In our electronic age, an organization compiles voluminous data and communications across the spectrum of its management and operations.
The organization must make ongoing decisions regarding the extent and timing of the destruction of records. It has likely adopted retention policies based upon the practical realities of its operational capacities and relies upon routine deletion protocols to manage its information.
When faced with the prospect of litigation or a regulatory investigation, the organization must alter its typical recordkeeping practices. Instead, it must implement a “litigation hold” to locate and preserve all information relevant to the issues at stake.
The failure to devise and maintain an effective litigation hold can result in adverse consequences in a legal proceeding, including the imposition of monetary sanctions or the dismissal of claims or defenses. Sanctions may be imposed without proof of bad faith.
The Rhode Island Superior Court recently issued a detailed decision sanctioning two defendant companies for their “spoliation” of evidence – the destruction of records that were relevant to the plaintiff’s claims. The court precluded one company from presenting any evidence regarding a material part of its defenses and ruled that an adverse jury instruction should issue against the other company.
At times, the need to implement a litigation hold will be obvious, such as the receipt of a demand letter threatening an impending lawsuit or the service of a complaint filed in a court or regulatory body. Other times, the signals will be far more subtle.
Employees may be contending that employment practices are unfair, customers may be complaining about services, or parties to a contract may be questioning performance. The organization must evaluate realistically and cautiously whether a contentious or disputed matter will likely develop into a legal proceeding. This analysis is compounded by applicable statute of limitations, which may allow the claimants or investigative bodies several years to commence an action.