Formulating A Document Retention Policy

By Harjit Singh posted 01-16-2011 10:27

  
 
 
Formulating A Document Retention Policy
 

 By   H.  Singh[1] 

 

A document retention program involves the systematic identification, categorization, maintenance, review, retention, and destruction of documents received or created in the course of business.   The existence of a valid and reasonable document policy shall be likely viewed to be a mitigating factor in litigation when documents are disposed of pursuant to it, while a non existence of a retention policy shall be an aggravating factor qua a party.   A document retention policy will contain guidelines how to identify documents that need to be maintained,  how long certain documents should be retained,  how and when those documents should be disposed of  if no longer needed, and how  should   be accessed or retrieved when they are needed.  A policy that is apparently designed to destroy certain evidence will not survive judicial scrutiny.  Courts are leaning towards applying  “good faith and reasonableness” standard for determining the acceptability of a retention policy.   What is reasonable for one company could  be unreasonable for another company in light of the facts and circumstances surrounding the document.   Courts view, a document destruction made outside a valid retention policy, with suspicion and especially with great suspicious when only damaging documents are destroyed.   A policy is likely to be tested in its letter and spirit to see the propriety of disposition of a document.  Such a policy may aid the company in litigation when documents were properly disposed of pursuant to that policy.  Conversely, failure to enact a competent policy may undermine the company's position in litigation, and failure to protect information subject to discovery can have dire consequences. ([2] see Tekctron Inc. v. Overhead Door Corp., 116 ER.D. 107 (S.D. Fla, 1987 . 

 

 "There is no cookie-cutter approach to creating an effective document   

retention policy.    A sound policy must be tailored to fit the specific  needs of the business involved and should have legitimate business  purposes at its core.   Rather than any desire to purge an occasional "smoking gun" from its files, the force compelling  businesses to adopt appropriate document retention policies should be considerations   of storage space and the administrative cost of searching through  hundreds of   boxes full of documents or massive electronic files to locate information".[3] see J. Messina and D. Trinkle, "Document Retention  Policies After Enron," 46 Boston Bar Journal 18 (September-October 2002)                        [

A well reasoned and validly documented retention policy leaves little room for any negative speculation relating to diposition of a document.   It will stand when tested on the anvil of judicial review. The courts would likely appreciate a self-speaking retention policy that could speak and explain for itself before any one moves to assail it.   The courts may hesitate to go through the process of seeking or allowing parole evidence in order to decide issues of validity and reasonableness of a retention policy.  There exists a very thin line between decision of destruction of a document and that of its retention; and both situations are not like water tight compartments.  The courts would likely hold the validity and reasonableness of a retention policy even if interpretation of its terms renders two inconsistent views, one for retention of a document and other for destruction; and the document is dealt in either way.  A document destroyed under a wrong policy is more dangerous than document destroyed under a valid and uniform policy.   Any disposition  of a document would be likely upheld if it is within the four corners of the retention policy.  The reasonableness and validity of the retention policy itself and not the destruction of the document come under judicial scrutiny at the first instance. 

A valid document retention policy must be reasonable, consistent, and uniform in the context of the facts and circumstances surrounding the relevant documents.   A reasonable policy reflects deadlines and requirements imposed by the applicable law or regulation.   It preserves documents as needed to support good business practice in a manner consistent and conforming with industry practice.   In addition, in today's world, a retention policy must adequately manage electronic discovery demands.   It should include standardized practices for retaining information unique to electronic files, such as computer-generated meta-data.   The policy should also anticipate the need to produce electronic documents in a variety of native file formats.

A retention policy in general must contain the following factors

1.                  How long, how and where to store both paper and electronic records, specifying specific retention periods for specific categories of records;

2.                  Accounting for all forms of electronic data in all devices and media;

3.                  Specifying the procedure to dispose of the documents when their retention period has expired;

4.                  Specifying how the disposition of documents shall be suspended under the retention policy when a litigation or investigation is reasonably or probably anticipated.

5.                  Its implementation should be consistent. uniform, and reasonable.   In Rambus' case[4]  Federal Trade Commission assailed Rambus' retention policy with suspicion by propounding " Rambus' document retention policy required Rambus employees to search out and maintain evidence that might be useful to Rambus in litigation, such as documents relating to patent disclosures and proof of invention dates that are of “great value to Rambus," as well as material relating to trade secrets….. In sharp contrast, however, Rambus' document retention policy never once mentioned any obligation to preserve any other documents relevant to litigation."

