Don't Gamble: Know When and How to Implement a Proper Litigation Hold

Earlier this year, Judge Shira Scheindlin of the New York Southern District Court (and author of the now famous Zubulake decisions) issued another landmark decision affecting the practice of document retention and e‐discovery in the United States.

Earlier this year, Judge Shira Scheindlin of the New York Southern District Court (and author of the now famous Zubulake decisions) issued another landmark decision affecting the practice of document retention and e‐discovery in the United States. In Pension Committee of the University of Montreal Pension Plan et al v. Bane of America Securities et al, 1 Judge Scheindlin found the plaintiff investors grossly negligent in failing to preserve relevant evidence, even though counsel for the plaintiffs had instructed the plaintiffs to be over‐inclusive in their collection efforts and had issued a litigation hold, albeit sometime after the litigation had commenced. She found that the instructions issued by counsel were inadequate, identifying the following weaknesses:

1. there was no specific direction to the plaintiffs (and their employees) to preserve all relevant records; and
2. there was no specific mechanism for collecting the preserved records so that they could be searched by someone other than the employee.

For these and other transgressions, Judge Scheindlin ordered that a spoliation instruction be given to the jury, permitting a rebuttable presumption against the plaintiffs that the lost evidence was relevant and prejudicial to the plaintiffs' case.

Although not binding on Canadian Courts, Judge Scheindlin's decision provides a cautionary tale on the importance of a timely and effective litigation hold (sometimes called legal hold).

Published in 2008, the Sedona Canada Principles 2 have become the standard employed by Canadian Courts with respect to document retention and ediscovery obligations. 3 The third Principle provides that:

As soon as litigation is reasonably anticipated, parties must consider their obligation to take reasonable and good faith steps to preserve potentially relevant electronically stored information.

The commentary to the third Principle offers the following guidance:

Once it is determined that a preservation obligation has been triggered, the parties should communicate to affected persons the need for and scope of preserving relevant information in both paper and electronic form. The notice should describe in detail the kinds of information that must be preserved, and should mention the volatility of [electronically stored information] and that particular care must be taken not to alter, delete or destroy it.

The keys to a proper litigation hold are to:

1. Act as soon as litigation is reasonably anticipated. For a plaintiff this will be before a claim is commenced. Although defendants cannot always anticipate a claim, in some instances where there is an ongoing dispute, the obligation may start for the defendant before the claim is issued.
2. Identify all departments or individuals who you expect or suspect have records that may be relevant to the dispute. This includes departments and individuals involved in the dispute and general record keeping departments. Remember: your duty to preserve casts a wider net than what is covered by your eventual duty to produce.
3. Designate a representative from the IT department who can identify sources of data, and design and oversee the actual preservation and eventual collection of data. (Ideally, the affected employees – i.e. witnesses – should not be left in charge of preserving and collecting the data.)
4. Specifically direct that records are to be preserved. Be clear as to why records are being preserved, and highlight the volatility of electronically stored information and the particular care that must be taken not to alter, destroy or delete the data. You should also list the possible sanctions for failure to comply.
5. List the types of records to be captured by the preservation hold: emails, letters, text messages, instant messages, spreadsheets, databases, calendars, telephone logs, internet usage files, drawings, contracts, drafts of drawings, correspondence, contracts, etc.
6. Identify the sources of records subject to the preservation hold: desktop computers, home computers, laptops, blackberry, smart phone, voicemail, etc.
7. Where possible, preserve data in its native format. Simply having employees forward their emails to counsel may not suffice, as relevant data may be altered or destroyed in the process.
8. Specify a time frame to which the preservation hold applies. (i.e. historical period or a period including all currently generated information). Clearly note that the preservation hold is in place until the recipient receives written instructions that the hold has been lifted.
9. Confirm compliance with the preservation hold by verifying receipt of the notice and confirming agreement to comply.
10. Document the steps you have taken.
11. Re‐issue the notice of the preservation hold and instruction periodically. Revisions may be necessary as new issues emerge. Ensure new staff are aware of preservation holds in place.
12. Release the hold when the matter is completed.

Of course, every case is different and the principle of proportionality means that not every case warrants heroic measures. However, the above checklist is a good starting point for the imposition of a defensible litigation hold. Footnotes 1 2010 U.S. Dist. LEXIS 1839. 2 The Sedona Canada Principles: Addressing Electronic Discovery: see www.thesedonaconference.org 3 See, for example: Innovative Health Group Inc. v. The Calgary Health Region, 2008 ABCA 219; Vector Transportation Services Inc. v. Traffic Tech Inc., [2008] O.J. No. 1020.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.