Mastering When to Issue a Litigation Hold Boils Down to a Simple Phrase With an Elusive Meaning

September 8, 2014Articles The E-Discovery Stage Blog

Litigation holds are not just an option in today’s e-discovery heavy litigation climate. The collective body of case law on the subject unambiguously instructs that litigation holds are a critical, early first step that must be activated when the reasonable hint of litigation arises. Especially in a world where electronically stored information is easily modified, deleted, and corrupted – even unintentionally without any nefarious motive whatsoever – a party’s failure to properly institute a litigation hold at the correct time and in the corrected manner could result in crippling sanctions ranging from any one or a combination of the following in a civil action: the dismissal of a claim or granting judgment in favor of a prejudiced party, the suppression of evidence, an adverse inference (referred to as “a spoliation inference”), the imposition of monetary fines, and/or an award of attorneys' fees and costs. See MOSAID Techs. Inc. v. Samsung Elecs. Co., 348 F.Supp.2d 332, 335 (D.N.J. 2004); Mitsui O.S.K. Lines v. Continental Shipping Line Inc., 2007 WL 1959250 *6 (D.N.J. June 29, 2007).

In the most general sense of the phrase, a litigation hold is a comprehensive protocol to preserve evidence reasonably likely to be relevant in litigation. In its most common application, it starts with a written notice of some variety, for example, an e-mail, and also includes some sort of concrete plan of action to preserve subject data. Yet, that simple concept has proven far more difficult in practice than the basic academic construct presented might appear on first blush. The difficulty surrounds assessing, in the first instance, whether the obligation to institute a litigation hold has been triggered.

United States District Court Judge Shira Scheindlin of the United States District Court for the Southern District of New York is widely credited with authoring some of the leading decisions on the topic of e-discovery in the nation. Judge Scheindlin’s series of Zubulake opinions have become the benchmark for courts across the entire country on e-discovery issues. In Zubulake v. UBS Warburg LLC (Zubulake IV), 220 F.R.D. 212, 217 (S.D.N.Y. 2003), Judge Scheindlin held that the duty to preserve evidence attaches at the time that litigation is reasonably anticipated.

In Major Tours, Inc. v. Colorel, 2009 WL 2413631 *4 (D.N.J. August 4, 2009), Magistrate Judge Joel Schneider of the United States District Court for the District of New Jersey cited a host of authorities from around the country to explain that the duty to preserve relevant evidence “arises not only during litigation but also extends to that period before litigation ‘when a party should have known that the evidence may be relevant to future litigation.’” (Citing Kronisch v. United States, 150 F.3d 112, 126 (2d Cir. 1998)). Magistrate Judge Schneider concluded that the duty to preserve extended to e-mails as it would to more traditional forms of evidence, and that mechanisms should have been put in place to suspend the automatic deletion processes customarily applied to those e-mails at the time that the party possessing the e-mails reasonably anticipated litigation. Id.

The decision to issue a litigation hold under the operative "reasonably anticipated" standard is factually intensive. The following are a few examples (but are by no means a comprehensive list) of situations where a party’s obligation to issue a litigation hold could be triggered:

  1. after the receipt of a letter, e-mail, phone call, or other form of communication overtly threatening litigation;
  2. when the decision has been made to commence litigation, file a grievance, complaint, charge, or otherwise make an allegation of an act or omission which could result in litigation;
  3. after the receipt of a summons and/or complaint (even a “draft”), subpoena, discovery request, investigative inquiry, or other type of legal process; and
  4. upon becoming aware of a grievance, complaint, or other allegation of an act or omission which could result in litigation, even under circumstances where actual litigation is not yet overtly threatened.

However, because the standard for issuing a litigation hold is so fact-intensive, there is no bright line rule on exactly when a litigation hold must be implemented. Under certain circumstances, even one of the examples above might not necessarily trigger the duty. Under other circumstances, even less might trigger the duty. This is an area that, in the first instance that it appears, will be filled with many unanswered questions. Moreover, organizational structures vary, meaning that decision makers may not be the first to receive the initial hold trigger. For these reasons, it is a good general rule to err on the side of caution, and to have policies in place to quickly escalate such matters to a level where swift action can be taken within your organization.

In the vast majority of cases, there is comparatively little downside to erring on the side of caution with litigation holds when the costs of issuance are compared to the potential sanctions for non-compliance. As the aphorism attributed to one of our nation’s founding fathers goes, “an ounce of prevention is worth a pound of cure.” (Benjamin Franklin). It is far better to incur the administrative costs of implementing a litigation hold that turns out to be a false alarm or that will simply result in discovering an issue that can be quickly resolved through, for example, an early settlement, than to simply ignore subtle, yet recognizable cues that could be triggering a duty to act and carrying grave consequences for non-compliance if simply left to fester. Because of the evidentiary protections afforded to a party’s consultations with counsel, assessing whether a litigation hold obligation has been triggered under the watchful eye of an attorney versed in the idiosyncrasies of electronically stored information and the mechanics of today’s technologies is an absolute must.

Allegations of a failure to timely institute a litigation hold can be rebutted with facts suggesting that there was no reason for the allegedly non-compliant party to foresee that litigation would come about. Generally, these defenses require an ability to demonstrate with actual evidence that the party supposedly responsible for issuing the litigation hold either did not receive certain alleged cues that litigation would be forthcoming, or that the alleged cues it did receive were objectively insufficient to make litigation reasonably foreseeable. Clearly, these defenses cannot be developed without a painstaking examination of the attendant circumstances, and this is also an area where it pays to cloak your decision making with the protections of the attorney-client relationship.

In sum, the good faith and reasonableness of a litigant are the central focus of the inquiry into whether a litigation hold is necessary. There are virtually no tried and tested triggers to the litigation hold obligation, short of service with a copy of a summons and complaint, which will always serve as guideposts to live by because every situation is different. Nonetheless, a generalized awareness of what types of things could trigger the duty to institute a litigation hold will assist in helping you spot when one might be appropriate. Upon discovery of a fact that could result in the need to institute a litigation hold, counsel should immediately be brought in to assess what, if any, additional measures need to be instituted to ensure full compliance with established law. Time is of the essence, and there is an important gatekeeper function to be served by non-attorneys and the rank-and-file within an organization if they are the first to receive information that an issue might be brewing. This is an area wrought with too many potential pitfalls to be left to an ex post facto analysis. After the fact compliance is simply too late in this electronic age. Data that is here today can very easily be gone or corrupted tomorrow.