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“Reasonable Anticipation” of Litigation Re-Affirmed as the Standard for Triggering Legal Holds

Created on March 7, 2012


Vice President, E-Discovery

Most attorneys understand that when a complaint is filed with the court, each party has a legal obligation to issue legal hold notices to all applicable custodians. But many struggle to understand that this is not actually the correct legal standard for preserving custodian information. Case in point, Voom HD Holdings LLC v. Echostar Satellite LLC (NY Slip Op. Jan. 31, 2012). In this case, the New York Appellate Court adopted the federal standard under Zubulake that “once a party reasonable anticipates litigation, it must suspend its routing document retention/destruction policy and put in place a litigation hold to ensure the preservation of relevant information." The court affirmed the lower court's ruling for spoliation sanctions (imposed adverse inference) against defendant for (1) delaying the implementation of a legal hold until the complaint was filed, rather than when litigation was reasonably anticipated and (2) for not immediately suspending its routine email document retention policy.

Under the court adopted Zubulake standard, counsel must understand two principles: (1) When the duty to preserve is triggered and (2) How the duty to preserve must be fulfilled.

1. When is the duty to preserve triggered?

Whether the party is the initiator or object of litigation, counsel has the duty to issue preservation orders when litigation is reasonably anticipated. “A reasonable anticipation of litigation arises when an organization is on notice of a credible probability that it will become involved in litigation, seriously contemplates initiating litigation, or when it takes specific actions to commence litigation." Against objections that this standard is “vague and unworkable," judges will argue that a rule requiring notice of a claim or actual litigation “would encourage parties who actually anticipate litigation, but do not yet have notice of a 'specific claim' to destroy their documents with impunity."

In Voom, it was determined that the defendant, Echostar, should have anticipated a lawsuit before the actual commencing of litigation. Four months before the formal law suit was filed, Echostar began threatening to terminate their contact with Voom. Echostar's in-house counsel knew that the contract termination would result in a lawsuit. Therefore, the court determined that by threatening to terminate its contract with Voom, Echostar should have reasonably anticipated litigation and started the preservation process. Making matters worse, Echostar failed to immediately issue a legal hold even after this action was initiated by Voom.

2. How do you fulfill the duty to preserve?

Suspend the document retention policy. Contact the IT department and inquire how to stop the automatic purging of documents. This will ensure that all potentially relevant electronically stored information (ESI), especially emails, is not deleted without the custodian's knowledge.

Issue a legal hold to all potentially relevant custodians. This notice, usually via email, must direct appropriate custodians to do the following:

  • Describe what ESI is relevant
  • Preserve all relevant ESI (electronic, paper)
  • Cease auto deletion and rewriting over documents/emails
  • Explain the consequences of not preserving ESI
  • *Note: Implementing a legal hold is considered inadequate if organizations “vest total discretion in the employee to search and select what the employee deems relevant without the guidance and supervision of counsel."

The court ruled that Echostar was grossly negligent for failing to suspend its email retention policy until four months after the beginning of litigation, which resulted in the deletion of relevant emails.

Conclusion

Hot topics, like predictive coding, have over taken the e-discovery headlines, but legal teams need to not forget the basic principles around preservation. As evidenced in Voom, even in state court defensible means preserving all potentially relevant ESI when litigation is reasonably anticipated by either party. Having established, automated workflows surrounding the legal hold process will enable attorneys to quickly and easily manage preservation steps to ensure relevant ESI is not destroyed, preventing court sanctions like the adverse inference instruction applied to Echostar. For more information on issuing defensible legal holds, view the following white paper, Five Steps to Overcome Common Legal Hold Mistakes, and attend Exterro's upcoming educational webcast, Mock Interview: Techniques to quickly identify relevant ESI when the trigger is pulled.

Mike Hamilton, J.D. is a Sr. E-Discovery Analyst at Exterro, Inc., focusing on educating Exterro customers, prospects and industry experts on how to solve e-discovery issues proactively with technology. His e-discovery knowledge, legal acumen and practical experience give him a valuable perspective on bridging the gap between IT and legal teams. You can find him on Google+, Twitter and Linkedin.