Legal Holds: Get Them in Writing

After being compelled to respond, the County revealed that “although [it] was served with the original complaint on June 16, 2005, it did not instruct any of the departments named in the complaint to preserve documents until September 12, 2006.” Id. Moreover, the County claimed that it did “not possess either the resources or the technology to locate and access non'e-mail electronic documents created by such programs as Word, Excel or PowerPoint.” Id. The plaintiff moved for sanctions for the county's failure to institute a legal hold, and for its failure to search for potentially relevant information.

The court had no problem finding that the duty to preserve in this case arose, “at the latest, when the County was served with the complaint in June 2005.” Id. at *2. The County maintained that the complaint was too vague to immediately determine which agencies and individuals should be subject to legal hold, that a “verbal hold” was issued to certain departments between June 2005 and September 2006, at which time a formal legal hold was instituted, and that there was no evidence of actual spoliation or bad faith. Id.

Gross Negligence

As noted above, the court held that the failure to institute a legal hold at the outset of the litigation constituted gross negligence, and the failure to take other steps to prevent the destruction of electronically stored information (ESI) was at least negligent. The plaintiff, however, was unable to establish that any relevant information had been destroyed, either by direct evidence or by inference. Thus, the court refused to issue an adverse inference instruction. Id. at *4. However, the court held that, given the County's gross negligence, “some sanction against the County is warranted,” and that an “award of costs serves both a remedial and punitive purpose ' it will compensate plaintiffs for having to make this motion, and it will discourage the County from repeating its cavalier decision to forego implementing a litigation hold while a motion to dismiss is pending.” Id. at *7.

The Importance of a Written Legal Hold Notice

It really should come as no surprise that a written legal hold notice is a fundamental part of a defensible discovery response process. Yet many companies fail to consistently issue written hold notices, if they issue them at all. Moreover, the written legal hold notice is only a part of an overall process that should consist not merely of issuance but also management of the hold notice, which includes ensuring that key custodians actually received and understood the notice, reminding custodians of their continuing obligation to preserve relevant information over time, and ultimately releasing the legal hold notice when the obligation to preserve ends. Indeed, the legal hold process itself should be only one phase of an overall discovery response plan that includes: 1) a defined process for identifying the custodians and data repositories of potentially relevant information; 2) a preservation process that includes not only the legal hold notice, but also strategies to capture and retain information subject to potential destruction; and 3) sound collection methodologies and technologies to ensure that ESI can ultimately be authenticated as evidence in support of dispositive motions or at trial.

The Acorn lesson can also be applied to the overall discovery response process: get it in writing.

A process that results in a well-documented record of discovery response activities will go a long way towardsdemonstrating good faith and reasonableness. In fact, it was the County's failure to produce any documentation of its “verbal” legal hold process that eventually led to sanctions. The court apparently offered the County a way out: the presentation of evidence in the form of an affidavit from the person responsible for issuing and managing the legal hold demonstrating what she did. But the County was apparently unable to demonstrate its efforts by reference to anything more than attorney argument.

Conclusion

As an attorney, I think I am allowed to say that it takes more than a great argument to overcome a really bad fact. Give me some documentation, a witness, something upon which to build my argument and I can do wonderful things. But an argument without factual support is the proverbial house built on sand, ready to fall in the storm of an angry magistrate. The bottom line here is that there is really no excuse for not having a documented discovery response process that includes, among other things, issuing, managing and releasing legal hold notices. The alternative, at least according to Acorn, may well be gross negligence.

Eight Steps to Defensible Legal Holds

The preservation of electronically stored information (ESI) is one of the most critical obligations in the legal process. Following are eight steps for defensibly managing legal holds.

1. Identify when the preservation obligation began. Legal hold actions should be based on a formal preservation plan.
2. Determine what ESI should be preserved. Legal, IT and other key stakeholders should meet to identify relevant custodians and data repositories.
3. Designate a technical authority. This should be an expert from the IT department who can serve as a 30(b)(6) witness regarding technological processes in court, as well as the main point of contact on all ESI-related matters.
4. Issue timely legal hold notices. Communication to all custodians and IT stewards should be clear and concise, ensuring suspension of all “auto” purge or routine destruction practices.
5. Confirm compliance with legal hold notices. Legal and IT should track compliance by verifying receipt of legal hold notice by each custodian, obtaining acknowledgement from each custodian and tracking all repositories where relevant data resides.
6. Document compliance with the legal hold process. To demonstrate good faith, this should include the date of the legal hold; the scope of information, custodians and systems involved; a master list of custodians and impacted systems; and documentation of custodian compliance.
7. Actively monitor compliance with legal holds. Periodically review the legal hold and determine whether it should be reissued to remind custodians of their continuing obligations and/or modified to include new electronic data that must be preserved.
8. Release the legal hold once the matter is concluded.

Dennis Kiker is a director of consulting for Fios, Inc. Prior to joining Fios, Kiker was a shareholder at Moran Kiker Brown PC. He is an active participant in both The Sedona Conference' and DRI.

In-house counsel and their outside counterparts routinely struggle with the problem of when and how to issue legal hold notices. When is litigation reasonably anticipated? Who should get the notice? Should the notice be tailored to the case or based on a rigid template? One question that should have a consistent answer is whether the notice should be in writing.

