Rolling the Dice on Legal Hold and Self-Collection: Not Worth the Risk

Daniel Lim

Corporate Counsel

12-10-2012

Relaxed legal hold processes, including letting custodians self-collect relevant data, have long been the de facto means of responding to the duty to preserve electronically stored information (ESI) in a legal action. This has always been a weak link in the e-discovery process, but two recent court decisions are making that strategy even more risky.

This past summer, both the Second Circuit and Southern District of New York courts issued opinions addressing the adequacy of legal hold notices, self-collection, and ESI search capabilities.

On July 10, 2012, the Second Circuit issued an opinion in Howard Chin v. The Port Authority of New York & New Jersey addressing the legal standard for failure to issue a legal hold notice for relevant evidence. The opinion limits the often-cited standard for legal holds announced in Pension Committee by Judge Shira Scheindlin, U.S. District Court judge for the Southern District of New York, in 2010.

Perhaps serendipitously, Judge Scheindlin issued an opinion three days after the Second Circuit opinion addressing the adequacy of preservation and ESI searches for Freedom of Information Act requests in National Day Laborer Org. Network v. United States Immig. & Customs Enforcement Agency, 2012 WL 2878130 (S.D.N.Y. July 13, 2012) (NDLON).

Both opinions provide a good summary of the state of the law for the “left-hand” side of the standard Electronic Discovery Reference Model (EDRM), including addressing the following points:

Failure to issue a legal hold notice for relevant documents is not gross negligence per se, but a factor in determining whether an organization should be sanctioned for preservation failures.
“Custodians cannot be trusted to run effective searches without providing a detailed description of those searches,” NDLON, slip op. at 36 (internal quotations omitted).
There is a need for the testing and refinement of e-discovery search terms.

To Hold or Not To Hold

The Chin case is an appellate opinion that addresses the alleged failure to institute a legal hold for relevant files. The case involved a group of Asian American police officers alleging violations of Title VII by the New York and New Jersey Port Authority based on their being passed over for promotions. Charges of discrimination were filed in January of 2001. During discovery, the plaintiffs learned that the Port Authority had failed to issue a legal hold to preserve at least 32 promotion folders used to make decisions between August 1999 and August 2002. Plaintiffs sought an adverse inference instruction for the spoliation, but the district court denied the motion, finding ample alternative evidence regarding the relative qualifications of the plaintiffs. The district court found that the defendant’s destruction of relevant documents was “negligent, but not grossly so.”

Second Circuit Rejects “Gross Negligence” Notion

Upon review of the district court’s denial of an adverse inference instruction, the Second Circuit rejected the notion that failure to issue a litigation hold constitutes gross negligence per se, as Judge Scheindlin had announced in her Pension Committee decision in 2010. Rather, the better approach was to consider the failure to preserve as a factor in determining whether discovery sanctions should issue.

Under an “abuse of discretion” standard, the appellate court affirmed the trial court’s denial of the adverse inference instruction given the limited role of the destroyed folders in the promotion process and the ample evidence plaintiffs were able to present as to their relative qualifications for promotion over those who were promoted.

The question remains as to how much of a practical effect this change in culpability standard should have on an organization’s decision to issue a legal hold. In Chin, the result turned into a general “no harm, no foul” scenario, as most of the plaintiffs succeeded on their Title VII claims.

The “Who” and “How” of Preservation

The NDLON litigation centered on a FOIA request by three plaintiffs—the National Day Laborer Organizing Network, the Center for Constitutional Rights, and the Immigration Justice Clinic of the Benjamin N. Cardozo School of Law—who sought information about a federal immigration program known as “Secure Communities” from the U.S. Immigration and Customs Enforcement Agency, the U.S. Department of Homeland Security, the Executive Office for Immigration Review, the FBI, and the Office of Legal Counsel.

The NDLON opinion ruled on cross motions for summary judgment on the adequacy of the government’s searches. Judge Scheindlin took a systematic look at the “adequacy” of the government’s efforts to find and provide plaintiffs with the ESI requests and found that some of the government’s searches were not adequate because of their choice of which government employees’ information to search, what keywords were used in searches and, critically, the method by which those search terms were combined and deployed in the searches.

Emphasis on Keyword Search Methodology

An instructive aspect of Judge Scheindlin’s analysis focused on how keyword searching is conducted. She quoted Iturralde v. Comptroller of Currency, 315 F.3d 311, 315 (D.C. Circuit 2003) that “[t]he adequacy of a FOIA search is generally determined not by the fruits of the search, but by the appropriateness of the methods used to carry out the search.”

Her first point goes to consistency of search methodology. She notes that, according to the government’s affidavits, it had not utilized a consistent set of keywords in conducting searches. She found that it was unclear which keywords were used by individuals searching for responsive data and how the keyword searches were constructed.

Judge Scheindlin pointed out how easy it is for the untrained to make search mistakes. These include misspelling search terms, failing to search email for the “subject field” as well as the “message body,” and failing to employ Boolean operators properly. “In order to determine adequacy, it is not enough to know the search terms. The method in which they are combined and deployed is central to the inquiry,” she observed.

Consistency across a search of many government employees’ data was also hampered by the fact that the government had many employees search their own data, arguing that it was “unclear why custodians could not be trusted to run effective searches of their own files, a skill that most office workers employ on a daily basis.”

Judge Scheindlin provided two answers:

“Custodians cannot ‘be trusted to run effective searches’ without providing a detailed description of those searches . . . .”
“Most custodians cannot be ‘trusted’ to run effective searches because designing legally sufficient electronic searches in the discovery of FOIA contexts is not part of their daily responsibilities. Searching for an answer on Google (or Westlaw or Lexis) is very different from searching for all responsive documents in the FOIA or e-discovery context.”

This disapproval is in line with the steady stream of court decisions in recent years criticizing—sometimes even issuing sanctions in response to—counsel failing in its responsibility to preserve potentially responsive data to individual custodians by outsourcing this crucial task. Her critiques of both disparate search methodologies and unreliable custodian self-collection both go to the issues of consistency and effectiveness when searching and collecting ESI.

Conclusion

Both the Chin and NDLON decisions demonstrate that basic steps of issuing legal holds and preserving ESI cannot be taken for granted. The changes to the Federal Rules of Civil Procedure relating to the preservation of ESI have been in place for more than six years, yet organizations continue to make missteps resulting in extended proceedings about the process of discovery rather than the merits of the substantive issues in the proceeding. The time and resources spent on debates over whether a specific action or inaction will result in spoliation or sanctions are better allocated to putting together a comprehensive, proactive plan that provides a systematic process for issuing legal holds and preserving ESI on a consistent basis for every case and every investigation.

Daniel Lim is the vice president and deputy general counsel of Guidance Software, Inc.