Top Ten Best Practices for Executing Legal Holds

By Samuel Toward, JD, Thomson-Reuters

Overview

Ten years after the landmark Zubulake decision from U.S. District Court Judge Shira Scheindlin laid much of the groundwork for the handling of electronically stored information (ESI), legal holds continue to pose a minefield of potential hazards.

Recent court actions around the country have seen a wide range of decisions regarding under what circumstances sanctions should be applied for evidence spoliation, and how severe those sanctions should be. The resulting uncertainty has reached the point where amendments to the Federal Rules of Civil Procedure are being considered that would set uniform standards for spoliation sanctions.

However, until such standards are enacted, counsel would be well served to err on the side of caution and prudence, with a bias towards being as prepared as possible. Last fall's Sekisui America et al v. Hart et al remains a cautionary tale of the cost of not managing a legal hold properly.

In Sekisui, the plaintiff failed to both implement a legal hold in a timely manner and notify a key document custodian. Judge Scheindlin ruled that "the failure to adopt good preservation practices is ... [a] factor in the determination of whether discovery sanctions should issue."

Judge Scheindlin granted an "adverse inference" instructing the jury that missing electronic documents should be considered negatively prejudicial to the plaintiff. The plaintiff's case was subsequently dismissed and the company was ordered to pay their opponents' legal fees.

Any dispute - whether involving employees, customers, suppliers, competitors, or government regulators - carries the potential to turn into legal action. Failure to prepare for a legal hold is like not buying insurance - if you don't have it when you need it, it's too late, and the consequences can be very serious.

Properly executing a legal hold need not be an overly complicated or intimidating process. What it does require, however, is thoughtful planning and preparation in order to protect the business. A defensible, repeatable and systematic process for executing legal holds can reduce the chances for legal sanctions and adverse outcomes, minimizing risk to the business.

Here are ten best practices for creating a systematic process for executing legal holds:

1. Outline specific notification criteria

A legal hold plan should contain specific, detailed criteria for what events will trigger a legal hold. Being served with a lawsuit or notice of a government investigation is not the only triggering event. A legal hold is required when there is "reasonable anticipation" of litigation. Courts have not established a standard for interpreting that phrase; instead, each case is evaluated on its circumstances.

2. Identify custodians

Be able to quickly identify custodians of relevant documents. Do not forget third parties, such as outside counsel, IT vendors, consultants, former employees, etc.

3. Provide clear, detailed notifications to custodians

Notifications should be comprehensive and provide all the essential information that custodians will need to properly carry out their role in the legal hold.

First and foremost, the notification should include a clear description of the subject matter of the litigation or investigation. Provide guidelines that detail what types of documents are to be preserved, with applicable date ranges and examples of the records that should be preserved.

Clearly state what the duty to preserve entails. There should be explicit instructions not to destroy or modify relevant records. It should be explained that this includes not only intentional or willful destruction of documents, but also passive destruction of documents, including regularly scheduled deletions and erasures. Automatic purges and deletions should be suspended.

The notification should inform custodians that the duty to preserve is on-going and the hold does not end until further notice. A warning should be included that explains the consequences of non-compliance.

Finally, include contact information for corporate counsel in charge of issuing and enforcing the legal hold.

4. Create and use templates

Creating notification templates can ensure that all necessary information and instructions are included, and that notifications can be issued in a timely manner.

5. Ask questions of custodians

Custodians are more than keepers of documents. They can help ensure that the scope of the legal hold is accurate. Ask them what relevant documents they possess, and if they know where the relevant documents are located. They are also excellent sources to query as to whether they know anyone else who possesses relevant documents.

6. Communicate regularly with custodians

Establish clear, open channels of communication that make it easy for custodians to ask questions. If a hold is in place for an extended period, reissuing the hold request and requiring custodians to re-acknowledge the hold is prudent.

7. Document, document, document

Assume that the courts will ask for documentation of any and every step of the legal hold to demonstrate that proper procedures were carried out in a timely manner and to provide proof that a good faith effort was undertaken to preserve documents.

Key events should be tracked for each custodian, including issuance of notification, acknowledgement of receipt, responses/non-responses, reminders to non-responsive custodians, and release of the legal hold.

8. Automate the process

Managing a legal hold can be time-consuming. Some organizations track custodian notifications and responses manually using spreadsheets and other methods, which can be labor-intensive and error-prone.

Automated solutions not only simplify and speed up execution of legal holds, they provide tracking, auditing and other tools that help ensure compliance and minimize risk to the organization at every stage of the legal hold:

Create new holds Draft and distribute notice, and upload files for custodians to review. In addition, surveys of custodians may be needed to in order to collect additional information.

Collect response data Acknowledgements that custodians have received and responded to the legal hold notices are vital to record and track. They provide important documentation that the hold was executed in a timely manner. Non-responsive custodians need to be sent reminders to carry out the legal holds.

Tracking and reporting The progress of the hold needs to be tracked at all stages of the process. Audit trails should be maintained in the event that any phase of notification or data collection needs to be documented or validated. The release of the legal hold with its custodian notifications and acknowledgements should also be recorded.

After the hold The release of the legal hold does not end the legal obligations. Custodian data, notifications and responses/non-responses need to be retained and preserved.

9. Select a solution that meets your needs

In addition to managing the above-mentioned tasks, it's important to consider additional features that can help ensure that the solution helps properly execute legal holds.

While it may seem obvious, the solution should be easy to use. Being in the midst of a legal hold is no time to learn how to use a solution - it should be user-friendly with intuitive dashboards that present useful, at-a-glance summaries and other vital information.

Real-time updates can help ensure timely execution. Status of the hold should be monitored in real-time at every step. Delays, bottlenecks and non-responsive custodians can be immediately identified and addressed.

Events that trigger a legal hold can occur at anytime. The ability to quickly initiate and manage a legal hold at anytime from anywhere, including from mobile devices, can be critical.

Security is paramount, and should include not only data-level security, but permission-based and role-based access controls for each user.

Solution providers should be able to demonstrate an established track record of legal and technical expertise, and long-term commitment to the legal industry.

10. Be Prepared

Courts have repeatedly made it clear that sheer negligence is not an acceptable excuse. Failure to properly execute a legal hold can result in severe consequences that could potentially place the entire organization at risk.

The solution is to have a legal hold process in place before trouble strikes. Preparation is key. An ounce of prevention can prevent a ton of pain. Having a systematic, repeatable and defensible legal hold process is critical. It also is easily achievable by taking the proper steps in advance of legal action.