Litigation hold letters have become commonplace in commercial litigation since the string of Zubulake decisions in 2003, Zubulake v. UBS Warburg, 220 F.R.D. 212, 217 (S.D.N.Y. 2003). The duty to preserve both hard copy and digital evidence exists under both federal and state law., as in Mount Olivet Tabernacle Church v. Edwin L. Wiegand Division, 2001 Pa. Super 232, 20, 781 A.2d 1263, 1270-71 (Pa. Super. Ct. 2001); 571 Pa. 60, 811 A.2d 565 (2002). This duty begins when a party knows or should have known of the threat of litigation, as held in PTSI v. Haley, 2013 Pa. Super 130, 71 A.3d 304, 315-16 (Pa. Super. Ct. 2013). Destruction or negligent loss of evidence that should have been preserved may warrant an adverse inference charge, fines, costs or other sanctions, as in Pa. R.C.P. 4019(c)(1)-(5); Oxford Presbyterian Church v. Weil-McLain, 2003 Pa. Super 14, 815 A.2d 1094, 1105 (Pa. Super. Ct. 2003). The duties of the parties to preserve evidence makes litigation hold letters both offensive and defensive weapons, provides the opportunity to frame the arena for discovery and send important messages to both your own client and your opponent.

The duty to preserve evidence, especially as it pertains to digitally stored material, frequently poses a significant burden—of both time and money—on parties in a commercial dispute. This is due to the large number of technical considerations that must be made to comply with a litigation hold duty, such as determining the universe of hard copy and digital evidence repositories (i.e., email, hard drives in copiers, cloud accounts, etc.), determining the parameters of a search of those repositories, taking the time to search those repositories and then preserving the results in compliance with the law. However, attorneys should look at the litigation hold duty as not merely a burden, but as a strategic opportunity. You must send litigation hold letters to your own client and to all opposing parties. Strategic opportunities exist for both; there is significant risk in squandering them.

Client-Facing Litigation Hold Letters

Client-facing litigation hold letters are sent to protect the client; they direct the client to preserve information that may be discoverable in order to comply with the law and avoid potential sanctions. This is the primary strategic opportunity; attorneys should draft these client-facing letters to ensure that the client's duty is clear, identifying as many potential repositories of data as possible for the client, and setting forth how those repositories must be preserved and searched. The client-facing letter is not a “fire-and-forget” letter; it is the start of a process. Ensure that your letter makes clear to the client that you will schedule regular follow-ups with the client, and obtain documentation that your client is complying with their obligations. This documentation can then be used to defend against claims that your client has allowed evidence to be altered or destroyed.

Further, the litigation hold letter can help make the reality of litigation clear to your client. In instances when a client insists on proceeding with ill-advised litigation, a litigation hold letter and ensuing discussions can bring the cost and burden involved into sharp relief for a client that has not listened to your advice. The timing of these letters also helps; they should be sent as soon as the attorney is aware of the potential of litigation. This allows the attorney to use litigation hold letters to help manage the client's expectations from the beginning of the matter. This can be especially important for mid-sized clients. Smaller clients may not have repositories of digital information that require significant cost to review; larger clients frequently have existing internal legal and IT departments who are familiar with the process. Midsized clients may have legacy systems from their growth, inexperienced personnel and a lack of policies that can magnify the costs of data collection. Getting ahead of the problem and ensuring that the client sees the time and cost of their duty to preserve evidence is important from both a client management and a litigation management point of view.

Finally, a litigation hold letter to your client helps to protect you. Failing to advise your client of their duty, and failing to guide them through the process of identifying, searching and preserving evidence, can harm your relationship with your client and lead to professional liability. You do not want to explain to a judge why you did not advise your client to preserve evidence. Sending a litigation hold letter as soon as you are aware of a potential litigation matter, and documenting your efforts and your client's efforts to comply with the duty to preserve evidence is an important part of commercial litigation practice.

Litigation Hold Letter to Opposing Parties

Rule 4.2 of the Rules of Professional Conduct generally prohibit communication directly with opposing parties without the permission of their counsel. A litigation hold letter can act as a permissible communication if you send it to an unrepresented party at the beginning of a matter, along with the initial demand letter or other communication, or you send it to opposing counsel, knowing that it will likely be shared with the opposing party by their counsel.

Knowing that the litigation hold letter is likely to be reviewed by the opposing party means that you should not rely on a form letter. Each letter should be crafted for the party it is directed to, and in the context of the matter at hand. This gives you the opportunity to impress on the opposing party a number of issues, such as: the cost and work involved in the litigation; whether you intend to demand access to trade secrets or confidential information; whether you intend to demand direct access to hard drives; whether you expect that the “internet of things” is relevant (i.e., hard drives in copiers, fax machines, etc.); whether you expect data management policies to be changed for the duration of the litigation; etc. You can make clear that you know about certain information the party believes hidden or unknown. You can make clear that data relating to certain individuals must be preserved, or that repositories that may contain 'deleted' data must be preserved (although this is the subject of a different article, there is really no such thing as “deleted” data). The discussions that the opposing party will have to have with their counsel regarding your litigation hold letter may lead to a more reasonable settlement position or confirmation of information that you suspect, but cannot yet prove, exists.

Responding to Litigation Hold Letters

Just as a litigation hold letter has strategic value in defining the universe of an opposing party's obligation to preserve evidence, the response to that letter provides an opportunity to narrow that universe. Never let a litigation hold letter go unchallenged; ensure that you respond to all areas of the letter—narrow the universe of repositories of data, challenge the types of data demanded, and limit the work being demanded of your client by presenting an efficient and limited data preservation plan that will meet your client's obligations under the law. This pushback should make it clear that although you and your client are diligently complying with your obligations to preserve evidence, that you will not allow the opposing party to define that obligation. Providing a reasonable and limited plan of preservation puts the ball back in the opposing party's court; if they fail to challenge the plan, it will be more difficult for them to claim you have violated your obligations. Draft the response letter as if it were going to be read by the judge, and then follow up on all positions taken in the letter.

Conclusion

Litigation hold letters allow you to frame the arena for discovery, manage your clients' expectations, impress on the opposing party the gravity of the litigation and set up your potential discovery motions and responses, all at the beginning of litigation. A good litigation hold letter and response thereto is therefore a critical part of discovery and litigation strategy, and any good commercial litigation practice.

Christopher E. Ezold is the managing partner of the business and health law group at the Ezold Law Firm. He has been litigating commercial matters for over 20 years in state and federal courts, including contracts and UCC matters, restrictive covenants, business divorces and more.