I was reviewing a client’s recall plan recently, trying to anticipate “worse cases” scenarios and a couple came to mind. One was using a company’s in-house attorney or “usual” outside counsel in the initial stages of a recall or outbreak investigation thinking “these conversations/e-mails are confidential” and finding later if the matter was to go into litigation that they may not be protected. The other, which I am about to go deeper into, concerns the sheer magnitude of electronically stored information (ESI) that even small agriculture or food operations create—especially in a tense situation accompanying a recall, investigation or outbreak—that a company must preserve if litigation commences.
A litigation hold is a written notice advising a defendant and custodians of electronically stored information (ESI) to preserve potentially relevant records and information that pertain to pending or anticipated litigation.
How does this come up in the food production arena? Well, take for instance e-mails from some other entity in the chain of distribution advising your company that a microbiological test of produce in a grocery distribution center or an illness somewhere might be tied to your crop. A flurry of questions back and forth within your company and with the others in the chain of distribution trying to find out more information to determine your involvement and response is likely to ensue. And you probably used e-mail. That is “ESI.”
Someone in the recall group will be called on manage the preservation of the ESI and the costs and the company’s exposure. Thought needs be given to whether this will be an in-house attorney (if present), a specially retained attorney hired to assist with the food safety issue, that person supervising counsel, or someone else in senior management.
Below are a few tips to help you in this regard and at the same time assist in preserving the company’s bottom line:
1. Be Prompt. The duty to preserve information immediately arises upon receipt of a complaint or notice of a lawsuit, receipt of a subpoena as a third-party to an existing lawsuit, receipt of a formal order of investigation from a regulatory body, or knowledge of a potential claim. This last point is so broad that one can argue that knowledge of adulteration or contamination of a commodity that may be marketed ready to eat, or as a component in such product gives rise to knowledge of a potential claim.
Failure to timely institute and maintain a litigation hold can have serious consequences, including monetary penalties, adverse jury instructions, preclusion of evidence, and in the worst cases, default judgment or dismissal. In other words, the worst—and potentially most costly— thing you can do is delay.
2. Define Scope. A typical litigation hold letter describes the litigation and the type of evidence that should be preserved. The person charged with responsibility in a company’s recall planning documents must be sure to understand the scope of the evidence that may become subject to the litigation and identify the key personnel in your company affected by the hold. Once you understand the scope, respond in writing (or have your counsel do so) stating the measures you are taking to identify and preserve relevant information.
I have found that responding in writing provides the company with the opportunity to establish the parameters of what it considers relevant and responsive to the hold. An early response also helps to shift the burden to the opposing party to articulate why those parameters should be broader. It goes without saying that the narrower the scope of the hold, the less costly and burdensome it will be.
3. Have A Plan. Have an action item in the recall plan for handling litigation holds and designate a team, including an IT professional, to be responsible for them. This component of the recall team should be able to promptly initiate the litigation hold action plan and work with key personnel involved in the litigation to identify the custodians of relevant records and notify them of the litigation hold. Although the litigation hold does not necessarily take effect as immediately as do other tasks in a recall plan, it is important to consider the effect of a litigation hold, and be able to have given thought to the issue before one is in the middle of an investigation or recall. Certainly thought needs to be given prior to a complaint being filed.
Keep in mind that relevant evidence may exist in paper or in today’s world more likely electronic form, and may be located in several places, including: employee files and workspaces; employee homes; emails and voicemails (both corporate and personal); company network storage; computer hard drives and external hard drives (both corporate and personal); corporate back-up tapes; and cellular telephones, PDA’s, and smart phones. Having a designated IT professional on your team who is knowledgeable in responding to litigation holds will help you manage the company’s exposure in the litigation and minimize disruptions to the general workforce.
4. Involve Others. If your company receives a litigation hold, it is at a minimum, an obligation to preserve documents. Accordingly, many liability insurers notified earlier in the process, but deferring from assisting you or your company “until a suit is filed,” you will want to re-notify the carrier to avoid notice issues. Finally, if your company is small or you do not have an IT professional who can be responsible for litigation holds, consider hiring a qualified ESI consultant. While the cost of these ESI consultants sometimes deters small companies from being proactive when faced with a litigation hold, such consulting costs have proven to represent a fraction of those costs and penalties that await the company that fails to take the necessary steps to comply with a litigation hold.
Even when not confronted with strong likelihood of litigation, it is a good idea to review and update your company’s document retention policy, be efficient in the records retention practices, ensure your company’s policies and procedures are routinely followed, and have a plan to handle litigation holds, including designating a team to be responsible in the event that one occurs.
Finally, the expenses of litigation—including costs and reimbursement for a litigation hold, retention of ESI and other consultants, selection and retention of experienced attorney/law firm of your choice—are within your powers when selecting a liability insurance policy. Give thought to these items when putting together your recall plan, but also when looking for liability insurance customized to your company’s needs.