Businesses:  Is Your Company Ready for a Litigation Hold?

Jennifer L. Parent
Director, Litigation Department & Chair Business Litigation Practice Group
Published: Association of Corporate Counsel Northeast FOCUS Newsletter - May 2024
May 23, 2024

Destruction of evidence found not only in drafts of documents but in emails, collaborative tools, texts and the like is a serious legal infraction, whether the destruction was intentional or accidental, and may lead to court sanctions such as adverse inferences or dismissal of claims in a case, fines, or payment of the other side’s attorney’s fees in a lawsuit.  The duty to preserve documents and electronic information usually falls on the shoulders of in-house counsel or business managers who address the issue early in a dispute.  Understanding when the company’s preservation obligation begins and assessing what internal steps the company needs to take are critical to protecting any business.

The volume of electronic data created on a daily basis is impressive and increases the stakes that something gets lost.  The continued use of email on both company-owned and personal devices creates its own challenges.  Add to that the number of collaborative tools being used by companies in the workplace such as Slack, Zoom, and Microsoft Teams and the amount of data held within those applications.  Consequently, it is not surprising that companies are dealing with the complexities of preservation, collection, and production of this electronically stored information (ESI) in litigation.

Spoliation is the destruction or significant alteration of evidence.  It includes the failure to preserve evidence when litigation is pending or reasonably anticipated.  The obligation to preserve information arises when a party has notice that the information is potentially relevant to litigation or when a party should have known that the information may be relevant to future litigation.  In other words, evidence must be preserved when litigation is “reasonably anticipated.”  The usual circumstances kick-starting this duty might be a lawyer’s demand letter, notice of a complaint with the EEOC or state agency, or notice of a lawsuit.  Depending on the circumstances, the duty to preserve may arise even before this.

A litigation hold, also referred to as a legal hold, should be sent when this “reasonable anticipation” obligation arises.  Legal holds notify individuals within an organization of their duty not to delete, destroy, or alter electronic information.  Companies must also put measures in place to cease any autodeletion processes to ensure no relevant information is being lost.

Determining what information must be preserved depends on two variables: (1) who is involved; and (2) what documents those people have.  When a reasonable anticipation of litigation arises, a company should immediately ascertain the key employees who are likely to have relevant information. That inquiry inherently requires an investigation of the types of information or documents each key player may have and the locations where that information may be stored, including documents in various electronic forms and mediums (desktop, laptop, server, thumb drive, collaborative apps, audio, camera, smart phone, etc.).

Failing to take the necessary steps to preserve and gather relevant information can be a game-changer in a company’s lawsuit if sanctions are issued.  A company can take a number of different actions to meet its obligation, the most common of which may include:

  • Work with IT people to gather all backup tapes and other electronic storage mediums that contain electronic documents and place them in a secure location and to ensure that routine data destruction measures are appropriately stopped according to the hold.
  • Determine the scope of the litigation hold (including subject matter and issues, key players, location of data, and relevant time periods) and promptly stop automatic destruction processes on all different devices until the proper scope can be determined.
  • Issue litigation hold notices to key players and IT, informing them that there is a hold on the destruction of any information subject to the preservation obligation. Key players should be reminded that preservation includes all information within the scope identified no matter where the data is located – for example, work cellphone or personal cell-phone.
  • Interview key players and determine any required expansion of the scope of the hold and segregate them to prevent any destruction.
  • Make any electronic forensic images of the hard drives of laptops, smart-phones, and other electronic devices of the key players at the time litigation is reasonably anticipated.

The obligation to preserve evidence does not end at the first instance that a company reasonably anticipates litigation. That is only the beginning.  As a company learns more about a potential dispute, it should reassess whether it has preserved all of the evidence that it must preserve.  Reassessment includes identifying any additional key players, determining whether new issues require broader preservation, and ascertaining any broader time periods than initially preserved.  Sending out reminders or new litigation holds is advisable.

It is critical for companies to understand and recognize when the obligation to preserve arises and the steps they are required to take to ensure those obligations are met.  The repercussions to the company can be significant otherwise.