Litigation Hold Memorandum

By: Marla Bergman, Christopher O'Neil; Editor: Carole Basri

The case law advises us that preservation should begin once litigation is ''reasonably anticipated.''

Core Cases:

See, e.g., Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 216-17 (S.D.N.Y. 2003) (duty to preserve attached as soon as defendant became reasonably aware of the possibility of litigation, rather than when the EEOC complaint was filed several months later.). Thus, information must be preserved once an organization is aware that a situation adversarial in nature has arisen that may lead to court action.

Core Cases:

Rambus, Inc. v. Infineon Technologies AG, 222 F.R.D. 280(E.D. Va. 2004) (when a party should be reasonably able to anticipate litigation, it has a duty to suspend the destruction of potentially relevant document to the anticipated litigation.).

Timing:

When litigation can be ''reasonably anticipated'' is a bit of an amorphouscommon-sense standard.

Core Cases:

Fujitsu Ltd. v. Federal Express Corp., 247 F.3d 423, 436 (2d Cir. 2001) (the obligation to preserve evidence arises when the party knows or should have known that the evidence may be relevant to future litigation.). A litigation hold may be warranted when a complaint is lodged by an employee to the human resources department, when a letter is sent to in-house counsel regarding an alleged infringement of a patent, when shareholders contest a board action, when a product is under investigation by a government agency or when attorneys are employed to draft a complaint.

The implementation of the litigation hold memorandum should be contemplated by the records management policy and facilitated by it where possible. For example, the records management policy can include a mechanism for the institution of the legal hold to suspend potentially relevant documents from the routine destruction practices of the organization, both in the ordinary course of business and within the records storage process. The preservation of the data is of paramount importance, and a finely tuned records management policy should enable the quick and efficient suspension of information destruction.

!!Warning:

Failure to institute the legal hold and failure to timely comply with it, may lead to accusations of the spoliation of evidence and attendant sanctions, including adverse inferences or loss of claims or defenses. Moreover, there must be follow up and periodic reminders to the affected custodians that the data must continue to be preserved.

Core Cases:

See, e.g., In re NTL, Inc. Sec. Litig., 2007 U.S. Dist. LEXIS 6198 (S.D.N.Y. Jan. 30, 2007) (failure to properly institute litigation hold and continue to preserve relevant information led to an adverse inference instruction.).

The litigation hold memorandum should include a description of the nature of the action, the subject matter and date parameters of the information that must be retained and the types of documents, including electronic documents, that need to be preserved. A contact person should be included in the memorandum as well. This is an opportune time to link the department or personnel charged with the auditing of the records management program to the legal hold process. It is good practice to send the memo to the organization's IT department and any managers of potentially relevant databases. Depending upon the systems in place, it may be useful to include specific technical information regarding how to preserve the information at issue. For example, a custodian of information may be instructed how to folder potentially relevant information or how to maintain voicemails or instant messages on their hard drive.

The organization with the assistance of counsel should affirmatively seek information to preserve. Outside counsel and the corporation are equally responsible for the preservation of information.

Core Cases:

See, e.g., Qualcomm v. Broadcom, 2008 U.S. Dist. LEXIS 16897 (S.D.Cal. Mar. 5, 2008) (both outside counsel and the corporation are responsible for the proper preservation and production of information.). Potentially relevant back-up tapes should be identified and sequestered, databases should be locked down so that information is not overwritten, the hard drives of former employees should be identified and stopped from going back into general circulation. At this initial stage of litigation, the focus needs to be on maintaining any potentially relevant materials. That is not to say that back-up tapes will need to be restored or that information will need to be produced. It is just to say that the information should be maintained so that further discussion can be had regarding the burden and cost of production. Once material is destroyed, it magically becomes the most interesting and sought after information to the requesting party, so the implementation of effective preservation methods may ironically result in less information that a party will ultimately be required to produce.

The Corporate Compliance Practice Guide: The Next Generation, which is the source of the above commentary, is a thorough and cutting edge reference work written and compiled by General Editor Carole Basri and featuring over 100 expert contributors: practitioners, compliance professionals, and scholars. It is a reasonably priced desk manual that is available at the LexisNexis Store and should be at the fingertips of every individual working in the corporate compliance field. The Guide is the first resource of its kind to address the new era of compliance issues and expectations triggered by the global financial crisis, and it presents essential practice tips and guidance in a well-ordered and intuitive manner.

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