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Comprehensive Written Policies and Established Response Teams are Best Practices for Handling Litigation Holds
Conducting a proper litigation hold at your organization is an important first step if your company is subject to a lawsuit. It can help preserve important documents that, if inadvertently destroyed, may lead to sanctions in the courtroom or could even cause you to lose the case.
But, what are the elements of a properly implemented legal hold? What kinds of things can general counsel be thinking of now to prepare for the unfortunate reality that their company will most likely face a large lawsuit at some point?
Rebecca Myers of Paul Hastings LLP, who specializes in complex commercial litigation, and who co-authored the book Bensen & Myers on Litigation Management, said that although litigation hold policies will vary based on the size of the company, they should always be tailored to the way the organization’s people work and store data, and they should always be in written form.
“Surprisingly, some organizations have informed their people of litigation holds through informal and/or oral communications alone. Not surprisingly, courts addressing this issue have concluded that that’s just not good enough. It needs to be in written form,” said Myers.
The policy should contain a standard procedure for document preservation as well as a form letter that can be modified on a case-by-case basis that informs the key custodians in the organization about their legal obligation to preserve documents and precisely how to do so, she said.
Myers said a good document hold policy should: describe the subject matter of the legal proceeding; identify where relevant information may reside; state the relevant time period to which the preservation obligation applies; and identify the types of records and materials, including Electronically Stored Information (ESI) and paper documents, that must be preserved.
“Things have gotten really complex in terms of ESI, and documents and data can be stored on numerous platforms these days, including network servers, personal drives, back-up tapes, in a cloud, on laptops or even on handheld devices such as smartphones and tablets,” she said.
Although creating an inventory of these items may be challenging since there are so many sources, Myers said that it’s an important step.
“In order to have a defensible protocol, corporate counsel needs to know the company’s information and its custodians. They need to know how their people work and where they store data,” she said.
Another important step after creating the document hold policy is to create a litigation response team, which is a group of employees who will act as “point people” in the event of litigation, said Myers.
The team will have the responsibility of determining whether a litigation hold should be issued. If it does, the team will meet with representatives of the applicable departments and data owners to determine where relevant information is stored, paying attention to include all the various formats that are now available. The team will then identify all employees, agents, or other people who may have documents that are relevant to the dispute and issue the litigation hold. It will coordinate with the IT department to ensure that all the relevant information is properly preserved and it will also be available to answer questions about the hold and to track compliance.
A final important responsibility of the litigation hold team is to determine when the hold can be released, since preserving relevant documents can take up valuable storage space and cost the organization a lot of money, Myers said.
She also recommended that the team tell “custodians to err on the side of over-preserving, so they don’t inadvertently destroy something that should have been saved.”
“Another point is there are a lot of technology solutions out there that can help streamline the process of a litigation hold and general counsel should consider implementing these,” said Myers.
Chin v. Port Authority
Myers said that some important relevant case law on the issue of litigation holds was issued this year in the case Chin v. Port Authority of New York & New Jersey (685 F.3d 135; 2012 U.S. App. LEXIS 14088). In this case the 2nd Circuit held that a district court did not abuse its discretion in denying the plaintiffs’ motion for an adverse influence, despite the fact that the defendant lost data and failed to implement a litigation hold.
This case overruled the earlier ruling in Pension Comm. of Univ. of Montreal Pension Plan v. Banc of Am. Secs. (691 F. Supp. 2d 448; 2010 U.S. Dist. LEXIS 15489), in which U.S. District Judge Shira A. Scheindlin ruled that failure to issue a litigation hold is gross negligence per se and warrants an adverse influence of spoliation.
“The second circuit basically said the failure to adopt good preservation practices is only one factor of many that a court should consider when determining whether spoliation has occurred,” said Myers.
She said the ruling in Chin is a positive development for corporate counsel “because it takes away the automatic determination that spoliation has occurred and requires the courts to look at the overall circumstances of a party’s preservation efforts. But it doesn’t give corporate counsel a free pass.”
Myers added that the Second Circuit is still stricter than the other circuits, whose views on spoliation are “much broader” and “tend to require an intentional finding of destruction of documents or bad faith in order to warrant a severe sanction such as adverse inference.” Regardless of the jurisdiction, however, Myers stressed that corporate counsel need to continue to employ best practices to their document hold policies.
Disclaimer: The views and opinions expressed in this article are those of the individual sources referenced and do not reflect the views, opinions or policies of the organizations the sources represent.