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Legal hold

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A litigation hold prevents the destruction, alteration, or mutilation of an organization's records that are part of a pending or anticipated litigation.
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Contents

Overview

A legal hold, also known as a "preservation order" or "hold order", is a process that temporarily suspends the regularly scheduled destruction of specific records (both paper and electronic) in an organization that are required for a pending or anticipated litigation. There is a legal duty to preserve evidence.  Penalties can occur if a legal hold is not complied with and evidence is inadvertently destroyed or altered.

Background

In 2001, Arthur Andersen, Enron's auditor, aware of financial irregularities within the company and a pending SEC investigation, sent an email employees instructing them to destroy documents pursuant to its company document retention policy.[1]  This event caused a couple of things to occur that would forever change how businesses used document retention schedules.  In 2002, Congress enacted the Sarbanes-Oxley Act which made a company criminally libable for knowingly altering, destroying, mutilating, concealling, covering up, or falsifying a record or document with the intent to impede, obstruct or influence an investigation.[2]  The Arthur Andersen incident also caused the development of the Sedona Principles as a "best practice" for attorneys to follow when handling electronic document production during the litigation process.[3]  These principles were the basis for the 2006 amendments to the Federal Rules of Civil Procedure with respect to discovery of "electronically stored information" (ESI) in civil litigation at the federal courts.  Recently, states have decided to apply these same principles to the e-discovery process in their own courts.  Legal holds were thus expanded beyond the preservation of paper records, but that of electronic too.

Best Practices

A legal/litigation hold notice should be sent to all employees notifying them of the suspension of regular record destruction schedule for specific records that are relevant to the litigation at hand.  It must be indicated that these records must be retained until the hold is removed. 

References

  1. http://news.findlaw.com/cnn/docs/enron/usandersen030702ind.html
  2. http://codes.lp.findlaw.com/uscode/18/I/73/1519
  3. http://www.thesedonaconference.org/content/miscFiles/7_05TSP.pdf

External Links

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