designing, maintaining, implementing and releasing legal...

DESIGNING, MAINTAINING, IMPLEMENTING AND RELEASING

LEGAL HOLDS

Browning Marean III – [email protected] Kathy J. Owen – [email protected]

Bradley M. Smyer November 2012

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I. INTRODUCTION This paper addresses various aspects of a legal hold,1 including: (1) when the

duty to preserve attaches; (2) determining the scope of the legal hold; (3) contents of

the legal hold notice; (4) enforcing the legal hold; (5) the preservation letter to your

opponent; and (6) releasing the legal hold. Two appendices follow. Appendix A lists

key cases, and Appendix B is a sample legal hold notice.

Once a party reasonably anticipates litigation, that party has a duty to preserve

information relevant to that litigation. A legal hold can satisfy that duty. A legal hold

suspends current document destruction policies, and informs certain persons that they

must preserve relevant information.

It is becoming more and more common that when a party is not succeeding in

developing the merits in litigation, the party will turn its focus from the merits towards

claims of destruction or spoliation of evidence. Proper implementation, documentation

and enforcement of a legal hold is a strong mechanism for defending against spoliation

claims.

II. When the duty to preserve attaches The duty to preserve attaches when litigation or an investigation is reasonably

anticipated.2 Whether a party reasonably anticipates litigation3 is a good faith

1 This white paper updates the “Designing, Implementing, Maintaining and Releasing Litigation Holds” white paper by Marean, Owen and Vogel dated April 14, 2009. That white paper referred to “litigation holds.” However, since the duty to preserve extends beyond litigation, the authors now refer to instructions regarding preservation as “legal holds” rather than litigation holds. 2 Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 217 (Zubulake IV) (S.D.N.Y. 2003). Note that the reasonably-anticipated rule only applies under common law. See Keithley v. Homestore.com, Inc., No. C-03-04447 SI (EDL), 2008 WL 3833384, at *5 (N.D. Cal. Aug. 12, 2008). See generally The Sedona Conference, The Sedona Conference Commentary on Legal Holds: The Trigger & the Process, 11 SEDONA CONF. J. 265 (2010) [hereinafter SEDONA LEGAL HOLDS].

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evaluation based on the individual facts and circumstances of the case as they are

known at the time.4

Whether a duty of preservation attaches depends on the likelihood of future

litigation. While a vague rumor or mere disagreement does not trigger a duty to

preserve, stronger signs of impending litigation can trigger a duty of preservation.5 “The

future litigation must be ‘probable,’ which has been held to mean ‘more than a mere

possibility.’”6 For example, pre-litigation correspondence with an opposing party with

unequivocal threats of litigation, receiving a summons or a complaint, notice of an

administrative complaint, an inquiry from the government, initiation of a government or a

third-party subpoena for documents, can all result in reasonably anticipated litigation

and trigger a duty of preservation. Other triggers are more amorphous but still require

an analysis of whether litigation is reasonably anticipated. These triggers include

internal grievances, compliance questions, pre-litigation communication with the

opposing party involving non-specific threats of litigation, or litigation involving similar

products. Depending on the facts, any of these events could trigger a legal hold.

Whether a duty of preservation is initiated is a fact-intensive determination.

3 As stated, a duty to preserve can be triggered when litigation or an investigation (internal or external) is anticipated; it is not limited to litigation. However, for simplicity, the triggering event is referred to as “litigation” in this white paper. 4 See Rimkus Consulting Grp., Inc. v. Cammarata, 688 F. Supp. 2d 598, 613 (S.D. Tex. 2010) (stating that although the general rules regarding the duty to preserve are not controversial, “applying them to determine when a duty to preserve arises in a particular case and the extent of that duty requires careful analysis of the specific facts and circumstances”). A sampling of factors to be evaluated in determining if there is a duty to preserve is listed in SEDONA

LEGAL HOLDS, supra note 2, at 276. 5 See Cache La Poudre Feeds, LLC v. Land O’Lakes, Inc., 244 F.R.D. 614, 621 (D. Colo. 2007) (“[T]he duty to preserve relevant documents should require more than a mere possibility of litigation.”); see also Spanish Peaks Lodge, LLC v. Keybank Nat’l Ass’n, Civil Action No. 10-453, 2012 WL 895465, at *1 (W.D. Pa. Mar. 15, 2012) (stating that a duty of preservation arises “when an organization is on notice of a credible probability that it will become involved in litigation”) (citing SEDONA LEGAL HOLDS at 271). 6 Keithley, 2008 WL 3833384, at *5 (citations omitted).

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The experience and knowledge of a defendant is a key factor in determining

whether a potential triggering event would result in a duty to preserve. If a party is

aware of events that usually result in litigation—or of actual litigation—and that certain

evidence is routinely requested in that litigation, the party has a duty to preserve that

evidence.7 For corporate defendants, timing may hinge on which agent was aware of

the claim or events. For example, the duty might attach sooner if corporate counsel

was aware of the claim or events, or similar claims in the industry, because they may be

better situated to anticipate which claims will evolve into full litigation.8 Conversely, if a

company’s experience is that a particular type of demand never results in litigation,

when it receives another of the same demand, there likely would not be a need to issue

a legal hold. For example, if a company had received 200 claims that its chocolate chip

cookies were stale and none of those claims had ever resulted in litigation, it may be

reasonable for the company to conclude, when it received the 201st claim of stale

cookies, that the claim would not result in litigation and that it need not issue a legal

hold. However, to defend the decision not to issue a legal hold for the stale cookie

complaint, it would be helpful if the company had written records of what demands did

and did not result in litigation. That way, if the 201st claim did result in litigation, the

company could defend its decision of not issuing a legal hold.

7 See Pension Comm. of Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC, 685 F. Supp. 2d 456, 466 (S.D.N.Y. 2010), abrogated by Chin v. Port Auth. Of New York & New Jersey, 10-1904-CV L, 2012 WL 2760776 (2d. Cir. July 10, 2012). 8 See, e.g., Phillip M. Adams & Assocs., LLC v. Dell, Inc., 621 F. Supp. 2d 1173, 1191 (D. Utah 2009) (concluding that preservation duty triggered when defendant’s industry was “sensitized to the issue” in the case and discussing importance of centralized document retention policies).

