Litigation Hold Basics

Allyson K. HowieManaging Counsel, Information Governance

Entergy Legal DepartmentOctober 12, 2017

We Power LifeSM

The meaning of the word HOLD

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What is a Litigation Hold?

A legal hold is a communication that suspends the normal disposition or processing of records. Shira A. Scheindlin, Daniel J. Capra, The Sedona Conference, Electronic Discovery and Digital Evidence at 688-89 (West 2009).

It may also be called a hold, preservation order, suspension order, freeze notice, hold order or hold notice. Id., Major Tours, Inc., et al., v. Colorel, et al., 2009 U.S. Dist. LEXIS 68128.

At Entergy we use the term Litigation Hold.

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What is it intended to do?

A Litigation Hold is a request to preserve:

potentially relevant information;

information that could lead to the discovery of admissible evidence; and

information likely to be requested during discovery, documents relevant to pending or anticipated litigation.

NOTE: Preservation can and often does extend beyond a record’s retention period.

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

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Who Can Issue a Litigation Hold?

Within my Company:

An attorney in the Legal Department

An attorney in the Tax Department

Outside Counsel through In-House Counsel

Generally case law uses the terms

attorney/counsel

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When Issuance of the Litigation Hold Notification Letter

Issue a Litigation Hold Notification Letter at the onset of litigation or whenever litigation is reasonably anticipatedZubulake v. UBS Warburg, LLC (“Zubulake IV”), 220F.R.D. 212, 218 (S.D.N.Y. 2003).

What does anticipate litigation mean?Receipt of a demand letter

Formal or informal government or regulatory investigation or audit

Potential claim – litigation is foreseeable or imminent. The duty to preserve evidence can arise many years before litigation actually commences; imminence is sufficient to create the duty, but it is not a requirement. Micron Technology, Inc. v. Rambus Inc., 255 F.R.D. 135, 2009 U.S. Dist. LEXIS 1260 (D. Del. Jan. 9, 2009).

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The Duty To Preserve – when does it arise?

Recent court decisions:

A 2010 presentation by Apple to Samsung indicating that Apple believed Samsung to be infringing on some of its patents put Samsung on notice Apple v. Samsung, 881 F.Supp. 2d 1132 (N.D. Cal. 2012).

A duty to preserve arose when plaintiff retained counsel in connection with potential legal action but had not yet identified responsible parties Silvestri v. Gen. Motors Corp., 271 F.3d 583, 591-592 (4th Cir. 2001); Crown Castle USA Inc. v. Fred A. Nudd Corp., No. 05-CV-6163T, 2010 WL 1286366 (W.D.N.Y. Mar. 31, 2010).

Plaintiff was on notice that a lawsuit was likely so as to trigger a duty to preserve the evidence due to: (1) the sheer magnitude of the losses; (2) plaintiff took photos and prepared reports on the losses; (3) hired counsel Indemnity Ins. Co. of N. Am. v. Liebert Corp., 1998 U.S. Dist. LEXIS 9475.Court order Haraburda v. Arcelor Mittal USA, Inc., 2011 WL 2600756 (N.D. Ind. June 28, 2011).

“The obligation to preserve evidence arises when the party has notice that the evidence is relevant to litigation or when a party should have known that the evidence may be relevant to future litigation.” Fujitsu Ltd. v. Fed. Express Corp., 247 F.3d 423, 436 (2d Cir. 2001).

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To Whom is the Hold Letter Issued?

Must be communicated to:

Key players controlling or maintaining the information defined by the Hold Letter Consul. Aluminum Corp. v. Alcoa, Inc., 244 F.R.D. 335, 2006 U.S. Dist. LEXIS 66642; Goodman v. Praxair Services, Inc., 632 F. Supp. 2d 494 (D. Md. 2009); Zubulake V, 229 F.R.D. at 424.

Key Players defined as:

Individuals to be included in initial disclosures under Fed. R. Civ. P. 26(a)(1)(A)(i)

Individuals likely to have discoverable information related to a party’s claims or defenses. Zubulake v. UBS Warburg, LLC (“Zubulake IV”), 220F.R.D. 212, 218 (S.D.N.Y. 2003) (narrow view of key players); Pippins v. KMPG LLP, 2011 U.S. Dist. LEXIS 116427 (S.D.N.Y., Oct. 7, 2011) (broaderview of key players).

Within my company - All employees who possess, have custody of, or control relevant records – some of whom may have had only a passing encounter with the issues in the litigation Goodman v. Praxair Services, Inc., 632 F. Supp. 2d 494 (D. Md. 2009); Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC, 685 F. Supp. 2d 456 (S.D.N.Y. Jan. 11, 2010).

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Network

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Scope of the Litigation Hold

Unless otherwise stated, the Litigation Hold applies to all records described in the Hold Letter and all such records are to be protected from destruction until the conclusion of the matter.

Includes records in all media formats – hard copy documents, electronic documents (word documents, excel spreadsheets, PowerPoint presentations), data stored in transactional systems, e-mail, CD/DVDs, files on network servers, records archived off-line, etc.

