E-discovery, data preservation, and information governance are just a few of an increasing number of legal terms that accounting firms are hearing more and more every day. Accountants provide valuable services and advice to their clients and are the recipients of information about them that is often sought when a client becomes engaged in a legal proceeding.
Consequently, accountants are often the targets of subpoenas, the receipt of which triggers a requirement to preserve and ultimately produce the documents and information requested. The process of preserving documents is done through the initiation of a legal hold over the documents requested in the subpoena and documents relating to the circumstances and parties in the lawsuit.
Two important considerations when implementing a legal hold are how the documents are preserved and when it is acceptable to release the hold.
HOW TO HOLD?
When implementing a legal hold triggered by the receipt of a non-party subpoena, the first consideration is how to identify, collect, and preserve the data. If there are automatic deletion or document destruction policies in place, they should be suspended for that client. This will help ensure that no data is lost that may be responsive. With automatic deletion suspended, the next consideration is whether to preserve the data in place on the email server or collect it and store it separately as a snapshot of the mailbox.
Email is the most difficult data source to monitor, as individuals are constantly in and out of their mailboxes and could potentially delete an email or attachment that is subject to the hold. There is no bright-line rule for when a snapshot is acceptable versus a continuous hold, and there are several factors to consider when making that decision.
To determine which option is the best for your situation, ask yourself the following questions:
- What are the chances that you could become a party to the lawsuit or have another related lawsuit brought against you concerning the same subject matter? A continuous hold or a combination of a snapshot and a continuous hold may be the easiest options.
- Does the time frame of the subpoena seek documents on an ongoing basis? Is it likely that the party issuing the subpoena will be looking for newly generated documents? A continuous hold will help ensure that these newly generated documents and communications are exempted from your firm”™s document retention protocol.
- Is the client whose documents are the target of the subpoena still your client? If so, is there ongoing work related to the subject matter of the lawsuit? Be aware that newly generated documents may be considered part of an ongoing subpoena.
- Is your client no longer a client so that no new documentation and communications are being generated? In this instance, a snapshot is advisable, provided you take appropriate steps to ensure that all responsive documents are captured.
- Although it seems like the continuous hold process is preferred, the snapshot approach is acceptable even if newly generated emails also should be preserved. Information technology staff would have to take the snapshot and implement the hold on the mailbox from the date of the snapshot, allowing the older emails to run off per the retention period, which could save storage space. The key is to ensure that the data is preserved, whichever approach you choose.
HOW LONG TO HOLD?
Maintaining a legal hold over documents that are the subject of a non-party subpoena gives many accounting firms cause for concern because they end up holding on to documents for a very long time, often longer than necessary. Once you have implemented the legal hold and documents have been produced, it is common that a significant amount of time will pass without hearing anything from the attorney who issued the subpoena or the parties to the lawsuit.
So how do you know when you can release the hold? With the assistance of an attorney, we recommend that you monitor the lawsuit and wait until it is settled or resolved, at which point the subpoena is no longer in effect. An alternative option is to request written representation from the parties involved that they will not be seeking any further documents or testimony from you, and inform them that the hold will be released. At the time a legal hold is released, normal document retention practices should be reinstituted. Documentation of the decision to release the legal hold, including the reasons why the decision is reasonable and made in good faith at the time, is important to memorialize and justify the decision should it be challenged in the future.
CONCLUSION
Even if you are well versed in the current litigation hold standards in your jurisdiction arising from state courts, federal courts, or administrative agencies, it may be best to consult with your legal or risk management counsel before taking any irrevocable actions. A wrong step could make you look not only careless but also culpable.
Gregory Bautista is a partner in Wilson Elser”™s White Plains office. He can be reached at Gregory.bautista@wilsonelser.com. Nicole B. Liebman, an associate in the firm”™s New York City office can be reached at nicole.liebman@wilsonelser.com.