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Plaintiffs also have a duty of preservation once the plaintiffs reasonably

anticipate litigation.9 The duty of a plaintiff “is more often triggered before litigation

commences, in large part because plaintiffs control the timing of litigation.”10 A plaintiff’s

duty of preservation may attach when the plaintiff decides legal action is appropriate,11

articulates a time frame and strategy for litigation,12 or when they retain counsel in

connection with potential litigation and have not yet identified a cause of action.13

Moreover, once a party—plaintiff or defendant—anticipates litigation, “he still has an

obligation to give the opposing party notice of access to the evidence or of the possible

destruction of the evidence.”14 Therefore, plaintiffs may have an additional duty to warn

possible defendants about destructible evidence.15

Because the time a duty of preservation attaches is based on subjective

concepts like reasonableness and good faith, it is important to document and record

facts of when, why and how a hold was implemented. The party or its attorneys should

record the facts known at the time, as well as the decision-making process. Working

from a company-specific set of guidelines that outline when a legal hold is necessary

and the steps to take may be helpful. In most cases, the decisions surrounding the

implementation of a legal hold are made by attorneys and are protected by the attorney

client privilege and work product doctrine.

9 See Rambus, Inc. v. Infineon Tech. AG, 220 F.R.D. 264, 281 (E.D. Va. 2004) (“[O]nce a party reasonably anticipates litigation, it has a duty to suspend any routine document purging system that might be in effect and to put in place a litigation hold.”) (emphasis added). 10 Pension Comm. of Univ. of Montreal Pension Plan, 685 F. Supp. 2d at 466. 11 See Milenkamp v. Davisco Foods Int’l, LLC, 562 F.3d 971, 981 (9th Cir. 2009). 12 See Rambus, Inc., 220 F.R.D. at 284-85. 13 See Innis Arden Golf Club v. Pitney Bowes, Inc., 257 F.R.D. 334, 340 (D. Conn. 2009). 14 Silvestri v. General Motors Corp., 271 F.3d 583, 591 (4th Cir. 2001). 15 See id.; see also Andersen v. Schwartz, 687 N.Y.S.2d 232, 234-35 (N.Y. Sup. Ct. 1999) (holding that plaintiffs should have notified the defendant of the initial and only vehicle inspection).

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III. Determining the scope of the legal hold

An effective legal hold captures only information that is relevant to the anticipated

litigation.16 The doctrine of proportionality applies to preservation, not just to

production.17 Therefore, only people who possess this relevant information should be

included in the legal hold.18 This includes people with relevant documents, people for

whom the relevant documents were made, and people directly named in the litigation.19

Particularly, concerning corporations, the duty of preservation of relevant material

extends to the “key players” in the potential litigation.20 Persons without relevant

information, but with structural knowledge may need to be included. This includes those

who maintain the information, such as IT and records personnel.21 Analysis should also

be done to determine if third parties to whom a company has outsourced data hosting,

such as “cloud” providers, have data in the custody and control of the company that

would be subject to a data preservation obligation.22

Determining which persons may have relevant documents requires careful

analysis. Knowledge of the company’s personnel structure and document retention

policies at the relevant time is helpful in the analysis. The nature of the litigation will

define the scope of the legal hold. For example, a product liability action alleging

16 Zubulake IV, 220 F.R.D. at 217 (“[A] party need not preserve all backup tapes even when it reasonably anticipates litigation.”). 17 Rimkus Consulting Group, Inc., 688 F. Supp. 2d at 613 (noting that “[w]hether preservation or discovery conduct is acceptable in a case depends on what is reasonable, and that in turn depends on whether what was done-or not done-was proportional to that case and consistent with clearly established applicable standards”) (emphasis in original). 18 Zubulake IV, 220 F.R.D. at 217-18. 19 Id. at 218. 20 See Zubulake v. UBS Warburg LLC (Zubulake V), 229 F.R.D. 422, 432 (S.D.N.Y. 2004). 21 Id. 22 The scope of the legal hold is typically much broader than the amount of data that is collected and the amount of data collected is broader than the data that is eventually produced. It is important to have a legal hold that is

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multiple types of defects could impact individuals in many departments including R&D,

manufacturing, consumer complaints and marketing. Once specific persons are

identified, a party may need to expand the hold to that person’s administrative

department and supervised employees. Administrative or lower-level employees may

ghostwrite emails or letters, or discard emails or letters, for their supervisors.

Considering these details will help increase a legal hold’s effectiveness.

Although a company-wide hold will insure that you have identified each person

with relevant information, it does have negative ramifications. A targeted legal hold is

more effective. Sending every legal hold to every employee in the company may

reduce the effect of legal holds because the warnings become too normalized and

employees will have a tendency to ignore the holds. The employees may assume this

one will not apply because none of the others have. Another potential negative

ramification of multiple company-wide holds is that employees may preserve everything

not just information subject to legal holds. They may find it is easier to keep everything

rather than perform an analysis to see if it is responsive to any legal hold. This

becomes very costly to companies as it increases the amount of storage required for

paper documents and electronic data. Increased storage results in an increased

number of employees to maintain it.

designed to identify and preserve all the relevant information. The scope of discovery is usually narrower than the data that has been preserved.

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An overly broad hold, either in number of individuals or scope of data to be

preserved will also capture a larger volume of unresponsive documents, thus taking

more time and effort to organize, process and review anything collected. Further, a

targeted legal hold lessens the risk that information about the litigation leaks outside the

company. Tailoring the hold to small groups, however, risks losing relevant information.

