NEW YORK: An Introduction to Litigation: General Commercial

To Retain Or Not To Retain? That Is The Question

As a result of an increased dependence on electronics, digital applications, and social media, clients today generate an incomprehensible amount of data. While such usage has been praised as an improvement in connectivity and the ability for more flexible work arrangements, lawyers appreciate that it also signals a logistical nightmare for complying with document retention obligations once litigation is perceived – a nuanced area of practice that remains a pitfall for many clients. The evolution of how clients communicate and the massive amounts of different kinds of data they generate necessarily calls for an overhaul of the way document retention notices are thought about, drafted, and implemented. There are three areas that are in dire need of improvement: 1) the scope of preservation, 2) non-party preservation, and 3) compliance tracking.

Broadening the scope of data preservation

First, the scope of data that must be preserved must be broadened to embrace the realities of how clients communicate today. Even though in years past, document retention notices focused on the retention of paper documents and emails, clients now communicate on many different mediums, resulting in traditional retention umbrellas failing to capture some relevant data. Today, it is common for clients to regularly engage in workplace collaboration and communications over text message, WhatsApp, Slack, Microsoft Teams chat, Signal, WeChat, and Dropbox, to name a few. Given the breadth of disparate systems that clients use, document retention notices should specify that potentially relevant materials, regardless of their format, version, or medium, must be preserved. Failure to retain such records can result in sanctions and adverse instructions in litigation. See eg, In re Keurig Green Mountain Single-Serve Coffee Antitrust Litig., 341 F.R.D. 474 (S.D.N.Y. 2022) (preservation missteps, including loss and destruction of documents, failing to promptly serve litigation hold notices on certain custodians, and failing to adequately interview certain custodians about their documents, led to award of attorneys’ fees, costs, and disclosure of spoliation to jury); Drips Holdings, LLC v. Teledrip LLC, No. 5:19-CV-02789, 2022 WL 3282676 (N.D. Ohio Apr. 5, 2022) (mandatory adverse inference instruction given to jury for deletion of relevant Slack data); Schnatter v. 247 Group, LLC, No. 3:20-cv-00003, 2022 WL 2402658 (W.D. Ky. Mar. 14, 2022) (sanctions imposed on Papa John’s for deleting text messages).

To help communicate to clients and other recipients how broad the retention umbrella is, it is recommended that the hold notice include a list reflecting the different kinds of materials to be retained, such as: hard-copy documents (including papers with hand-written notes), emails (along with documents in the “Inbox,” “Sent Items,” “Deleted Items,” “Drafts,” and other generic folders that may contain relevant electronic documents), text messages (including messages sent via Slack, WhatsApp, WeChat, or any other messaging applications), voicemail messages, calendars, notes, memos, letters, drafts, telephone messages, tape or other audio recordings, transcripts, computer databases, and other computer files (such as shared drives and local documents on a desktop, on any personal or home computer, on any smartphone or other portable device, or in individual email folders or archives of messaging applications). The notice should state that the recipient is also obligated to retain potentially relevant materials that normally would be discarded in the ordinary course of business, requiring the recipient to turn off auto-deletion functions over relevant emails, documents, and folders, or create appropriate archives to prevent deletion of any such computerised information. The notice should make clear that any doubt as to whether a document is potentially relevant should be resolved by retaining it. Lastly, the notice should include the contact information for internal and, to the extent applicable, external attorneys who can help address any questions. To maximise attention to the importance of these retention obligations, it is recommended that the notice be sent by a high-ranking executive, such as the client’s General Counsel, Chief Executive Officer, or the Chief Operating Officer, as part of a confidential and privileged attorney-client communication.

Non-party preservation obligations

Second, non-party preservation obligations cannot be forgotten. Preservation duties extend not just to the potential parties of a litigation, but also to third-parties over which those potential parties exercise control, including outside IT managers that are responsible for overriding and pausing auto-delete functions of potentially relevant data and information, consultants, and certain professionals (ie auditors, accountants, etc.). See eg, GenOn Mid-Atlantic, LLC v. Stone& Webster, Inc., 282 F.R.D. 346, 355 (S.D.N.Y.) (plaintiff had a duty to preserve documents in the possession of a non-party consultant because the documents were in the practical control of the plaintiff), report and recommendation adopted, 2012 WL 1849101 (S.D.N.Y. 2012); Babaev v. Grossman, 2008 WL 4185703, *3 (E.D.N.Y. 2008) (finding that the defendants had sufficient “control” over their bank records to trigger their duty to preserve them); In re NTL, Inc. Sec. Litig., 244 F.R.D.179, 195 (S.D.N.Y.) (finding that the defendant “had both the legal ‘right’ and certainly the ‘practical ability’ to obtain the relevant documents . . . , and therefore had the necessary ‘control’ of those documents to be able to preserve . . . them”), report and recommendation adopted, 2007 WL 1518632(S.D.N.Y. 2007). In addition to timely forwarding the retention notice to these third-parties, it is important for the client and/or the litigation team to confer with them to ensure they understand the scope of the notice and the actions that must be taken to comply with the requirements. 

Document retention obligations

Third, given the complexity of document retention obligations, the length of time over which a litigation hold may run (oftentimes years), and the number of individuals and companies that must collaborate to properly retain relevant information, compliance must be diligently tracked. Technology can help monitor and track compliance. Clients can use “read-receipts” to require recipients to affirmatively confirm that the email notice was received. A subsequent email can be sent with embedded voting buttons that require the recipient to acknowledge they performed the obligations described in the notice, such as turning off auto-deletion policies, logging emails and documents on central databases, scanning in hard-copy documents in designated folders, saving communication logs from chat application, etc. Maintaining detailed records of document retention outreach and compliance monitoring, not only, allows clients to ensure they have satisfied their retention obligations, but also helps clients and their attorneys guard against any allegations of spoliation that may arise in the future. Recording the release of a litigation hold after a matter has been fully disposed of, settled, or adjudicated is also important. It is prudent to first cross-check whether any retained data is subject to a different litigation hold pertaining to another matter before a release notice is sent, but if there are no other applicable obligations to retain the data, a further notice should be sent to the same recipients informing them that standard retention procedures once again apply.

Given the gravity of sanctions and adverse consequences that may accompany failures to preserve relevant documents to a litigation, clients and their attorneys should remain vigilant in monitoring how and where relevant custodians communicate, which third-parties must also be notified of the retention obligations, and how retention obligations are satisfied. And, where evolutions continue to materialise, clients and attorneys should continue to customise their retention notices to account for these developments in order to comply with their obligations.