how not to mess up a litigation hold

877.557.4273catalystsecure.com

How Not to Mess Up a Litigation Hold Mary MackAlon IsraelyJohn TredennickRachelle Rennagel

WEBINAR

ModeratorMary Mack | Executive Director | ACEDS

Alon Israely | Co-Founder | Total Discovery/BIA

Rennagel | eDiscovery Special Counsel | Pillsbury Winthrop Shaw Pittman LLPRachelle L. Rennagel is eDiscovery special counsel in the firm’s litigation practice and is a part of the nationally recognized Information Law and Electronic Discovery group.

Alon is a co-founder of NYC based legal services company, Business Intelligence Associates, Inc., a highly respected and successful legal technology consulting and solutions firm.

Mary is known for her skills in relationship and community building as well as for the depth of her e-discovery knowledge.

Presenters

John Tredennick | Founder & CEO | CatalystJohn is a former trial lawyer and litigation partner with a large national law firm, and has written or edited five books and countless articles on litigation and technology issues.

AgendaThank you for joining us! We’ll cover…

Lessons from VW and Enron: An introduction to the problem.

Legal Holds 101: What are your legal hold and compliance obligations?

Legal Holds 102: Complying with your compliance obligations.

Legal Holds 201: The practical side of legal holds: a senior counsel’s perspective

Legal Holds 501: Key issues for legal hold (advanced course).

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Lessons from Volkswagen and Enron

1

An introduction to the problem

U.S. v. Volkswagen

DOJ▪ Fraud Section, Criminal Division▪ Securities and Financial Fraud Unit▪ Environment and Natural Resources

Division▪ White Collar Crime Unit▪ US Attorney, ED Michigan

USA v Volkswagen AG, No. 16-CR-20394 January 11, 2017 Plea agreement

Law Firms▪ Steptoe and Johnson▪ Freshfields▪ Sullivan and Cromwell

Factors for Disaster

§ Different legal systems (Germany v US)

§ Different languages (check documents)

§ Different discovery obligations§ Different privilege (in house qualified

German attorney)

§ Bet the company case

§ Personal criminal liability

§ Elapsed time between verbal notice of hold and written hold

§ Verbal discussions

Chronology: August to September 2015Attorney A Speaks to Engineers

Hold is imminent,“Check docs”

August 27

Meeting—Forthcoming hold, imminent hold, check documents

August 31

Hold is issued.

VW AG calls Company A, asks for docs to be deleted.

September 1

Supervisor D gives Supervisor A a hard drive, asked assistant

to throw it away

September 3

Attorney A asked what to do about new docs—Keep on USB, only put finals on VW AG’s

system, and then, only if “necessary

September 15

How VW Remediated

▪ Self disclosure▪ Recover what has been lost

(forensics)▪ Termination (6), Suspension (8),

Disciplining (3)▪ Agree to huge fine ($2.8B)▪ Agree to no reimbursement,

indemnity▪ Agree to monitors

Obstruction of Justice?

§ Altered…or concealed a record or document or other object

§ Acted knowingly§ Acted corruptly and§ Acted with intent to impair the record,

document or object’s integrity or availability for use in an official proceeding

Legal Holds 101 2

What are your legal hold and compliance obligations?

Duty to Preserve

The duty to preserve requires a party to identify, locate, and maintain information and tangible evidence that is relevant to specific and identifiable litigation.

The Sedona Conference Commentary on Legal Holds: The Trigger & The Process, Sedona Conference Journal (Vol. 11, Fall 2010).

What is a Legal Hold

“Once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a ‘litigation hold.’”

Zubulake v. UBS Warburg (“Zubulake IV”) 220 F.R.D. 212 (S.D.N.Y. 2003)

2006 Amendments

Fed R. Civ. P. 37(f), Committee Notes (2006 amendments)

“When a party is under a duty to preserve information because of pending or reasonably anticipated litigation, intervention in the routine operation of an information system is one aspect of what is often called a ‘litigation hold.’”

