Nov 29, 2023

SEASON 2 EPISODE 4

The Case of the Email Evidence

Episode Summary

Luka is sued! As part of the lawsuit, he must hand over all his email messages and texts as evidence. Heidi reviews what “digital communication hygiene” every founder should follow to avoid any bumps in the road if served papers. She also shares how the term “legal privilege” can protect you – but only when correctly used.

Full Transcript

HEIDI: Welcome to The Startup Solution and “The Case of the Email Evidence.” I'm Heidi Roizen from Threshold Ventures.

. . .

I was at our office a few years ago when the receptionist let me know there was someone from a law firm waiting for me in the lobby. I walked out to see what he wanted. He asked me my name, and when I told him, he served me papers – naming me in a lawsuit. A few minutes later, I got a call from someone I’ll call Luka, who was the CEO of the company the lawsuit was about – a company we had invested in where I was also a board member.

LUKA: Hey Heidi, it’s Luka. I’m in total disbelief. EverPain is taking legal action against us over the merger catastrophe. I’ve just been served the papers, and I feel so light-headed. I feel like I should faint. But what should I do? I should contact our lawyer, I guess. But I need to hear from you first. Please call me back as soon as possible.

. . .

HEIDI: Luka and I had just become embroiled in the fallout of a failed merger, and being served was a first for both of us. EverPain (obviously also not their real name) was a private equity firm that held a large position in a company that operated in the same space as Luka’s. Both companies thought that a merger might be the best way to survive a recent downturn in the market, especially since EverPain had committed to putting new capital into the combined entity.

It seemed like a great idea at first, but during the diligence process we hit some problems. EverPain was very slow to respond to information requests. Worse, they seemed to be having a hard time coming up with the capital. Luka had already been feeling queasy about the deal, and when EverPain delayed the funding commitment date for the third time, Luka and his board decided to pull the plug on the merger.

So, five weeks later, Luka and his entire board – including me – found ourselves entangled in a lawsuit.

. . .

I called Luka immediately to warn him about something I had learned from watching others go through similar situations. It was not something he needed to do, but rather something he needed to not do. He needed to not muck with anything – no email, no documents, no text messages, nothing.

Eventually, we were ordered to turn over all emails and texts related to the failed merger, which we did.

There seems to be a knee-jerk reaction most people have in these situations, fears that there might be something incriminating or even just embarrassing in their digital communications – so perhaps it would be a good idea to delete those things now before anyone else looks.

No. It's not a good idea.

. . .

As you may have noticed in news about other legal battles, the cover-up is often worse than the crime. And Luka didn’t even have anything to cover up! Mostly, he was concerned that he had sent some snarky emails about EverPain to his team when things started going wonky. And he was worried about being embarrassed if those emails got exposed.

I mean, let’s be honest, haven’t you read some of those exchanges between industry titans who thought their messages would never be read by anyone else? Yeah, I thought you did. I did, too. And while it might be entertaining to read other people’s messages, it would be pretty embarrassing to be in that situation yourself. I get it!

But deleting digital communication is not the way to avoid potential embarrassment. First of all, it’s against the law to tamper with evidence. If you’re innocent, wouldn’t it be better to be innocent and embarrassed instead of starting your life of crime now?

Also, trust me, there are all sorts of other ways to get that data, even if you clean out your email account or reformat your hard drive. If it’s text, your data service provider has copies too. If it’s email, there’s bound to be a backup somewhere that you don’t control and probably don’t even know about. It will almost certainly be found, no matter what you do.

So don’t even go there.

. . .

The next thing to do, as with pretty much any legal matter, is to engage experienced counsel immediately – regardless of whether you believe you’ve actually done anything wrong. These types of situations require highly specialized knowledge and skill sets, not your Uncle Louie, who is a divorce attorney. We were lucky to have a great law firm already working with Luka’s company, so we called them immediately, told them what was up, and got them on board to help.

As it turns out, there was another shoe to drop, and a few months later, it did. Luka and I found out that we both had to be deposed, which basically meant we were required to answer questions from the opposing attorney under oath, similar to what would happen in an actual trial. Another new experience for me and for Luka, too.

. . .

When it comes to being deposed – kids, do not attempt this alone. You will need counsel specifically experienced in depositions to train you. And so, Luka and I were prepared, separately, by an attorney who had conducted dozens of depositions herself. When it was my turn, she walked me through how to respond and how not to respond. Do it honestly, directly. Succinctly. Politely. Do not embellish, do not add details that were not asked for. Do not argue. Some of this was against my nature; I mean, I’m a talker and an explainer. But a deposition is not the time or place to make your points – that happens elsewhere in the process. She and I practiced with likely questions for a number of hours over multiple days until I had learned how to answer succinctly, directly, and with no embellishments. Even a talker like me can learn a new skill when there’s a lawsuit breathing down your neck!

. . .

The day of my deposition arrived, and I reported to a nondescript conference room in nearby San Mateo, where I was sworn in, and my testimony was then recorded in its entirety–both a written transcript and a video file. Just as my lawyer had predicted, highlighted copies of emails I had written were brought out, and I was asked to answer questions about them. In one email to Luka, I referred to the EverPain guys as “bush league,” – so now I was being asked what exactly I meant by “bush league.” I was deposed for close to two hours, and it was clear to me and my attorney that they were grasping at straws.

