Process of Instituting A Litigation Hold - Tip of the Month - Disclosure & Electronic Discovery & Privilege

Originally published February 27, 2009

Keywords: document preservation, retention and destruction of data, company databases, records management, Federal Rules of Civil Procedure, electronically stored information, litigation hold

Mayer Brown's Electronic Discovery & Records Management practice's Tip of the Month series provides practical information for litigators, IS and other business professionals. This February 2009 edition addresses the process of instituting a litigation hold.

Scenario:

A large company implements a set of policies that govern the retention and destruction of data and documents. On March 1, 2009, a lawsuit is filed alleging that the company engaged in a price-fixing conspiracy for the past several years. Under the company's retention policies, many of the documents relating to the pricing and sale of the product at issue would be eligible to be discarded or destroyed.

What to Do Before Litigation Occurs

Courts have held that when a party reasonably anticipates litigation, "it must suspend its routine document retention/destruction policy and put in place a litigation hold to ensure the preservation of regular documents."¹ Although the process of instituting a litigation hold is often viewed as the first step when responding to an anticipated litigation or investigation, there are a few other steps that organizations can take to help control the costs and minimize the risks associated with document preservation.

Understand the ESI Landscape

In order to implement an adequate and defensible litigation hold, an organization should understand the types of electronically stored information (ESI) that exist, where the ESI is located, and who has control over the ESI. To do so, it can be helpful to catalogue all of the organization's active and legacy ESI. The level of detail depends upon the business, but organization should consider developing a catalogue that will:

Identify types of active and legacy ESI and places where ESI may reside
Identify ESI custodians for shared ESI, such as company databases and web pages
Identify applicable retention schedules and auto-delete functions

This catalogue can be updated regularly and whenever sources of ESI are added or deleted.

Designate a Litigation Response Team

An organization may also, in advance of litigation, consider identifying a response team that represents the relevant constituencies within the organization, including legal personnel, IT personnel, records management, human resources, and administrators. A litigation response team will facilitate:

Identification of relevant ESI
Suspension of applicable auto-delete functions
Identification of individuals who have or control ESI that should be subject to a litigation hold

Identify When the Preservation Duty Arises

Generally speaking, the preservation obligation is triggered by "reasonable anticipation" of litigation. There is not typically a bright line, and it can sometimes be difficult to determine (and prove in hindsight) the precise point in a developing dispute in which litigation becomes reasonably foreseeable. Consideration should be given to this question as disputes are evolving.

Determine the Scope of the Litigation Hold

Before a litigation hold can be issued, counsel must determine what ESI must be preserved and which custodians must be notified. A litigant is under no duty to keep or retain every document in its possession; rather, the litigant is under a duty to preserve what it knows, or it reasonably should know, is relevant in the action. Courts have accepted an approach to evidence preservation based on a focus on "key players" – those who are expected to have relevant evidence based on the allegations in the case and their roles in the company. No effort will ever be perfect. Reasonableness is the standard.

In order to establish reasonableness later, if a challenge arises, it is important to document the steps taken to identify the custodians and relevant repositories of ESI. The process is iterative and the scope of the hold should be expanded, or narrowed, as the case evolves and more information becomes available.

Since 2006, the Federal Rules of Civil Procedure have invited, and even required, cooperation and transparency in matters of discovery, and judges are calling for a new spirit of cooperation. Engaging opposing counsel in frank discussions regarding ESI, as uncomfortable as that can sometimes be, is not only expected by the courts but can be of strategic benefit. Counsel should be open about ESI issues and seek agreements setting reasonable limits on preservation and discovery obligations. Even if agreement is not possible, disputes can be heard and resolved by the court before spoliation becomes the issue. Diligently working to narrow the scope of the hold and the ESI collection and production is one of a party's best tools for reducing the burden and cost of litigation.

Issue Litigation Hold Notice

The Federal Rules of Civil Procedure require prompt intervention in routine operations in order to establish the good faith that can protect against sanctions. As early as practicable, the organization should send a legal hold notice to affected employees and other agents. The legal hold can be expanded as more information becomes available. The first legal hold notice need only be reasonable given what is known at the very outset of the matter.
Organizations should consider having a legal hold template at the ready. Such a template would include standard instructions about how to override any automatic deletion functions pending the legal department's consideration of implementing more robust precautions. The template could have a space to insert basic, readily available information about the nature of the case so the recipients can know what information might be relevant. A more detailed legal hold notice may follow that identifies more precisely and completely the relevant topics and information sources.

Monitor and Audit Compliance

Some courts have held that it is not enough to issue a litigation hold. They expect the legal department, and outside counsel, to take other affirmative steps to ensure that relevant information is not being lost as a result of routine operations. To ensure compliance by individuals placed on legal hold, the party can issue periodic reminders or to take other measures to ensure that their information is retained. Counsel should establish a process to identify and address changing personnel so that information is not lost when an employee who is subject to a legal hold changes job functions or leaves the company. Custodians of centralized information, such as databases, web pages, and warehouses, should be identified and given clear instructions. Occasional "spot checks" are a useful tool in auditing compliance with the litigation hold.

Re-evaluate the Litigation Hold

The "final" step in the process is periodic re-evaluation of the litigation hold to determine whether it should be continued, expanded, contracted, or lifted. In most cases, a hold should only be lifted when it is determined that the matter has been ultimately concluded and counsel does not anticipate any further litigation involving the same ESI.

Learn more about Mayer Brown's Electronic Discovery & Records Management practice.

Mayer Brown LLP's Electronic Discovery & Records Management (EDRM) practice's "Tip of the Month" series provides information about effective risk and cost management practices associated with EDRM.

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Footnote

1. Zubulake v. UBS Warburg LLC, 229 F.R.D. 422, 439 (S.D.N.Y. 2004) ("Zubulake IV").

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

United States: Process of Instituting A Litigation Hold - Tip of the Month