Legal Hold Best Practices for Modern Organizations

Courts and litigation opponents long have expected corporate litigants to implement effective legal hold programs as part of their reasonable, good faith efforts to preserve relevant data. See, e.g., Wm. T. Thompson Co. v. General Nutrition Corp., 593 F. Supp.1443 (C.D. Cal. 1984) (imposing case terminating sanctions for destruction of relevant information after being on notice of the litigation). 

As the complexity and prevalence of electronic data sources evolved over time, data preservation standards expanded to meet new technologies and phrases like “litigation hold” joined the legal lexicon.  See Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 218 (S.D.N.Y. 2003) (“Once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a “litigation hold” to ensure the preservation of relevant documents”).

Federal Rule of Civil Procedure 37(e) established the standard for parties to preserve electronically stored information ("ESI") in anticipation of litigation or an investigation and details the sanctions and relief available if “reasonable steps” are not followed to preserve it.  Though "legal hold" and "data preservation" practices are commonplace, many companies still fall short in execution and practice.

Modern organizations may find meeting the reasonable steps standard required by the court rules more challenging and burdensome as new technologies and data sources are implemented across their companies. Following the practices outlined below will help your organization avoid the pitfalls of data loss that draw judicial ire and costly discovery sanctions.

Prioritize information governance and data preservation processes before you need it for a legal matter.

A modern organization’s data landscape is not only complex, but ever-changing.  Companies continually onboard and upgrade software and third-party applications.  Employees are always chasing the newest features or attempting to leverage the newest options in their industry.  It is important that a company understands what data is in its possession through information governance and knowledge management programs to avoid scrambling to identify data sources once a preservation obligation arises and losing data in the interim.  Clarify how to preserve data or turn off automatic deletion features when you are onboarding the new software or applications.  Determine how to collect or retrieve relevant data when it is needed down the road for a legal matter.  Understand the ways your employees use and create data (including on third party platforms), and whether/how it can be preserved when needed.  Document these findings and revisit the process regularly. 

When a preservation obligation arises, act methodically to identify relevant information sources.

Organizations are required to undertake reasonable steps in good faith to preserve relevant information when they anticipate litigation or investigations.  Once an organization has identified a need for data preservation, it must identify the pertinent custodians, systems, and other sources with that relevant information.  While certain sources and custodians may be identifiable by way of organizational charts or even on the face of the complaint itself, conducting surveys, questionnaires, or interviews with individuals who may possess, or may know how to find relevant data, memorializing the findings, and following up on the information learned, are important steps toward a demonstrating a defensible preservation effort.  For example, on January 26, 2024, the Court of Chancery of the State of Delaware issued an opinion imposing spoliation sanctions including an adverse evidentiary inference at trial against  an organizational defendant and its principal for having failed to take reasonable steps to preserve relevant text messages, citing among other things their failure to conduct custodian interviews which would have identified that a custodian had relevant text messages set to auto-delete and would have identified additional custodians in possession of the relevant text messages.  See Goldstein v. Denner, 310 A.3d 548 (Del. Ch. 2024).

A legal hold notice, where appropriate, should be issued to potentially relevant custodians, documenting reasonable steps in good faith to preserve data.  

A formal legal hold notice should detail the scope of the matter, the time periods for potentially relevant data, and provide representative examples of the types of data that should be preserved pursuant to the notice.  It should explain the custodian's obligations to comply with the legal hold notice and provide a reliable contact for questions regarding compliance.  There may be circumstances where issuing a legal hold notice is not appropriate, such as a sensitive internal employment investigation.  In these instances, a "silent hold" can be placed on the custodian's data to prevent data loss on sources that can be automatically preserved, without notice to the custodian.  There may also be instances where a formal legal hold is issued to the owner of a non-custodial data source that has relevant information to a matter, such as a database, SharePoint site, or other system or application used by the organization. All of the leading legal hold tool providers include automated processes for issuing and tracking legal hold notices.  Many of the providers also include processes and tracking for silent holds and non-custodial data source holds.

Invest in legal hold software to organize, automate, and document your data preservation practices.  

Legal holds and data preservation may not be flashy budget priorities, but investment in legal hold software is a wise expenditure that will save the organization money in litigation costs and potential sanctions down the road.  There are many legal hold software options available in the industry, which can issue legal hold notices and custodian surveys and track responses, automate data preservation, and organize your holds through automated workflows and user-friendly interfaces.  Importantly, use of an industry standard hold tool bolsters the reasonableness of your process in the eyes of litigation opponents and judges, which reduces the potential for costly, risky discovery-on-discovery, which is becoming more prevalent.  See e.g., EEOC v. Formel D USA, 2024 WL 4172527 (E.D. Mich. 2024) (ordering production of legal hold notices and other information regarding preservation efforts following a claim that relevant data was lost due to server failure).   Moreover, in the event your preservation efforts are subject to dispute, the leading legal hold tools can provide reliable, industry-accepted documentation of your preservation efforts with little effort. 

Whenever possible, rely on automated preservation, as opposed to custodian-driven preservation efforts, to meet your preservation obligations. 

While certain data types (such as hard copy notes) may always involve custodian involvement in the preservation process, many electronic data sources can be preserved automatically on the backend, for example, through built-in software features or mobile device management software.  Courts often expect more than just the issuance of a legal hold notice to deem an organization’s efforts to preserve information reasonable where individuals are responsible for preservation, especially if the scope or instructions in the legal hold notice are complex and challenging for individuals to understand.  Automatic preservation avoids human error such as misunderstandings regarding hold instructions or scope, accidental loss, or intentional destruction on the part of an employee.  Additionally, if a legal hold notice also instructs employees to preserve the data it may operate as a backup method and increase defensibility.

Increased judicial scrutiny of data preservation and legal hold practices necessitates organizations to prioritize information management and legal hold tooling infrastructure.  Investing in procedures, workflows, and tooling to ensure your company meets industry standards for legal holds and data preservation will reduce your risk of data loss and spoliation accusations in litigation.  Proactive data preservation and legal hold software can avoid legal risk and reputational harm that accompany discovery sanctions and judicial ire.