Several recent court decisions demonstrate the severe sanctions companies face for destroying documents during litigation and underscore the need to implement and comply with litigation holds. For example, in Zubulake v. UBS Warburg LLC, 2004 U.S. Dist. LEXIS 13574 (S.D.N.Y. July 20, 2004), the court ruled that a party must take affirmative steps to preserve documents, including: (1) issuing a litigation hold at the outset of the litigation or whenever litigation is reasonably anticipated such that all sources of discoverable information are identified and retained; (2) communicating the litigation hold directly to all key employees; (3) repeating the litigation hold instructions; (4) monitoring compliance with the litigation hold; and (5) instructing all employees to produce potentially relevant documents in their files. Id., at *39-41. See also United States v. Philip Morris USA Inc., 2004 U.S. Dist. LEXIS 13580 (D. D.C., July 21, 2004) (sanctioning defendant $2.75 million for violating a court order to preserve potentially relevant documents where defendant routinely destroyed e-mails and other electronic records while the action was pending).
Developing, implementing and managing an effective litigation hold as part of a company’s overall records management policy is therefore essential. An effective record management program minimizes the records retained to the minimum required to meet a company’s legal requirements and operational needs. As a result, companies significantly reduce the inconvenience and expense in responding to discovery requests in litigation. A records management program that includes a litigation hold component also is an invaluable tool to demonstrate a company’s good faith and reasonable efforts to comply with its discovery obligations.
Proactive coordination and planning among corporate counsel, outside counsel and IT personnel are necessary to design and implement a litigation hold that is ready to respond effectively when needed. An effective litigation hold should include:
- A records management program, which includes a litigation hold component to allow for immediately suspension the disposition of hardcopy and electronic records, including e-mail, that may be potentially relevant in pending or reasonably anticipated litigation;
- The identity of company employees to be notified of the litigation hold, a standard notice (such as the Record Preservation/Notice of Litigation Hold) and an acknowledgement procedure for affected employees;
- Specific steps and assignments for preserving back-up tapes, archiving e-mails, and, if necessary, notifying third-party vendors;
- A method to monitoring compliance with any litigation hold in effect;
- Periodic follow-ups with company employees to reiterate the litigation hold instructions, and procedures for notifying new employees of the litigation hold; and
- A procedure for rescinding the litigation hold, notifying necessary third-party vendors, and restoring the record retention schedule for disposition of records.
Vedder Price has developed unique expertise in advising clients regarding effective records retention and management, electronic communications policies and e-discovery.
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