Litigation Hold

Once on notice of a lawsuit or potential lawsuit, you have an affirmative obligation to ensure that no potential evidence is lost or destroyed. This duty includes electronically stored information or ESI. Courts can and do impose drastic sanctions if a party loses or destroys evidence, referred to as spoliation, even when it is not intentional. Immediately collect and preserve all potential evidence, and ensure that all routine data and document destruction policies have ceased until you are absolutely certain that all potentially relevant evidence has been preserved. Consult an attorney on this.

Never Admit You Are at Fault

In addition to circulating an internal litigation hold memorandum amongst your employees, it is also important to direct all management and employees to not discuss the litigation or dispute – either internally or externally. The last thing you want is an employee discussing the lawsuit or transaction in an email or by any other means, which could lead to the portrayal of wrong actions taken by your credit union. This happens all too often, innocently.

Retain Counsel

Once sued, do not delay in retaining legal counsel. Every court in the country imposes deadlines, and every defendant has a limited amount of time to respond to a lawsuit. In most jurisdictions a defendant is only provided 20 or 30 days to respond. If you miss the deadline to respond, a default judgment could be entered against you. So you must act promptly, and immediately retain counsel to represent you in the lawsuit. Find an attorney who has experience in this type of litigation, and choose somebody whom you will be comfortable working with over an extended period of time. If you do not already have a relationship with an attorney or firm that is suitable, seek referrals from your credit union peers that you trust.

Review, Repair and Assess

Once you have retained an attorney as discussed above, it is imperative to speak with them about determining what you should do to reduce the risk of additional similar lawsuits. Do not fear that by implementing these measures it will imply guilt that could be used against you in a court of law. Legal rules of evidence prevent that from happening and such measures can be monumental in reducing potential liability down the line. Additionally, you will work with your attorney in reviewing relevant documents and evidence relating to the lawsuit, and try to determine the strengths of the claims against you and your defenses as well as your possible liability.

We do recommend taking an aggressive approach and attacking the lawsuit on the merits. We believe this can be done in line with the best business decisions and for the benefit of your members. An effective and proper defense is the only way to mitigate the damage to your credit union and its members.

Michael M. Bell is an attorney and counselor for Howard & Howard Attorneys. He can be reached at 248-723-0493 or [email protected].