Businesses have numerous reasons to retain their data besides for internal recordkeeping and privacy concerns. They must also consider the possibility of being entangled in litigation and be forced to turn over records that might be requested by the opposing side. Generally, if a company is involved in or even reasonably anticipates being involved in litigation, an audit, government investigation or even arbitration, it must ensure that relevant information is neither destroyed nor hidden.
Especially if not large enough to have its own legal department, a company should consult with outside legal counsel in the early stages of its formation to develop policies and procedures for litigation holds. Through such proactive measures, a business can avoid costly delays and possible court-ordered sanctions if forced to turn over records. Having such a policy can also be useful in non-adversarial situations, such as for mergers and acquisitions, divestitures and other business restructuring instances.
In companies without in-house counsel, typically the chief operations officer or information technology manager would be in charge of developing and implementing a litigation hold plan. Once it is determined that records have to be produced to a third party, the person designated to handle records should be able to quickly notify employees who may have relevant records or information.
When drafting an overall data detention policy, counsel should consider specifically defining the term “litigation hold,” as broadly as possible. For example, it may be described as a procedure undertaken by the business to preserve records in all forms, whether hard copies or electronic records, related to an existing lawsuit or one likely to occur, as well as to government investigations or other official requests for information. The plan should explicitly direct employees to suspend the ordinary destruction and disposal of records and information relevant to the litigation or investigation. It should override any existing retention periods set out in the company’s policies.
By including a clear and concise definition of a litigation hold and laying out the procedure for retaining and ultimately producing requested records, counsel can help ensure that employees do not mistakenly (or sometimes intentionally) destroy records and information the company has a legal obligation to retain and possibly turn over.
Counsel should also provide the business with a description of the steps that must be taken to carry out the litigation hold. The policy should be specific enough to give employees sufficient guidance to answer any demand or request for records, but not so detailed that it reveals any proprietary information or document retention programs that may be a unique practice.
An experienced outside counsel will also advise the company on circumstances in which it may legitimately hold back certain records and information. Such instances might include information that has long-term operational or strategic value to the company or would jeopardize its ability to defend its legal rights. In any case, all employees should be made aware of the legal consequences for either destroying company information or unauthorized disclosure without advice of counsel or others responsible for handling litigation holds.
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