Safe Harbor

Fed R. Civ. P. 37(e) (2006 amendments)

“Absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.”

Triggering the Duty

The duty to preserve relevant information arises when litigation is “reasonably anticipated.”

Triggering the Duty

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.

The Sedona Conference Commentary on Legal Holds.

Compliance

A consistent policy demonstrates reasonableness and good faith.

1. Identify relevant custodians2. Inform custodians of their respective duty to preserve relevant

information 3. Provide instructions for doing so4. Monitor compliance5. Keep an audit trail6. Release the hold when appropriate

Must be in Writing?

“The failure to issue a written litigation hold constitutes gross negligence.”

Pension Committee v. Bank of America Securities, LLC 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010).

Formal Holds?

1. The failure to institute a formal litigation holddoes not automatically constitute gross negligencefor sanctions purposes

2. But developing and implementing a litigation holdwill aid parties in avoiding allegations of spoliationand related consequences.

Kinnally v. Rogers Corporation 2008 WL 4850116, at 7 (D. Ariz. Nov. 7, 2008).

Amending Rule 37(e)

The current rule “has not adequately addressed the serious problems resulting from the continued exponential growth in the volume of such information.”

Advisory Committee on Civil Rules, Committee Notes

Rule 37(e) Failure to Preserve ESIIf ESI that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court:

1. Upon finding prejudice, may order measures no greater than necessary to cure the prejudice; or

2. If the party acted with intent to deprive another party of the information’s use in the litigation may:A. presume that the lost information was unfavorable to the party;B, instruct the jury that it may or must presume the information was

unfavorable to the party; orC. dismiss the action or enter a default judgment.

Culpability

§ Negligence§ Gross negligence§ Willful misconduct

The distinction between "negligence" and "gross negligence" is one of degree, with "gross negligence" described as "'a failure to use even that care which a careless person would use.'" In contrast, "willfulness" involves intentional conduct in "'disregard of a known or obvious risk that was so great as to make it highly probable that harm would follow. . . .'"

Penalties

A consistent policy demonstrates reasonableness and good faith.

1. Adverse inferences2. Directed verdict or finding3. Pleadings or case dismissal4. Attorneys fees5. Other penalties including contempt6. Sanctions on counsel or client

Inherent power of the court to correct misconduct

3 Legal Holds 102

Complying with your compliance obligations.

Legal to IT Language TranslationSo we’re all on the same page

▪ “Custodian” = “user” = “employee”

▪ “Legal hold” = “notify users and preserve data”

▪ “Documents” or “ESI” = “data”▪ “Data collections” = “securing the data”

“What happens on corp-net “behind the firewall” Preservation

▪ Identifying and gathering stuff, notifying people and ensuring housekeeping tasks are not breaching duties

Broadly Defined, Preservation Means:

▪Legal hold notification and acknowledgement management

▪Data identification and tracking (data mapping) ▪ IT Task Management- task suspension where necessary

▪Defensible and secure data collection

Preservation (broadly defined) = left side of EDRM

In Case You Don’t think IT Plays a Critical Role

THE IT DEPT ENSURES THAT THE MECHANICS OF PRESERVATION HAPPEN CORRECTLY!!

Related IT Tasks – Must be Addressed Early

▪Automated housekeeping tasks suspension (where appropriate and non-burdensome)

▪Archive copies/ processes implicated

▪Coordinate with legal regarding what systems/ data is/is not suspended

THIS ASPECT OF THE PRESERVATION PROCESSIS PRIMARILY RELATED TO ENSURINGINFORMATION IS NOT ALTERED OR DELETEDINADVERTENTLY BY AUTOMATED SYSTEM ANDDATA ADMIN TASKS.