6.                  Identifying the individuals responsible for enforcing, monitoring and updating the policy;

7.                  Defining penalties for non-compliance and ensuring their imposition;

8.                  Describing the manner in which to organize and catalog stored records so that they can be retrieved effectively and expediently.

The evolution of electronic media documents has significantly widened the ambit of record to include soft and invisible copies of a document.   Regularly expanding telecom has been making more additions to the scope of documents requiring an effective and efficacious document management.   For drafting a valid document management and retention policy, the following vital role playing matters need to be discussed:-

         i.            the scope, creation, storing and disposition of a document;

         ii.            types of documents to be kept or tossed, discoverable documents, and form of documents;

     iii.            formation of a document management and retention policy, its, its key players, its evaluation, and the reasonable anticipation of litigation for holding out documents

Scope of a document  

A document shall include "electronic data compilation," even when the electronic data, that is not visible, can be obtained or visualized only with the use of "detection devices" or from" the electronic source itself”. 

The scope of document has become comprehensive to include computer disks, blueprints, CAD designs, spreadsheets, photographs, e-mails, any paper image, digital photo, video, audio files, discs, fax, report, any thing that is printable. Document  includes any written, printed, recorded or graphic matter,  letters, telegrams, telexes, chatting , messages, reports of telephone conversations and conferences, books, magazines, newspapers, publications, booklets, pamphlets, circulars, bulletins,  instructions, minutes or other communication, questionnaires, surveys, contracts, memoranda of agreements, assignments, book of accounts, voice recordings, records or summaries of personal interviews or conversation, appointment calendars, diaries, schedules, printouts, drawings, specifications, certificate of registration, applications for registration, graphs, charts,  plans and planning materials, statistical statements, compilations, forecasts, data sheets, microfilm microfiche, photographic negatives, architectural diagrams, blue prints, schematics, logic diagrams, timing diagrams, flow charts, pictures, photographs, belts, tapes, magnetic tapes, compact discs, DVD, paper tapes, electronic mail records and messages, magnetic and optical disks, data cards, drives, films, data processing films and all other computer readable records, files and programs, object codes, source codes, and all other written, printed, or recorded matters of any kind including "electronically stored information and all other data compilations from which information can be obtained and translated, drafts and non-identical copies. 

The constituents of records and definition of a document are significantly changing.  Telecommunicating is causing the creation of record in different media locations in different places that is making record management more complicated.   Each state or country has different laws to deal with such media of communication.   One of the risks of electronic records is that they can be easily changed or edited (either accidentally or otherwise) and the difficulty in detecting such changes.   This is a vital difference between paper data and electronic data for purposes of e-discovery in litigation.   Some electronic documents contain dynamic fields which automatically change without a user command.   For example, the date or time in word processing documents is often set to change automatically to show the current date and time of its editing.   A document also often linked to another document so that entries in it automatically change when changes are made in the linked document.   An important consideration with an electronic document is that it contains more information than a paper document or printout of electronic document.   The electronic format contains "metadata," i.e., "data about data," which includes information about the electronic file such as when and by whom it was created, accessed, edited, and what changes have been made.   Electronic records also often contain embedded data, like formulas in spreadsheets or links in databases, which does not appear in printed copies.   Electronically stored information be referred "ESI" hereinafter for the sake of brevity.

Creation and storage of a document

 A document is created physically in form of hard copy or paper copy, and electronically or digitally in the form of soft copy.  Paper documents usually used to be the bulk part of the records but presently electronic documents are substituting them. Once digital information is created in the system, then we could visualize it including the virtual location and its processing stage.   Electronically routing of documents can fasten the workflow procedure that could deliver excellent and efficacious gains by providing multiple users to access and process electronic documents simultaniously. 

Whether documents are to be created and saved on local machines or stored exclusively on a central network server require the backup and preservation procedures that must be implemented by a good retention policy.  If files are created and saved on local machines, then copies thereof should be stored or saved on a central network server.  It provides much better control of potential evidence. Otherwise, the contents of each machine require their periodical review that is, a time-consuming and expensive process. Digital data in the form of e-document present particular challenges in records management and discovery because it is difficult to eradicate them, and because they reside in many locations;  networks, desktop and laptops, hard drives, removable drives, backup, PDAs, copies on CDs, disks or floppies.  Approximately 500 pages of papers could be stored on an electronic media of one megabyte capacity.  Thus one gigabyte could store 500,000 pages.   These page figures could vary depending on software and format.  Compression and zipping can increase capacity.   Most modern programs generate a greater volume of data per page which will reduce these page counts.   A figure usually used for images of paper documents on a CD is 15,000 pages per CD.   The continued rapid growth of electronic records will be advanced by the broad legal recognition of electronic transactions and electronic records in the federal Electronic Signatures in Global and National Commerce legislation, 15 U.S.C. §§7001-7031 ("E-Sign") a Uniform ElectronicTransactions Act ("UETA"), and by the requirement that federal agencies generally recognize the validity of electronically submitted documents.