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E-Mail Servers Network Shares DMS ServersFinancial Systems

Time & BillingBack-up Servers

Web ServersIndividual User

E-mail Archives

and Local Files

Back-Up Tapes

Smartphone Paper Files External Storage Voice Mail Company

Firewall

Remote and Home

Users via VPN

Failure To Preserve Evidence is Negligent – may be Grossly Negligent

Possibly after October, 2003, when Zubulake IV was issued, and definitely after July, 2004, when the final relevant Zubulakeopinion was issued, the failure to issue a written litigation hold constituted gross negligence Zubulake v. UBS Warburg LLC (“Zubulake IV”), 220 F.R.D. 212 (S.D.N.Y. 2003); Zubulake v. UBS Warburg LLC ("Zubulake V"), 229 F.R.D. 422 (S.D.N.Y. 2004).

6 years later Judge Scheindlin ruled in what she called ZubulakeRevisited:

The failure to issue a written Litigation Hold constitutes gross negligence because that failure is likely to result in the destruction of relevant information. . . Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC, 685 F. Supp. 2d 456, 471 (S.D.N.Y. Jan 15, 2010) (Amended Order).

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Pastorello v. City of New York, No. 95 Civ. 470, 2003 U.S. Dist. LEXIS 5231, 2003 WL 1740606, at *11-*12 (S.D.N.Y. Apr. 1, 2003) (concluding that loss of data due to unfamiliarity with record-keeping policy by employee responsible for preserving document was grossly negligent).

Treppel, 249 F.R.D. at 121 (holding that the failure to preserve backup tapes after December 2003 was sufficient to constitute gross negligence or recklessness).

In re NTL, Inc. Sec. Litig., 244 F.R.D. 179, 198-99 (S.D.N.Y. 2007) ("[T]he Court finds that [the] utter failure to preserve documents and ESI [electronically stored information] relevant to plaintiffs' allegations in this case . . . to be at least grossly negligent.")

Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC, 685 F. Supp. 2d 456, 471 (S.D.N.Y. Jan 15, 2010) (Amended Order) citing Zubulake V, 229 F.R.D. at 432.

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The adequacy of each search must be evaluated on

a case by case basis

The adequacy of each search must be evaluated on

a case by case basis

Doe v. Norwalk Cmty. Coll., 248 F.R.D. 372, 380 (D. Conn. 2007) (finding gross negligence where there was "no evidence that the defendants did anything to stop the routine destruction of the backup tapes after [their] obligation to preserve arose").

Gutman v. Klein, No. 03 Civ. 1570, 2008 U.S. Dist. LEXIS 97707, 2008 WL 5084182 (E.D.N.Y. Dec. 2, 2008) (adopting finding of the Magistrate Judge that spoliator acted in bad faith by intentionally deleting computer files).

Adorno v. Port Auth. of N Y. & N.J., 258 F.R.D. 217, 228-29 (S.D.N.Y. 2009) (holding that defendants were only negligent where they instituted some form of a litigation hold -- albeit limited in scope -- when the duty to preserve arose in 2001).

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No longer enough just to issue a Litigation Hold

Not sufficient to issue a Litigation Hold and expect employees to identify, collect and preserve all relevant and discoverable information

Counsel must take affirmative steps to monitor the process - review, sample and spot-check the collection efforts

Counsel must ensure that discoverable information is not lost

Litigation Hold must be periodically reissued

Within Entergy we reissue Litigation Holds during Annual Records Maintenance – annual review of Official Records and Administrative & General Records

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What does it mean to place a Record on Litigation Hold

Once a Record has been placed on Litigation Hold it is maintained by the Business Unit that owns the Record until notified by the Responsible Attorney that the reason for the Litigation Hold has concluded.

Placing Records on Litigation Hold prevents the destruction of Records that have passed their retention period pursuant to Entergy’s Record Retention Schedule. It is only after the Litigation Hold has been removed that the Record is to resume being maintained in accordance with the Records Retention Schedule.

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Suspend the routine document retention/destruction policy

Become fully aware of the client’s document retention policies and data retention architecture

Communicate with key players in the litigation

Take reasonable steps to monitor compliance with the Litigation Hold so that all sources of discoverable information are identified and searched

Identify all sources of potentially relevant information, retaining that information and producing information responsive and not privileged to the opposing party’s requests

Consider taking the following steps:

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Litigation Hold Letters are generally not discoverable, they are protected under attorney-client privilege or the work-product doctrine Major Tours, Inc. v. Colorel, 2009 U.S. Dist. LEXIS 68128.

A Litigation Hold typically establishes the first date for the work product privilege to apply.

Although in general hold letters are privileged, the prevailing view, which the Court adopts, is that when spoliation occurs the letters are discoverable. Keir v. Unumprovident Corp., No. 02-CV-8781(DLC), 2003 U.S. Dist. LEXIS 14522, 2003 WL 21997747 at *6 (S.D.N.Y. Aug. 22, 2003) (allowing detailed analysis of emails pertaining to defendant's preservation efforts after finding that electronic records which had been ordered preserved had been erased).

