Grasping legal holds: what organizations need to know: several high-profile decisions make it clear that courts expect organizations to manage legal holds competently and will issue sanctions against those that do not. Taking the steps outlined in this article will ensure your organization is well-prepared.

• Author: Harris, Brad

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The legal hold as a necessary preservation tool has moved from the understudy to star performer. This year will be forever remembered as the year legal holds transformed from best practice to a necessary practice. Why? Judges in U.S. federal courts and some state courts have grown weary of dealing with procedural issues related to whether a litigant took reasonable steps to properly identify and preserve information related to litigation. Cases are clogging the court system, stuck on ancillary issues that are entirely avoidable, and the courts are crying, "Enough!" That makes it imperative to understand why legal holds are so important, what their purpose is, and how to implement them effectively.

A legal hold is the term applied to the steps an organization takes to suspend its routine destruction of expired records, non-records, and electronic data. A legal hold notice is the oral or written communication provided to members of the organization informing them that the retention policy of the organization is being suspended for potentially relevant information.

In the United States, litigants are obliged by law to preserve evidence, regardless of how incriminating it may be. When an organization "reasonably anticipates" litigation or investigation, a duty to preserve responsive information--in electronic and physical formats--arises, and it must set out in good faith to preserve that information and prevent its alteration.

If information is destroyed or altered, whether intentionally or inadvertently, it is referred to as spoliation of evidence. Indeed, this is the very problem that has angered judges in the United States. As U.S. District Judge Lee Rosenthal expressed in her Rimkus Consulting Group Inc. v. Nickie G. Cammarata opinion issued in February 2010:

Spoliation of evidence--particularly of electronically stored information--has assumed a level of importance in litigation that raises grave concerns. Spoliation allegations and sanctions motions distract from the merits of a case, add costs to discovery, and delay resolution. Records and information management (RIM) professionals play a critical role in ensuring that their organizations comply with their preservation obligations. They possess critical knowledge regarding:

* What information their organizations are retaining

* How long it is retained

* When it should be destroyed

* How and where it should be preserved, when required

* How to quickly and efficiently suspend routine destruction when their organizations come under a legal obligation to preserve such data

A Preponderance of Case Law

Since early 2010, noteworthy court opinions have been issued that prominently feature legal holds. The definitive conclusion is that courts (especially at the federal level) are focusing an unprecedented amount of scrutiny on litigants' legal hold procedures. They issue sanctions whenever existing procedures are not followed, are not adequate, or do not exist. The bottom line is: organizations that fail to grasp their legal hold obligations do so at their peril.

The first opinion to focus on legal holds this year was issued by prominent jurist U.S. District Judge Shira Scheindlin. She penned a series of seminal opinions that defined the concept of a legal hold in the Zubulake v. UBS Warburg case in 2004 and 2005. The Zubulake opinions have been widely cited throughout the United States. Needless to say, the legal community took notice when she issued an 89-page comprehensive legal holds opinion on January 11, 2010, in The Pension Committee v. Banc of America Securities.

In her Pension Committee opinion, Scheindlin reiterated many of her concerns from the Zubulake case six years earlier. A tremendous amount of legal resources were devoted to arguments over the poor legal hold efforts of a group of plaintiffs. Plaintiffs' failure to issue timely legal hold notices and to properly enforce the legal holds now seriously jeopardize their case. In her findings, Scheindlin concluded that an organization's failure to issue written legal holds will inevitably result in the destruction of relevant evidence.

Shortly thereafter, Rosenthal also called into question legal hold practices in the Rimkus case. The opinion singled...