Disposition of a document

A valid retention policy requires a company (hereinafter the term "company" denotes inter-alia any business entity or a natural person) to document its document disposition.  Such documents should not be tossed away like garbage, rather should be shredded by a professional shredder who should certify destruction of those documents.  The manner of destroying a document will indicate the level of importance of its contents to the company itself and the way the company treated that document.  Most important information should be destroyed in such a way, not going any where except to its back up designated location with the company. Similarly  e-documents or its storing devices should be disposed of by IS department ensuring their permanent removal from all locations other than their back up location. 

Keeping or tossing of a document

Neither it is a wise protocol to destroy or delete all documents nor it is cost-effective to retain all of them.       A responsible approach shifts the focus from “what to destroy” to “what  to retain.  These two areas are not like water tight compartments and there is a very thin line between them that could be easily broken if not focused properly.  Given the ease at which potentially needed electronic data can be stored, searched, and preserved qua reams of paper documents, the default position of a company should fairly, when in doubt, retain electronic data rather than purge it.  The life of a documents depends upon its legal, informational, operational, and technical value.   A document without these values becomes of no use. The purpose of creating a document plays a vital role in determining life of a document.  The document may be deleted or destroyed as soon as the purpose is finished if that document is logged in the log chart  and is not material or relevant to any reasonably anticipated litigation or investigation.   If a government investigation or lawsuit comes up and one doesn’t have a valid reason for not producing what the other side wants, then be prepared to face the sanctions by the court.  The vital part of any document-retention policy should be to ensure that there’s a procedure to shut down destruction practices at the first sign of trouble or doubt. 

E-mails have become a primary form of communication.   Millions of e-mails are exchanged daily.   E-mails are considered to be informal.   Nevertheless, in an informal e-mail, an employee can generate an opinion on an issue, falsely implicate other employees in wrongdoing and make a binding admission all without the knowledge of the employer and paper trail of such informal communication remains track-able.   When writing e-mails, many employees may not understand that their informal e-mail comments can be twisted and taken out of context.  A member of a product developing team may send an e-mail to another member explaining that the product is unsafe for a particular use or would not work for a particular purpose, but neglect to specify the conditions under which it would not be safe or workable because the sender of the e-mail thought that the recipient sophistically understood that information.  It is likely to happen when a specific word is used by the sender without specifying the context in which such word is used and copying that e-mail to different users besides the principal receiver.  Every user could interpret such word differently without the controlling context. In litigation or other proceedings, the opposing party may urge choosing  any favorable interpretation while asking the court to interpret that word accordingly rather than in general, as in the case of interpretation of  words in claim construction procedure.   The absence of such important qualifiers could render that e-mail a "smoking gun" if it surfaces during e-discovery.  Hundreds of "good" e-mails will not matter if one idly sitting "bad" e-mail is discovered during the course of pretrial discovery.    An e-mail is not going to evaporate after it has been sent; it may reside permanently on hard drives, servers and backup tapes. Unlike a paper draft, an e-mail may be sitting around permanently and could be harmful for the company during discovery. 

In a class action against the Boeing Company, the plaintiffs’ attorney learned that Boeing had stored about 14, 000 e-mail backup tapes in a Washington, D.C., warehouse.  The plaintiff demanded the tapes. Boeing tried to narrow the scope of discovery but got involved in a confusion of its own strategy of storing the documents.   Boeing  was unable to tell which e-mails were on which tapes without retrieving the tapes first. Using  of several e-mail systems by Boeing created a confusion.  The Boeing Company not only retained more data than needed, but its retention was awfully disorganized.  The unfortunate result was the contents of the tapes could damn the company significantly and Boeing had to settle the lawsuit for $92.5 million. 

In Lewy case[5], court reasoned that if a company knew or was supposed to know that the documents would become material or relevant at some point in the future then such documents should have been preserved.  The court concluded that a company cannot blindly destroy documents and expect to be shielded by a simple document retention policy.  In evaluating this generalization, consider two documents--one document casually discussing expert opinions regarding design  A exists in paper form, and the second document casually discussing the same exists in electronic form.  It is assumed that the two documents are identical in every conceivable way (e.g., content, language, author, recipient) except in terms of the form of manifestation (i.e., one document is in paper form and the other electronic).  Such documents, may be similar but not identical, are called non-identical. 

