MINIMIZING MINIMIZING LITIGATION RISKSLITIGATION RISKS

Lisa A. Powell, Esq.

Lawyer JokeLawyer Joke

What do you call What do you call 20 lawyers 20 lawyers skydiving? skydiving?

A Skeet A Skeet ShootShoot

60% of business documents are in electronic form

Employees of large companies send and receive on average 178 e-mails per day

Electronic InformationThe New Frontier

E-mail Management

Think before you send! Be careful about tone Profanity looks bad in hindsight. Check Addresses Don’t unnecessarily add CC recipients

EXAMPLES “Let’s just keep this to ourselves”

“No need to investigate, we’ve already got enough problems”

“Get rid of all those damn documents”

“_______ up Folder”

Sun employee sends e-mail to 35,000 employees worldwide complaining about his missing lunch

CBS anchor, Alycia Lane sends seven e-mails of herself in bikini to Rich Eisen of the NFL Network who shared that e-mai address with his wife, ABC reporter, Suzi Schuster

A magazine devoted to privacy on the internet sends mass e-mail to its subscribers and instead of sending blind copies to recipients displays all addresses in “to” field

E-mails May Last Forever Emptying Trash does not delete e-mail

from hard drive. E-mails remain on hard drive as “Unallocated Space” and are recoverable until overwritten

Even if space is used on hard drive, e-mails still may exist because not completely overwritten (“shadow files”), but are extremely difficult and expensive to extract

Meta Data Usually Stays with the Document Your name Your initials Your company or organization name The name of your computer The name of the network server or hard disk where you saved the document Other file properties and summary information Non-visible portions of embedded OLE objects The names of previous document authors Document revisions Document versions Template information Hidden text Comments

Solution – Buy Software that removes meta dataAt a minimum convert to PDF

The Duty to Preserve Evidence is Not New

A duty to preserve evidence arises when a party knows or reasonably should know that there is a substantial chance that a claim will be filed and that evidence in its possession or control will be material to the claim.

Wal-Mart Stores, Inc. v. Johnson, 106 SW2d 718, 722 (2002).

Sanctions for Spoliating Evidence

A presumption that the evidence would have been harmful to the spoliating party

The striking of pleadings of the spoliating party

Monetary sanctions Potential criminal liability

What is New? New cases applying these principals

to “Electronically Stored Information” (“ESI”)

AND

New Federal Rules of Civil Procedure governing discoverability of ESI

Ways to Preserve E-Mail 1. Turn off auto delete for Persons

identified having Relevant Knowledge 2. Inform Employees of Litigation Hold

for Documents relating to Dispute – DON’T DELETE

3. Best Practice- Temporarily Suspend Overwriting of Back-Up Tapes for Persons with Knowledge

This is what happens when you forget to turn things off.

Plastering Contractor

Specific Issues

Liability to Owners: No implied warranty by a subcontractor to perform

construction like services in a good and workmanship manner to Owner

Only general contractor can sue subcontractor for breach of the warranty of good and workmanlike construction absent special circumstances

Example: Contractual provisions in which G.C. requires sub to give a warranty directly to owner.

IMPORTANCEUnder the economic loss doctrine, tort claims

should theoretically only encompass damage to other property, not aesthetic claims or damage to the product itself.

Examples: No tort claims for cracking or color issues. No tort claim for replacement of plaster except if somehow necessitated by damage to other parts of the building.

Liability to G.C.Indemnity Agreements

Indemnity Agreements can shift the risk of one party’s negligence on the other

In order for an indemnity agreement to be enforced under Texas law, the language must be conspicuous and give fair notice that the indemnitor (subcontractor) is indemnifying the G.C. for the G.C.’s own negligence.

Standard Form of Agreement Between Contractor and Subcontractor (AIA Document A401-1997)

Contains a provision in which the subcontractor purports to indemnify the G.C.

It has been found unenforceable

Cabo Construction, Inc. v. C.W. Construction, Inc. 01-05-00487-CV (Tex. App.[1st App.], April 12, 2007).

Repairs:

Good News: Repairs do not suspend the statute of limitations for the original construction

Bad News: May create new liability

Statute of Repose

10 Years - Claims against contractor initially repairing or installing improvements to real property

15 Years - Product liability claims against sellers and manufacturers of products

Does not apply to fraud claims

Inspection After Complaints

No liability for failure to identify problems

Versus

Potential liability for Statements Made During Repairs/Inspection

“Problems Fixed” “No Problems”

Potential Claims Based on Inspections

Negligent Misrepresentation/Negligent Undertaking Claims

Fraudulent Concealment Claims may Extend Statute Limitations

Strategies to Avoid Liability Don’t represent that a full inspection performed unless

one was in fact done

If an inspection is performed, document the scope and purpose of inspection, i.e., cosmetic

Exclude concealed items unless proper tests have been performed

Have customers sign an agreement concerning repairs which defines the scope of repairs

Examples: Don’t Represent: Repaired Leak Do Define the Scope of Repairs: Repaired

Diverter Flashing at the second story on west elevation

Never perform a repair when you know that it is likely that the repair will not be successful due to other construction defects