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Know When To Hold 'Em, Know When To Fold 'Em; Is Your Company Ready for a Litigation Hold?

Written by: Jennifer L. Parent

(Published in the New Hampshire Business Review, July 2010)

Sarah, vice president of human resources, receives a letter from counsel for a former employee claiming discrimination.  The letter details allegations of sexual harassment against two co-workers and a supervisor who had knowledge of the harassment.  The allegations include jokes and lewd pictures being sent to the former employee by these co-workers as well as sexually suggestive remarks in front of the supervisor.  At the end of the letter, the counsel advises the company to put a litigation hold on all relevant information and to preserve all electronic data, including all emails and texts, of these co-workers, the supervisor, the former employee, and others.  The company has never had a discrimination complaint let alone a litigation hold letter.  What are the company’s obligations? 

The destruction of evidence by a litigant is a serious legal infraction, whether the destruction was intentional or accidental.  Destruction of evidence or spoliation may lead to court sanctions such as fines or the loss of a lawsuit.  A company can fall into a trap if it is not aware of its preservation duties and fails to have effective procedures in place to ensure that its responsibilities are satisfied.

Spoliation is the destruction or significant alteration of evidence.  It also encompasses the failure to preserve evidence in pending or reasonably foreseeable litigation.  To avoid spoliation, a company must know (1) when it has an obligation to preserve information and (2) what information it must preserve. 

With respect to the first issue, the obligation to preserve evidence arises when a party has notice that the information is 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 letter, notice of a complaint with the EEOC or state agency, or notice of a lawsuit.  The duty to preserve may arise even before this when an employee makes internal complaints to managers and human resources people where they anticipate the possibility of litigation.

A company should be mindful of the duty to preserve as it will fall squarely on the shoulders of the business managers and human resources people who address the issue before counsel may become involved.  To meet this burden, managers and HR professionals must understand the 'reasonable anticipation' standard, including specific instances that give rise to the duty in the employment context, and they must be able to assess what evidence must be preserved and what steps to take to ensure preservation.
 
With respect to the second issue, determination about what information must be preserved depends on two variables: (a) who is involved; and (b) what documents such people have.  When a reasonable anticipation of litigation arises, a company should assess who are the key players, that is, which employees are likely to have relevant information.  A company should then determine what documents each person may have.  That inquiry inherently requires an investigation of the types of information that 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, audio, camera, cell-phone, etc.).

The obligation to preserve evidence does not end at the first instance that a company reasonably anticipates litigation.  To the contrary, 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.  That involves reassessing whether there are additional key players, whether there are new issues that require the preservation of a broader type of evidence, or whether evidence spans a broader time period than initially preserved.

The obligation to secure evidence can require a company to take a number of different actions.  The most common actions may include:

  1. Determining 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 until the proper scope can be determined.
  2. Issuing litigation hold notices to key players and other corporate employees, such at IT people, informing them that there is a hold on the destruction of any documents 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.
  3. Interviewing key players, and determining any required expansion of the scope of the hold and segregate them to prevent any destruction.
  4. Working with the IT department to gather all back up tapes and other electronic storage mediums that contain electronic documents and placing them in a secure location and ensuring that routine data destruction measures are appropriately stopped according to the hold.
  5. Making electronic forensic images of the hard drives and other electronic devices of the key players at the time litigation is reasonably anticipated.
  6. Routinely reissuing litigation hold notices so that key players are reminded of the preservation obligation, so that people newly identified as key players are given the notices, and so that new employees get the notices.  Following up to ensure compliance.

Here, with reasonable anticipation of litigation, Sarah must ensure that the company promptly ceases the destruction of electronic data until the scope of the litigation hold can be determined and steps taken to preserve evidence.  The company may consider consulting with counsel on the scope of the preservation or the content of a litigation hold issued to key players.  The company must take prompt steps to determine the key players, the relevant time period, and where any data may be stored so that electronic data is properly preserved.

Jennifer L. Parent, a director in the Litigation Department and Chair of the Employment Law Practice Group of McLane, Graf, Raulerson & Middleton, P.A., can be reached at 628-1360 or [email protected].

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