A large company has just learned that new—and stringent—regulations are about to take effect which will drastically increase the volume of litigation it expects to confront. Previously, the company relied on an ad hoc process of issuing litigation holds when the need arose to ensure that the company complied with its obligation to preserve relevant documents. However, in light of the expected flood of new claims, in-house counsel is concerned that this ad hoc process will no longer be sufficient and is looking for guidance to develop a more formalized litigation hold procedure.
The Sedona Conference Commentary on Legal Holds, Second Edition: The Trigger & The Process
The Sedona Conference is a legal research and educational institute which has, among other things, published a number of influential guides and commentaries relating to electronic discovery. In June 2019, they issued a new publication, The Sedona Conference, Commentary on Legal Holds, Second Edition: The Trigger & The Process, 20 Sedona Conf. J. 341 (forthcoming 2019) available at https://thesedonaconference.org/publication/Commentary_on_Legal_Holds (the “Second Edition”).
The Second Edition—developed largely following the substantial 2015 revisions to the Federal Rules of Civil Procedure (the “Federal Rules”)—is intended to provide practical guidelines for determining when to issue a litigation hold, what should be covered by the hold, how to implement the hold and how to address foreign data protection laws or regulations that might affect an organization’s preservation measures outside the United States. It is a valuable resource for companies seeking to ensure that their document preservation policies and processes are up-to-date and reflect contemporary best practices.
The Second Edition sets forth 12 “Guidelines” for companies to consider in “articulating policies to implement legal holds tailored to their needs.” Those guidelines are set forth below, along with some explanatory comments. The Second Edition provides significant additional details and explanations of these guidelines and is well worth reviewing when crafting a preservation policy.
Guideline 1: A reasonable anticipation of litigation arises when an organization is on notice of a credible probability that it will become involved in litigation, seriously contemplates initiating litigation, or when it takes specific actions to commence litigation.
Commentary: A “duty to preserve” documents or other evidence typically arises when there is a “reasonable anticipation of litigation.” That is the time when a litigation hold should generally be issued.
Guideline 2: Adopting and consistently following a policy governing an organization’s preservation obligations are factors that may demonstrate reasonableness and good faith.
Commentary: In a large organization, it is inevitable that something that should have been preserved will be lost from time to time. The Federal Rules do not require perfection, however. Generally, under the rules, sanctions for the loss or destruction of evidence are available only if the loss or destruction was the result of a failure to undertake reasonable, good faith preservation efforts. Adopting and consistently following an adequate policy can help make the case that the company’s efforts were reasonable and done in good faith and so can help avoid sanctions when something is inadvertently lost.
Guideline 3: Adopting a procedure for reporting information relating to possible litigation to a responsible decision maker may assist in demonstrating reasonableness and good faith.
Commentary: Particularly in a large organization, ensuring that information flows to the right people can be challenging. If in-house counsel does not know about a particular litigation risk, he or she cannot take steps to issue a legal hold. But generally counsel’s ignorance will not excuse the company’s failure to preserve documents. Adopting procedures designed to ensure that counsel is made aware of litigation risks may help a company show that it was acting reasonably and in good faith, even if in a particular case the process breaks down, resulting in the loss of evidence.
Guideline 4: Determining whether litigation is or should be reasonably anticipated should be based on a good-faith and reasonable evaluation of relevant facts and circumstances.
Commentary: There is always some theoretical risk of litigation. But that does not mean that companies must preserve every document or piece of information. A “duty to preserve” does not generally arise until litigation is “reasonably anticipated.” Counsel should be made aware of all the relevant facts and circumstances so that he or she can make an informed, good-faith judgment in each case about whether litigation is “reasonably anticipated.”
Guideline 5: Evaluating an organization’s preservation decisions should be based on the good faith and reasonableness of the decisions (including whether a legal hold is necessary and how it should be implemented) at the time they are made.
