Failure to Issue “Litigation Hold” Could Result in Sanctions and Attorney’s Fees

The recent S.D.N.Y. decision in Pension Committee of the Univ. of Montreal Pension Plan v. Banc of America Securities, 05 Civ. 9016, 2010 U.S. Dist. LEXIS 1839, *1 (S.D.N.Y. Jan. 11, 2010, and amended, Jan. 15, 2010), highlights that litigation requires more than simply responding to discovery once it is initiated by a formal request.  In this case, the plaintiffs failed to anticipate and issue within its company a litigation hold to preserve and collect all reasonably relevant documents.  The plaintiffs waited nearly two years before initiating a written litigation hold.

The court was clear that “the failure to issue a written litigation hold constitutes gross negligence because that failure is likely to result in the destruction of relevant information.”  The court found that a litigation hold should “direct employees to preserve all relevant documents —both paper and electronic” and “create a mechanism for collecting the preserved records so that they can be searched by someone other than the employee . . . .”  The court also found that collection efforts do not “require hands-on supervision from an attorney. However, attorney oversight of the
process, including the ability to review, sample, or spot-check the collection efforts is important. The adequacy of each search must be evaluated on a case by case basis.”

Here are some practice pointers offered by Orrick:

*  “[O]nce a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a ‘litigation hold’ to ensure the preservation of relevant documents.”

*  Employers should consider whether they have an obligation to preserve, search and collect information on an employee’s home computer or mobile personal device.

*  Once the duty to preserve is triggered: 1) suspend auto-deletion of ESI; 2) ensure preservation efforts account for departed employees; and 3) take steps to ensure preservation of relevant information under the litigating party’s control but in the custody of third parties.

*  Custodian self-collection can be defensible with the appropriate supervision by counsel. To ensure defensibility, it is important to understand the technology and process used for collection, document actions and decisions, and sample custodian self-collection.

*  Collection instructions should be in writing and technical support should be available to the custodian.

*  If relying on custodian self-collection, instructions to individual employees should include a broad description of “relevant documents.” As much as possible, avoid asking the employee to make relevancy determinations.

*  Any proffer of eDiscovery evidence should be specific and accurate. Whether arguing for cost shifting or presenting evidence of the reasonableness of preservation or collection, it is essential that the statements have specificity. Cursory summaries of IT infrastructure, scope of collection and preservation or cost will inevitably lead to problems. To support these detailed evidentiary offerings, it is important to document decisions and actions throughout the eDiscovery process. When identifying an appropriate witness on these issues, ensure the witness understands the company’s IT infrastructure and can explain, in detail, the preservation and collection protocol at issue. The average IT employee or paralegal is unlikely to have the knowledge and skill to be an effective witness.

*  The Pension Committee Court pointed out that all of the declarations in this case stated that “all documents” had been collected.  With today’s proliferation of information, even the most comprehensive and well-run searches cannot locate “all documents.” “Courts cannot and do not expect that any party can meet a standard of perfection.” Rather, when offering evidence or certifications regarding preservation and collection, describe these efforts in accordance with the “reasonable inquiry” standard of Fed. R. Civ. P. 26(g).

*  Where the value of the case justifies the expense, there are distinct advantages to collections performed by expert vendors. These vendors are well versed in collection and search techniques and generate detailed documentation regarding the who, what, where, and when of the collection. They can also serve as the declarant or 30(b)(6) witness on issues of eDiscovery. This can spare the party’s legal or IT department from serving as the witness.

*  Preserve backup tapes when they are the sole source of relevant information. If, on the other hand, they contain duplicate copies of information available on servers, hard drives or other accessible sources, preservation is not necessary.

Good luck.

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