An analysis must be done to determine the scope of the information to be

preserved. Preservation obligations often must be determined prior to the Federal Rule

of Civil Procedure 26(f) “meet and confer” conference to discuss the scope of data to be

preserved. As a result, a party must analyze available data sources and determine the

scope. Back-up tapes are one of the areas where a preservation decision could have a

huge impact on the company. Stopping a back-up tape rotation can be cost prohibitive

to a company. As discussed previously, courts are applying proportionality to

preservation obligations.23 In evaluating whether back-up tapes should be preserved,

one criteria is to determine if they are an active or accessible data source, i.e., are the

back-up tapes used only for disaster recovery or are they used on a regular basis to

obtain data. Generally, a legal hold does not apply to inaccessible back-up tapes,

which can continue to be recycled through the standard back-up tape rotation.24

Another consideration is if the back-up tapes are duplicative of other information. The

court in Zubulake IV stated that a “party or anticipated party must retain all relevant

23 See Rimkus, 688 F. Supp. 2d at 613. 24 See Zubulake IV, 220 F.R.D. at 217 n.22 (citation omitted). Companies are well-served to set up and enforce procedures that require treatment of back-up tapes in such a way that they remain as inaccessible data. For example, if companies allow employees to have data restored from back-up tapes on a regular basis without any

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documents (but not multiple identical copies) in existence at the time the duty to

preserve attaches, and any relevant documents created thereafter.”25 If a back-up tape

is the unique and only source of information, then preservation could be warranted.26

Again, the analysis with respect to preservation of back-up tapes (and other data

sources) is fact intensive and the preservation decisions must be reasonable and

documented in writing.27

IV. Contents of the legal hold notice

The contents of a legal hold notice can vary based upon a number of factors

including the scope of litigation, the way a company stores data, the types of accessible

data in a company, and how types of data should be preserved within a company. The

authors feel that there are certain things that should be included in a legal hold notice

such as:

An explanation of the preservation obligation and the consequences that can result from failing to follow the directive.

An explanation that the legal hold notice is privileged and instructions to not discuss the matter with individuals other than the party’s attorneys.

A description of the matter, including relevant time period. A description of the scope of data to be preserved. A description of the types of data to be preserved. A directive to cease document retention/destruction polices. Directions to departing employees. How to handle instant messaging, blogging and social media. Instructions on who to contact with questions relating to the legal hold. An acknowledgement that the employee has read, understands and agrees to be

bound by the legal hold.

showing of disaster, then they run the risk of back-up tapes being characterized as “accessible data” and could be required to preserve them. 25 Id. at 218. 26 Id. at 217. 27 Preservation of back-up tapes can be extremely burdensome and costly if a company is required to cease all back-up tape rotations. If it is uncertain whether back-up tapes contain unique information, an option could be to take one set of back-up tapes out of the rotation and preserve only that set.

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After receiving and reading a legal hold, an employee should be able to easily

comprehend his or her obligations for preservation. The legal hold should be prepared

in layman’s terms. “Legalese” should be avoided. An example of a legal hold

memorandum is included as Appendix B.

V. Enforcing the legal hold

Initiating the legal hold is only the first step. Once the hold is in place, “counsel

and client must take some reasonable steps to see that sources of relevant information

are located.”28 Enforcement requirements depend on the size of the company and the

scope of the hold. No matter the size and scope, “it is not sufficient to notify all

employees of a litigation hold and expect that the party will then retain and produce all

relevant information.”29

Effective enforcement begins with the initial distribution of the hold. Consider

communicating the hold using a variety of methods. A preferred, but not required,30

method is to send a written memorandum to employees, which can be done by e-mail

distribution, that includes a certification to be signed and returned stating that the

recipient read, understood and agrees to comply with the preservation obligations.

Another option is to issue a web-based survey that contains the hold information that

the individuals can review, print and acknowledge receipt, understanding and

28 See Zubulake V, 229 F.R.D. at 432 (emphasis in original). 29 Id. 30 See Steuben Foods, Inc. v. Country Gourmet Foods, LLC, No. 08-CV-561S(F), 2011 WL 1549450 (W.D.N.Y. Apr. 21, 2011) (absence of a written legal hold will not necessarily create a presumption that relevant evidence was lost or destroyed); Chin v. Port Auth. Of N.Y. & N.J., 10-1904-CV L, 2012 WL 2760776 (2d. Cir. July 10, 2012) (“reject the notion that a failure to initiate a litigation hold constitutes gross negligence per se” and sanctions cannot be issued based solely on the failure to initiate a litigation hold).

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compliance. Parties could also consider a legal hold training program, conference call,

or webinar to explain the legal hold to the employees.

After the initial distribution, parties should issue periodic notices and reminders

about the legal hold. Solicit ideas from various departments, including IT, Human

Resources, legal, and records, to develop a variety of methods. Reminders could

include posting the legal hold on the company’s intranet, periodically issuing pop-up

messages on individuals’ work computers, leaving recorded messages on work phones,

or simply reissuing the original legal hold notice. The hold should contain specific

instructions for departing employees. Companies could consider placing a brightly

colored label on computers that instructs the IT department to contact the legal

department prior to destroying any data on the computer.

In addition to sending periodic reminders about legal holds, parties should

periodically review the scope of the hold to determine if any people should be added to

or removed from the hold and if the scope should be changed. As stated, the creation

of a legal hold is very fact intensive, so logically as the fact investigation of a matter

proceeds, the scope of the hold could change. For instance, a party may learn of

additional people who have relevant data, and thus, should be added to the hold. A

party may learn that there are people who were included in the original hold who did not

have any involvement related to the anticipated litigation, and thus, should be removed

from the hold. As a result of investigation, it might be determined that the scope of the

data that is being preserved should be changed. Any changes in the scope of the hold,

and the basis for those changes, should be documented in writing.