Commentary: In hindsight, decisions about whether litigation was “reasonably anticipated,” or whether particular documents would be relevant and should be preserved, might turn out to be wrong. The evaluation of whether a company acted reasonably and in good faith, however, is not to be assessed in hindsight. Rather, it is assessed based on the information available at the time the decisions were made. This makes it all the more important to ensure that the decision makers have all of the relevant information available to them so that they can make informed decisions.
Guideline 6: Fulfilling the duty to preserve involves reasonable and good-faith efforts, taken as soon as is practicable and applied proportionately, to identify persons likely to have information relevant to the claims and defenses in the matter and, as necessary, notify them of their obligation to preserve that information.
Commentary: Once litigation is “reasonably anticipated,” the company must make a reasonable and good-faith effort to identify who is likely to have (or have access to) relevant information and to issue a litigation hold to those persons instructing them to preserve that information.
Guideline 7: Factors that may be considered in determining the scope of information that should be preserved include the nature of the issues raised in the matter, the accessibility of the information, the probative value of the information, and the relative burdens and costs of the preservation effort.
Commentary: The 2015 amendments to the Federal Rules expressly sought to emphasize the importance of “proportionality” in discovery. In comparatively minor cases, a company generally need not scour every nook and cranny to ensure that nothing is lost. However, in more significant cases, more extensive measures may be appropriate. Companies should, therefore, think carefully about each matter to decide what should or should not be preserved in a given case.
Guideline 8: In circumstances where issuing a legal hold notice is appropriate, such a notice is most effective when the organization identifies the custodians and data stewards most likely to have discoverable information, and when the notice:
(a) communicates in a manner that assists persons in taking actions that are, in good faith, intended to be effective;
(b) is in an appropriate form, which may be written, and may be sent by email;
(c) provides information on how preservation is to be undertaken, and identifies individuals who can answer questions about preservation;
(d) includes a mechanism for the recipient to acknowledge that the notice has been received, read, and understood;
(e) addresses features of discoverable information systems that may make preservation of discoverable information more complex (e.g., auto-delete functionality that should be suspended, or small sections of elaborate accounting or operational databases);
(f) is periodically reviewed and amended when necessary; and
(g) is followed up by periodic reminder notices, so that the legal hold stays fresh in the minds of the recipients.
Commentary: Legal hold recipients typically have jobs that focus on something other than just preserving information for litigation. To be effective, a legal hold notice needs to provide clear instructions to the recipients so that they know what they need to do to comply with it.
Guideline 9: An organization should consider documenting the procedure of implementing the legal hold in a specific case where appropriate.
Commentary: This sort of documentation is often useful in litigation when a party needs to defend its assertion that it took “reasonable steps” to preserve documents. Documenting the procedures by which a litigation hold was issued can help establish that a party’s preservation efforts were reasonable.
Guideline 10: Compliance with a legal hold should be regularly monitored.
Commentary: It is not enough to just issue a legal hold and hope for the best. Organizations should take steps to monitor compliance and ensure that the legal hold is complied with. That will often serve as powerful evidence that the party took “reasonable steps” to preserve documents.
Guideline 11: Any legal hold process should include provisions for releasing the hold upon the termination of the duty to preserve, so that the organization can resume adherence to policies for managing information through its useful life cycle in the absence of a legal hold.
Commentary: Business operations can easily grind to a halt if, over time, every scrap of paper and every electronic document is being preserved due to outstanding legal holds. That not only is burdensome for the business but also can lead to organizational resistance to issuing and implementing legal holds in the first place. An organization’s policies regarding legal holds should, therefore, address the circumstances in which a hold can be lifted so that ordinary operations can resume.
Guideline 12: An organization should be mindful of local data protection laws and regulations when initiating a legal hold and planning a legal hold policy outside of the United States.
Commentary: Many jurisdictions, including the European Union, have stringent data privacy laws which may affect an organization’s ability to preserve and produce documents in litigation. Organizations should consider whether to develop country-specific data preservation policies and procedures tailored to the applicable local statutes and regulations.