One of the most important management challenges facing corporate counsel right now is how to carry out their court-ordered responsibilities with respect to the execution of litigation holds. As they dig into the details of how to put in place an internal system that works in the era of electronic communications, many in-house legal executives have learned the litigation holds process can be very costly and difficult to implement.
The biggest specific pain point is proving to be the proper management and tracking of holds. However, new technology tools are emerging to help corporate counsel gain an upper hand in this effort and more effectively manage litigation holds in compliance with the recent directives they have been handed by the courts.
Litigation Holds: Serious Business
The revision of the Federal Rules of Civil Procedure (FRCP) in December 2006 created a "duty to preserve" electronic information in the discovery phase of a legal matter. At the heart of this preservation duty is the execution of litigation holds, which is the suspension of an organization's document retention policies for electronic files that may be relevant to a lawsuit or for litigation that may be reasonably anticipated. The idea of a litigation hold, of course, is to ensure that relevant data is not destroyed and to alert employees about the risk involved if they fail to preserve relevant electronic information.
There is a very simple reason why this is such serious business: a company's failure to properly impose litigation holds can result in court-ordered sanctions, in the form of both monetary fines and perhaps even spoliation charges.
The case that brought litigation holds into everyday discussion in law department offices was Zubulake v. UBS Warburg , in which the Court imposed dramatic sanctions because of UBS's failure to notify all employees of a litigation hold and monitor their ongoing compliance. Judge Shira Scheindlin's rulings in Zubulake outlined the responsibilities for lawyers when it comes to the preservation of electronic information, establishing a standard for litigation holds.
A number of subsequent cases extended the guidelines outlined by Zubulake . In Coleman v. Morgan Stanley , the court sanctioned the defendant for failing to adequately monitor and ensure the timely execution of litigation holds. In The Pension Committee v. Banc of America Securities , Judge Scheindlin reiterated many of the court's concerns from her Zubulake opinion, finding that the failure to issue a written litigation hold constitutes gross negligence.
Meanwhile, in Rimkus Consulting v. Nickie Cammarata , Judge Lee Rosenthal (Texas) called into question legal hold practices with an opinion that singled out the need for better preservation practices to preserve the integrity of the evidence discovery process. And in Merck Eprova v. Gnosis , U.S. District Judge Richard Sullivan (New York) issued severe sanctions on the defendant for failing to issue a written litigation hold, frequently citing Judge Schiendlin's Pension Committee opinion in the process.
The point is that U.S. courts are putting a high degree of scrutiny on litigation hold procedures and are not afraid to punish corporate law departments - and their law firms - when litigation holds are not properly administered.
Challenges With Management And Tracking
We all know that good management requires good planning, but one of the biggest mistakes that companies make when it comes to legal holds is not having policies and procedures in place before litigation strikes. If a corporate law department treats litigation as an unexpected crisis to which they must respond, they are already in a difficult place from which to manage and track litigation holds.
Just as it's important to establish and follow clear policies and procedures for document retention, it's important to take the time to create a data map for the inevitability of litigation holds. That means determining what policies and procedures are already in place, what information is likely to be relevant and who the key players are going to be. This kind of management planning can pay dividends down the road by creating best practices and reliable templates that can be followed when it comes time to implement holds.
Another major challenge with managing litigation holds relates to the need to get the legal and IT organizations in a company to work together. After all, a hold will only be effective if all of the appropriate players are notified of their responsibilities and clear on what is expected from them in the way of cooperation.
This means establishing the parameters of a pending hold, translating those parameters to data fields and keeping the various professionals working together.
Compounding the problem is the fact that data is often stored on complicated networks that include desktops, laptops, servers, smart phones, flash drives and all sorts of other mobile devices. So a major challenge is to simply identify where information is stored in order to effectively track to the execution of a hold. Under these conditions, attempting to manage and track holds manually is a monumentally difficult task.
How Technology Can Help
Any corporate law department can follow certain best practices to improve their management and tracking of litigation holds, but depending on the size and complexity of their organization it may be useful to deploy a more systematic approach that guarantees that nothing falls through the cracks. This is where emerging technology tools enter the picture.
Issuing written holds
Corporations have the duty to quickly issue written holds to all involved parties once they are informed of pending litigation. The problem is that these notices are very time-consuming to draft and difficult to confirm when those notices are received. New technology tools allow users to create standard litigation hold templates, improving the efficiency of drafting the notices. Moreover, technology such as LexisNexis' CounselLink application can enable end-to-end tracking of emails and acknowledgements, providing an auditable trail of who was notified, when they were notified and when they acknowledged the notice.
Changes in personnel
It's important to know when individual data custodians enter or leave the company so corporate law departments can ensure continuity in their efforts to enforce litigation holds. Most corporate IT groups routinely wipe an employee's system when they leave the company. However, by integrating with HR systems, litigation holds software systems can provide updated employment information so IT departments can be pro-actively notified to preserve information stored on equipment used by terminated employees. Also, custodian dashboards can provide updated counts and statuses regarding employees that join a department so a determination can be made if the new employee should be added to an existing hold.
Continuous monitoring
A common pain point for corporations seeking to manage litigation holds is the need to continually monitor existing holds and send reminder notices to the data custodians. Many executives try to do all of this tracking with basic office software tools, such as Outlook and Excel. CounselLink Litigation Hold can provide a full audit trail of litigation hold actions and the actions of the many custodians related to a hold. Exceptions that need follow-up can be easily highlighted so that litigation hold managers can conduct additional interviews. Automatic reminder notices to custodians that they are still under hold can be created and easily tracked.
Effective tracking
It's essential for corporate law departments to track all actions taken related to a litigation hold so the company can prove it took the appropriate steps to avoid spoliation of evidence. Unfortunately, compiling these kinds of reports can be very difficult, given that the data is spread across email and various spreadsheets. With emerging technology tools, all litigation hold information can be made available for reporting so that audit reports, statistics and trends can be presented as verification that proper hold notice processes were followed. Data can also be used to improve the overall litigation hold management process.
Conclusion
The courts have made it abundantly clear that they expect corporate counsel to treat the execution of litigation holds as very serious business. That means deploying effective internal systems, creating a culture of compliance with holds and - perhaps most complex of all the challenges - implementing procedures for the proper management and tracking of holds. The good news is that new technology tools are making this process more manageable for corporate counsel, a helping hand they could surely use.
Published December 6, 2010.
