For a party to meet its obligation to produce relevant evidence in litigation or in response to a subpoena, they must first meet their duty to preserve evidence. Often, one of the first steps an in-house lawyer takes to preserve evidence is to send a litigation hold letter (or “legal hold”) to employees that worked on the project or transaction subject to dispute.
Litigation hold letters are issued in anticipation of litigation instructing recipients to preserve relevant documents and other information. The duty to preserve relevant information is triggered when litigation is “reasonably anticipated.” Rimkus Consulting Group, Inc. v. Cammarata, 688 F. Supp. 2d 598, 612-613 n. 7 (S.D. Tex. 2010).
The test for “reasonable anticipation of litigation” varies by jurisdiction, but, in general, reasonable anticipation of litigation arises when a party knows there is a credible threat that it will become involved in litigation. Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 217 (S.D.N.Y. 2003).
Events rising to the level of a credible threat of litigation take many forms and may occur several years before actual litigation commences. Situations triggering an obligation to preserve evidence include receipt of a demand letter, formal complaint, records subpoena, or the occurrence of an event that typically results in litigation. Additionally, a reputable media report suggesting an impending government investigation (and possible litigation) may also trigger litigation hold obligations.
The following cases illustrate various situations triggering preservation obligations:
The Sedona Conference’s “Commentary on Legal Holds” explains that whether a reasonable anticipation of litigation exists and whether a party must preserve documents should be determined on a case-by-case basis based on facts known to the potential litigant. Along those lines, judicial evaluation of a party’s preservation and legal hold efforts is a factual inquiry and generally based on the good faith and reasonableness of the decision (including whether a legal hold is necessary and how the legal hold should be executed).
In Bagley v. Yale, the court offered several factors a court might consider to determine if legal hold efforts were reasonable:
1. When did a party’s duty to preserve evidence begin?
2. Did the party issue a litigation hold notice in order to preserve evidence?
3. When did the party issue a litigation hold notice, in relation to the date its duty to preserve the evidence arose?
4. What did the litigation hold notice say?
5. What did recipients of the litigation hold notice do or say, in response to or as result of, the notice?
6. After receiving recipients’ responses to the litigation hold notice, what further action, if any, did the party giving the notice take to preserve the evidence?
Adoption and compliance with an information governance policy (IG Policy) may help demonstrate reasonableness and good faith in meeting preservation obligations as will adoption of an effective and defensible legal hold process. Implementation of these processes will minimize the risk of document spoliation (loss or destruction), sanctions, and even damage to reputation.
To meet preservation obligations, suspension of document retention and deletion protocols may be necessary. But, as the court noted in Zubulake, to comply with legal hold obligations a party is not required to preserve “every shred of paper, every e-mail or electronic document, and every backup tape.” As the Fourth Circuit Court of Appeal observed, “a party is not required to preserve all its documents but rather only documents that the party knew or should have known were, or could be, relevant to the parties’ dispute.”
To document preservation efforts and to fully understand the extent and nature of information to preserve, use of ESI (Electronically Stored Information) questionnaires, custodian interviews and legal hold software is often advisable.
Even if a party fails to put a legal hold in place despite reasonably anticipating a legal dispute, they may escape sanctions if their opponent is not prejudiced by the loss of the information.
For example, in Snider v. Danfoss, LLC, 15 CV 4748 (N.D. Ill. Jul. 12, 2017), an employee complained about sexual harassment and the offending co-worker disciplined. After complaining about the harassment , the employee was moved to a different position. She viewed the move as a demotion and consulted a lawyer who sent the company a demand for preservation of evidence. The employee later quit and sued her former employer. However, pursuant to company policy, and despite receipt of the document preservation notice, the company deleted the employee’s email 90 days after she left.
The employee unsuccessfully requested spoliation sanctions against the company for deleting the email. Noting that the “deletions were not best practices . . . [and t]he fact that [the employer] is not being sanctioned should in no way be viewed as the Court approving of [the employer’s] reckless or careless actions” the court declined to sanction the company because there was insufficient prejudice to the employee’s case.
Under Federal Rule of Civil Procedure 37(e), sanctions for destruction of ESI are only allowed with a showing of prejudice. However, the court noted that even with the deletion of the departed employee’s email, copies of many pertinent email messages sent or received by the employee were available in others’ mailboxes (such as her supervisor and the human resources manager). So, the court concluded there was insufficient prejudice to support a finding of sanctions
If there is even a remote chance of litigation, it is best to err on the side of caution and preserve information relevant to the dispute or run the risk of penalties, evidentiary sanctions, adverse rulings or fines. Silvestri v. General Motors Corp., 271 F.3d 583 (4th Cir. 2001).