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VI. The preservation letter to your opponent

A preservation hold letter formally requests that the opposing party institute a

legal hold to preserve relevant data. This letter is not a discovery request; it is an

attempt to avoid losing data, either through inadvertence, normal computer operations,

normal document retention/destruction policies or even misconduct.31 At a minimum,

the letter should instruct the party to preserve digital evidence relevant to issues in the

case, or evidence that may lead to the discovery of that evidence.32 The letter should

request the suspension of regular document retention/destruction policies, describe the

data to be preserved, and identify possible evidence locations.33 Broad preservation

requests can be returned in-kind, therefore, it may be helpful to carefully tailor the

letter’s document requests, or establish a set scope of discovery. In addition, if you are

the recipient of an overly broad preservation request that would cripple a company, it is

important to respond to the request stating what you are willing to do in response to the

preservation request and offer to “meet and confer.”

31 Stone v. Lockheed Martin Corp., Civil Action No. 08–cv–02522–REB–KMT, 2009 WL 267688, at *2 (D. Colo. Feb. 2, 2009) (describing the contents of a legal hold letter and including references). 32 Id. 33 Id.

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VI. Releasing the legal hold

A party can release a legal hold when litigation has concluded or is no longer

reasonably anticipated. Litigation is concluded when all parties sign a final settlement

and release, the court enters a dismissal with prejudice as to all parties, or the deadline

for any further appeals has run and the entered judgment is final.34 Determining when

litigation is no longer reasonably anticipated is not as straightforward. Courts look for

whether the party based the release decision on a good faith and reasonable evaluation

of the facts and circumstances known at the time.35 This evaluation involves the same

facts used in determining whether a legal hold was originally triggered, such as potency

of the claim, and the experience and knowledge of the possible defendant.

Legal hold releases have three requirements: (1) documentation; (2) reviving

normal document retention policies; and (3) notification to employees and third-parties.

First, the company should document when and why a release was implemented. Legal

hold decisions are based on subjective concepts like reasonableness and good faith,

and documentation helps demonstrate why the decision was reasonable at that time.

As with legal hold implementation decisions, the company should memorialize in writing

the known facts and the decision-making process. This documentation process is

typically done by attorneys and may be protected by the work product doctrine and the

attorney-client privilege.

34 Alan M. Anderson, Issuing and Managing Litigation-Hold Notices, 64 BENCH & B. MINN. 20, 23 (2007). 35 Consol. Aluminum Corp. v. Alcoa, Inc., 244 F.R.D. 335, 345 n.18 (M.D. La. 2006) (referencing The Sedona Principles: Best Practices Recommendations & Principles for Addressing Electronic Development Production).

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Second, the company should revive normal document retention policies. Before

reviving, however, a party should determine whether the held documents are subject to

other holds. If some documents might be relevant to future claims while others are no

longer necessary, a party may decide only to partially release a hold.36 Any documents

previously held may be folded into regular document retention policies and procedures.

For example, if a party usually discards documents after five years and the documents

under the hold are five years old or older, those documents can be discarded

immediately.

Finally, the company should notify all employees and third parties subject to the

hold. These employees could include records management, IT personnel, and any

other department involved in structuring the legal hold. The importance of following the

release should be emphasized. Unnecessarily retaining records can cause inefficiency,

inconsistency, overloaded computer systems, and increased discovery costs.

VII. CONCLUSION Proper preservation is one of the most important aspects of responding to

anticipated litigation. A party’s duty to preserve, which is triggered when the party

reasonably anticipates litigation, can be satisfied by properly implementing and

enforcing a legal hold. If relevant information is not preserved, the focus of litigation

may shift from the merits to spoliation.

36 See id. at 345.

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Courts evaluate preservation and legal hold decisions based on the

reasonableness, proportionality, and good faith of the party’s preservation activities. As

a result, it is important to document the reasoning for those decisions so that, if needed,

a party can demonstrate to a court that the decisions were reasonable and made in

good faith. Once the legal hold has been initiated, it must be monitored and enforced.

As shown in this paper and further illustrated in the cases in Appendix A, properly

implementing, documenting, and enforcing a legal hold is very important in defending

against allegations of spoliation of evidence, so that you can focus on the merits of your

litigation.

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APPENDIX A: KEY CASES

When the duty to preserve arises:

Kronisch v. United States, 150 F.3d 112, 126 (2d Cir. 1998) (duty attaches “when the party has notice that the evidence is relevant to litigation – most commonly when suit has already been filed, providing the party responsible for the destruction with express notice, but also on occasion in other circumstances, as for example when a party should have known that the evidence may be relevant to future litigation”).

Testa v. Wal-Mart Stores, Inc., 144 F.3d 173, 177-78 (1st Cir. 1998) (duty attaches

when there is “institutional notice – the aggregate knowledge possessed by a party and its agents, servants, and employees”).

Fujitsu Ltd. v. Fed. Express Corp., 247 F.3d 423, 436 (2d Cir. 2001) (duty attaches

“when the party has notice that the evidence is relevant to litigation or when a party should have known that evidence may be relevant to future litigation”).

Silvestri v. Gen. Motors Corp., 271 F.3d 583, 591 (4th Cir. 2001) (duty attaches

when the party knows or reasonably should know that the evidence may be relevant to pending or anticipated future litigation).

Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 217 (Zubulake IV) (S.D.N.Y. 2003)

(noting that duty attaches “at the time that litigation was reasonably anticipated,” which, in that case, meant when the plaintiff’s former supervisors became reasonably aware of possible litigation.).

Rambus, Inc. v. Infineon Tech. AG, 220 F.R.D. 264, 281 (E.D. Va. 2004) (“[O]nce a

party reasonably anticipates litigation, it has a duty to suspend any routine document purging system that might be in effect and to put in place a litigation hold to ensure the preservation of relevant documents-failure to do so constitutes spoliation.”).

Stevenson v. Union Pac. R.R. Co., 354 F.3d 739, 746 (8th Cir. 2004) (duty attaches

when party “knew or should have known that the documents would become material” and “should have preserved them”).

In re Kmart Corp., 371 B.R. 823, 842 (N.D. Ill. 2007) (duty attaches to specific

documents only if “the party controlling the documents has notice of those documents’ relevance”) (citations omitted).

