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Legal Hold and Process are Effectively Inseparable

A Lesson for In-House Counsel




After many years, I believe that corporate legal teams are finally beginning to realize that addressing legal holds cannot be conducted either in a vacuum or in an ad hoc, unplanned manner. In fact, the best policy is one that contains a complete process which creates accountability, transparency AND defensibility in court. Clearly something this interrelated cannot be developed as a series of separate unrelated decision points; it must be created as a set of related policy decisions that is part of a unified plan.

The Problem
The problem has become compounded in the last 10 years with the growth of eDiscovery into terabytes and petabytes of potentially relevant ESI that exists across a wide variety of sources including; client servers, desktops, third party data centers, the Cloud, social media sites and personal devices. Without a unified, written plan in place it is very easy for mistakes to occur when a variety of individuals attempts to issue, monitor, gather, comply with and release legal holds from this vast number of locations under a tight time schedule.

The Case
Since parties involved in civil litigation have a duty to preserve all potentially relevant ESI when litigation is reasonably anticipated, it is risky behavior to not act according to a well thought out plan that can be implemented on a moment’s notice. When this duty is violated, severe penalties and sanctions may be the result. A case from 2012, Day v. LSI Corp. (D. Ariz. Dec. 20, 2012) is an example of how an ad hoc legal policy can lead to spoliation and subsequent court sanctions.

This case arose from a complaint filed by the plaintiff, Day, alleging multiple claims against the defendant, his former employer which included breach of contract, fraud and misrepresentation. When plaintiffs claim was noticed, the General Counsel sent out a written notice to several key custodians who might have information regarding the claim. The notice instructed them “not to delete or destroy any document, including emails, related to Day.” After the claim was filed, the plaintiff accused the defendant of failing to preserve all the relevant ESI, specifically information from a key employee who was involved in Day’s hiring and performance reviews.

The Finding
The court held that the defendant, LSI Corp., both failed to preserve relevant ESI and that spoliation had occurred. The court noted that the Defendant failed to adequately preserve the key employee’s ESI; and that no hard drive and only three emails were produced. Additionally, the court noted a series of preservation errors with included: a failure to follow its own document retention policies and the GC’s contradicted testimony concerning directions to search and preserve data.
According to the court, in-house counsel mistakes (for which they could be held culpable) could be categorized in three major ways:

• by exercising an incorrect judgment as to which employees were to receive a litigation hold notice;
• by failing to maintain a reliable record of what instructions were given to the IT department about what documents were to be collected and from which sources, or to supervise and understand the collection process;
• by allowing the company’s document retention practice to be ignored or forgotten.

Based on this evidence, the court held that the GC acted with a “willful” culpable state of mind by not sending out a legal hold notice to the key employee because he “knew or should have known that Skelton (key employee) had contact with Day during the hiring and performances processes.” As a result of spoliation, the court awarded partial default judgment to one of the plaintiff’s claim while awarding an adverse instruction and $10,000 in monetary sanctions.

The Takeaway
This case should be studied carefully by corporate legal teams. It is easy for anyone from a litigation support manager to the general counsel to make mistakes when it comes to defensibly preserving potentially relevant ESI. Without a pre-defined, transparent and enforced legal hold process it is very easy to go off the rails and make mistakes. Without proper written guidelines in place, the following is a very short list of the potential errors that can be made:

1. It is very easy for IT staff to misinterpret what the requirements are for preserving all potentially relevant email or data sources. Without written guidelines to follow, mistakes can and will be made.
2. Under the pressure of the moment legal teams may not properly identify potentially key employees to the legal hold list. If employee interview are not carefully conducted it is easy to miss potentially relevant custodians.
3. Without a meaningful, reproducible record of all the instructions and steps that were implemented by Counsel, it is virtually impossible to prove that best efforts have been made to comply with a reasonable process.

The only defensible way to meet this duty is to create a process around legal holds that can be tracked, monitored, audited and automated. There are now a number of E-Discovery software solutions designed specifically for legal teams to easily meet this burden. The time is past for in-house legal teams to implement these procedures immediately. Some major factors to consider when investigating a software solution include a product that will:

• Increase transparency by recording and tracking all efforts to preserve, collect, process and produce ESI regardless of location
• Enable users to identify gaps in the process and, subsequently, create a more efficient process
• Identify key employees and schedule follow-up interviews to ensure all potentially relevant custodians are put on legal hold
• Automate legal hold reminders and re-issuance notices so that custodians will not forget their obligation to preserve all potentially relevant ESI

Best Practices, eDiscovery, legal hold, defensible destruction, document retention

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