Garbage In, Garbage Out Data Collections MUST be Done Right

▪ A deficient data collection process vastly increases risks

▪Risk of sanctions and worse

▪ Altering

▪Under/over collecting

▪Deficient integrity – spoliation

▪ Proper custodian involvement

▪Court and regulatory standards

▪ Protect client IT staff

▪ Losing on a technicality metadata

§ Forensic Principles Should Guide, Not Controlo Custodian Trackingo Chain of Custody (Source Tracking)o Metadata Preservationo File Hashing

§ Targeted Collections are Keyo Hard Disk Imaging vs.

Surgical Collectionso Targeted Systemso Caution on Contextual Collections

§ Scale is Important to Costso Legal Hold Solutiono Custodian Questionnaireso ESI Collection Technology

Defensible Data Collection BasicsGuiding Principles for All Data Collections

Legal Holds 2014

The practical side of legal holds: a senior counsel’s perspective

The Process – Identification THEN Preservation

Identification – Basic Steps§ Interview custodians - can’t identify without this and can’t

preserve what you don’t know about. § Interview and coordinate with IT - do this early to

coordinate avoid issues§ Departing employees§ Legacy Systems§ Repairs§ Meet with Legal - get ahead of privilege issues (work

product protection, trigger date, other attorneys)§ Technical Support – Outside vendors? Litigation hold

technology? § Document, Document, Document – tracking spreadsheets

Identification – Common Pitfalls

§ Custodians (including terminated/departing employees)§ Business units§ IT systems§ Third parties§ Paper files

Determine if identification should be based upon department, geography, job function or other criteria, such as date ranges, domain names, entity, etc.Group custodians into those that are key vs. non-key Identifying potentially relevant document and data types

“Owners” of data could include

Identification – Technical Issues

§ computer hard drives and shared drives§ databases§ archived data / backup tapes§ CDs, DVDs, USBs and other external

media§ audio recordings / video footage§ voice mail

The sources of potentially discoverable electronic information encompass virtually every form of media on which computerized information may be stored. Courts have required production of information from:

§ smartphone data, including text messages§ cloud-based sources, including employee

personal accounts§ social media§ web pages§ deleted files

Preservation – Legal Hold

§ The Myth of the Sample Legal Hold Notice: It must be tailored to the client’s ESI environment and the needs of the case. Litigation holds are always bespoke.

§ Involve IT early: They need to work closely with you to ensure data is preserved, especially non-custodian repositories and data in flux.

§ Proper identification: Essential for a successful legal hold.

§ Trust but verify: ensure that hold notice has been distributed, acknowledged and implemented, and that periodic reminders are sent out.

Preservation – Legal Hold Notice

§ Identifies the person(s) who are likely to have relevant information and communicates a preservation notice to those persons;

§ Communicates the preservation notice in a manner that ensures the recipients will receive actual, comprehensible and effective notice of the requirement to preserve information;

§ Is in written form;§ Clearly defines what information is to be preserved and how the

preservation is to be undertaken;§ Is periodically reviewed and, when necessary, reissued in either its

original or an amended

A legal hold notice is most effective when it:

The Sedona Conference Commentary on Legal Holds, Guideline 8 (August 2007)

Sanctions 37(e) – 2 Paths

Prejudice AnalysisIF ESI should have been preserved, ANDIF unable to restore/replace, ANDIF prejudice to party from lost info,THEN order proportional curative measures

Intent AnalysisIF ESI should have been preserved, ANDIF unable to restore/replace, ANDIF party acted with intent to deprive party of info,THEN Instruct jury that it can presume info unfavorable to party, OR dismiss action or enter default judgment

Legal Holds 5014

Key issues for legal hold (advanced course)

Legal Holds 5014


How does preservation and legal hold go together?

Legal Holds 5014


How do I handle third-party subpoenas?

Legal Holds 5014


What are counsel’s duties with respect to preservation and hold?

877.557.4273catalystsecure.com

How Not to Mess Up a Litigation Hold Mary MackAlon IsraelyJohn TredennickRachelle Rennagel

WEBINAR