Keithley v. Homestore.com, Inc., No. C-03-04447 SI (EDL), 2008 WL 3833384, at

*5 (N.D. Cal. Aug. 12, 2008) (“A preservation obligation may arise from many sources, including common law, statutes, regulations, or a court order in the case.”).

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Goodman v. Praxair Services, Inc., 632 F. Supp. 2d 494, 511 (D. Md. 2009) (“[T]he letter openly threatens litigation, then the recipient is on notice that litigation is reasonably foreseeable and the duty to preserve evidence relevant to that dispute is triggered.”).

Innis Arden Golf Club v. Pitney Bowes, Inc., 257 F.R.D. 334, 340 (D. Conn. 2009) (“working to identify the parties responsible . . . then to pursue recovery of costs establishes that litigation was reasonably anticipated from the very beginning of the investigation and remediation process” initiates a litigation hold).

Phillip M. Adams & Assocs., LLC v. Dell, Inc., 621 F. Supp. 2d 1173, 1191 (D. Utah

2009) (preservation duty triggered when defendant’s industry was “sensitized to the issue” in the case; also discusses importance of centralized document retention policies) reaffirmed by Phillip M. Adams & Assoc., LLC v. Windbond Elecs. Corp., 2010 WL 3767318 (D. Utah Sept. 16, 2010) (the defendants’ duty to preserve was triggered by the fact that “[i]n late 1999 the entire computer and component manufacturer’s industry was put on notice of a potential for litigation regarding defective floppy disk components (“FDCs”) by the well-publicized settlement in a large class action lawsuit against Toshiba.”).

Siani v. State Univ. of New York at Farmingdale, No. CV09–407 (JFB)(WDW), 2010 WL 3170664 (E.D.N.Y. Aug. 10, 2010) (claims of work product may trigger the duty to preserve).

Rimkus Consulting Grp., Inc. v. Cammarata, 688 F. Supp. 2d 598, 613 (S.D. Tex. 2010) (a party “about to ‘preemptively’ sue . . . had an obligation to preserve documents and information—including electronically stored information—relevant to these disputes”).

In re Semrow, Civil Action No. 3:09–cv–1142 (VLB), 2011 WL 1304448, at *3 (D. Conn. March 31, 2011) (“litigation likely if not certain” initiates a duty of preservation).

Haraburda v. Arcelor Mittal U.S.A., Inc., Civil No. 2:11 cv 93, 2011 WL 2600756 (D. Ind. June 28, 2011) (duty to preserve attaches prior to the Rule 26(f) conference).

Pippins v. KPMG, No. 11 Civ. 0377 (CM) (JLC), 2011 WL 4701849, at *1, 5 (S.D.N.Y. Oct. 7, 2011) (duty of preservation attaches to all “key players” of corporation if they hold relevant information even if they are entry-level employees).

Cedar Petrochemicals, Inc. v. Dongbu Hannong Chem. Co., Ltd., 769 F. Supp. 2d 269, 289 (S.D.N.Y. 2011) (“given that the condition of the phenol [chemical samples] . . . is the central issue in this case, the duty to preserve samples of that phenol was plain from the very first moment that a dispute over liability for the phenol’s corruption arose”).

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E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 803 F. Supp. 2d 469, 506 (E.D. Va. 2011) (six days to send legal hold notice was too long and it needs to be in the native language of the recipients).

Voom HD Holdings LLC v. EchoStar Satellite LLC, 93 A.D.3d 33, 43 (N.Y. App. Div. Jan. 31, 2012) (a preservation duty arises at “such time when a party is on notice of a credible probability that it will become involved in litigation.”)

Apple Inc. v. Samsung Elecs. Co., ---F. Supp. 2d ---, 2012 WL 3042943 (N.D. Cal. July 25, 2012) (sending a pre-litigation hold notice may be deemed an admission that litigation is reasonably anticipated; judge imposed an adverse jury instruction against defendant Samsung after finding that relevant emails were lost because Samsung did not take adequate steps to avoid spoliation in an eight-month period between issuance of its initial hold notice and the filing of Apple’s complaint; Samsung’s pre-litigation hold went to 27 recipients and its post-litigation hold went to 2,841 recipients).

Hynix Semiconductor v. Rambus, No. C–00–20905 RMW, 2012 WL 4328999 (N.D. Cal. Sept. 21, 2012) (Upon remand, the court found that hosting shred days after litigation was reasonable foreseeable was “spoliating evidence in bad faith or at least willfully.” The evidence did not support the conclusion that Rambus intentionally shredded documents it knew to be damaging, but “Rambus nonetheless spoliated evidence in bad faith or at least willfully.” The sanction issued by the court was that is struck from the record Rambus’ evidence supporting a royalty in excess of a reasonable, non-discriminatory royalty.).

Brigham Young Univ. v. Pfizer, Inc., 282 F.R.D. 566, 572-73 (D. Utah 2012) (“Clearly there is a duty on a party to preserve evidence when it is anticipating litigation, yet such a duty cannot prevent the inadvertent destruction or misplacement of evidence that can occur before such a duty arises. Nor can it prevent the fading of human memories.”).

Scope of duty of preservation:

Concord Boat Corp. v. Brunswick Corp., No. LR-C-95-781, 1997 WL 33352759, at *4 (E.D. Ark. Aug. 29, 1997) (“[T]o hold that a corporation is under a duty to preserve all email potentially relevant to any future litigation would be tantamount to holding that the corporation must preserve all email.”).

Zubulake v. UBS Warburg LLC, 217 F.R.D. 309, 324 (Zubulake I) (S.D.N.Y. 2003)

(plaintiff is entitled to all relevant electronic documents, including backup tapes; because of the burden and expense of restoring inaccessible backup tapes, a cost-shifting analysis is appropriate).

Mosaid Techs. Inc. v. Samsung Elecs. Co., 348 F. Supp. 2d 332, 336 (D.N.J. 2004)

(a litigant is under no duty to keep or retain every document in its possession, but it must preserve what it knows, or reasonably should know, will likely be requested in foreseeable litigation).

