Implementing a secure litigation hold system to avoid preservation pitfalls

4 steps to ensure that electronically stored information is preserved

As the corporate world becomes increasingly paperless, the preservation of electronically stored information (ESI) remains a necessity for organizations involved in litigation. Given that data spoliation sanctions can be immense, the automatic or unintentional deletion of ESI associated with information technology data management is one of the most significant risks that corporations face in today’s legal environment.

Recent cases at both the state and federal levels—such as Voom Holdings LLC v. EchoStar Satellite L.L.C. and Pippins v. KPMG LLP, respectively—emphasize the far-reaching and exhaustive preservation responsibilities incumbent upon all organizations within the legal community. The key question is: How can an organization that routinely faces the prospect of litigation implement effective litigation holds and avoid preservation pitfalls?

Overall, an effective litigation hold consists of two stages. In the “notice” stage, an organization must follow the well-known Zubulake standard by prompting a hold as soon as litigation is “reasonably anticipated.” In the next stage, the hold must be “perfected,” which means that measures must be taken to identify and preserve all potentially relevant ESI, since courts will deem the automatic or unintentional deletion of any such ESI as punishable.

For example, in Voom Holdings, the court issued a spoliation sanction to the defendant for failing to stop the automatic deletion of emails until four months after the commencement of the lawsuit. This case serves as a prime example of how corporations must take all possible steps to ensure that litigation holds are adequate.

Thus, to ensure that all holds meet legal requirements and that no ESI falls through the cracks, organizations must implement a robust litigation hold system—a distinctly defined process—to appropriately preserve and manage ESI. Corporations familiar with litigation holds have developed automated litigation hold systems to ensure that, upon notification of a hold, the appropriate individuals are made aware and can then take immediate action to preserve all potentially relevant ESI.

Data preservation can be such a complex and multifarious endeavor that, for any corporate entity, the lack of an automated litigation hold system is a massive risk that will likely result in the incurrence of preventable legal penalties, as well as extra discovery and data recovery costs.

It is important for an organization to devise its automated litigation hold system, document its creation and maintenance, test the system and ensure that updates to the system can be made quickly and efficiently. There is no fixed way to set up an automated litigation hold system since all organizations vary in culture and structure, but an effective system typically consists of four main steps.

  1. The head corporate counsel, who is usually the first person to be made aware of anticipated litigation, must officially initiate the discovery process and trigger the hold.
  2. Members of the legal department, such as associates or paralegals, must actually take action to carry out the hold. This action could include providing instructions to employees about the hold and researching the law to ensure that the hold is sufficient.
  3. Until given notification from the legal department that the hold is over, the IT department must ensure that specific systems containing potentially relevant ESI are identified and secured. A good data map, indicating the systems and applications in use at a corporation with corresponding backup and retention information, is critical to this step, as it allows IT and legal to quickly identify potential automated deletion issues before they occur. If systems are set up to automatically delete ESI after a set amount of time, it is critically important for the IT department to immediately stop the automatic deletion. 
  4. All corporate employees must promptly be made aware of the hold, understand the instructions from the legal department and ensure that they do not delete potentially relevant ESI, such as business emails, instant messages and stored files. As an added layer of protection, an organization can use an electronic archive to centrally secure all ESI to avoid accidental deletion and to relieve employees of the responsibility. Overall, comprehensiveness is one of the most important aspects of a successful hold. An organization must take all possible steps to ensure that all potentially relevant ESI is safeguarded.

Adopting and enforcing a strong litigation hold system, such as the one above, will not only reflect well on an organization before the court, but also dramatically decrease risk and lower overall litigation costs. Of course, as with any human process, there is no absolute guarantee that a litigation hold system will eliminate all potential mishaps.

Given this fact, and since there is no one-size-fits-all litigation hold system, corporations that work with outside providers to ensure that their litigation hold systems are strong will usually save time and money in the long-run. With the right consultant and a thorough approach, any organization can prepare for litigation to its best ability. 

Contributing Author

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David Canfield

David E. Canfield is a managing consultant in Kroll Ontrack’s electronically stored information consulting group.

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