Unfortunately, litigation is inevitable for all companies. This means it is inevitable that all in-house lawyers will have to deal with litigation at some point in their careers. While that may sound like a perfectly awful time, and it is, having experience with managing litigation is vital to rounding out the skills necessary to ultimately succeed to the general counsel chair. In other words, when litigation arises, run to the fire! Given the importance of the discovery process in the U.S. legal system and e-discovery in particular, one of the most important steps in defending or prosecuting litigation is a proper litigation hold, sometimes called a legal hold. If done correctly, many of the problems and costs that plague some participants can be avoided. Done incorrectly, however, you may find that you have inflicted a fatal error on yourself — one that has nothing to do with the merits of the litigation. Below are the key things in-house lawyers need to know about the litigation hold process along with some best practices.
When litigation starts or is reasonably anticipated, the rules of civil procedure — federal and state — impose a burden on all of the parties to preserve potentially relevant records and information. The litigation hold process puts the organization and key custodians on notice that certain information must be preserved and, ultimately, gathered and produced to the other side. In federal court, the obligation to preserve information arises from FCRP 37(e) under which participants in litigation have a duty to take “reasonable actions” to preserve information that is relevant to the dispute. Moreover, they must be able to show that they have taken “reasonable and good faith” steps to ensure that relevant information is not deleted after the obligation kicks in. A well-thought-out litigation hold process allows a party to meet this burden. Failure to meet this burden may lead to claims of spoliation of evidence and the negative consequences that follow.
The first step in the litigation hold process is identifying — based on the nature of the dispute and the specific claims — which company records are at issue. This typically involves email, presentations, word processing documents, spreadsheets, and other corporate documents — both hard and soft copies. However, it can also include collaboration software, voicemail, videos, calendars, photographs, text messages, and many other types of records that you may not think are relevant. This huge mass of electronic information is why e-discovery is so complex and expensive. Second, once you have identified the type of records at issue, you need to think about all the places where this information may be located. The test is whether the information is in the possession, custody, or control of a party. Potential locations include email servers, smartphones, cloud storage, meeting software, collaboration software, network drives, social media accounts, flash drives, file cabinets, and more. It includes personal devices if an employee uses that personal device to conduct business for the company. Third, once you have identified the what and the where, you must identify the “who”: that is, which individuals are most likely to have the information at issue. It can be a handful to hundreds — it just depends on the nature of the lawsuit.
In addition to the notice going to potential custodians, the notice — or a version of it — should go to the IT department to stop any auto-destruction, human resources to ensure that the legal department is informed when any custodian is leaving the company, and any other organization that will have a role in ensuring records are maintained and not accidentally destroyed.
It is very easy to mess up the litigation hold process, either by not putting it in place correctly or in a timely fashion or, worse, learning that records were destroyed that should have been preserved. Any of which can lead to sanctions from the court, from monetary fines up to striking defenses or claims.
Here are some best practices to consider when it comes to litigation holds:
While the name implies a simple process, there is little that is simple about putting a proper litigation hold process in place. All in-house lawyers should have a basic understanding of the rules in their jurisdiction and a plan on what to do when a litigation hold is triggered. Fortunately, for in-house lawyers with access to Practical Law, there is an entire tool kit dedicated to legal holds with templates, checklists, and more — and all just a click away.
Sterling Miller, HILGERS GRABEN PLLC
Sterling Miller is a three-time General Counsel who spent almost 25 years in house. He has published five books and writes the award-winning legal blog, Ten Things You Need to Know as In-House Counsel. Sterling is a regular contributor to Thomson Reuters as well as a sought-after speaker. He regularly consults with legal departments and coaches in-house lawyers. Sterling received his J.D. from Washington University in St. Louis.