Advising a small business on litigation holds

October 21, 2014

Litigation holdWhen a major corporation gets involved in a lawsuit, it has a dedicated, in-house legal department that handles the litigation on its behalf; when a smaller company gets sued, it likely has very few, if any procedures in place to respond.  This may be because the smaller company lacks dedicated legal counsel, has never been sued before, or both.

If such a company that is involved in or even confronts the threat of litigation approaches you for legal advice or representation, there is one significant issue that needs addressing as soon as possible: litigation holds.

“Litigation holds” – also known as “legal holds” – refers to internal processes undertaken by organizations to preserve records, documents, and other information relevant to imminent or ongoing litigation.

If you happen to have begun representation of a business client after the threat of litigation has already manifested, you need to get a litigation hold in place as soon as possible.  There are serious legal consequences for a failure to preserve relevant evidence, and there is no widely-used standard to determine what these consequences will be.  Nevertheless, all of the possibilities are severe, and they range from being ordered to pay an opposing party’s legal fees and costs to an adverse inference jury instruction relating to the evidence that that was lost.  It’s even possible (although unlikely) to have a judge rule against your client summarily because of the loss of the evidence, particular if the judge feels that the loss of the evidence was done in bad faith.

But how do you know if a litigation hold should be implemented?

Well, the most obvious signal is an actual letter threatening litigation or demanding that certain evidence be preserved.  Other times, however, the signs are less apparent, taking forms as subtle as management awareness of issues that stand a real chance of turning into lawsuits or a regulatory investigation of or inquiry into the company itself.  When in doubt, err on the side of preservation.

Once you recognize the need for a litigation hold, though, don’t waste any time implementing it.  Even a few hours can save important documents.

Your first step here is identifying which documents and information are relevant.  Clearly, this determination is completely dependent on the facts of the particular dispute, and within this set of facts, “relevance” is defined broadly.  That is, if you think that it could be even the remotest bit relevant to the lawsuit, the information should be preserved.

Another important part of this “identification step” is identifying possible locations of these documents and information: paper files, electronic documents, emails, voicemails, backup hard drives, backup tapes, remotely stored files, and employee handheld devices such as tablets and smartphones, just to name a few.  It’s also important to note that the evidence to be preserved encompasses more than just explicit documents and emails; such evidence can be something like employee Internet browser histories, calendar entries, task lists, phone logs, social media pages, or text messages.  Any employee home computers that have access to the office network should be included as well.  If need be, don’t be afraid to hire outside help for assistance in mapping out your client’s data locations.


Underscoring the pervasiveness of the litigation hold is that it should be communicated to all employees within the organization that may be impacted by the litigation hold, not just management.  Moreover, it should be communicated in writing with explicit instructions not to destroy or modify records (along with an explanation on what constitutes “records” and which records are relevant).  Such notice should be in writing and should use some form of written confirmation from each recipient that acknowledges that the employee has read, understands, and will comply with the hold.  Of particular importance is communicating with records custodians and members of the IT department of this need to preserve information, there is a significant amount of data that is likely lost or deleted as a result of the organization’s record retention and deletion policy.

The organization should also keep in contact with any departing employees that have access to relevant records to ensure their compliance with the hold.  Finally, the written notice should include relevant contact information (yours or the designated counsel/person in charge of document retention) for employees to contact with any questions.

Yes, these steps are to ensure that employees comply with the litigation hold; but these processes are also meant to ensure that if somehow a document does become lost, you can point to these measures as proof to the court that you have taken good faith steps to prevent such a loss from happening — which may serve to reduce any sanctions that may be leveled against your client as a result of the loss.

To that end, you should continue to monitor the status of the litigation hold to make sure that it is being followed properly.  It may be wise to send periodic reminders throughout the organization to affected employees about the hold.  The hold may not be the first thing on a lot of employees’ minds, so regular reminders may be necessary to ensure compliance.

Beyond the immediate case for which you are working on the litigation hold, it is prudent to develop a litigation readiness plan with your client to provide that the litigation hold process will be much simpler and smoother next time.  Such a plan should detail where the organization’s data is located and who needs to be contacted to stop the organization’s customary deletion procedures.  Furthermore, the plan should contain some kind of procedure to deal with the documents of employees that are leaving the organization.

Overall, it’s important to be as swift and organized as possible when it comes to litigation holds, which is why planning ahead is the preferred route whenever possible.

This is second 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 Stay tuned to this blog for more to come.