“The trigger” for litigation hold notices: When?

October 2, 2014

Litigation holdAlthough most attorneys know that there is a duty to preserve documents and data when litigation is “reasonably anticipated,” what does that really mean?  This standard is more easily said than understood in everyday practice, so litigators and in-house counsel should be aware of general guiding principles, as well as some real world examples, when evaluating their own circumstances to determine whether this “trigger” for a litigation hold has occurred.

As a preliminary matter, guidance from The Sedona Conference® must be considered in assessing a “trigger” event for the implementation of a hold notice.  In its “Commentary on Legal Holds,” The Sedona Conference explains that whether litigation is “reasonably anticipated” should be evaluated on a case-by-case basis, premised on a “good faith and reasonable evaluation of relevant facts and circumstances.”  Putting additional meat on the bones, The Sedona Conference further explains that litigation is reasonably anticipated “when an organization is on notice of a credible threat that it will become involved in litigation, seriously contemplates initiating litigation, or when it takes specific steps to commence litigation.”

With that backdrop in mind, consider the case of Cache La Poudre Feeds, LLC v. Land O’Lakes, Inc.,  Although the parties had communicated about a trademark dispute for over a year, the defendant did not suspend its practice of routinely overwriting e-mail and backup media until after the plaintiff filed suit.  The court denied the plaintiff’s motion for sanctions. Although the court recognized that the duty to preserve may arise pre-suit, the plaintiff never threatened litigation, and critically, implied it was willing to enter into a settlement to resolve their differences.  The court explained that “an equivocal statement of discontent” is not a sufficient trigger.  This is consistent with the Sedona Conference’s principles, whereby the plaintiff’s willingness to compromise rather than engage in litigation would not be considered a “credible threat” to constitute a trigger.

In contrast, take in account Voom HD Holdings LLC v. EchoStar Satellite, LLC, 93 A.D.3d. 33, 38 (N.Y. 2012), in which case the defendant was sanctioned for failing to implement a timely legal hold because it waited until after the plaintiff filed suit to issue a hold notice.  In this case, the plaintiff had issued pre-suit written correspondence accusing the defendant of “material breaches” of an agreement and reserving its “rights and remedies in equity or at law.”

L-392755_600x300_A

Although sanctions per se are not the subject of this post, the implementation of sanctions are often due to the failure to institute a litigation hold, so such cases are instructive.  For example, consider the often-cited Silvestri v. General Motors Corp., 271 F.3d 583 (4th Cir. 2001), a products liability action in which the plaintiff’s failure to preserve the vehicle in question as evidence resulted in the dismissal of his complaint.  Although the plaintiff had retained counsel after he was involved in an accident with the vehicle, and retained experts to examine the vehicle for a defect  – who advised him and his counsel of the need to preserve the vehicle – the plaintiff did not preserve the vehicle (or put the defendant on notice of his claim until three years later).  As the circuit court observed in affirming the sanction of dismissal, “The duty to preserve material evidence arises not only during litigation but also extends to that period before the litigation when a party reasonably should know that the evidence may be relevant to anticipated litigation.”  Id. at 591.  It seems fair to say that the plaintiff’s actions demonstrated, at the least, what the Sedona Conference has coined the “serious contemplation” of litigation, requiring the implementation of a hold.

Overall, attorneys must gather all relevant facts to inform the requisite good faith determination of whether a “trigger” has occurred to mandate the issuance of a litigation hold notice.  Just keep in mind, although the “reasonable anticipation” standard may be ambiguous, it is not synonymous with the filing of a lawsuit.

This is first in a series of posts addressing litigation holds.  For more information, check out eDiscovery For Corporate Counsel, available in print and online on Westlaw, and legalsolutions.com/legal-hold. Stay tuned to this blog for more to come.