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When to Hold ‘Em; When to Fold ‘Em

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Two weeks ago, I took the Certified E-Discovery Specialist (CEDS) exam. For those of you thinking about adding this certification to your resume, I encourage you to do it! It’s a challenging exam, but not impossible with a little preparation.

Legal hold is a topic that the exam covers in depth. After a deep dive into all-things data preservation, I thought I would revisit this area for any of you who need to freshen your knowledge on the duty to preserve ESI.

Understanding your organization’s duty to preserve – when it begins, what it entails and when it ends – is a key strategy in e-discovery that can save your organization time and avoid risks in litigation or regulatory matters.

What is the duty to preserve?

As soon as an organization reasonably anticipates the threat of a dispute, that organization has an immediate obligation to preserve hard copy and electronic data relevant to the subject of the dispute. Relevant information should not be altered in any manner from its form at the time of the triggering event. The definition of “reasonably anticipates” and the timing of the “triggering event” are open to case-by-case interpretation and often a hotly debated subject in discovery disputes involving deleted data.

Specifically, courts look to what events should have triggered the hold. The receipt of a formal complaint obviously triggers preservation duties, but what if data should have been preserved prior to formal commencement of litigation? What notice did the company have of suit or threat of suit? Was there a written or oral threat of litigation? Were the circumstances obviously contentious and likely to lead to litigation? What is the company’s litigation history? When did the company consult in-house or outside counsel? Certainly, a cautious approach is advisable when initiating the preservation duty, and a hold should be issued as soon as an organization’s legal team receives reasonable notice of litigation. Once formal proceedings commence, hold parameters can be altered if initial preservation estimations were too broad. Reasonableness, not perfection, is the standard.

How should a hold be implemented?

Courts pay attention to the forum, substance, and timing surrounding the preservation efforts. A legal hold is crucial to showing defensible and good faith efforts to preserve relevant information. The most prepared organizations will have clear procedures in place ahead of time. This means implementing a detailed, formal written legal hold policy across all matters. The notice should outline the subject matter of the dispute, conveying with specificity what ESI needs to be retained and how to properly accomplish the hold. Also, the notice should explain the potential consequences to the individual and the organization for noncompliance with the hold.

A point person should be assigned in case any data custodian has questions, and there should be a method for the data custodian to acknowledge receipt and understanding of the hold instructions. Sometimes, follow-up interviews will be necessary to ensure that the hold is being fully effectuated. The plan should also take into account a process for preserving non-custodial data, such as information on a shared drive. For IT staff, the hold should instruct them to suspend any routine document destruction that might impact data subject to the hold. It is important that the legal team send periodic reminders about the nature and scope of the hold.

Just as important as issuing the hold, the preservation plan must allow for releasing ESI from a legal hold, and communicating such a release to data custodians. Oftentimes, legal holds across various matters overlap, so when releasing holds it is important to check if the data and custodians to be released still need to be held for other matters.

Ideally, there is a technology system that tracks all holds consistently and reliably. Some organizations choose to utilize a legal hold software, but many organizations have developed manual procedures that are just as effective. The most important factor is keeping adequate records of what actions were taken (and why they were taken), should the preservation efforts be called into question later in discovery.

What are the consequences for failure to preserve?

Failure to adequately issue hold notices and properly preserve may create trouble in the courtroom. Sanctions may be imposed upon parties for failing to take reasonable steps to preserve ESI. Sanctions may include: monetary awards, adverse inference instructions, limiting claims/defenses, and default judgement or dismissal. In determining sanctions, courts look to Federal Rule of Civil Procedure 37(e). This rule states that sanctions for loss of ESI are appropriate if the loss caused prejudice to the opposing data, cannot be replaced through additional discovery, and the party acted with intent to deprive.

Since Rule 37(e) was adopted, courts have been more hesitant to issue sanctions, only harshly penalizing a party for flagrant loss of relevant data. Nonetheless, parties still need vigilance with regards to holding data. Knowing what an organization needs to do and how to do it are two very different tasks. Parties need to have their legal hold processes and systems in check to avoid unknown or neglected preservation duties, ineffective legal holds, or faulty deletion strategies.

Michele Lange
Michele C.S. Lange is a freelance writer and attorney based in Minneapolis, MN. She has more than 15 years of experience in the legal technology industry, where she regularly wrote articles, blogged, podcasted, and spoke on topics related to eDiscovery, computer forensics, and technology’s role in the law. Most notably, she authored the American Bar Association book, "Electronic Evidence and Discovery: What Every Lawyer Should Know." Solving complex problems, building cutting-edge tools, and helping clients navigate sticky situations, Lange also has worked extensively in the areas of cybersecurity, information governance, privacy, security, and artificial intelligence. Currently, she writes columns for law.com, Minnesota Lawyer, and other media companies, as well as consults and writes for organizations, helping them look for ways technology can create efficiencies and reduce legal and IT costs. Her passions: inquisitive kids, playful pups, red licorice and anything with words.

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