Legal Holds

Companies use legal holds to preserve relevant information when they believe that there is a high likelihood of litigation – or any other type of investigation where business records will be called into question.

Legal counsel typically initiates a legal hold request when it believes that it is in its client’s best interest to suspend the normal disposition or processing of records. In a nutshell, the purpose of legal holds is to prevent evidence spoliation (the intentional or negligent withholding, hiding, altering, or destroying of evidence relevant to a legal proceeding), which can have serious legal consequences for the violating party, including fines and incarceration.

An archiving solution that can place critical electronic data on legal hold dramatically reduces legal exposure, while raising the awareness and accountability of employees to protect pertinent information.

While the importance of legal holds dates back to 2005 (Zubulake v. UBS Warburg) and was later codified with the FRCP Amendments (Dec 2006),  a number of recent cases involving legal holds demonstrate the courts growing impatience with litigants who fail to exercise due diligence when it comes to legal holds.

  •  Pension Committee v. Banc of America Securities: The court held that “the failure to issue a written litigation hold constitutes gross negligence.” Organizations must also identify all of the key players (or custodians), ensure that their electronic and paper records are preserved, cease the deletion of email and preserve the records of former employees that are in their possession, custody or control.
  • Rimkus v. Cammarata: The courts provided further guidance on how federal courts approach failures to properly preserve ESI and the range of sanctions permitted for such failures.
  • Crown Castle v. Nudd Corp.: The courts reaffirmed earlier rulings that failure to issue a written legal hold is grounds for gross negligence. As discovery progressed in this case, a great deal of responsive emails were subsequently uncovered from the defendant’s old computer.  
  •  Merck Eprova AG vs. Gnosis: The Southern District of New York imposed a $25,000 fine on Gnosis for failure to properly install a litigation hold and conduct appropriate searches for relevant email, which represented gross misconduct. The courts upheld that even small organizations like Gnosis are duty-bound to preserve relevant ESI.