Why Legal Hold Management is an Important Internal Control — – Can You Test Yours?

Every organization needs an auditable, centralized process for tracking legal holds, yet most admittedly lack good controls in this area.  Processes are not comprehensive and properly coordinated through proper policy development and training. We provide a few reasons here for that somewhat lofty statement, but this important topic deserves much deeper analysis.

Legal hold management has become a focal point since the passage of the amendments to the Federal Rules of Civil Procedure last year, but the duty to preserve in the face of known or anticipated litigation has always existed at common law.  The new rules are procedural and merely speak to the consequences that could flow when an organization cannot demonstrate that it has procedures in place to suspend the routine disposition of information.  In 2002, following the Arthur Andersen debacle, the Sarbanes Oxley amendments included changes to the Federal Obstruction of Justice Law, exposing individuals up to 20 years behind bars for the intentional destruction or concealment of information relative to pending or “contemplated” federal proceedings.  Effective compliance with the Federal Rules of Civil Procedure and the Federal Obstruction of Justice Law is unattainable without an enforceable and auditable records and information management program.

The use of Microsoft Excel or Access is a fine interim measure to track legal holds and preserve a record that individuals were notified to suspend the routine destruction or disposition of information.  Many companies do no more than this. In large organizations, or even smaller entities that have regular litigation exposure, however, a static repository of legal hold notices simply is not enough.  This is not an argument in favor of capital investment in a clunky new IT system (with software licensing and all the trimmings) for litigation hold management.  The starting point is having an understandable policy and proper employee training. 

Substantive criminal and civil laws necessitate action when an organization is on actual or constructive notice of legal or regulatory problem.  The need to provide notice of hold instructions occurs well before outside counsel is retained to represent a company.  A database or spreadsheet that merely tracks litigation holds but does not provide a real-time lens into an organization’s litigation profile will present difficulties.  A system must be accessible to and regularly updated by outside and inside litigation counsel, or whoever is charged with oversight of litigation at a company.  Like reserves management and analysis for FSAS 5, litigation hold management must be part of comprehensive litigation management procedures. However counsel tracks litigation, if at all, they must track holds in perfect lockstep with the opening and closing of litigation files. 

Your organization might already have license to use MS SharePoint or other applications with collaborative tools that can be configured inexpensively using to establish a platform that inside and outside counsel may use to access and track critical litigation data.  A law department you should have no problem getting adequate support and funding to create a system that does not require capital investment.  The key, however, remains in the policy development training, and training lawyers is not easy. 


4 Responses

  1. […] , Litigation Hold DataKos blog has posted an article seeking to persuade organizations to develop a litigation hold database: Effective compliance with the Federal Rules of Civil Procedure and the Federal Obstruction of […]

  2. I do not mean this as a commercial for InBoxer. But, your posting is so in line with what we are doing that I had to comment. Actually, we are looking for some companies to test a new expanded litigation hold / electronic discovery feature for the InBoxer Anti-Risk Appliance and would like to see if your readers may be interested.

    We believe that one of the most important functions of an email archiving appliance is to manage litigation holds. Of the competitive products that can put holds on email, usually they are in one category of hold.

    We have incorporated litigation hold management into our solution with two unique capabilities:

    AUTOMATIC LITIGATION HOLD — InBoxer automatically places any downloaded (exported) message or viewed message on hold. This is because we think that anything downloaded or viewed is a message of interest. In that way, it cannot be deleted between the time of the first search and the eventual dataset. (Holds can be removed.)

    LITIGATION HOLD BY CASE/SET — Instead of placing messages on litigation hold, they can be organized into sets for hold. A message can be in multiple sets. If any one set is on hold, the message is held. So, if a hold is removed from one set, a message can still be on hold if it fits into another set.

  3. There area also software applications such as Exterro Fusion which provides an integrated framework to implement a repeatable and defensible legal hold process.

    More importantly allows for comprehensive e-discovery management providing both corporate legal departments and law firms with greater control over the entire discovery process, from planning, legal holds, collection, processing, review through production.

    With Exterro Fusion, you have complete visibility into the e-discovery process. Exterro Fusion enables legal teams to manage custodians and data sources, automate legal hold process, streamline collection workflow, facilitate vendor relations, track review and production processes, monitor progress, track costs, set budgets and manage schedules — in an integrated environment, giving you greater control over legal teams and discovery processes.

    Having a repeatable, consistent & defensible process is key .

  4. I think the record center in SharePoint 2007 would be a great platform to deliver litigation hold, in addition to that, you can add custom event handlers to document libraries to manage the hold proces


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