While no single set of rules can direct suo motu what and for how long the company should retain the documents, there are a number of laws that, if applicable to one’s situation, will ultimately impact on the decision.   Mostly the relevancy factor of a document to the anticipated litigation controls the retention or destruction of the document.   “What type of documents and what sort of key words or phrases are deemed relevant or material to an anticipated or pending litigation”, is the principal question to be answered for determining what to toss or what to retain.  To isolate e-mails containing such words, an e-mail filtering program could be customized to search both messages and attachments and save copies of any that contain keywords.  This would safeguard the company from relying on end-users to save these messages, and would guarantee that all e-mails are retained in a universal format in a single location.

" A Pocket guide for Judges" by Federal Judicial Center cites Moore's Federal Pratice § 37A.21[1] (3d ed. 2005) mentioning the following:

                       "The disclosing party should identify the nature of its computer system including    back-up sytem, network system, and e-mail system as well as any software applications used to operate those systems.  However, the disclosing party should not be required to attempt to search back up systems or to retrieve deleted files in an exhaustive effort to locate all potentially relevnat evidence as part of this initial disclosure oblifation.  Further, a party should not be held liable for sanctions or other penalties for failing to disclose this evidence as part of initial disclosure obligation, even when that evidence is subsequently usedin the litigation.  The difficulty in retrieving this informaton provides "substantial justification" to excuse such an exhaustive serarch effort."

Companies also must understand that electronic data stored on backup tapes or other inaccessible media may take significant time and money to retrieve and review.  If the company keeps this material, it may be required to produce it by incurring a heavy price, as mostly expensive experts are needed to retrieve data from antiquated or obsolete systems. However, a litigant who attempts to destroy relevant materials, whether in electronic or paper form, can find itself in deeper trouble than had it kept the damaging document around.  Specifically, such parties that fail to preserve relevant documents and data upon the threat of litigation may stand guilty of spoliation.  Spoliation is the act of intentionally or negligently destroying or failing to preserve documents or data that is relevant to anticipated or pending litigation or investigation. 

The court may presume the existence of any fact which it deems likely to have happened, in view of the common course of natural events, human conduct and public and private business, in their relation to the facts of the particular case:-

                                 i.            the evidence which could be produced and is not produced would, if produced, be unfavorable to the person who withholds it; and

                               ii.            if a person refuses to answer a question which he is not compelled to answer by law, the answer, if given, would be unfavorable to him.

 When a corporate information retention policy directs that "correspondence" be retained for a certain period of time, it raises the question of whether this includes e-mail, instant messages, word processing documents or even database-generated forms.  In fact, all these formats may be considered correspondence based on their interpretations.  Thus, it becomes critical for information technology and records managers to collaborate on creating storage solutions that resolve the confusion of categorizing data required for retention.  The company need not preserve every document in the company's electronic files and it need not retain all electronic information ever generated or received.  Rather, the company has the duty to preserve what (1) it knows or reasonably should know is material or relevant  to the litigation; (2) is reasonably calculated to lead to the discovery of admissible evidence; (3) is likely to be requested during discovery;     (4) or is the subject of a discovery sanction.

 Discoverable documents

Electronic data has already been recognized as discoverable evidence. According to the amended rule 34 of Fed. Rules of Civil Procedure, a document shall include "electronic data compilations" even when such data could be obtained only with the use of “detection devices' or from the electronic source itself.   Electronic documents are no less subject to disclosure than paper records. Email messages are discoverable.  Even information never printed on papers and stored only in electronic form is discoverable.   A party should make its computer available to the expert of the other party for retrieving deleted documents.  Even the information reduced to paper form does not relieve the producing party from obligation of producing that requested information in its electronic form.   The amendment to the Rule 26 (a) (1) has further increased the obligation of the producing party to disclose the existence of electronic documents and other information when a litigation is commenced or to hold those documents and information in a secured place when a reasonable anticipation of a litigation is arisen.  These amendments introduce the phrase “electronically stored information” to its Rules 26(a)(1), 33, and 34, to acknowledge that electronically stored information is discoverable and is meant to include any type of information that can be stored electronically.  It is intended to be broad enough to cover all current types of computer-based information, and flexible enough to encompass future changes and technological developments.  Several of the amendments of these rules require the parties to address ESI early in the discovery process, recognizing that such early attention is crucial in order to control the scope and expense of electronic discovery, and avoid discovery disputes.   Rule 26(a) (1) (B) adds electronically stored information to the list of items to be included in a party’s initial disclosures.   Rule 16(b) (5) adds provisions for the disclosure or discovery of electronically stored information as an item that may appropriately be included in the court’s scheduling order.   Rule 26(f) modifies the list of issues that must be  addressed as a part of the meet and confer process, and includes a requirement that parties develop a discovery plan that addresses issues relating to the discovery of ESI)– including the form or forms in which it will be produced.   It also requires parties to address any issues relating to the preservation of discoverable information, and that relating to work product or privilege claims.   Whether an electronic data request is unduly burdensome or expensive depends primarily on the way each party maintains its data.  Data that is currently available is considered accessible and relatively inexpensive to produce, so the producing party should bear that cost. Deleted data, and data contained on backup tapes are considered inaccessible, and thus may be unduly burdensome or expensive to produce. Inherently inaccessible data may warrant cost shifting.  The courts apply different tests to determine whether cost shifting is appropriate; there is no uniform rule for making such a determination. 

