The Lawsuit 'Data Rule' All Startups Should Know About

12 October 2022 by Anith eDiscovery lawsuit startup

Takeaway: A key part of preparing for lawsuits is to have systems that protect vital data for eDiscovery. So, small business owners should connect with attorneys early to find out how best to preserve case-related files. And ideally, they should also understand how to choose and use the right eDiscovery software.

Lawsuits are a very real threat to startups and small businesses.

Starting a business is rewarding, but it’s risky, too. And the threat of a lawsuit is one of many challenges that most business owners have to navigate at some point. This is especially true in the US, where state courts see 100+ million cases filed yearly. Obviously, your risk of getting sued depends on your type of business – e.g., brick-and-mortar businesses risk more than online businesses. But whatever your product or service, it’s worth preparing for the worst, early. Especially since many malpractice claims degenerate into people accusing each other without tangible evidence. And these exchanges will cost you time and money, even though they’re unproductive.

Your first task as a business owner is to understand the types of incoming lawsuits.

Most civil lawsuits involve one party accusing another party of wronging them. These ‘civil wrongs’ are called torts, and they describe a handful of different scenarios. For instance, there are property torts (if any property is damaged), liability/negligence torts (for physical/emotional damage), dignitary torts (for defamation/slander), and infringement torts (for trademark infringements). As a small business owner, knowing these problem areas upfront can help minimize the chances of getting sued.

If you do get sued, don’t rush your response until you fully understand what the claim says.

The biggest mistake you can make is to rush your response to a claim/complaint. Instead, take a deep breath (maybe even go for a walk) and look for answers to the following. Firstly, who is suing you? Is it someone you know or a stranger? Secondly, why are they suing you? If they’re a stranger, you’ll need to figure out which of your employees engaged with them and what likely went wrong. Thirdly, where are you being sued? Many laws and procedures are location-specific. So you’ll want to find out the state, city, and court you’re being sued in. This will also help you choose an attorney with the right kind of specialization and experience. Finally, are there any deadlines? The claim might outline a timeline for you to follow (e.g., a date by which you have to reply), so read the document carefully to pick out relevant deadlines.

Respect deadlines because ignoring them will complicate things.

It might be tempting to push the claim to the bottom of your to-do list, but that won’t make it go away. Further, it’ll complicate things because courts often hand out ‘default judgments’ for delays – whether or not they’re intentional. With a default judgment, the court makes a decision with only the evidence opposing counsel presents. So, skip a deadline, and the court might decide that you owe money or must recall your products. And you won’t be able to plead your case. The lesson here? Never ignore a claim because it’ll just complicate things.

Don’t try deleting files either. In fact, you’ll need to do the opposite and consolidate your data.

Another thing panicking business owners tend to do is to start destroying potentially-incriminating evidence. But this is a huge mistake – first, because it’s illegal – but also because you’ll rarely get away with it. Remember, electronically stored information (ESI) like PDFs, emails, Word documents, etc., leave a digital trail even after you try and scrub all the evidence. So, you’ll want to consolidate your data rather than delete files. Set up systems in advance to capture and organize records like invoices, contracts, receipts, agreements, emails, and more. That way, you’ll have everything ready if/when you receive your first claim.

This data consolidation is central to what comes next – i.e., electronic discovery.

eDiscovery (or electronic discovery) is the process of collecting, sharing, and searching electronically stored information. And it’s how attorneys disclose to each other the evidence they’ll use in court. They’ll gather potentially relevant data, upload it to an eDiscovery application, review it using eDiscovery tools, and ‘produce’ the final collection for opposing counsel to review. So, as a business owner, the better you preserve your data, the more your attorneys will have to work with. Learn more about these eDiscovery stages.

Preserving data is harder than you’d think, though.

With entire cases revolving around responsive files, it’s easy to see why protecting your data is vital. But this protection is harder than you’d think. For instance, all your files come with contextual information called metadata. This metadata is a file’s digital footprint, with information about when it was created, who created it, who last modified it, and so on. Unfortunately, it’s easy to change/destroy metadata mistakenly. For instance, you could potentially change a file’s ‘last viewed’ metadata field simply by opening the file incorrectly. Learn more about metadata.

This is why you’ll need an attorney who understands technology.

A reputable attorney can guide you through these preservation complications. And they can bring in an eDiscovery professional if needed. Make sure to hire the right attorney, though. Ask friends and family for suggestions, check your state’s bar association website for options, or look for court-recommended self-help offices for guidance. Ideally, you’ll want to pre-select attorneys before you’re involved in any litigation, so you’ll have time to assess them properly.

Crucially, it’s also worth understanding how eDiscovery applications work.

Cloud eDiscovery services like GoldFynch can speed up eDiscovery, protect data, and help your attorneys control costs. And they’re simple enough for even the most tech-averse attorneys to use. See for yourself, to better understand the tools your attorneys will use. GoldFynch, in particular, comes with a bunch of valuable features. For instance:

  • It costs just $25 a month for a 3 GB case: That’s significantly less than most comparable software. With GoldFynch, you know exactly what you’re paying for: its pricing is simple and readily available on the website.
  • It’s easy to budget for. GoldFynch charges only for storage (processing files is free). So, choose from a range of plans (3 GB to 150+ GB) and know up-front how much you’ll be paying. You can upload and cull as much data as you want, as long as you stay below your storage limit. And even if you do cross the limit, you can upgrade your plan with just a few clicks. Also, billing is prorated – so you’ll pay only for the time you spend on any given plan. With legacy software, pricing is much less predictable.
  • It takes just minutes to get going. GoldFynch runs in the Cloud, so you use it through your web browser (Google Chrome recommended). No installation. No sales calls or emails. Plus, you get a free trial case (0.5 GB of data and a processing cap of 1 GB) without adding a credit card.
  • It’s simple to use. Many eDiscovery applications take hours to master. GoldFynch takes minutes. It handles a lot of complex processing in the background, but what you see is minimal and intuitive. Just drag-and-drop your files into GoldFynch, and you’re good to go. Plus, you get prompt and reliable tech support.
  • Access it from anywhere, and 24/7. All your files are backed up and secure in the Cloud.

Want to find out more about GoldFynch?