In a recent case in the U.S. District Court for the Eastern District of New York, the judge held that “the failure to implement a litigation hold at the outset of litigation amounts to gross negligence,” necessitating a punitive monetary sanction. Acorn v. Cty. of Nassau, 2009 WL 605859 (E.D.N.Y. Mar. 9, 2009). This is tough language, perhaps encouraged because the failure actually resulted in the loss of potentially relevant information. In Acorn, the plaintiffs sought discovery about the County's “document retention practices and its production of documents in this case,” purportedly due to alleged deficiencies in the County's discovery responses. Id. at *1.

How It Happened

After being compelled to respond, the County revealed that “although [it] was served with the original complaint on June 16, 2005, it did not instruct any of the departments named in the complaint to preserve documents until September 12, 2006.” Id. Moreover, the County claimed that it did “not possess either the resources or the technology to locate and access non'e-mail electronic documents created by such programs as Word, Excel or PowerPoint.” Id. The plaintiff moved for sanctions for the county's failure to institute a legal hold, and for its failure to search for potentially relevant information.

The court had no problem finding that the duty to preserve in this case arose, “at the latest, when the County was served with the complaint in June 2005.” Id. at *2. The County maintained that the complaint was too vague to immediately determine which agencies and individuals should be subject to legal hold, that a “verbal hold” was issued to certain departments between June 2005 and September 2006, at which time a formal legal hold was instituted, and that there was no evidence of actual spoliation or bad faith. Id.

Gross Negligence

As noted above, the court held that the failure to institute a legal hold at the outset of the litigation constituted gross negligence, and the failure to take other steps to prevent the destruction of electronically stored information (ESI) was at least negligent. The plaintiff, however, was unable to establish that any relevant information had been destroyed, either by direct evidence or by inference. Thus, the court refused to issue an adverse inference instruction. Id. at *4. However, the court held that, given the County's gross negligence, “some sanction against the County is warranted,” and that an “award of costs serves both a remedial and punitive purpose ' it will compensate plaintiffs for having to make this motion, and it will discourage the County from repeating its cavalier decision to forego implementing a litigation hold while a motion to dismiss is pending.” Id. at *7.

The Importance of a Written Legal Hold Notice

It really should come as no surprise that a written legal hold notice is a fundamental part of a defensible discovery response process. Yet many companies fail to consistently issue written hold notices, if they issue them at all. Moreover, the written legal hold notice is only a part of an overall process that should consist not merely of issuance but also management of the hold notice, which includes ensuring that key custodians actually received and understood the notice, reminding custodians of their continuing obligation to preserve relevant information over time, and ultimately releasing the legal hold notice when the obligation to preserve ends. Indeed, the legal hold process itself should be only one phase of an overall discovery response plan that includes: 1) a defined process for identifying the custodians and data repositories of potentially relevant information; 2) a preservation process that includes not only the legal hold notice, but also strategies to capture and retain information subject to potential destruction; and 3) sound collection methodologies and technologies to ensure that ESI can ultimately be authenticated as evidence in support of dispositive motions or at trial.

The Acorn lesson can also be applied to the overall discovery response process: get it in writing.

A process that results in a well-documented record of discovery response activities will go a long way towardsdemonstrating good faith and reasonableness. In fact, it was the County's failure to produce any documentation of its “verbal” legal hold process that eventually led to sanctions. The court apparently offered the County a way out: the presentation of evidence in the form of an affidavit from the person responsible for issuing and managing the legal hold demonstrating what she did. But the County was apparently unable to demonstrate its efforts by reference to anything more than attorney argument.

Conclusion

As an attorney, I think I am allowed to say that it takes more than a great argument to overcome a really bad fact. Give me some documentation, a witness, something upon which to build my argument and I can do wonderful things. But an argument without factual support is the proverbial house built on sand, ready to fall in the storm of an angry magistrate. The bottom line here is that there is really no excuse for not having a documented discovery response process that includes, among other things, issuing, managing and releasing legal hold notices. The alternative, at least according to Acorn, may well be gross negligence.

Eight Steps to Defensible Legal Holds

The preservation of electronically stored information (ESI) is one of the most critical obligations in the legal process. Following are eight steps for defensibly managing legal holds.

1. Identify when the preservation obligation began. Legal hold actions should be based on a formal preservation plan.
2. Determine what ESI should be preserved. Legal, IT and other key stakeholders should meet to identify relevant custodians and data repositories.
3. Designate a technical authority. This should be an expert from the IT department who can serve as a 30(b)(6) witness regarding technological processes in court, as well as the main point of contact on all ESI-related matters.
4. Issue timely legal hold notices. Communication to all custodians and IT stewards should be clear and concise, ensuring suspension of all “auto” purge or routine destruction practices.
5. Confirm compliance with legal hold notices. Legal and IT should track compliance by verifying receipt of legal hold notice by each custodian, obtaining acknowledgement from each custodian and tracking all repositories where relevant data resides.
6. Document compliance with the legal hold process. To demonstrate good faith, this should include the date of the legal hold; the scope of information, custodians and systems involved; a master list of custodians and impacted systems; and documentation of custodian compliance.
7. Actively monitor compliance with legal holds. Periodically review the legal hold and determine whether it should be reissued to remind custodians of their continuing obligations and/or modified to include new electronic data that must be preserved.
8. Release the legal hold once the matter is concluded.

Dennis Kiker is a director of consulting for Fios, Inc. Prior to joining Fios, Kiker was a shareholder at Moran Kiker Brown PC. He is an active participant in both The Sedona Conference' and DRI.