Seven Factors to Consider in Triggering a Litigation Hold

The differing views expressed by federal district court judges in Pension Committee of the University of Montreal Pension Plan, et al., v. Banc of America Securities (SDNY) and Rimkus Consulting Group v. Cammarata (S.D. Tex.) and their effects on e-discovery data retention and destruction policies continue to be hotly debated by experts.

For in-house counsel, one key concern is determining exactly when a legal threat triggers a litigation hold.

According to the August 2007 "Sedona Conference Commentary on Legal Holds: The Trigger and the Process," in-house counsel should consider seven factors:

  1. 1. The nature and specificity of the complaint

2. The position of the party making the claim

3. Whether the threat is implied, direct or inferred

4. Whether the party has a reputation for being litigious

5. The value and strength of the claim

6. The similarity to other claims

7. The likelihood that if data is not preserved, it will be lost

B. Jay Yelton III, principal and e-discovery team director at Miller Canfield, suggests that in companies that routinely automatically delete data, the following questions should be asked when facing possible litigation: "Are electronic records going to be a key data source and does your company automatically delete some of that information? If yes is the answer to both, then it's very risky not to send some form of legal hold out."

But Ralph Losey, shareholder at Jackson Lewis and director of its e-discovery program, says many in-house lawyers don't understand that it's usually permissible to routinely destroy documents in the absence of a specific litigation threat.

"There is nothing wrong with shredding documents [and ESI] that some third party might want to have unless you have in mind a particular official proceeding in which those documents might be material," Losey says. "Then, when a duty to preserve has been triggered, and only then, do you have a duty of accountability to third parties. This is a fundamental point, key to information law and privacy law, that many people do not seem to get."

Losey adds that even good faith efforts to comply with e-discovery rules can result in violations.

"Perhaps a company was unaware that any ESI existed and had a reasonable, good faith belief for that mistake," he says. "For instance, if the dispute concerned events of many years ago and you been advised by IT that no data from older systems remained. Then later you might discover that one IT employee had surreptitiously made and kept his own backup copy. This kind of thing is not that unusual."

Michael Kozubek

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