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E-discovery begins with the litigation hold notice

The Duty to Preserve

New discovery rules impose a poorly defined general duty to preserve all potentially relevant electronically stored information (ESI) when litigation becomes reasonably foreseeable. The duty to preserve material which might later become discoverable begins when a party has “reason to believe” that it may become a party to litigation.

In this digital age, the duty to preserve information significantly affects the use of computers, files or databases. Digital information is inherently ephemeral, dispersed, easily duplicated and increasingly voluminous. Even relatively minor litigation can involve terabytes of ESI from dozens of potential custodians and data sources stored in places as remote as “cloud” servers.

Failing to preserve relevant ESI carries significant legal consequences. Courts frequently sanction litigants and their attorneys for evidence spoliation or other forms of e-discovery misconduct. Sanctions range from monetary penalties, adverse inference instructions, preclusion of evidence to default judgments or outright dismissal of a case with prejudice.

The Litigation Hold Notice

Litigation hold notices instruct the parties upon whom they are served —even a government agency —and all of their employees, not to delete ESI or destroy other materials that may be relevant to litigation which is already pending or even merely contemplated.

A Litigation Hold Notice should always be served together with the summons and verified complaint and certainly made a part of any Order to Show Cause which might commence an action or special proceeding.

Communicating the Preservation Duty Through “Legal Holds”

A legal hold is an instruction by an attorney directing a client and their employees to preserve and refrain from destroying or modifying records and information that may be relevant to a pending or anticipated lawsuit.

Attorneys have a nondelegable duty to immediately issue a legal hold notice to their client as soon as they are retained to consider litigation even if there is no certainty that an action may ever be actually commenced.

Legal hold notices need not specifically describe or even mention pending litigation under consideration, but they must provide clear instructions that there can be no destruction of ESI or other materials without the written approval of a responsible supervisor. The legal hold notice should specify ESI or other materials that need to be preserved, using names and date ranges and provide a well-defined path to someone who will be responsible for deciding whether to retain or discard the material.

The attorney is ultimately responsible for the final decision on whether to retain and preserve specific material. The classic advice, “When in doubt; throw it out.” is no longer appropriate.

Don’t delay issuing the hold

The “reasonable anticipation of litigation” standard is highly ambiguous, but, for a party contemplating litigation, it certainly begins before any pleadings are drafted. Failure to issue a legal hold in writing constitutes gross negligence.

The practical reality that parties often engage in settlement discussions before and during litigation does not vitiate the duty to preserve.

The Federal Government was sanctioned for failing to issue a timely legal hold, identify relevant custodians and adequately monitor the hold process.

The Legal Hold Notification, Reminder and Escalation Process

The legal hold process is a series of linked activities from the triggering event to final legal hold release all of which must be supervised by the attorney responsible for managing the litigation.

  • Drafting the legal hold notice
  • Distributing the notice
  • Monitoring and managing acknowledgments
  • Initiating escalations to those custodians who are non-responsive
  • Sending periodic reminders
  • Refreshing the legal hold with any changes that might occur to the preservation obligation as the case progresses
  • Answering custodian questions regarding the legal hold instructions
  • Releasing the legal hold upon the resolution of the litigation

The particular details of a legal hold policy will depend on the structure and culture of the organization, but protocols must be in place to account for the fact that custodians may leave or change jobs during the duration of the hold and also account for identifying and tracking individuals who inherit data from former employees. Always memorialize the steps taken to manage that process, particularly tracking compliance and communicating with custodians.

Data Maps to Identify Critical ESI

Without a coordinated approach to identify which systems or repositories contain relevant ESI, most organizations default into a “save everything” mode and quickly begin to drown in a rising sea of unnecessary information and over preservation. Data mapping and data maps — a shared inventory of what ESI is stored, where it is stored, how it is accessed, and what obligations are imposed upon its custodians and users — are a convenient and effective way to identify critical ESI.

Develop an interview strategy

The attorney managing the litigation is responsible for conducting an investigation sufficient to precisely scope the legal hold. Generally this will require the attorney to interview the custodians, determine the locations of relevant documents and identify the sources of potentially relevant ESI.The duty to preserve potentially relevant ESI applies to all custodians, including those who may have had only a passing encounter with the central issues in the litigation.

Develop well-defined reminder, update and escalation schedules

Attorneys managing litigation must recognize the trigger, identify the custodians, prepare the litigation/legal hold notice, and also monitor compliance. At a minimum, reminder notices should be distributed on a regular schedule and if the information requirements change, communicate those changes to custodians in a systematic fashion.

Ensure custodians comply with the legal hold notice

The draconian sanctions and penalties for failure preserve protect ESI and other materials after they become subject to a litigation hold notice make compliance with the notice critical. Merely issuing a legal hold notice is not enough. Tracking acknowledgements of the hold, reminding custodians of their hold obligations, and having a plan for dealing with unresponsive custodians are all part of establishing a defensible legal hold process.

If a custodian ignores the hold and deletes or “despoils” responsive data, a judge can determine that stronger and much more expensive preservation measures such as physically collecting the ESI should have been taken.

Document the litigation hold process

The legal hold process will eventually come under judicial scrutiny, and you, as the responsible attorney, may be asked to produce a record of your activities or answer some specific questions about the process. The Courts have clearly established the critical role documentation plays in defending claims of spoliation.

Keep a log of steps taken, key decision points, and process milestones

Through careful documentation of steps taken, litigants can demonstrate to thecourt that the hold process was implemented with good faith in a reasonable, manner even if evidence was lost. Documentation need not disclose strategy or legal analysis, but need only focus on the mechanics of the process: the who, what, when, where, and why of various tasks.

Releasing a Legal Hold

Before a legal hold is released, counsel responsible for the litigation must verify that preservation obligations have ended with the approval of the Court and are not likely to re-emerge on appeal or other subsequent legal action. Document each and every decision and element of the release process from the decision to release through the final notification to the custodians.

Counsel must also identify whether the legal hold to be released might overlap with other requirements for preservation in the same or other matters and ensure that responsive data is adequately protected. When in doubt, it is better to hold rather than release data too soon.

Releasing a data hold means the client may reinstate normal document retention policies. If, at the time the initial legal hold notice was circulated your client did not have an established data retention/data destruction policy, it is imperative that one be developed and implemented immediately.

Challenging a legal hold notice

Most clients consider a litigation hold notice an onerous burden on their business operations and personal lives. Even before preparing an answer to a complaint or a response to an order to show cause, counsel for a defendant who has been served with a litigation hold notice should prepare a challenge to the legal hold notice and immediately serve and file a litigation hold notice upon the plaintiff.

While E-discovery is not supposed to be a fishing expedition or industrial espionage, it can quickly become both. Counsel must keep this possibility in mind throughout the entire E-Discovery process.

Litigation holds and nonparties

Traditionally, a non-party subpoena served pursuant to Rule 45 of the Federal Rules of Civil Procedure or a corresponding state rule created a legal obligation on the nonparty to take affirmative steps to preserve information responsive to the subpoena including ESI. Today, however, the same obligation to preserve ESI may be imposed by simply serving a litigation hold notice. Failure to properly preserve ESI after receipt of a litigation hold notice can make even a nonparty liable for negligent spoliation.