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You are at:Home»Law»Cannabis Litigation: The Importance of Litigation Holds
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Cannabis Litigation: The Importance of Litigation Holds

adminBy adminFebruary 21, 2023No Comments4 Mins Read
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We regularly cover litigation on the blog, but today we’re going to cover how to prepare for cannabis litigation that may or may not come. And while it’s always important to have effective systems in place, it becomes even more paramount when our clients realize how involved the discovery process is in the American litigation system. If implemented properly, a proper litigation hold can save a lot of expense and headache down the line – for our clients and for us.

What is a litigation hold?

When a lawsuit is filed or – is even reasonably anticipated – the rules of civil procedure in both federal and state courts impose a burden to preserve all potentially relevant records and information. For example, Federal Rule of Civil Procedure (“FRCP”) 37(e) provides:

“(e) Failure to Preserve Electronically Stored Information. If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court:

(1) upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or

(2) only upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation may:

(A) presume that the lost information was unfavorable to the party;

(B) instruct the jury that it may or must presume the information was unfavorable to the party; or

(C) dismiss the action or enter a default judgment.”

Essentially, the litigation hold puts everyone and their key custodians of documents and records on notice that a certain scope of information must be preserved (and later, compiled and produced in the discovery process). And as FRCP 37(e) makes clear, if that isn’t done properly (or worse, if it isn’t done intentionally), there can be severe consequences: those include dismissal (if you’re the plaintiff) or a default judgment (if you’re the defendant).

How to implement a good litigation hold

First, it’s important to identify the scope or universe of what needs to be preserved in any burgeoning cannabis business dispute. Think beyond the specific dispute/issue or claims/defenses. What may be deemed “relevant” can be extremely broad in the discovery context.

Second, identify and implement protocols for everything that may hold those records. While this previously meant file cabinets of papers, it now typically means emails, documents, spreadsheets, etc. But, don’t stop there: is there company software people collaborate or communication on? Are employees given company phones? It’s important to think beyond emails and documents because most likely, discovery is going to require it all.

Finally, follow up regularly to ensure all employees are sticking to the litigation hold as long as necessary. It sometimes makes sense to assign oversight to key individuals who can check that the systems are working on a quarterly or annual basis.

Conclusion

Litigation holds can be tedious processes so it’s best to tackle this head on. Typically, nothing causes more delay and stress in a lawsuit than a client that doesn’t have a handle on its evidence – whether it’s evidence it should have but doesn’t, or evidence that it finds piece by piece over an extended period of time because the client or the information is disorganized.

And for our proactive readers, it’s never too early to develop a general plan that can ensure a litigation hold can be effectively prepared in the future. Identifying where data is stored in active systems, making sure backups are regularly produced, and developing exit checklists for when employees leave a company can ensure all relevant data are preserved and accessible.

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