if the dispute is large enough, you’ll want to retain the assistance of outside counsel. 

Any correspondence from a third party and/or their lawyer threatening litigation must be taken seriously. Time is of the essence as you mobilize to defend your company. Never try to respond to anyone who has threatened to sue you. Remember that anything you put in writing can be used against you, even if you are trying to work things out. Always seek legal guidance before responding. 

2. Notify your insurance carrier of the business dispute 

If your company carries insurance that can protect you against certain types of commercial litigation claims, now is the time to notify your insurance provider of the potential claim. Some insurers only cover claims if they are reported immediately, so this should be your second call as soon as you know a lawsuit is looming on the horizon. 

3. Halt the destruction of potentially relevant information 

The duty to preserve evidence attaches as soon as you reasonably foresee litigation. If you receive a letter from a lawyer demanding a settlement or threatening litigation, receive a subpoena or document from a regulatory agency, or hear that a former employee or other stakeholder plans to sue your company, you should suspend all data destruction policies immediately until the conclusion of the matter. 

Failing to preserve all relevant evidence can open your company up to a claim of destruction of evidence, otherwise known as spoliation. If the other party alleges that you lost or destroyed evidence, you can be sanctioned by the court. Spoliation sanctions may include a fine, a presumption that the lost or destroyed information was harmful to your case, or even a judgment against you. 

4. Identify custodians with potentially responsive information 

To preserve evidence, you need to know where it is. So, your next step should be to send out a questionnaire or interview people who are likely to have information about the underlying facts that may inform your legal strategy. Issue these potential custodians a legal hold instructing them to preserve all information. Then gather intelligence from them about the claims in the lawsuit, what types of information they have that may be relevant to the claims and where they store that information, and who else may have insight into the claims. 

5. Locate and collect potentially relevant data 

Using what you found out in your custodian interviews, begin collecting documents. And remember that “documents” includes both hard copy and electronically stored information, including emails, texts, chats on Slack and other apps, and the like. Work with your IT team to ensure that you’re capturing an accurate chain of custody for all data, which means you can account for how you’ve handled the data you collect from the time of collection all the way through to its production in court. 

Be sure to record when you collected the data, where you collected it from, and who owned the data source. All of this information should be captured in the data’s metadata, which you’ll use as you organize the data for review and production. 

6. Limit communications 

Once litigation or a regulatory investigation has begun, remember that any communications about the business dispute may become relevant to the case. You may have to share those communications in court or before an agency unless a lawyer is involved in the communications. Therefore, you should take steps to reduce written communications as much as possible, whether that’s by email, text, or even letter sent by carrier pigeon. 

You should also resist the urge to create new documents that may “help” your case. Courts and regulatory agencies will see through your attempt to paper the file, and it will hurt your credibility. 

Keep in mind that conversations can be discoverable too. If the opposing party asks to depose your witnesses, the contents of the conversations you’ve had about the case are fair game for discovery unless they are protected by the attorney-client privilege. 

7. Set a strategy 

Based on the information you’ve gathered, work with your legal team to choose the best course of action. Sometimes you’ll be confident that you’ll prevail in court, but other times it may be more practical to settle out of court to protect your organization’s wallet and reputation. 

Proactive eDiscovery is essential for successful business litigation 

If you’re facing a business dispute, chances are you’re also facing a mound of eDiscovery. It can be challenging to know how to identify, collect, and preserve all the different types of electronic information implicated in a legal matter. 

That’s where ZyLAB comes in. We help businesses from start to finish in a lawsuit, from collecting data securely and accurately to reviewing data efficiently and uncovering the details that will shape a commercial litigation strategy. Contact us to learn how we can help you do more with your data with less risk.