By the way, Ken King, the attorney who helped me get all the legal stuff right for this episode, told me a funny story about once when he was deposed. The interrogator, thinking that he had found a smoking gun, pulled out an email and said: "And what exactly were you referring to, Mr. King, when you said, 'I can’t continue this. The door is closing, and I need to shut this down now!'" So, Ken, with a straight face, answered truthfully – “Well, I was on a plane that was about to take off, and the flight attendant had just told me to turn off my phone.” Omigod, I love that.

. . .

Anyway, we finished our depositions and waited for whatever would happen next.

Both we and our lawyers believed that we had the legal right to break the contract when they didn’t make the payment on time. And we’d gotten advice from our lawyers on exactly that before we’d even done it.

And so, another six weeks later, we were notified that the suit had been dropped. I was definitely relieved. But I was also jangled by the whole experience. So, I decided to at least make something good come from it by reflecting on what I’d learned.

. . .

First is this: digital communications are forever. There’s a saying among lawyers that the “e” in email stands for evidence. Not only email but any digital communication may be discoverable – which means you have to turn it over to the opposition in a legal process like this. And the only digital communication that absolutely can’t be discovered is the one that was never written in the first place.

Now, clearly, I’m not saying I never use email or text anymore – of course, I use them all the time! But what I am saying is I also use my judgment. I’ve now learned that even if I’ve done nothing wrong, those emails and texts may be viewed with someone else’s intent in mind and completely out of context or nuance, months if not years after I sent them. So, I always try to write emails calmly and thoughtfully, not in the heat of the moment. And for certain topics, I just pick up the phone.

I’ve noticed that some people use text in particular, as a substitute for conversation, especially colorful conversations. The relative care most people use when engaging in email seems to fly out the window when texting. But they’re all equally discoverable. So, if someone starts texting me something colorful, I usually shut that down with a phone call, too.

And I don’t text or email any venting or smack talk about work things. If I want to talk smack, I do it in my backyard over a glass of wine. And I make sure that Siri isn’t listening too, because one time, my messaging app took down three paragraphs of smack talk before I realized what it was doing.

. . .

Now, there are certain email communications that are actually protected from being exposed in discovery, as long as they adhere to certain rules, called attorney-client privilege.

Attorney-client privilege has been around for a long time. In fact, it was already codified into English law by the 16th century. As the name implies, this privilege relates to communications between an attorney and their client. For the privilege to hold, the communications have to actually be about legal advice and made in confidence – that is, no one other than the clients and the attorney can be privy to the exchange.

The good news is that if you follow these rules, those emails will not be discoverable. That means they won’t be given to opposing counsel.

It’s important to understand exactly how this works. It’s actually quite easy to screw up a privileged communication and make it subject to discovery. I knew someone who forwarded some privileged emails to his personal admin outside the company and asked her to file them….and Boom! She was not in the privileged circle, and so those forwarded emails became discoverable.

In another case, a VC wanted to get one of his more senior partner’s advice about a tricky situation at a portfolio company where the more junior VC was a board member. So, he forwarded a privileged email containing both the background information about the situation as well as the counsel’s advice and asked the senior partner if she had any guidance for him. And yep, that email to his partner and all the attachments that went with it were now discoverable.

Not only must a privileged communication always stay inside its bubble of intended recipients, and always with counsel included, but it also must only involve the actual seeking of legal advice with counsel.

Let me underscore that last point – you can’t create a magic privilege cloak by cc’ing your lawyer on any old random email! I’ve received more than a few emails that have attorney-client privileged in the subject line and an attorney copied, but in fact, have nothing to do with the seeking or giving of legal advice between that attorney and the client. So, no matter what the sender has put in the subject line, those are, in fact, not privileged communications.

. . .

So, what might you take away from The Case of the Email Evidence besides not leaving your iPhone’s messaging app open when you’re venting?

First, while you hope to never be in a lawsuit, they happen, they take a lot of time, and they cost a lot of money. You will need strong, experienced counsel to get you through the process, even if you’ve actually done nothing wrong. So don’t go it alone.

Second, if you do get sued, don’t start your life of crime by erasing or tampering with your email or other records in any way.

Third, if you are also going to be deposed, you need to be trained. Remember, the person deposing you has done it dozens, if not hundreds of times, and you’ve probably never done it. It would be crazy not to be as fully prepared as you can be.

Fourth, every digital communication leaves a record. The best way to not have those records become an issue is to not create them in the first place.

And finally, attorney-client privilege is a longstanding and powerful construct. But it’s easy to break. So don’t be “that guy” who does something dumb and breaks it!

. . .

HEIDI: And that concludes “The Case of the Email Evidence.” I want to thank Ken King of the law firm Skadden Arps for making sure I got all the legal stuff right. And as always, names and details have been altered to protect identities.

We hope you’ve enjoyed this episode, and if you have, please share it with someone who might enjoy it or someone who might need it. I’m Heidi Roizen from Threshold Ventures.

The Case of the Email Evidence

Episode Summary

Full Transcript

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