Litigation hold can help save the case

In our electronic age, an organization compiles voluminous data and communications across the spectrum of its management and operations.
The organization must make ongoing decisions regarding the extent and timing of the destruction of records. It has likely adopted retention policies based upon the practical realities of its operational capacities and relies upon routine deletion protocols to manage its information.
When faced with the prospect of litigation or a regulatory investigation, the organization must alter its typical recordkeeping practices. Instead, it must implement a “litigation hold” to locate and preserve all information relevant to the issues at stake.
The failure to devise and maintain an effective litigation hold can result in adverse consequences in a legal proceeding, including the imposition of monetary sanctions or the dismissal of claims or defenses. Sanctions may be imposed without proof of bad faith.
The Rhode Island Superior Court recently issued a detailed decision sanctioning two defendant companies for their “spoliation” of evidence – the destruction of records that were relevant to the plaintiff’s claims. The court precluded one company from presenting any evidence regarding a material part of its defenses and ruled that an adverse jury instruction should issue against the other company.
At times, the need to implement a litigation hold will be obvious, such as the receipt of a demand letter threatening an impending lawsuit or the service of a complaint filed in a court or regulatory body. Other times, the signals will be far more subtle.
Employees may be contending that employment practices are unfair, customers may be complaining about services, or parties to a contract may be questioning performance. The organization must evaluate realistically and cautiously whether a contentious or disputed matter will likely develop into a legal proceeding. This analysis is compounded by applicable statute of limitations, which may allow the claimants or investigative bodies several years to commence an action. The organization should not simply assume a matter will fade away and preservation obligations do not trigger.
To implement a litigation hold, the organization should issue detailed written instructions to its records custodians and any employees who may be called as witnesses. It should send periodic reminders to its personnel, as well as inform newly hired employees of the litigation hold.
The organization should document its activities, including templates showing what records have been retained and by whom. Personnel overseeing the preservation protocols must think outside the box and address a myriad of considerations.
A mere review of hard copy documents in file cabinets or employee offices will not be enough. Electronically stored information must be reviewed in its various formats.
Courts are increasingly requiring the preservation of social media postings and communications, particularly in employment related cases. If the organization allows employees to use personal laptops or tablets in the workplace, it must determine whether business data subject to preservation may be commingled on the employees’ devices with personal information subject to reasonable privacy expectations. The organization should also examine the extent that employees access its network through home computers. Managerial and technological personnel should meet regularly to confirm employees’ preservation of records subject to the hold. The organization may have to look beyond its own walls and evaluate the extent to which third parties possess relevant records.
In litigation, the organization must produce records within its “possession, custody or control.” Courts interpret the scope of this obligation based upon the facts and circumstances of each matter before it.
The organization may routinely share information with vendors or consultants in furtherance of business relationships. Additionally, the organization may have to contact a former employee if relevant information cannot be located and there is any suspicion that the person may have kept copies of business records. The organization should utilize exit checklists to identify where departing employees maintained records in the workplace and ensure that the records have been properly identified and stored.
A litigation hold may seem daunting, but it can be effectively devised and managed through proactive measures. The organization must not preserve only those records helpful to its case, but it must undertake a balanced and detailed review of all of its data sources.
Once the legal proceeding has ended, the organization may resume its normal retention and deletion protocols, or it may wish to revise them in light of the lessons learned from the litigation hold. Even when there is not an existing prospect of litigation, the organization would be wise to project ahead and have a readiness plan to implement a future litigation. •


Steven M. Richard is an attorney with Nixon Peabody LLP in Providence.

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