Litigation Hold Policy

Senior managers, in-house counsel and litigators take note: last month a new set of e-discovery guidelines emerged. Judge Shira Scheindlin, author of the definitive electronic discovery opinions in the Zubulake case six years ago, has issued another soon-to-be classic opinion in Pension Committee of the Univ. of Montreal Pension Plan, et al., v. Bank of America Securities, LLC, et al., 05 Civ. 9016 (SAS) (S.D.N.Y. Jan. 15, 2010) Amended Opinion and Order. Judge Scheindlin dubbed her decision in Pension Committee, “Zubulake Revisited: Six Years Later,” and in it, set out some examples of common mistakes companies make with respect to records management and e-discovery.

In Pension Committee, Judge Scheindlin enumerates specific conduct that she deems to be per se negligent, or worse. The harsh sanctions that accompany a finding of negligence with respect to electronic discovery is a warning to senior managers and in-house counsel that e-discovery can no longer be passed off to the IT department—the process must be closely managed by legal counsel at every step along the way.

Technically the opinion is only applicable to the federal courts in New York, but Judge Scheindlin’s status as a thought leader in the field of electronic discovery guarantees that the examples set out in this case will elicit serious discussions between senior management, legal departments, and IT groups throughout the country. Because Pension ­Committee is too lengthy for overview in a blog, I intend to highlight some of the key findings in a series of blogs that should get companies thinking about the way they handle electronic discovery and records management.

LESSON 1:

Fully review and document your Litigation Hold Policy
In Pension Committee, Judge Scheindlin sanctions a number of plaintiffs for failing to issue a timely, written litigation hold. In some cases, the offending parties did not issue their litigation holds until years after the litigation commenced. While a litigation hold issued years after litigation commences is uncommon (in this case, it had to do with a discovery stay), Judge Scheindlin warns that the duty of preservation arises when litigation is reasonably anticipated. Any hold issued after that is untimely—even if a discovery stay is in place. The penalty for a late litigation hold is a finding of gross negligence per se, which means the judge instructs the jury to make an adverse inference against the offending party. Adverse inferences are significantly detrimental sanctions as they take arguments away from the offending party. They can, and frequently do, turn the case against a party who would otherwise win on the merits.

To avoid such a devastating sanction, companies should take the time now to review their litigation hold policy with experienced counsel. Taking Judge Scheindlin’s opinion as an example, in most cases litigation holds must be issued in advance of the filing of a suit. Because of the timeliness requirement, a litigation hold process must allow for swift and comprehensive implementation of the hold as disputes become apparent. Also, the mere issuance of a litigation hold is not enough to avoid devastating e-discovery sanctions. A timely issued hold that does not effectively protect potentially relevant data is meaningless. Companies must carefully outline not only litigation hold triggering events, but they should also review the technology used to implement the hold to ensure compliancethat potentially relevant data is being saved.

Next installment: Ensure there is sufficient legal oversight of your document review and production.