A company is obligated to preserve evidence when it “reasonably anticipates” litigation. Failure to issue a written litigation hold at that time can constitute gross negligence. (See Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities , 685 F. Supp. 2d 456 (S.D.N.Y. 2010) (Scheindlin, J.).) Though a company is clearly on notice of litigation when it is served with a complaint, the duty to preserve can arise earlier — sometimes years before litigation actually commences.
The standard for determining when litigation is reasonably foreseeable has been described as “flexible” and “fact-specific.” (See Micron Technology v. Rambus , 645 F.3d 1311 (Fed. Cir. 2011).) Although such a standard allows district courts discretion to decide whether — in hindsight — spoliation has occurred, it can pose challenges to counsel responsible for advising their clients in pre-litigation disputes. Should you issue a comprehensive litigation hold and potentially incur large costs and compile voluminous records for a litigation that may never materialize, or should you continue routine document management practices and risk the serious consequences of spoliation?
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