Form/format of a document

An amendment to Rule 34(b) of Federal Rule of Civil Procedure addresses the format of production of electronically stored information, and permits the requesting party to designate the form or forms in which it wants electronically stored information to be produced.  The rule does not require the requesting party to choose a form of production, however, since a party may not have a preference or may not know what form the producing party uses to maintain its ESI.  The rule provides that if a request does not specify a form of production, or if the responding party objects to the requested form(s), the responding party must notify the requesting party of the form in which they intend to produce the ESI, with the option of producing either (1) in a form in which the information is regularly kept, or (2) in a reasonably usable form. Amended Rule 26(b)(2) creates two step approach to the production of  ESI, distinguishing reasonably accessible documents and inaccessible documents.   A responding party may not be required to produce ESI from its sources that it identifies as not reasonably accessible because undue burdon or cost.   If the requesting party moves to compel discovery of  such information, the responding party must propound the reasons for  the information being not reasonably accessible.   Once the reasons are propounded, the onus shifts to the requesting party to show that the information is very necessary for the determination of the involved issues and is not available  or accessible from  any where easier  than the responding party,  then  the  court  may order  discovery only for good cause.  The new rules also require the parties to discuss the form or format of the their ESI productions.  The new discovery rules also provide a possible safe harbor if  ESI is  destroyed in course of  the regular procedure or retention policy to delete automatically when done in good faith.  The company is protected from adverse inference or sanctions or even a presumption of wrong doing, if the documents were destroyed following a valid policy. 

Why a document retention policy is necessary?

Since companies will continue to create and maintain records, the development of effective document retention programs is necessary.   An effective document retention program can wonderfully reduce storage problems.  A policy will facilitate the business' operations by promoting efficiency and freeing up valuable storage space.  In addition, a document retention policy can protect the firm in litigation.  It is important to clear out clutter but tossing the wrong paper or deleting an important e-mail could result in a disaster.      A uniform and consistent document retention policy reduces the risk of a party by ensuring its proper handling of the documents.  Such a policy formalizes a party's policy of saving and destroying or deleting documents received or created in the regular course of business.  The intention of a party for deleting or destroying documents depends upon the reasonableness, consistency, and validity of its retention policy.  Under the new Federal Rule of Civil Procedure , a document retention policy can be a "safe harbor" against liability for inadvertently destroyed documents.  The important reasons why  a company should  create and enforce a document retention policy are: i) to comply with legal duties and requirements, either statutory or regulatory; ii) to avoid liability through “spoliation,” the improper destruction or alteration of documents in a litigation situation; iii) to support or oppose a position in an investigation or litigation; iv) to protect from unnecessary expense and time during discovery; and to maintain control over discovery and e-discovery; and v)to keep documents confidential and avoid leakage to attackers or competitors. 

A law firm should not dispose of a client's record without the client's permission or any prior agreement as to how long it would hold the record.  A law firm is generally a custodian, not lesser than a bailee, of the client's record.  Whether a law firm should follow its retention policy or client's retention policy in handling and dealing with client's documents? In the absence of specific instructions from the client, the law firm should adhere to its own policy.  In the engagement letter there should be a provision to the effect how long the firm should hold or store a client's record after final conclusion of client's case and how that record should be dealt after such period.  State or federal laws might subject a company to an "affirmative legal requirement" to keep certain records for specific time periods.  These regulations encourage the implementation of minimum retention periods. In Anderson case, the court opined that document retention policies which are created in part to keep certain information from getting into the hands of other parties, including the government, are common in business.  It is not wrongful for a manager to instruct his/her employees to comply with a valid document-retention policy under ordinary circumstances.  