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Qualcomm Incorporated v. Broadcom Corp., No. 05cv1958-B (BLM), 2008 WL

66932, at *7 (S.D. Cal. Jan. 7, 2008) (demonstrating need for proactive discovery plan and discussing discovery rules) vacated in part by Qualcomm Inc. v. Broadcom Corp., 2008 WL 638108 (S.D. Cal. Mar 05, 2008).

Mancia v. Mayflower Textile Servs. Co., 253 F.R.D. 354 (D. Md. 2008) (discussing

federal discovery rules and lawyers’ discovery responsibilities). Victor Stanley, Inc. v. Creative Pipe, Inc., 250 F.R.D. 251, 259-64 (D. Md. 2008)

(discussing evidence search and retrieval methodology). Gaffield v. Wal–Mart Stores East, LP, 616 F. Supp. 2d 329, 337 (N.D.N.Y. 2009)

(party “had ample opportunity in the nearly two years between the accident and the filing of the complaint” to inspect evidence so adversarial party no longer has a duty of preservation).

In re Delta/Air Tran Baggage Fee Antitrust Litig., 770 F. Supp. 2d 1299, 1308 (N.D.

Ga. 2011) (“unwilling to conclude that upon service of a DOJ-issued CID ([civil investigative demand], a duty to Plaintiffs to preserve documents devolved . . . even though Plaintiffs did not file this action until three months later.”).

Geiser v. Simplicity Inc., No. 5:10CV21, 2012 WL 174951, at *6 (N.D. W. Va. Jan.

20, 2012) (litigant not under duty of preservation of evidence if litigant is under severe emotional distress).

Spanish Peaks Lodge LLC v. Keybank Nat’l Ass’n, No 10-453, 2012 WL 895465, at *2. (W.D. Pa., Mar 15, 2012) (duty of preservation attaches if party is “on notice of a credible probability that it will become involved in litigation” and internal conversations of possible litigation without more do not initiate a litigation hold).

Margolis v. Dial Corp., Civil No. 12-CV-0288-JLS (WVG), 2012 WL 2588704 (S.D. Cal. July 3, 2012) (a preservation order was not required for voicemail and instant message where the defendant had already taken reasonable steps to preserve such messages).

Scentsy Inc. v. B.R. Chase LLC, Case No. 1:11-cv-00249-BLW, 2012 WL 4523112 (D. Idaho Oct. 2, 2012) (“Generally not deleting documents, and orally requesting certain employees to preserve relevant documents concurrently with filing a lawsuit, is completely inadequate. It is very risky – to such an extent that it borders on recklessness.”).

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Sanctions relating to duty to preserve:

QZO, Inc. v. Moyer, 594 S.E.2d 541 (S.C. App. 2004) (answer stricken).

United States v. Philip Morris, USA, Inc., 327 F. Supp. 2d 21 (D.D.C. 2004) ($2,750,000 fine and barring witness testimony).

Paramount Pictures Corp. v. Davis, 234 F.R.D. 102 (E.D. Pa. 2005) (spoliation inference).

Wachtel v. Health Net, Inc., 239 F.R.D. 81 (D.N.J. 2006) (deeming facts admitted, precluding evidence, striking privilege claims, striking trial witnesses, and fine).

In re September 11th Liability Ins. Coverage Cases, 243 F.R.D. 114 (S.D.N.Y. 2007) (sanction of $1.25 million).

Conner v. Sun Trust Bank, 546 F. Supp. 2d 1360 (N.D. Ga. 2008) (adverse inference instruction).

Ingoglia v. Barnes & Noble College Booksellers, 852 N.Y.S.2d 337 (N.Y. A.D. 2008) (dismissal).

Acorn v. County of Nassau, No. CV 05–2301(JFB)(WDW), 2009 WL 605859, at *4

(E.D.N.Y. Mar. 9, 2009) (awarding motion costs and attorney’s fees for failure to implement a legal hold; holding that “the failure to implement a legal hold at the outset of litigation amounts to gross negligence.”).

Olson v. Sax, No. 09-C-823, 2010 WL 2639853 (E.D. Wis. June 25, 2010) (even

with a duty to preserve, evidence of bad faith destruction is a “prerequisite to imposing sanctions for the destruction of evidence”).

Siani v. State Univ. of New York at Farmingdale, No. CV09-407 (JFB)(WDW), 2010

WL 3170664 (E.D.N.Y. Aug. 10, 2010) (moving party should show relevance of lost documents in order to be entitled to receive sanctions).

Booker v. Mass Dep’t of Health, 612 F. 3d. 34 (1st Cir. 2010) (holding trial court has

wide discretion in giving an adverse inference instruction, but must be some evidentiary foundation for an adverse inference instruction).

Orbit One Commc’ns v. Numerex Corp., 271 F.R.D. 429, 441 (S.D.N.Y. 2010)

(“rather than declaring that the failure to adopt good preservation practices is categorically sanctionable, the better approach is to consider such conduct as one factor” in determining whether to issue sanctions).

Victor Stanley v. Creative Pipe, Inc., 269 F.R.D. 497 (D. Md. 2010) (As sanction for

breach of duty of preservation a court may award a default judgment, adverse

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inference instruction, or civil penalties such as increased discovery costs or attorney fees). Victor Stanley, Inc. v. Creative Pipe, Inc., No. 8:06-cv-02662, Doc. 448 (D. Md. Jan. 24, 2011) (ordering defendants to pay an additional $712,053.67 for attorney’s fees and costs, making the total assessment more than $1 million).

Fed. Trade Comm’n v. First Univ. Lending, LLC, No. 09-82322-CIV, 2011 WL

673879 (S.D. Fla. Feb. 17, 2011) (spoliation sanctions not imposed for destruction of data because of a mistaken belief by a non-party that data had been preserved).

Rosenthal Collins Grp., LLC v. Trading Techs. Int’l, No. 05 C 4088, 2011 WL

722467 (N.D. Ill. Feb. 23, 2011) (serious spoliation sanctions can be leveled where a party knew or should have known its agent was destroying evidence; actual knowledge is not required).

