Properly executing a legal hold need not be an overly complicated or intimidating process. But, it requires thoughtful planning and preparation to protect the business. Any dispute with an employee, customer, supplier, competitor or government agency carries the potential to turn into legal action. Failure to prepare for a legal hold can cause very serious consequences. However, an effective and defensible process that works for your business can reduce the chance for adverse outcomes and legal sanctions, while also minimizing risk to your business and damage to the organization's reputation.
Here are 10 practice tips for creating a defensible process for executing legal holds:
1. Understand When the Preservation Obligation Arises and What It Means.
The duty to preserve is required when there is "reasonable anticipation" of litigation. Being served with a lawsuit or notice of government obligation is not the only triggering event. Courts have not established a standard for interpreting "reasonable anticipation." Instead, each case is evaluated on its facts and circumstances and may be unique to your business/industry.
Standards differ greatly across circuits, although one consistent theme remains: reasonable efforts to meet the preservation obligation must include affirmative steps to ensure preservation of relevant documents/data. Once the obligation arrives, several steps are required, but the most important step is to ensure that relevant documents and data related to the claims are preserved.
Court decisions have taught us that preservation orders need not be overbroad. There is no duty to preserve every shred of paper, every e-mail or electronic document, and every backup tape because such a rule would cripple large corporations. However, the duty to preserve means what it says, and a failure to preserve and search in the right place will inevitably result in a finding of spoliation by the courts.
2. Create a Written Legal Hold Plan/Process.
A legal hold process should contain specific, detailed criteria for what events trigger a legal hold in your business and industry. In-house counsel should err on the side of caution and prudence, balancing business risk, burden and cost.
Be consistent in determining triggers and executing holds in your company. Events that trigger a legal hold can occur at any time. The ability to quickly execute a legal hold at any time and from anywhere (including remotely or via mobile devices) is critical.
Issuing a written preservation hold notice will only help (not harm) counsel's process.
3. Identify and Interview Custodians.
To implement an effective legal hold, you must quickly identify custodians of all relevant documents and data. Don't forget third parties, such as outside counsel, IT vendors, consultants, independent contractors, former employees, etc.
You must interview custodians (potential or actual) to ensure the proposed scope of the legal hold is accurate. Your interview should find out what relevant documents and data they may possess, and if they know the location of the relevant documents and data. Also, custodians are excellent sources in identifying other potential custodians or sources of relevant information.
Whether you cast a narrow or wide net in identification of custodians, make sure your company's policy for locating these custodians is documented and followed.
4. Issue the Legal Hold - Part I
Legal hold notifications should be comprehensive and provide all the essential information custodians need to properly perform their role in the legal hold. Don't leave it up to the custodians to guess what they should remove from your company's normal document/data destruction process.
Critical elements of the legal hold include:
o Clear description of the subject of the litigation/investigation;
o Detailed guidelines and specific examples of what types of documents/data are to be preserved;
o Possible sources of data;
o Applicable date ranges of relevant documents/data;
o Clear statement on what the duty to preserve entails, including an explicit instruction not to destroy/modify relevant records;
o Notification that the duty to preserve is on-going and the legal hold does not end until further notice;
o Warning of consequences for non-compliance;
o Contact information for in-house counsel in charge of issuing/enforcing the legal hold, invitation to reach out for questions;
Legal holds should be issued promptly. Also, the legal hold should include an acknowledgement that the custodian has received, understands and agrees to comply with the preservation notice
5. Issue the Legal Hold - Part II
Court decisions have taught us that issuing the hold is not enough. Counsel must try to search for and identify all relevant documents and data.
Legacy searches may not be reasonable. Certain courts have held that keyword searches are no longer the favored methodology. Consider advanced technology to enhance defensibility.
Beware asking custodians to self-collect or self-identify relevant documents/data can be risky and may not viewed favorably by courts. Also, be sure to follow up with non-responsive custodians.
Don't overlook documents and data stored in the cloud, on social media sites and in rich media. Also, don't forget about the passive destruction of documents, including regularly scheduled deletions and erasures. Suspend automatic purges and deletions, even if contrary to the document retention policy.
6. Utilize Templates.
Developing legal hold templates can ensure that all necessary information and instructions are included, and that notifications can be issued promptly. However, don't simply use a template you have found in the Internet. Instead, create and customize templates that suit your business.
Types of templates can include:
o Preservation notices
o Custodial acknowledgements
o Tracking and records of preservation instructions
It's best to create templates before you need them. Check various ACC resources for samples.
7. Communicate Regularly with Custodians.
It is important you establish open channels of communication that make it easy for custodians to ask questions. If a hold is in place for an extended amount of time, re-issue the preservation notice and require custodians to re-acknowledge their receipt and intent to comply. Also, periodically evaluate whether the legal hold must be narrowed or expanded to address new information in discovery, or if new custodians exist.
8. Release the Hold.
Legal holds in association with litigation must remain in place for the life of the litigation including appeals. However, once the litigation is over, the legal hold should be lifted and the documents/data destroyed as per the company's standard document/data destruction policy.
When releasing a legal hold, limit the release to a specific legal hold. Do not issue a release of ALL legal holds.
Reiterate the time period and date range for release of all relevant documents and data. Also, provide legal department contact information for questions regarding the release.
9. Document Your Processes.
The release of the legal hold does not end the legal obligations to prove compliance with the legal hold and the company's standard document retention policies. You must assume you will have to provide documentation of each step of the legal hold to demonstrate that proper procedures were carried out promptly. You should be prepared to show proof that a good faith effort was undertaken to preserve documents, and maintain an audit trail if any phase of the legal hold process requires validation.
Key events should be tracked for each custodian, including issuance of the preservation notification, custodial acknowledgements and responses, reminders, re-issues and release. Manual documentation and tracking may be burdensome and error-prone. Consider automated solutions not only to simplify the process but reduce the risk of human error.
Practical tips when considering a third party legal hold software solution include:
o Easy to use and user-friendly;
o Real-time updates on legal hold status;
o Ability to issue/manage a legal hold remotely or via mobile device;
o Highly secure, not just for data security, but permission and role-based access controls for users; and
o Credible solution providers with an established track record of legal and technical expertise, and long-term commitment to the legal industry
10. Be Prepared.
Preparation is key. You must understand the preservation obligation and your company's plan/process for implementing legal holds. You must have a good legal hold template ready to go, BEFORE you need it. And you must remember to follow up and re-issue legal holds and document your preservation attempts.
Failure to properly execute a legal hold can cause severe consequences and serious business risk. Those consequences include evidentiary sanctions, adverse jury instructions, default judgment/dismissal, fines and negative media coverage. Also, courts have repeatedly held negligence and ignorance are not acceptable excuses for failure to properly execute a legal hold.
While meeting the preservation obligation can be a daunting task, implementing a defensible legal hold process in preserving relevant documents and data is essential. Creating a systemized and repeatable process to be used across all cases will only enhance the defensibility of process and remove the pressure of ad hoc processes.