 The courts will probably weigh the validity and reasonableness of a retention policy qua the deletion or destruction of a document in order to see which way the scales go.  If a retention policy is valid and reasonable, its due and regular implementation will certainly prevail upon.  If a retention policy passes the test of its validity and reasonableness then the matter of deletion or destruction of a document will invite little attention.  I think a court will apply the same standard of reviewing a retention policy as it applies in reviewing rules and policies of a statutory administrative agency.  The court will see whether destruction of a document by the company is intra-vires or ultra-vires qua the company's retention policy.    Rambus case propounds that the inquiry regarding destruction of documents should focus on whether a particular policy was adopted and implemented for the purpose of destroying relevant information or whether the loss is merely the legitimate consequence of pursuing other objectives.[6]

 Any question regarding a deletion or destruction of a document will generate the following issues:-

1. Whether the destroyed or deleted document was relevant to any pending or anticipated litigation?

For establishing an appropriate sanction for spoliation, the degree of relevance of the destroyed document must be considered.  Such relevance allows the tribunal to assess the harm to its procedure caused by the destruction of evidence.[7]  The state of mind of the party that caused destruction determines the amount of proof necessary to show relevance of destroyed documents.  The more culpable that party is, the easier it is for the other party to establish relevance.[8] .In Rambus’ Virginia case, Judge Payne noted Rambus' conduct as threat to judicial process by observing,

                      "Simply put, destruction of documents of evidentiary value under those circumstances is wrongful and fundamentally at odds with the administration of justice.  Such activities are not worthy of protection by privileges that are designed to advance the interests of justice and, in fact, they frustrate the fair adjudication of controversies by depriving the finder of fact of evidence from which the truth may be discerned.  Courts simply cannot sanction the destruction of relevant evidence when litigation is or should be, reasonably anticipated.  Nor can Courts allow cherished and important privileges to be diminished by permitting their use to conceal document destruction as practiced by Rambus.[9]

                 2. Whether the document was deleted or destroyed under a valid, consistent and reasonable policy?

A review of the cases reveal that sanctions are imposed not simply for someone destroyed or deleted a document that might have some relevance to the pending or reasonably anticipated litigation,  rather for those documents were deleted or destroyed under a policy that was not valid and reasonable.   Further the traditional concepts are applied to the facts e.g. intent, gross negligence, known or foreseeable harm, good faith, reasonableness, relevance, certainty of damages and prejudice, proximate cause, and remedies appropriate to the harm and culpability.

 How a document retention policy is formed?

A document retention policy must be generated with the active participation and coordination of Records department, IS (information system) department and Legal department.   Maintenance, categorization, identification, retention, and destruction of tangible documents and those of e-documents should be handled by Record department and IS department respectively. What to toss or retain, when to toss or retrieve, and when to start or lift a litigation hold should be handled by legal department.

 

In general, records retention programs should include a method for determining retention periods, retention schedule, and retention procedures of the records.   The company implementing a retention program should (1) develop and adopt a program that covers all records, including reproductions and records maintained on other media; (2) identify appropriate procedures for obtaining written approvals for all records retention and destruction of documents (3) strictly ensure the enforcing and compliance of the policy; (4) provide a document hold procedure and suspension of document destruction where litigation is imminent or reasonably anticipated. It should describe the procedure how, where and how long to store paper and electronic records, specifying retention periods for specific categories of records. Electronic data in all devices and media (including digital printers, copiers and voice mail) should be considered in retention policy and how and when such records are to be destroyed when their retention period expires. The persons responsible for enforcing, monitoring and updating the policy must be specified.  Penalties for noncompliance are described and imposed.   The procedure for retrieving the documents from offsite or storage should be detailed.

The Sedona Guidelines [10]  describes following guidelines for an organization to have a valid retention policy:-(1)  it should have reasonable policies and procedure for managing information and  records, (2)  its information and record management policies and procedures should be realistic, practical and tailored to the circumstances of the organization, (3) it deos not need to retain all electronic information ever generated or received, (4) adopting an information and record management policy, it should consider including procedures that address the creation, identificaion, retention, retrieval and ultimate disposition or destruction of information and records, and (5) its policies and procedures must mandate the suspension of ordinary destruction practices and procedures as necessary to comply with preservation obligations related to actual or reasonabley anticipated litigation, governmental investigation or audit.

