Establishing a Defensible and Efficient Legal Hold PolicySeptember 2013

Connie Hall, J.D., Manager, New Product Development, Thomson Reuters

AGENDA• Definition of a legal hold• Triggers for sending a legal hold• Legal hold notification criteria• Best practices

– Create and use templates– Ask questions of the custodians– Document, document, document– Communicate with the custodians– Automate the process

• Preserve the custodians’ data• Current state of the law• Questions

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• A legal (or litigation) hold is:

• The process serves to: Advise employees of document preservation requirements in

the face of existing or anticipated lawsuit or investigation Suspend normal document retention/destruction practices Provide proof that company understands its duty to preserve

relevant documentation and to notify custodians of record of this duty

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An instruction within a business organization directing employees

to preserve (and refrain from destroying or modifying) certain

records and information that may be relevant to a pending or

anticipated lawsuit or investigation.

WHAT IS A LEGAL HOLD?

TRIGGERING EVENTS

Complaint or otherwise put on

notice of a lawsuit

Subpoena for information as a third party to an existing lawsuit

Formal investigation

order from a US regulatory body

Reasonably anticipate – or

should reasonably

anticipate – a potential legal

claim

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INITIAL STEPS• Develop a policy outlining a process for handling

legal holds– Include both notification and collection/preservation

processes

• Ensure that the process is repeatable, automated and defensible

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WRITTEN LEGAL HOLD NOTICE CRITERIA• Overview Clear description of the subject matter of the litigation or investigation Explanation of the duty to preserve and warnings to the recipient of the

consequences of non-compliance Explanation of ongoing duty to preserve; hold does not end until further

notice

• Scope Guidelines re: applicable date ranges for, and types of, documents to

be preserved

• Instructions Explicit instructions not to destroy or modify records, with examples of

the records that should be preserved Contact details for corporate counsel in charge of issuing and enforcing

the litigation hold6

BEST PRACTICES• Create and use templates

– Helps to ensure that uniform message is delivered and that nothing is missed

• Ask questions of the custodians– What do you have? Where? What format? – Do you know anyone else with information?

• Communicate with the custodians– Make it easy for them to ask questions

• Document, document, document

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SENDING THE LEGAL HOLD

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An effective legal hold captures information that is relevant to the litigation / investigation; therefore, only people who have that information (“custodians”) will be subject to the hold.

CUSTODIANS are individuals who were involved in the events relating to the potential or pending lawsuit or who may possess knowledge of issues relating to the potential or pending law suit.

OTHER PARTICIPANTS may include:

• IT & records personnel

• Human resources

• Legal department

• Support staff

• Former employees

• 3rd parties, such as outsourced-service or storage facility providers

Note: Your legal hold policy should specify how broadly or narrowly to target hold notifications.

WHAT RECORDS MUST BE PRESERVED?

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Employee files and workspaces Document warehouses Emails Voicemails Computer and external hard drive

data Videos Back-up tapes Social media records Hand-held digital device content

(cell phones, smartphones, tablets)

Relevant evidence may exist in paper or electronic form and companies must preserve this evidence regardless of the media in which it exists.

CONSEQUENCES FOR FAILING TO IMPLEMENT A LEGAL HOLD

Monetary penalties, such as payment of the adversary’s legal fees and costs

Adverse inference instruction(s) to the jury relating to information that was lost or destroyed

Preclusion of evidence to support a claim or defense

In extreme cases, default judgment or dismissal

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Failure to timely institute and maintain a litigation hold can have serious consequences for a company. US courts sanction companies for failing to adequately implement litigation holds.

STATE OF THE LAW• Zubulake v. UBS Warburg LLC, 220 F.R.D. 212 (S.D.N.Y. 2003) (“Zubulake IV”)

(setting forth clear standards for scope of duty to preserve evidence)• Apple Inc. v. Samsung Electronics Co., Ltd., 888 F. Supp. 2d 976 (N.D. Cal. 2012)

(stating that “by failing to do as little as issue a litigation hold notice to any employees for eight months after its preservation duty arose, and by further delaying issuance of litigation hold notices to several key custodians … Apple acted with not just simple negligence but rather conscious disregard of its duty to preserve.”)

• Chin v. Port Auth. of New York & New Jersey, 685 F.3d 135 (2d Cir. 2012) cert. denied, 133 S. Ct. 1724, 185 L. Ed. 2d 785 (U.S. 2013) (applying gross negligence standard, rather than gross negligence per se, for failure to implement litigation hold, abrogating Pension Comm. of Univ. of Montreal Pension Plan v. Banc of Am. Secs., LLC, 685 F. Supp.2d 456 (S.D. N.Y. 2010)

• Botell v. United States, 2013 WL 1178226 (E.D. Cal. 2013) report and recommendation adopted as modified, 2013 WL 2106033 (E.D. Cal. 2013) (defendant deemed negligent as sanction for spoliation of evidence in case where no litigation hold was issued)

• Sekisui Am. Corp. v. Hart, 2013 WL 4116322 (S.D.N.Y. 2013) (stating that failure to issue litigation hold was “inexcusable”)

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SUMMARY: AN OUNCE OF PREVENTION IS WORTH A POUND OF CURE• Corporate counsel are on the front lines of protecting a

company against litigation. But litigation is almost inevitable, so being prepared counts.

• The challenges of managing the growing base of electronic data requires companies to implement and enforce document retention/destruction policies.

• A company has a duty to preserve relevant documents and records in connection with known or anticipated litigation. A company must suspend litigation destruction and send litigation hold notices to custodians of records. Failure to do so will result in severe legal repercussions.

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QUESTIONS?

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