Steuben Foods, Inc. v. Country Gourmet Foods, LLC, No. 08-CV-561S(F), 2011

WL 1549450 (W.D.N.Y. Apr. 21, 2011) (absence of a written legal hold will not necessarily create a presumption that relevant evidence was lost or destroyed).

Micron Technology v. Rambus, 645 F.3d 1311 (Fed. Cir. 2011) (Dismissal is a “harsh sanction” and appropriate only when there is “clear and convincing evidence of both bad-faith spoliation and prejudice to the opposing party.”).

Evans v. Mobile Cnty. Health Dep’t, No. CA 10-0600-WS-C, 2012 WL 206141 (S.D.

Ala. Jan. 24, 2012) (adverse inference granted against individual plaintiff that burned her personal computer after the duty to preserve attached).

State Nat’l Ins. Co. v. County of Camden, Civ. No. 08-5128 (NLH)(AMD), 2012 WL

960431 (D.N.J. Mar. 21, 2012) (failure to implement a legal hold after being notified of a lawsuit breaches the duty to preserve, and regardless of lack of actual spoliation, can lead to the imposition of sanctions in the form of attorneys’ fees and costs to reimburse the non-breaching party its fees and costs to determine if any data has been destroyed).

Tracy v. NVR. Inc., No. 04–CV–6541, 2012 WL 1067889 (W.D.N.Y. March 26,

2012) (to support an order compelling production of an opponent’s legal hold notice and list of notice recipients, a movant must show the loss or destruction of documents that should have been preserved).

Silver v. Countrywide home Loans, Inc., No. 11-12282, 2012 WL 2052949 (11th Cir.

June 8, 2012) (a finding of bad faith is required to warrant sanctions and a spoliation inference where there was a failure to turn over relevant emails and an alleged failure to have a proper litigation hold policy in place).

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Equal Employment Opportunity Comm’n v. Fry’s Elecs., Inc., --- F. Supp. 2d ---,

2012 WL 2576283 (W.D. Wash. July 3, 2012) (intentionally withholding relevant information and documents can lead to sanctions in the form of striking affirmative defenses, creating a presumption of admissibility at trial of certain documents and testimony, requiring monetary payment of $100,000, and appointing a special mater to review document retention, search, and disclosure activities).

Chin v. Port Auth. Of N.Y. & N.J., 10-1904-CV L, 2012 WL 2760776 (2d. Cir. July

10, 2012) (“reject the notion that a failure to initiate a litigation hold constitutes gross negligence per se” and sanctions cannot be issued based solely on the failure to initiate a litigation hold).

Pension Comm. of Univ. of Montreal Pension Plan Banc of Am. Sec., 685 F. Supp.

2d 456, 465 (S.D.N.Y. 2010) abrogated by Chin v. Port Auth. Of New York & New Jersey, 10-1904-CV L, 2012 WL 2760776 (2d. Cir. July 10, 2012) (“failure to institute a litigation hold constitutes gross negligence because the failure is likely to result in the destruction of relevant evidence” and sanctions can be issue based on this failure to initiate a litigation).

In re NCAA Student-Athlete Name & Likeness Licensing Litig., 2012 U.S. Dist. LEXIS 110824 (N.D. Cal. Aug. 7, 2012) (“sanctions are appropriate if the subpoenaing party fails to take reasonable steps to avoid imposing an undue burden on a third party,” and a showing of bad faith or improper purpose is not necessary before awarding sanctions under Rule 45).

Sherman v. Rinchem, 687 F.3d 996 (8th Cir. 2012) (federal law, not state law, applies to the imposition of sanctions for the spoliation of evidence; federal law requires a finding of bad faith prior to the imposition of sanctions of summary judgment or an adverse-inference instruction and bad faith did not exist where an individual lost rather than intentionally destroyed information.).

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION

ATTORNEY WORK PRODUCT

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APPENDIX B: SAMPLE INTERNAL LEGAL HOLD MEMORANDUM

To:

From:

Cc: .

Date:

Re: XXXXXX-Related Documents

DO NOT FORWARD

ATTORNEY-CLIENT-PRIVILEGED AND COMPANY CONFIDENTIAL

This memorandum is to [inform or remind] you about the ongoing litigation [or potential litigation] in connection with ___________________________________________ and your [continuing] obligation to preserve all documents that relate in any way to ___________________, in accordance with the policy explained to you [previously, and again] below. We are required by law to preserve all documents and records relevant to the inquiry in any way. You have been identified as a person who may have relevant documents and data, and your assistance is required so that we can preserve all corporate information related to the inquiry. The document retention obligations described in this memorandum are in addition to obligations to preserve documents in connection with other investigations and litigation with respect to [company name], all of which continue to be in effect. [Your responsibilities are similar to those that were outlined in previous memoranda concerning document retention with respect to the [describe other matters], but it is important that you review this memorandum and ensure that you understand and are in compliance with the document retention policies it describes.]

The directive in this memorandum is extremely important; please read it carefully and do not forward it without permission of the sender.

1. Severe consequences of failure to comply with this directive

The failure to preserve relevant documents and data can result in severe sanctions against _____________________ (the “Company”). Thus, it is of critical importance that you comply with the instructions below. Please note that you may be called to give testimony about your document and data preservation efforts. No one is permitted to destroy or delete relevant evidence that could be helpful to an adversary or support our case and/or defenses.



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2. Departing employees

All departing employees in receipt of this memorandum are under an obligation to inform the legal department about any impending departure from the Company. You MUST contact [Company Name] Legal Department when you learn of your departure so that we can arrange for a preservation of your electronic data (from your computer and other sources) and collection of all relevant hard copy documents. Do not send any computer to the deployment center without first going through Legal. Please contact ______________ at __________________ if you are departing.

3. The matter

[Describe litigation or potential litigation] As a result of this litigation [or potential litigation], the Company requests that you continue to retain all related documents.

