Builders and Contractors Exchange
Weekly Bulletin: 2 may 2008
Litigation Hold Letters In The Digital Age
By: Ethan G. Ostroff
When a company learns that litigation has been filed or "reasonably anticipates" litigation, it must suspend its routine document retention/destruction policies and practices and put in place a litigation hold to ensure the preservation of relevant documents. The new changes to the rules applicable to civil litigation in federal courts, and the similar proposed amendments to Virginia's rules, specifically address electronic discovery and will have considerable impact on the manner in which businesses preserve their records, including the storage administration of electronic data in particular. "Litigation holds" are likely to be an increasingly troublesome issue. A litigation hold means that you are required to preserve data that may be the target of a lawsuit against your company so that you can make the necessary information (e-discovery) available if required. But a huge gap exists between your lawyer asking you to put a litigation hold on data and your ability to actually do so. And this is an important challenge that businesses must be prepared to handle prior to a dispute arising.
A litigation hold is simply a communication within a business organization ordering that all information - whether paper or digital - relating to the subject of a dispute being addressed by a current or impending litigation be preserved for possible production in the litigation. Such a litigation hold is intended to suspend a company's document retention/destruction policies for those documents that may be relevant to a lawsuit that has been actually filed, or even one that is "reasonably anticipated." A litigation hold ensures that relevant data is not destroyed and that key employees are notified of document preservation requirements. Even informal procedures for managing print or electronic documents, such as recycling e-mail backup tapes, must change when a company is sued, or even threatened with suit.
Litigation holds are about the guaranteed preservation of data that can serve as evidence in a lawsuit. The duty to preserve arises, in general, when a party is alerted that certain information is likely to be sought in discovery. This may be triggered when your company learns of pending litigation or is put on notice that litigation is imminent, which can occur, for example, upon receipt of a complaint, upon receipt of a demand letter; or upon receipt of a "preservation letter" expressly requesting that certain documents be preserved.
Coping with a litigation hold may sound costly, but the consequences of failure to meet these obligations can be much more costly. Courts have imposed penalties such as large monetary fines, reimbursement of an opponent's litigation costs, or, in extreme cases, giving instructions to juries that permit them to draw damaging inferences against a party that failed to meet discovery obligations relating to the information destroyed because an effective litigation hold was not put in place in a timely manner.
If you receive a claim or demand, or if you are served with a complaint, or have reason to believe that you or your business may be sued, an attorney should be consulted immediately. The attorney has a vital role in advising the client on when and how to suspend document retention polices, determining the scope of the potential investigation or lawsuit and the source and location of possibly relevant documents. Often a technology consultant will also need to be involved.
Questions?
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This article is meant to bring awareness to this topic and is not intended to be used as legal advice.