It’s a virtually inevitable scenario in companies of all sizes and types and in all industries: Your employer has been sued. As corporate counsel, one of your many duties is advising your client what steps it should immediately take to protect itself. The previous columns in this series have discussed the myriad sources of corporate data, and how to manage them before litigation. This column presents practical, prudent actions to take upon learning the company is a defendant in state or federal court.
One of the first steps that in-house counsel should take upon learning of an action filed or threatened against the company is issuing a litigation hold, or preservation, notice. This is a written instruction to individuals and/or departments that are custodians, or potential custodians, of data in any form that might be relevant or responsive to discovery requests in the suit. The hold notice directs its recipients to immediately preserve the relevant information so that it may be reviewed and possibly produced in the litigation, and not destroyed.
When crafting an effective preservation notice, consider the who, what, where, when, and why:
- Who: The notice itself needs to be directed to the appropriate persons and possibly also to departments or groups. Determining the right audience is critical. An over-inclusive notice results in profligate, unnecessary preservation and collection, while an under-inclusive hold might result in the destruction of relevant evidence and subject the company to allegations of spoliation. Identifying the custodians generally requires consultation with the managers of affected departments, all the more challenging when the gravamen of the suit occurred several years or more in the past.
- What: The information to be saved and collected for review is likewise critical. In some cases, only certain types of electronically stored information (ESI) are relevant—email, for example. When in doubt, be over-inclusive with regard to what is to be preserved; it is always possible to narrow the hold notice after direction from the court or after consultation with the plaintiff, but it is difficult and onerous to perform a second, broader collection, which naturally risks losing relevant material.
- Where: It is vitally important to determine where discoverable information potentially exists. For example, ESI on backup tapes subject to a litigation hold might require the IT department to suspend recycling of backup tapes. Furthermore, the notice might require retrieval of paper records from archival storage.
- When: A good hold notice informs the custodians how far back their retention needs to go based on the factual issues in the case, and for how long they need to preserve the collected material (generally the entire duration of the case).
- Why: Most litigation holds inform the recipients why they are required to preserve the data, at least in general terms, for context.
Another key decision that needs to be made is whether the hold notice is privileged. In some cases it is desirable for the notice not to be protected by the attorney-client privilege, so that if the propriety or sufficiency of the document collection is called into question, the notice can be furnished to the adversary or court with minimal risk of waiving the privilege for the case generally. Other circumstances might require that attorney advice is conveyed to the client within the hold notice, requiring the controls afforded privileged documents.
Crafting an appropriate, tailored litigation preservation notice is one of the first steps a prudent corporate lawyer takes when his client is sued. It ensures the preservation of relevant data and demonstrates the good faith efforts of the company to comply with its discovery obligations. In the next column, we’ll see what can happen when companies fail to adequately preserve discoverable information.