This data is commonly referred to as electronically stored information, or ESI, and parties to litigation and government investigators are entitled to obtain and review relevant ESI in the event of a lawsuit or government investigation.
As with other evidence, ESI cannot be intentionally destroyed. In fact, businesses have an affirmative duty to preserve relevant ESI. This duty to preserve may arise earlier than one might expect. The duty to preserve arises when a party should “reasonably anticipate” litigation or a government investigation. In some cases, the exact time when the duty arises is obvious – for example it arises when a party is unexpectedly served with a lawsuit or subpoena.
More often, however, the party has knowledge of credible facts and circumstances that litigation or a government investigation is probable, thereby triggering the duty to preserve.
For example, if a manufacturing company learns that one of its products malfunctioned and seriously injured a consumer, the company is on notice that litigation is probable and the company must begin preserving relevant ESI even though a lawsuit or investigation may be months, or even years, away. Similarly, an employer has a duty to begin preserving ESI when it learns that one employee has been making inappropriate comments to another employee while on the job.
Likewise, if an electrical subcontractor learns that an electrical fire occurred in a new building in which it recently performed electrical work, it should reasonably anticipate litigation and begin preserving relevant ESI.
In other words, if you see trouble on the horizon, safeguard related electronic information.
Once the duty to preserve arises, businesses must make a reasonable and good faith effort to retain the ESI that may be relevant to the litigation or investigation. Businesses can satisfy this duty by implementing an effective “legal hold.” The legal hold should begin with a written notice to persons likely to possess or control potentially relevant information.
A. Legal Hold: In-House Notices:
(1) The notice should be sent to individuals within the company who have actual knowledge of the events giving rise to the litigation and who operate the devices on which the relevant information is stored (document custodians); and
(2) The notice should be sent to persons within the company who manage the company’s information systems (document stewards).
B. Legal Hold: Third-Party Notices:
The legal hold should also be sent to third parties under the company’s control if those third parties otherwise fit the definition of document custodians or stewards. For example, if a company’s server is managed by a third party, the legal hold should be sent to such third party.
The legal hold should not simply state that “all relevant information shall be preserved.” Rather, the legal hold should be crafted so that it effectively communicates the importance of the obligation to preserve, and clearly defines which information is subject to the obligation.
To that end, the Sedona Conference, an organization that promotes legal education with respect to electronic discovery, suggests that the written notice of legal hold should:
1) describe the subject matter of the litigation (e.g. breach of X contract or malfunction of Y product) and the subject matter, dates, and other criteria for defining the relevant information to be preserved;
2) contain a statement that relevant ESI (and other evidence) must be preserved;
3) identify the likely locations of the relevant information (e.g. network, cell phone, laptop, iPad, landline call logs, etc.);
4) provide steps that can be followed for preserving the information as may be appropriate given the applicable device; and
5) reiterate the importance of the obligation.
Finally,the company must alter its document retention policy and suspend its routine auto-delete and purging activities until the litigation or investigation has been completed.
A company’s failure to discharge its legal duty to preserve by failing to implement an effective legal hold can have serious consequences. The destruction or alteration of relevant evidence, or “spoliation,” may result in monetary sanctions, an instruction to the jury that documents not preserved would have been harmful to that party, and even an adverse disposition of the case.
Although the specific subject matter of the ESI to be preserved necessarily differs from case to case, businesses are well-advised to proactively develop their legal hold process prior to the time the duty to preserve has arisen.
Your attorney can help you with developing this process. In any event, once a business has sufficient reason to believe that litigation or a government investigation is probable, it should contact its attorney to implement a proper litigation hold. Counsel will not only ensure that the written notice of the legal hold is adequate and delivered to the appropriate custodians and stewards, but will also ensure that the company’s litigation hold process is well-documented in the event it is challenged.
While it was once enough for lawyers to warn clients that what is said cannot be unsaid, clients must now be warned to consider every keystroke as well.
Brian J. Holleran is an attorney with the law firm Meuleman Mollerup LLP, focusing his practice in the areas of business law and litigation, real estate law and estate planning. Mr. Holleran can be contacted at 208.342.6066 or by email at firstname.lastname@example.org. More information at www.lawidaho.com.