Compliance with a "litigation hold" generally means preservation of certain documents which may be relevant to a lawsuit. When a litigation hold is in place, parties must suspend their routine destruction of documents and preserve all documents for examination by another party.
Parties may request production of documents of a specific nature during the discovery phase, but a litigation hold can be put in place long before discovery begins and ensures preservation of documents that may become important as the legal dispute changes shape. In this way, a litigation hold may be broader than any future discovery request, as it involves preservation of anything and everything associated, or that may become associated, with the subject of the lawsuit.
A litigation hold can commence in a variety of ways. One party may serve another with a demand to preserve evidence, a lawsuit may be filed, or a party may be required by law to proactively institute a litigation hold when a dispute cannot be resolved. Federal law is particularly instructive and generally requires that the party put its litigation hold in writing so that all individuals are aware of the hold and understand its scope. "[T]he failure to issue a written litigation hold constitutes gross negligence because that failure is likely to result in the destruction of relevant information."1 Furthermore, "once a party reasonably anticipates litigation, it is obligated to suspend its routine document retention/destruction policy and implement a 'litigation hold' to ensure the preservation of relevant documents."2 Notably, the beginning of a litigation hold depends on whether there is a reason to expect the filing of a lawsuit, which could be long before suit is actually filed.
Likewise, a party's duty to preserve potentially relevant evidence arises "as soon as a potential claim is identified" and "once a party reasonably anticipates litigation."3 This duty can arise prior to the initiation of a lawsuit.4 Moreover, federal district courts in California have held that "[a] party's discovery obligations do not end with the implementation of a litigation hold–to the contrary, that's only the beginning. Counsel must oversee compliance with the litigation hold, monitoring the party's efforts to retain and produce the relevant documents."5 By requiring legal counsel to manage the litigation hold, it is clear that each party must ensure preservation of its own documents, rather than relying solely on what another party has requested.
However, by way of contrast, federal district courts in Texas have held proper compliance with a litigation hold is judged by each party's conduct and is not measured by blanket rules. Where parties demonstrate bad faith in failing to preserve documents, courts will find non-compliance with the litigation hold.6 Federal district courts in Illinois look to whether a party's conduct under a litigation hold was reasonable. "While [a party] need not have an official written policy regarding the preservation of documents related to litigation to avoid sanctions," its "apparent failure to warn its employees to preserve documents potentially relevant to this litigation evidences fault by acting with negligence or flagrant disregard of the duty to preserve potentially relevant evidence."7
Given the varying standards applied by the federal courts, engineers should have a policy in place for preserving information, documentation, and other potential evidence prior to the filing of any lawsuit, particularly where a reasonable person might recognize the potential for litigation in the future. In fact, the wisest strategy is to simply retain all information, documentation, and potential evidence indefinitely, or as long as possible, taking into account the jurisdiction’s applicable statutes of repose, regardless of state or federal document retention requirements.
1Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of America Sec., LLC, 685 F. Supp. 2d 456, 465 (S.D.N.Y. 2010).
2YCB Int'l, Inc. v. UCF Trading Co., Case No. 09-CV-7221, 2012 U.S. Dist. LEXIS 104887, at *25 (N.D. Ill. June 12, 2012).
3Zest IP Holdings, LLC v. Implant Direct Mfg. LLC, Case No. 10cv541-GFC (WVG), 2014 U.S. Dist. LEXIS 171223, at *25 (S.D. Cal. June 16, 2014).
5Hous. Rights Ctr. v. Sterling, Case No. CV-03-859 DSF, 2004 U.S. Dist. LEXIS 28877, at *29 (C.D. Cal. Dec. 6, 2004).
6Guzman v. Jones, Case No. L-10-121, 2013 U.S. Dist. LEXIS 196677, at *11 (S.D. Tex. March 28, 2013).
7Diersen v. Walker, Case No. 00CV2437, 2003 U.S. Dist. LEXIS 9538 (N.D. Ill. June 6, 2003).