4. The types of data that you must retain

You must maintain hard copies of documents as well as all e-mail and other electronically stored information. Electronic information includes e-mail, voicemail, word processing documents, spreadsheets, databases, calendars, networks, computer systems (including legacy systems), servers, archives, backup and disaster recovery systems, tapes, disks, drives, cartridges, other storage media, laptops, internet records, web pages, personal computers, and other information storage devices. Retain any copies you have on any storage medium, and do not overlook sources of data such as portable hard drives, memory cards, “thumb drives,” blackberry, personal digital assistants, mobile telephones, iPods® and smartphones.

The term “documents” includes handwritten notes, drafts, tabulations, calculations, summaries, and work papers; it is not limited only to “formal” or “final” documents. Examples of documents (whether in electronic or hard copy) that should be retained include letters, correspondence, memoranda, reports, tabulations, calculations, invoices, vouchers, ledgers, journals, external and internal literature, books, notes, schedules, worksheets, plans, minutes, bulletins, brochures, catalogs, notices, press releases, transcripts, calendars, appointment books, diaries, charts, forecasts, and drafts of all such documents that mention or relate to the subject matter of the aforementioned investigation. This list is not exhaustive; it is provided by way of example only, and all documents relating in any way to the topics discussed in this memorandum must be preserved.

If you use a home computer or personal laptop to perform work on behalf of the Company, you must preserve any relevant information from that computer as well. If you use a personal email account to send emails related to work, you must preserve those emails. If you store hard copy documents in locations other than the office, those documents also must be preserved.



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YOU MUST MAKE DILIGENT AND REASONABLE EFFORTS TO PRESERVE RESPONSIVE DOCUMENTS IN ALL LOCATIONS WHERE THEY MAY BE FOUND.

5. The categories of documents and data you must retain

Documents you should retain include those that mention or discuss any of the following subjects with respect to [ ]:

•

•

•

•

There may be other categories of documents relevant to this issue. If you are unsure about the relevance of a document, be cautious and preserve it.

Please do not discard any documents (including email) relating to these topics or any other aspect of the [ ] issue. This request applies to documents now in your possession, as well as those you create or receive subsequent to this memorandum. We want to emphasize that normal attorney-client privilege will apply to many documents, so as with all attorney-client consultations, you should be assured that the document itself may remain confidential but you must take the ordinary steps to preserve the attorney-client privilege (e.g., not sharing the document with non-lawyers unless they have a need to know, not sharing the document with those outside the company).

Your only obligation at this time is to identify and preserve relevant documents. Please do not sort, categorize, index or summarize any documents—including electronic documents—that are responsive to this memo, but rather merely identify them and preserve them intact in the way that they were collected or created and filed in the ordinary course of business (e.g., if you created a personal folder in your e-mail, leave it intact and do not try to copy it to a CD or external drive). Also, please do not mark up any documents or create any new documents in response to this memo.

6. “Instant messaging,” text messaging, blogs and social networking sites

[Different language to be used if IM can be saved at server] The instant message/chat application currently in use at [Company] does not allow for messages to be readily saved at a Company level. As a result, and in order to comply with the requirements of this document hold memo, you should refrain from using instant messaging as a means of communicating information in any way relating to [issue subject to hold] until further notice. If you find that someone has communicated with you on via instant messaging in



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any way relating to [issue subject to hold], the document hold requires that you manually save the entirety of that communication.

Data from text messaging, blogs and social networking sites (e.g., Facebook, Twitter, LinkedIn, etc.) are not maintained on company servers. As a result, in order to comply with the requirements of this document hold memo, do not use text messages, blogs and/or social networking sites to communicate information in any way relating to [issue subject to hold] until further notice. If you find someone has communicated with you via text messaging or social networking sites regarding [issue subject to hold] please contact [Legal Contact].

7. Suspension of document destruction policies

Please suspend all standard document destruction programs, including programs or processes that automatically delete electronic information at the conclusion of a set period of time. [Destruction of backup tapes must be suspended, as well as any process that overwrites or destroys relevant information - determine how back-ups will be handled and edit accordingly.] If you are unsure whether some of your electronic information is subject to routine destruction, please contact [_______________] in the IT Department at corporate extension [______]. If you are unsure whether you have any archived hard copy documents, please contact [__________________] in the Records Department at corporate extension [_____].

8. Please err on the side of retaining documents, and contact [Legal Contact] with any questions regarding this memo or document preservation

We understand that these categories of information are broad; however, we do not know at this time which specific documents or categories of documents may be requested in the future. As a result, the Company must ensure that all documents of potential relevance are preserved. If you are not sure whether particular documents or records should be retained, please err on the side of caution; you must not destroy, discard, or delete those documents without prior approval from [Company] legal. If you have questions as to whether particular documents should be preserved, please contact [Legal Contact]. Further, if you believe that an employee who has documents or records subject to this directive has not been advised of his or her preservation obligations, please contact [Legal Contact] with the name of that employee.

9. General information

We anticipate that you will have questions about this retention effort, including questions about whether to retain specific documents or about saving email. Please do not hesitate to contact [Legal Contact] with any questions. In addition, if you believe that someone else at the Company may have important related material that should be



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included in this special document retention program, please contact [Legal Contact] rather than discussing this memorandum with that person.

Please do not discuss the lawsuit or any potential claims or issues with anyone outside the Company unless specifically directed otherwise. This letter is confidential and its contents may not be shared or discussed. Do not forward or distribute this memorandum without the permission of the sender.

We will continue to do our best to minimize inconvenience to you, but the need to comply with Court rules on this issue is very important. We appreciate your ongoing cooperation and assistance with this process.



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Signature Page Please confirm that you have read, understand and agree to comply with the above Document Preservation Memorandum dated [__________________] regarding XXXXXX-Related Documents in its entirety by signing below. If you have any questions regarding the Memorandum, please contact [Legal Contact]. Return only this page with your signature to [Legal Contact]. Please keep the Memorandum for your records. Sign_____________________________ Date__________________________ Print_____________________________