Five questions about global litigation holds

Implications of custodial non-compliance, and steps organizations may take to elevate employee compliance

Serious consequences for non-compliance exist when a legal hold is in effect. One is potentially substantial financial penalties for custodial lapses. For example, other cases have likewise produced fines in the millions of dollars for custodial lapses, failure to produce held data, and deliberately withholding case evidence.

Reputational damage is another concern. Failure to preserve litigation-relevant information could call a company’s trustworthiness into question, potentially damaging relationships with vendor/partners, customers, regulators, and even employees. Organizations that lack a clear process for preserving data can face critical decisions under the pressure of pending litigation. What data should be subject to legal hold? Which people should be custodians? In extreme cases, the inability to answer these and other related questions can necessitate a legal hold on all employees, a manual, time-consuming process that can lead to large-scale over-preservation of data.

An important step to address these and other issues is increased awareness of what legal holds entail. Potential ways to do this include online training for employees and contractors, including testing and annual attestations that they understand the process and are ready to perform data preservation duties. Clearly written enterprise-wide legal hold policies and well-defined processes for data retention can help guide custodial actions in the event of a legal hold notice. They can also assist in reducing the risk of over-preservation of data that is not relevant.

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Which leading practices should be considered in designing an effective legal hold workflow?

A discrete step that can provide significant benefit is to establish a custodian status-change mechanism. If a custodian leaves the organization, the legal department needs to be notified of the departure. The person assuming the vacated position will become the custodian and subject to the legal hold. A module in an integrated legal hold solution can track changes in the status of custodians in existing roles and captures the assumption of duties by new custodians.

An end-to-end legal hold solution can also help reduce manual processes. As noted above, the solution can provide linkage to backend data archives, enabling automated preservation of emails and other custodian data. An integrated solution can also help tame cascading holds in which individuals can be subject to multiple legal holds, some legal holds may overlap, and others that may lapse.

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Our take

As legal actions carrying fines and penalties for an inefficient legal hold processes increase, so does the need for organizations to implement a defensible legal hold process and support it with the necessary tools and technologies.

Companies and their legal teams can be effectively prepared to meet this growing need by conducting a program assessment to help them understand the current state, establish a desired future state, and identify and measure gaps. Also, identifying opportunities for improvement of the legal hold process is another important consideration. A risk-based approach to remediation can yield beneficial results in a relatively short timeframe.

Finally, considering a solution that automates the legal hold process from end to end can help reduce manual dependencies, provide robust audit trails, and enable thorough tracking and reporting mechanisms. An important part of that process is developing a “target operating model”, which can help map the journey to end-to-end legal hold management.

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