.The Carlucci case[11]  illustrates a poorly conceived effort at document retention/destruction.  The district court reviewed the defendant's 'policy and practice of destroying documents’.  The court noted that the stated purpose of the destruction of records was to eliminate documents that might be detrimental to the defendant in a law suit.  The policy was administered on an ongoing basis by employees who systematically reviewed and destroyed all potentially harmful documents.   Given the pervasive nature of the corporation's activities, the court entered a default judgment against the corporation.   The court, however, noted that a "reasonable" document retention program might survive judicial review.  In fact, the courts occasionally suggested that the good faith disposal of documents pursuant to a bona fide, consistent and reasonable document retention policy might actually provide a justification for failing to produce documents requested in the course of discovery.  Companies have a legitimate business or economic interest in the destruction or deletion of unnecessary records/documents.  However, society has an interest in imposing upon business entities an ongoing obligation to retain documents potentially relevant to current or future litigation.  The balance between these two competing interests takes the form of a reasonableness standard.    Applying this standard, it is apparent that retention periods for ESI should be longer than "reasonable" periods for paper records because administrative expenses to retain paper documents are much lesser than that of ESI.

Chats and E-mails often discuss or disclose important information that does not appear on paper documents because people tend to be more informal and open when chatting or drafting an e-mail.   E-mail has replaced written correspondence and electronic form has replaced paper form.   Adapting a "document retention policy" relating to electronic data is a major challenge.   For dealing with retention and deletion of e-documents, mostly the users will not follow a process that is manual in nature, so automated software solutions will have to address this area of need.  Such solutions revolve around automatically training the software program to recognize categories of documents based upon their content.  In the case of e-mails, the sender-receiver information and other objective data serve to automate categorization.

 Vital team members for formulating and enforcing this policy

Record department, IS department, and legal department should work as a team for formulating a retention policy. A retention policy must be a product of their common efforts and actions.

 The moment of triggering the reasonably anticipation of litigation and starting the hold out period

The main thing under the new rules is that once litigation is "reasonably contemplated," an obligation to preserve evidence automatically arises.  Litigation may be "reasonably contemplated" well before the company is served with a complaint or notice from opposing counsel.  The issue of determining the birth of reasonable perception of litigation hinges upon a good faith and reasonable evaluation of the information and circumstances as are known to the company at a particular time.  The available information may not be of such level at a certain point to cross over the bar of reasonable anticipation but may later on cross that level with the new incoming information.  Such information should be monitored and evaluated regularly to determine its level of going up or down of the crossing bar.  New information can bring the level down enabling a company to revisit the triggering issue to find out that it should no longer reasonably anticipate a particular litigation and consequently should not keep the holding out of the documents. Some courts have held that litigation can be reasonably contemplated when an employee first complains about harassment or when the company first learns about a problem with one of its products.  As the company can see, because an obligation to preserve evidence can arise so early in a dispute, it is usually a good idea to involve the company’s legal counsel at the first sign of trouble.  The duty to hold also includes an obligation to specify, locate, and retain, document that is relevant or material to the reasonably predictable litigation.  This duty triggers at that moment when intention to sue or be sued is credibly manifested.

 The "reasonable anticipation of litigation" doctrine could comprise "should have known" or "supposed to know".   Lack of knowledge is irrelevant when a party should have known or is supposed to know with the use of available resources.  If  a party lacks using of available resources to attain knowledge of anticipated litigation instead of their availability, then that party may be held negligent.  Common law demands that spoliation of documents relevant to an anticipated litigation must be stopped in order to avoid imposition of sanctions.  The failure to properly preserve, locates, and discloses relevant ESI can lead to catastrophic results.  The rules of equity demand that anyone who seeks equity must come with clean hands and no unclean hand should be allowed to seek patronage of sacred fountain of justice.  The justice requires the parties to put their all required cards before the court either by their own motion or by the order of the court. When litigation is "reasonably anticipated," routine e-mail and e-document destruction is required to cease.  While lawyers equivocate the meanings of "reasonable anticipation of litigation" there is no doubt that the "litigation hold" must be taken seriously and emphasized to all involved employees of the company when an intention to sue or be sued is reasonably manifested.  Such manifestation must be above rumors, vague or incredible threats of litigation.

 Whose reasonable anticipation or notice of litigation could be deemed that of the company?   A notice to an employee could not be attributed a notice to the company unless that employee is specifically authorized to receive or anticipate that notice for and on behalf of a company.   A duly authorized person or a person who controls, manages and regulates the affairs of the company should have such notice or knowledge.   When litigation arises or appears reasonably likely to occur, consider the electronic data requests that may confront in the matter and other electronic discovery issues that may arise.  It is critical for the company's attorney to be in touch with its IS department early, so that they may collectively plan for and coordinate on electronic data issues.  Discussing electronic discovery issues at the company internally and especially with the outside attorney early will help the company to devise an appropriate strategy for e-discovery.     It can save the company from any harsh sanction in litigation for deletion or destruction of a document.    In Williard case[12]  the Court observed, "There is a tendency to impose greater responsibility on the defendant when spoliation will clearly interfere with the plaintiff's prospective lawsuit and to impose less responsibility when the interference is less predictable".

