Litigation Holds: Seven Steps For Companies Facing Lawsuits or Investigations
By Mary Jacoby | November 1, 2012 12:06 pm

Jacoby: Hi. This is Mary Jacoby. I’m the editor in chief of Main Justice and we’re conducting a podcast today on the issue of litigation holds.

Adam Cohen is a leader of the information management and E-Discovery readiness practice within Ernst and Young LLP’s Forensic Technology and Discovery Services group. Adam is also a former litigation partner at a major international law firm and the author of the major legal treatise on E-Discovery, “Electronic Discovery Law and Practice.”

Adam, thanks for being with us today. Litigation holds — what do you want to tell us about that first? And then we’ll go through seven steps you say every company needs to take into account.

Adam Cohen

Cohen:  Well, let’s be clear what we mean by a litigation hold. We’re talking about what needs to be done to implement compliance with a duty to preserve, which arises any time you reasonably anticipate or have pending a litigation, investigation or any other kind of legal process. And a litigation hold really refers to something much broader than a legal hold notice that we’re talking about and really refers to this entire process that we’re going to describe.

Jacoby: All right, the first step: systems overview.

Cohen: It’s impossible to do any of this correctly — any of electronic discovery, certainly any preservation — without having thorough knowledge of the sources of electronic information that you’re trying to preserve or collect or handle at any point in the process. What we typically recommend is that clients, certainly multinational companies with complex information systems, document the information about those systems and those sources of information that are relevant to electronic discovery. Surprisingly, or not surprisingly, most organizations do not have such documentation in any centralized way. Documentation about systems tends to be spread out with different IT administrators and therefore it’s difficult for legal personnel who are charged with implementing a preservation duty to identify the sources that they need to address in accomplishing preservation.

Jacoby:  Okay, so the second step is the employee policy.

Cohen: Right, so you know what your sources are now, how are you going to find out when there are facts that might lead you to a lawsuit because your legal obligation begins when you reasonably anticipate a litigation and knowledge on the part of employees, even if they’re not people from the legal department, will be imputed to the company. So that if there are business people that are involved in a contract dispute with a vendor, for example, and they receive a threat of litigation but if they never communicate that to the personnel who can actually initiate preservation, that’s not going to help the company very much. So what we recommend is a policy that advises employees that if they become aware of facts that could lead to a lawsuit or an investigation or other legal proceeding, that they are required to notify and individual from the legal or compliance department.

Jacoby: Number three – trigger decision.

Cohen: The first decision is one of timing, and that decision is, ‘Has a preservation duty been triggered?’ As I mentioned, the standard is reasonable anticipation. That’s not a bright line standard. So what lawyers need to do is look at all the facts and circumstances surrounding the issue and decide whether it gives rise to a reasonable anticipation of litigation. This requires a thorough factual investigation, it requires thinking conservatively because you decision will always be judged with 20/20 hindsight. And it also requires documenting that decision in case it is questioned later and you want to demonstrate your good faith.

Jacoby:  Number four — scope decision.

Cohen: When you have decided that you have a duty to preserve, you will then need to decide how broad or narrow the duty is with respect to time periods, custodians, systems, sources of information, etc. and this can be especially difficult to do where a lawsuit has not been filed yet. Because the issues have not been crystallized, certainly not in a document request or a subpoena from a regulatory agency. So again, you’ll have to think conservatively, preserve broadly, and again, document that decision and the reasons for it.

Jacoby: So after you’ve decided that you need to preserve data, you have to give notice? Tell us about that step.

Cohen: Right. So you’ve decided that you have to preserve, and you’ve decided what you have to preserve. The next thing is to provide that information to the people that actually have custody of the data. Usually we’re talking about two groups here. We’re talking about IT personnel, IT and records management personnel, who have access to centralized stores of information and have the ability to exert control over that information. And then of course we have all the employees, the custodians we call them, who have their own personal files, not necessarily just electronic, but paper they have in desk drawers or removable storage media they may have at home in their home office, for example. So a notice has to go out to those people. The notice has to be very clear, it should be as simple as possible and not contain extraneous information that would cause the message to get lost in the shuffle. We all know people tend to gloss over communications from the legal department. It should provide a contact if the person has questions and sometimes even instructions on how to go about accomplishing the preservation depending on the circumstances.

Jacoby:  But you say there’s another step, the decision to use self preservation or other means. What do you mean?

Cohen: Preservation can be actually accomplished in a number of different ways. The least expensive way is to simply notify individuals with the control of the information and essentially hope for the best. And hope that they will take care of that information and take whatever steps are necessary to preserve it. Now in many cases, this may be inappropriate. For example, when the employee who has the information is directly implicated by the allegations in a complaint or is the target of an investigation, then the clearly it’s not appropriate to ask that person to be in charge of preserving the evidence that may be harmful to them. Sometimes, where the stakes of a case are too high, or whether the nature of the liability is extreme, like criminal liability, you don’t want to leave preservation in the hands of the individual custodian. Now, there’s another step you can take here, which is to have internal parties go and accomplish the preservation. You can have your internal IT people go and collect the data or stop the backup tapes from overwriting each other. You can have personnel from the legal department go out and get the data. But this is also considered self-preservation. This is the entity exerting its own control over the evidence which again could be harmful to it, and so if something happens to that information – let’s say it’s lost accidentally – there is an appearance of bias and a lot of hay for plaintiffs lawyers to make about why the information just happens to be missing. So in many of these important cases and investigations, the only sensible way to proceed is to hire a third party expert who will use sophisticated, defensible, technical means to preserve the data and hold it in a secure location until it’s needed in the litigation.

Jacoby: So hiring this third party expert insulates you, so to speak, from any bias questions?

Cohen: Yes it should, and those people have experience testifying and there’s a whole raft of advantages. The disadvantage of course is that it is more expensive. As I said, in cases that have high enough stakes – not just monetarily, but reputation, criminal exposure, etc – it’s well worth that expense.

Jacoby:  All right, our last step is collections versus preservation. What’s the difference there?

Cohen: What I mean by that is sometimes, collecting the data is really the only effecting means of preserving it. Preserving information really just means that you are not going to permit it to be destroyed, that you’re saving it. And that could mean just keeping it in place. Collecting information, on the other hand, means you’re going and actually gathering the information, typically a copy of the information, but often a forensic copy – which is an exact physical copy of the date – and that does involved another step, the step of collection, which does add expense at that point in the process, but there are similar considerations there, as in terms of self-preservation or using a third party. If you do not go out and get the data and keep it secure, there is a chance that something might happen to it. Electronic data is notoriously prone to being manipulated. It can easily get corrupted or degenerate. So you’re taking that chance if you aren’t using collection as your means of preservation.

Jacoby: All right. Thank you, Adam, for walking us through those seven steps of litigation holds. Appreciate it.

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