Proper Preservation & Litigation Hold Management
Missing vital evidence? Electronic records not properly preserved? Organizations that do not have proper preservation and litigation hold management plans place themselves at risk for costly sanctions. While the Federal Rules of Civil Procedure and ensuing case law require preservation of data, the Rules do not dictate a proper preservation process and offer little guidance regarding when the duty to preserve arises. Case law has provided some insight, explaining the duty to preserve is triggered "upon reasonable anticipation of litigation." Zubulake v. UBS Warburg, 220 F.R.D. 212 (S.D.N.Y. 2003). No matter when the duty to preserve arises, it is imperative that parties understand how to effectively implement litigation holds in order to preserve pertinent information and avoid costly sanctions.
Upon reasonable anticipation of litigation, counsel must issue litigation holds and communicate them appropriately to employees of the organization. This ensures all department heads, IT personnel and pertinent employees are made aware of the hold. The hold issuance should include the purpose for the hold, a description of the lawsuit or investigation, and the guidelines for determining what data should be preserved and by whom. Counsel should then work jointly with IT to notify legal opponents and any relevant third parties of their duty to preserve potentially responsive information. Internal automatic destruction must also be suspended, which includes halting defragmentation software and other forms of automatic or routine drive "cleanup" activities.
Once a litigation hold letter is issued, counsel should actively monitor internal suspension measures and ensure compliance. This includes sending update notices to keep key players and new employees informed, reminding them of their preservation obligations. Detailed and accurate records should also be kept of what data have been preserved and how, should the opposing party bring preservation methods into question. Counsel should ensure the litigation hold is in effect until final judgment, a settlement has been reached and a formal release has been signed by all parties, or the case is dismissed and no related claims remain outstanding.
Counsel's failure to issue a litigation hold and preserve information appropriately may prove detrimental to the case. For example, the Western District of Kentucky recently issued an adverse inference instruction finding the defendant's deletion of data and failure to implement a litigation hold fell beyond the scope of a routine, good-faith operation of an electronic information system. KCH Servs., Inc. v. Vanaire, Inc., 2009 WL 2216601 (W.D. Ky. July 22, 2009).
However, courts are hesitant to impose severe sanctions—such as an adverse inference instruction or default judgment—if the moving party cannot demonstrate the favorability or relevancy of the lost evidence. In a recent case from the Southern District of New York, the plaintiff sought sanctions claiming the defendants failed to preserve and produce ESI. Green v. McClendon, 2009 WL 2496275 (S.D.N.Y. Aug. 13, 2009). While the court determined the defendants' counsel failed to meet discovery obligations by neglecting to issue a litigation hold, it declined to issue an adverse inference instruction because there was no proof provided that the defendants' actions created an unfair evidentiary imbalance. The court determined some sanctions were appropriate and allowed further ediscovery and an award of attorneys' fees and costs to be allocated among defendants and counsel. This was also the case in the recent matter of Scalera v. Electrograph Sys. Inc., 2009 WL 3126637 (E.D.N.Y. Sept. 29, 2009) [summary above]. In this action for employment discrimination, the court declined to issue sanctions, holding that while the defendant employer acted negligently in failing to preserve ESI until almost two months after the duty to preserve arose, the plaintiff failed to demonstrate that the destroyed e-mails would have been favorable to her case.
The decision of whether to issue sanctions for preservation failures depends on the jurisdiction because there are no uniform standards in place. In the Northern District of Oklahoma, if the failure to issue a litigation hold and meet preservation obligations is not intentional, the court may not impose a default judgment or adverse inference instruction. See Pinstripe, Inc. v. Manpower, Inc., 2009 WL 2252131 (N.D. Okla. July 29, 2009). In Pinstripe, the defendants' attorneys drafted a litigation hold, which the defendants failed to issue, resulting in the deletion of e-mails. Similar to Green, the court determined some level of sanctions were appropriate for the defendants' conduct and provided the plaintiff with the opportunity to petition the court for further relief if relevant e-mails were discovered. Additionally, the court ordered the defendants to pay $2,500 to the local bar association to fund a seminar on preservation and litigation holds.
Avoiding spoliation requires proper planning from the outset. One way to proactively approach the data management process is to create an application inventory and data map. This will identify key sources of ESI and important human resources that will provide organization to IT environments that can be an uncharted morass of ESI. An application and inventory map also allows for a quick identification of pertinent data and custodians that are key to the fulfillment of preservation obligations, and it prevents the need to search for information throughout the organization's electronic information. Investing resources in proper preservation and litigation hold management now will pay off in the long run by ensuring your corporation or client's practices withstand judicial scrutiny in the unfortunate event opposing counsel files a motion seeking spoliation sanctions.