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a statement(s) setting forth the purpose for the Litigation Hold,

a description of the litigation or other legal matter,

a list of individuals or groups to whom the hold applies,

a description of the potential types and sources of information to be preserved,

guidelines/instructions for determining what information should be preserved and by whom, etc.,

a reminder to recipients of their legal obligation and potential penalties for noncompliance, and

instructions to recipients regarding who they can talk to about the Litigation Hold and how to conduct those communications.

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The Litigation Hold Notification Letter

should include at a minimum the following:

The Litigation Hold Notification Letter

should include at a minimum the following:

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Sample Email

Why Care about Litigation Holds?

A company that does not have and enforce its records policy

and retention schedule will incur costs associated with

storage fees, will be unable to locate records when needed,

and may be fined by regulators and the courts:

Civil and Criminal Charges

Fines

Court Costs

Adverse Inference Instruction

Dismissal

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What happens when you fail to issue a Litigation Hold!

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What is Spoliation?

The destruction, significant alteration or

non-preservation of evidence that a party

knows or reasonably should know is

relevant to anticipated or pending litigation.

Spoliation gives one party an unfair

advantage over an adversary.

Zubulake v. UBS Warburg LLC ("Zubulake V"), 229 F.R.D. 422 (S.D.N.Y. 2004).

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Sanctions

“Sanctions are appropriate when there is evidence that a party's spoliation

threatens the integrity of [the court]." MOSAID Techs. Inc. v. Samsung

Elec. Co., 348 F. Supp. 2d 332, 335 (D. N.J. 2004). Sanctions serve three

functions:

a remedial function (by restoring the aggrieved party to its

original position),

a punitive function, and

a deterrent function. Id.

A district court has the inherent power to sanction parties. Schmid v.

Milwaukee Elec. Tool Corp., 13 F.3d 76, 78 (3d Cir. 1994). The choice of

a sanction to impose in a particular case is a matter within the sound

discretion of the court. Gates Rubber Co. v. Bando Chem. Indus. Ltd., 167

F.R.D. 90, 106 (D. Colo. 1996).

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Potential Sanctions for Spoliation

Civil and Criminal ChargesCharges of malpractice

Charges of perjury, tampering with evidence

Discipline for Ethical ViolationsReported to the State Bar Association

Contempt Citations

Monetary SanctionsAttorney’s fees

Court Costs

Precluding certain evidence from being introduced at trial

Adverse Inference Instruction

Dismissal – the most extreme sanction

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Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC, 685 F. Supp. 2d 456, 471 (S.D.N.Y. Jan 15, 2010) – monetarysanctions and adverse inference instruction

Zubulake v. UBS Warburg LLC ("Zubulake V"), 229 F.R.D. 422 (S.D.N.Y. 2004) – adverse inference instruction and reimbursement of costs to plaintiff

Rimkus Consulting Group, Inc. v. Cammarata 688 F. Supp. 2d 598 (S.D. Tex.

2010) - adverse inference instruction

Qualcomm Inc. V. Broadcom Corp., 2008 WL 66932 (S.D. Cal. Jan. 7, 2008), vacated in part and remanded, 2008 WL 638108 (S.D. Cal. Mar. 5, 2008) - adverse inference jury instruction, awarded motion costs and attorneys fees and attorneys themselves sanctioned

Failure to preserve relevant materials forms

the basis for sanctions

Failure to preserve relevant materials forms

the basis for sanctions

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Employee’s Obligation

Employees should notify their manager/supervisor as

well as the Legal Department should they become aware

of potential litigation.

An attorney in the Legal Department will evaluate the

situation and determine whether

records/information/equipment should be placed on

Litigation Hold.

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Immediately review the Litigation Hold Notification Letter. If you determine that the Responsible Attorney (“RA”) is requesting Records owned by your business unit, you should immediately:

i. place those Records on hold (which means Do Not Destroy);

ii. inform the RA by e-mail of all Records placed on hold by your business unit;

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Coordinator/ Custodian Responsibility

The Litigation Hold Notification Letter

Coordinator/ Custodian Responsibility

The Litigation Hold Notification Letter

iii. Segregate the records on hold by labeling them or placing them in a different location;

iv. Inform your entire BU as to which records have been placed on hold and their duty to preserve these records until further notice by the RA; and

v. If requested by the RA copy the record(s) on hold and send the copy to the RA or if requested send the original record(s) to the RA and make sure to set a time period within which to pick up the documents.

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Coordinator/ Custodian Responsibility

The Litigation Hold Notification Letter (cont.)

Coordinator/ Custodian Responsibility

The Litigation Hold Notification Letter (cont.)

Litigation Release Letter

Counsel should ensure that the Litigation Hold is in effect until a final judgment is rendered, 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, then a Litigation Release Letter can be completed and distributed.

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If Litigation was not filed . . .

The Litigation Hold should remain in effect

until the factors that initially gave rise to

the anticipation of litigation are no longer

in play.

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Evidence Collection, Tagging & Storage

It is not just hard copy documents and

electronically stored information that must

be preserved when litigation or a claim is

pending or anticipated. Equipment and

other materials must also be preserved.

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Questions???

“Hold On, I’m Comin”