Stanley M. Gibson: Litigation holds don't require an actual lawsuit
PLI: Corporations still tend to delay placing litigation holds when litigation is in the offing. Can you clear up when litigation holds should be implemented?
STANLEY M. GIBSON: Most businesses do not implement litigation holds until (or even well after) the initiation of a lawsuit or until documents are formally requested by the other side. This is plainly inadequate. The requirement to implement a litigation hold begins when litigation is "reasonably anticipated"—not when litigation is filed or when a request for information or documents is made. Nonetheless, many businesses fail to take the steps necessary to understand and document when litigation is "reasonably anticipated." As a result, these companies fail to implement a litigation hold at the appropriate time and risk the loss of electronic records that they should have preserved.
PLI: Corporations still tend to delay placing litigation holds when litigation is in the offing. Can you clear up when litigation holds should be implemented?
STANLEY M. GIBSON: Most businesses do not implement litigation holds until (or even well after) the initiation of a lawsuit or until documents are formally requested by the other side. This is plainly inadequate. The requirement to implement a litigation hold begins when litigation is "reasonably anticipated"—not when litigation is filed or when a request for information or documents is made. Nonetheless, many businesses fail to take the steps necessary to understand and document when litigation is "reasonably anticipated." As a result, these companies fail to implement a litigation hold at the appropriate time and risk the loss of electronic records that they should have preserved.
The standard for when the preservation of records and information for litigation is when the company "reasonably anticipates" litigation—not merely when the litigation begins or when a formal request for information or documents is made. Nonetheless, and although the "reasonably anticipates litigation" standard is frequently cited, there is no easy definition and certainly no definition that fits all cases and situations. Indeed, because the "reasonably anticipates litigation" standard is amorphous, it is important for every company to understand when it normally becomes involved in litigation and it should develop and maintain a litigation profile that will provide a guideline for triggering litigation holds. The company should document its process for when it reasonably anticipates litigation and make sure that a system is in place for identifying when and how electronic records will be preserved once litigation is reasonably anticipated. In most cases, waiting to issue the litigation hold until after the case is filed is likely to be deemed too late, putting the company at risk for failing to preserve electronic records. Of course, not every complaint will result in the need for a litigation hold, particularly where a company receives many complaints that do no result in litigation. What is needed, however, is a well-defined set of guidelines, based on business experience, that will be used to determine when litigation is reasonably anticipated.
These guidelines need to document the types of litigation that the company normally encounters. They also need to distinguish between situations in which the company receives, for example, consumer complaints, demand letters, cease and desist letters and when the company typically engages in litigation as a result of these situations. If litigation is typically unlikely, then the company should document why litigation is not reasonably anticipated in such situations and why a litigation hold would therefore not be appropriate in every instance. This reasonable and good faith documentation will be helpful to establish why electronic records were not preserved at an earlier time, even if a lawsuit is later filed. On the other hand, if the company normally becomes involved in a lawsuit as a result of these activities, it may well be deemed to reasonably anticipate litigation and accordingly should know to institute the appropriate litigation hold. The key is to formalize these discussions into a writing that shows the steps the company follows to determine when litigation is reasonably anticipated and what steps it takes to preserve electronic records when that occurs.
One important caveat: the "reasonably anticipates litigation" standard also applies in the context of the work product doctrine. Outside counsel are generally responsible for making claims of work product protection for a variety of documents during the litigation, many of which will likely have been created prior to the filing of the lawsuit. A company claiming work product protection – because it created a document in anticipation of litigation – must ensure that it began its litigation hold and preservation efforts at least as early as it claims work product protection during the litigation. Any failure to make sure that the company does not claim work production protection before it began to preserve documents could have serious consequences.
The comments to this entry are closed.
« Dark Pools (Of Liquidity) | Main | Yoram Keinan: International derivatives can result in some very taxing situations »
Back to top
PLI in Brief is the online home of Practising Law Institute's popular weekly eNewsletter series more...
Recent Archives
• June 2010
• May 2010
• April 2010
• March 2010
• February 2010
• January 2010
• December 2009
• November 2009
• October 2009
• September 2009
• Complete Archive
Categories
• All-Star Briefing
• Compliance Counselor
• The Lawyer's Toolbox
• The Pocket MBA
• Accounting
• Antitrust
• Bankruptcy
• China
• Class Actions
• Communication & Media
• Compliance
• Consumer
• Copyright
• Corporate
• Corporate Governance
• Due Diligence
• Employee Benefits
• Employment Law
• Environment
• Estate Planning
• Estates & Trusts
• Ethics
• Executive Compensation
• Export Control
• Financial Institutions
• Financial Products
• General Practice
• Government Contracting
• Green Tech
• Hedge Funds
• Immigration
• Information Technology
• Insurance
• Intellectual Property
• Internal Investigations
• International
• Law Practice Management
• Licensing
• Litigation
• Mergers & Acquisitions
• Patent
• Privacy
• Private Equity
• Real Estate
• Secured Transactions
• Securities
• Tax
• Taxation
• Trademark
20% off PLI Treatise!
Employment Law Yearbook 2008, by Orrick Herrington & Sutcliffe LLP, the one volume source to help your clients lessen their legal exposure, no matter what front, including whistleblowing, workplace violence, downsizing, privacy, and trade secrets.
order...
20% off PLI Treatise!
Accountants' Liability, by Dan L. Goldwasser (Vedder Price Kaufman & Kammholz PC), M. Thomas Arnold (University Of Tulsa College Of Law), and John H. Eickemeyer (Vedder Price Kaufman & Kammholz PC). Use the link to order this uniquely comprehensive legal and tactical resource.
order...
|
Feeds
Full-Content FeedWhat are feeds?
Credits & Contacts
General Email Inquiry
Editor
Michael Singer
About PLI
PLI is a non-profit continuing legal education organization dedicated to providing the legal community with the most up-to-date information available. Founded in 1933, PLI's continuing mission is to enhance the professionalism of attorneys and other qualified persons by providing, in a cost effective manner, the highest quality and most innovative programs, online CLE, publications and other services to enable them to practice law competently and ethically, and to fulfill pro bono responsibilities.
All contents
Copyright © 2009
Practising Law Institute
810 Seventh Avenue
New York, NY 10019-5818
For more information call (800) 260-4PLI
(212) 824-5710
Comments