Archiving & Legal Holds – An ESI Recipe for Efficiency and Cost Reduction

Sunday, January 3, 2010 by Thought Leadership Team

Organizations that are heavily regulated and targeted in litigation face increasingly significant risks when attempting to optimize and tailor information management and data storage practices to meet business, legal and regulatory requirements. The tendency to over preserve electronic data leaves organizations with mountainous volumes of electronically stored information that should be reduced to only what is needed to support business continuity and ensure compliance with legal hold and regulatory obligations. Through technology, organizations can proactively minimize many of the burdens and risks associated with failing to execute ongoing retention and destruction protocol, while properly implementing and monitoring legal holds.

Archiving Technology

Organizations operating within tightening budgets or decreased resources may question why archiving is an important investment. The reality is archiving technology can help predict and control electronic discovery costs, which is often the largest unbudgeted business expense. Maintaining data in an archive will also allow the organization to meet short timelines to preserve, collect, process, review and produce data, while delivering electronic information in a form conducive to cost-effective document review. This will prevent the expense of searching through unorganized data that is often scattered across various mediums within an organization when litigation or an investigation is imminent.

Archiving also allows organizations to meet regulatory requirements for record retention, by helping to prevent the spoliation of records. As demonstrated in recent case law, failing to properly preserve data may result in severe consequences, perhaps leading to a harder battle during trial, a dismissal of claims or significant monetary penalties.

Operational efficiency may also be increased by archiving and creating an effective retention policy. Over preserving electronically stored information is a bad business practice that can set the organization up for liabilities down the road, particularly in electronic discovery. Preserving and disposing of data through an automated, repeated process will also conserve IT resources that are often consumed during attempts to locate data that is relevant to a legal or investigation matter.

Legal Holds

Another important archiving functionality is the ability to administer legal holds. Once litigation or an investigation is anticipated, an authorized user from the organization can search the archive, employing initial filtering techniques to narrow the volume of data. A legal hold may then be placed on the content that is responsive to the litigation or investigation. The user can then conduct additional filtering, sending non-relevant data back into the retention and disposal schedule. The remaining relevant and responsive documents can then be exported from the archive for processing and document review.

This process allows data stores to be narrowed before the data encounters the processing phase of electronic discovery, which starts a discovery project off on an efficient and cost-effective note. The archiving process also ensures that the data relevant to a litigation or investigation is properly identified and preserved. As demonstrated by several recent cases, failure to adequately issue hold notices and properly preserve information may create serious trouble for an organization in the courtroom.

One such recent case has received significant attention throughout the legal community. In Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, LLC,1 Judge Scheindlin found all thirteen plaintiffs worthy of monetary sanctions since they conducted discovery in an “ignorant and indifferent fashion,” and imposed a permissive adverse inference instruction against six of the thirteen plaintiffs, who were grossly negligent in failing to issue a written litigation hold at any point in the discovery process.

Another recent case from the Southern District of Texas, Rimkus Consulting Group, Inc. v. Cammarata,2 addressed preservation and spoliation issues in the context of intentional actions. In this case, the defendants claimed they routinely deleted e-mails as part of their business practice. However, the court determined the defendants intentionally lost, altered and deleted e-mails and found it appropriative to send the case back to a jury with a permissive adverse inference instruction.

The Cammarata opinion drew several distinctions between it and Pension Committee, particularly in regard to the differences between circuits in relation to culpability of parties. In particular, case law in the Second Circuit as applied in Pension Committee, allows sanctions to be imposed for negligent evidence destruction, whereas in the Fifth Circuit and some others, negligent destruction, as opposed to intentional, bad faith destruction is insufficient for imposing an adverse inference instruction. Judge Rosenthal concluded that these circuit differences in culpability levels limit the applicability of the approach in Pension Committee. Based on these differences in approach, counsel must approach education with a broad stroke, consulting experts when needed, to determine when the preservation duty arises and what must be preserved.


The above cases are just two recent examples of parties being punished for failing to properly preserve relevant ESI. These matters demonstrate that it is far more cost-effective for organizations to proactively implement archiving technology and properly manage retention and litigation holds, rather than later incur the costs and burdens associated with defending motions for preservation failures and possible sanctions that may result. It is important to remember that the courts do not require perfection, but rather expect necessary steps to be taken to properly preserve relevant records for collection, review and production. Investing resources in proper preservation and legal hold management from the outset will return dividends by ensuring discovery practices withstand judicial scrutiny in the unfortunate event opposing counsel files a motion seeking spoliation sanctions.

1 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010). 2 2010 WL 645253 (S.D.Tex. Feb. 19, 2010).