Evidence from business records generated over years and even decades affects an increasing number of civil lawsuits. In fact, damage awards have soared in recent years, some due to explosive content of business communications, gaps in documentation, inflammatory e-mail, or charges of evidence tampering.
Most recently, General Motors was hit with a record $4.9 billion verdict, based largely on an internal memo a staff engineer wrote nearly two decades earlier. Similarly, in lawsuits against large insurers and small service providers, old marketing memos were pivotal evidence. Inflammatory e-mail messages haunted Microsoft in its antitrust trial, and offensive e-mail plagues employers in costly harassment lawsuits. These are just a few examples of business communications created in one context and then “spun” against the company in the courtroom.
Equally troublesome are high profile accusations of document shredding. Enron and Andersen are the latest (but not the only) businesses finding themselves on the defensive over when and how they destroyed evidence. From gigantic civil penalties to criminal obstruction of justice charges, haphazard enforcement of document retention and disposal policies is a legal minefield.
Many managers today are unaware of the legal pitfalls inherent in generating written communications and business records. The fact is that during a trial, the courts may analyze everything from informal memos to performance appraisals to marketing plans, all of which may be turned against the company. Unfortunately, those managers who are informed of the legalities often feel pressured into either over-documenting information, avoiding written communications completely, or using ambiguous language due to fear of lawsuits.
How Courts Use Business Records And Documentation During LitigationDocumentation is a record of an event, discussion, or observation by one or more individuals. Most organizations rely on documentation to record their activities and those of their employees. Any written information, whether formally or informally generated, can be considered documentary evidence if it is pertinent to a legal action, a regulatory proceeding, or a misconduct investigation. Written documents can include both hard copy and electronic records, even those never actually printed.
Most lawsuits ultimately revolve around three simple questions about a business organization:
-- What did the company know?
-- When did it know?
-- What did it do?
Often, written business records can answer each of these questions. In the absence of a written record of the activities that took place, the company's position may be significantly affected. That's why unambiguous, complete, accurate documentation is often invaluable when used in the context of regulatory or judicial proceedings. Additionally, complete records, used as an adjunct to accurate testimony, are important in enhancing a witness's credibility.
Primarily, courts use written business records in the following context:
-- To tell the story of what occurred in the underlying activities. Business records can reconstruct actual events and aid in establishing the company's good faith, objective actions, and appropriate business activities. Often, the lawsuit's subject matter can span years. When there are no documents to establish the basis for the company's past actions, businesses have a difficult time retelling what happened and supporting their claims.
-- To document that management made personnel decisions objectively, consistently, and in accordance with all company policies.
-- To refresh a witness's memory or to discredit a witness who gives inconsistent testimony.
-- To reconstruct past events, such as personnel decisions or decisions about sales or contacting practices.
-- To establish knowledge, notice, or intent of the company or a particular individual at a relevant time.
Effective documentation has several elements. In particular, it should be consistent, understandable, and readable for everyone in the organization. The following 10 principles of effective documentation will help assure that your business records work for - not against - your organization in the courtroom.
1. Write with accuracy and precision.
Be factual with all memos, letters, and other business communications. Include all details: date, time, location, name of persons involved, witnesses, work environment conditions, and necessary action taken or recommended. If your adversary can take your documents out of context or if your records express opinions on the ultimate facts in dispute yet don't contain all the relevant data, then your position may suffer during a lawsuit. Avoid speculation, exaggeration, subjective, or relative descriptions that are at best ambiguous.
Limit the use of terms such as “frequent,” “excessive,” and “sub-standard,” unless you also give the context. Think about your objective for the communication and how you intend others to read it and act upon it. If someone reading the communication could ask “relative to what standard?” then the writing is non-specific. Use objective facts and examples instead.
2. Avoid negative connotations that may be misleading to someone not familiar with the company or the industry.
Avoid slang or shortcuts in terminology. Minimize unnecessary technical jargon by defining the term's meaning in its technical context. Make sure your communications are consistent with the intended recipient's knowledge so that you can defend against a claim that the recipient did not understand the content or requested action. Describe all actions and conclusions objectively, and be honest in assessing the situation (do not rely on second/third party information unless it is specified as such).
3. Know what you're writing about.
When writing about activities or events, stay within your personal knowledge, expertise, and responsibility. Don't speculate or guess as to the meaning of any aspect of a business transaction with which you are not personally familiar.
4. Avoid legal conclusions.
Don't use legal terms in a non-legal sense. For example, “He was negligent because he didn't read his e-mail,” uses a legal term (negligent) in a lay sense. While it might be unprofessional or otherwise bad business not to read e-mail, it isn't “negligent,” which is defined in the law as failure to exercise that degree of care and skill necessary to avoid foreseeable risk of harm to a person or property. Other terms to avoid include “defective,” “fraudulent,” “misleading,” or “discriminatory,” unless you have both the expertise and the job responsibility to reach those conclusions.
5. Eliminate all inflammatory, offensive, or otherwise inappropriate language.
Minimize the use of labels, such as “malingerer” or “not a team player,” without a description of the underlying factual basis for the evaluation. Also, avoid subjective terms when describing people, as those terms may be misleading to a layperson serving as a juror.
6. Define or clarify technical terms involving your work, including specialized industry terms.
Always consider the communication's purpose. For example, if you are writing to someone outside the company and require that person to take action, use terminology the person will understand. Remember that a lay juror, arbitrator, or judge from outside your industry may later have to consider the effect of your internal and external communications.
7. Close the loop on all significant issues raised in writing.
If someone requests information from you, provide it promptly or notify the person of any foreseeable delays. If an action is requested in writing yet the resolution is not reflected in writing, the courts may later mischaracterize the company's actions.
8. Minimize off-the-cuff responses.
Limit handwritten comments in the margins of business records and rapid e-mail replies when they are not well thought out. These types of communications are often incomplete or misleading. This is especially a concern with e-mail messages, where employees tend to write off-the-cuff conversational messages. These communications don't use the same tone and format expected of business communications, and jurors often believe they reflect the writer's true unedited intentions. Such messages usually become smoking guns when turned against the writer in the courtroom.
9. Control copy distribution of all sensitive records or confidential/proprietary data.
Be sensitive to confidentiality where appropriate. Make sure your employees understand their responsibilities to safeguard proprietary business records, intellectual property, and other company assets from inadvertent disclosure. Also, understand the scope and limitations of attorney-client privileges. Big Tobacco learned the hard way that labeling a document “privileged” doesn't govern whether the document can be safeguarded from production. Privileged exchanges between lawyer and client are limited to those where the client provides facts intended to be a confidential request for legal advice, and the lawyer responds with analysis of those facts. Marketing studies and medical analysis of the addictive powers of nicotine were not privileged, and the courts ultimately sanctioned the companies for trying to rely upon a legal protection that didn't exist.
10. Be consistent in your documentation techniques.
Inconsistency often reflects poorly in the courtroom, especially in the context of performance appraisals when an employee claims that management singled out him or her for negative action. However, consistent doesn't mean inflexible. Rather, consistency enhances the company's ability to defend against discrimination claims when the employer can demonstrate that the needs of the particular job consistently required adherence to concrete, well-articulated performance expectations, and that all similarly-situated employees were held to the same standards.