 The first step in implementing a litigation hold is to determine the point at which it's necessary to institute a hold.   A litigation is reasonably anticipated when an intention to sue or be sued is credibly and objectively manifested.  After deciding to place a hold, the next step is determining the hold's scope.  After specifying key players of holding plan, the next step is generating the hold notice. After sending out hold notices, the next step is to obtain confirmation that employees received the notice and have agreed to abide by it.  The next step is to obtain confirmation that employees received the notice and have agreed to abide by it. The work is just begun.  This is the time to narrow the scope of the hold. Because the consequences for releasing a hold prematurely can involve multimillion-dollar sanctions, the last step in the process lifting the hold can be the most challenging. Releasing a hold too late can be just as costly.

Majority of the judicial rulings dealing with "reasonable anticipation of litigation" concentrate on that issue from the perspective of a party responding the filing and not the party which had filed, or was contemplating filing, a lawsuit.   In Hynix case[13] court decided that although Rambus included litigation as part of its licensing strategy as early as February 1998, the institution of litigation could not be said to have been "reasonably probable" at that time because several contingencies had to occur before Rambus would engage in litigation. In particular, the Court noted that "the path to litigation was neither clear not immediate" because those contingencies included, among other things, Rambus needing the approval of its Board to even commence negotiations with a DRAM manufacturer about the patents in question, and there could be negotiation before anticipating any litigation.  There could be no litigation if negotiation succeeds. The court did not extend the scope of anticipated litigation to cover negotiation.  Even Hynix failed to assert that negotiation should be considered a part of anticipated litigation.  Some times "cease and desist letter" is considered first step of the anticipated litigation and it could trigger negotiation, as such it could be a pre-negotiation step.  Negotiation could lie between “cease and desist letter" and “litigation". Demanding a higher licensing fee in a negotiation is an indication of licensor's initial intention to litigate in case the proposed licensee does not yield to that demand.  I think such a logic might have convinced Judge White to consider negotiation a part of anticipated litigation.

 

In Rambus' Virginia case[14] Judge Payne began the re- trial of Rambus vs. Infineon that was remanded by the Federal Circuit disagreeing with the trial court's claim construction and fraud determination.  Infineon contended that Rambus had spoliated documents that were relevant or material to Infineon’s case.     In February 2005, a bench trial was held on Infineon’s defense of unclean hands, which was based on Rambus' alleged spoliation of evidence and other litigation misconduct.   Simultaneously, a corollary evidentiary proceeding was held with respect to spoliation of evidence, for which a sanction of dismissal was requested.   Rambus' document retention policy required Rambus employees to search out and maintain evidence that might be useful to Rambus in litigation, such a documents relating to patent disclosures and proof of invention dates that are of great value to Rambus as well as material relating to trade secrets.   Rambus' document retention policy did not mention any obligation to preserve any other documents relevant to litigation. Rambus' employees were instructed to carefully preserve evidence potentially helpful to Rambus in its upcoming litigation, and to engage in the wholesale destruction of everything else physical and electronic documents, including those that were not helpful to Rambus.   Court have found bad faith in document destruction  when firms, in anticipation of litigation, selectively preserve documents favorable to them, but allow other relevant evidence to be destroyed pursuant to established document retention programs.   At the conclusion of the trial of those issues, the Court ruled from the bench that Infinion had proved that Rambus was liable for unclean hands, thus barring Rambus form enforcing the four patents-in-suit.   In an oral ruling, Judge Payne ruled that Infinion had proved, by clear and convincing evidence, that Rambus had spoliated evidence, for which dismissal was the appropriate sanction. Rambus anticipated that such a written decision with findings of fact and conclusions of law by Judge Payne on spoliation would damage its case against Hynix and Micron who would likely use such findings to thwart  Rambus' case qua them.   On May 21, 2005 Rambus hurriedly settled with Infineon for a low royalty rate.   Such settlement ended the trial and eliminated the chance of a written judgment from Judge Payne and the chances for collateral estoppel where that judgment could be used as a precedent in other court proceedings.

 

In Rambus’ California case[15], the court observed that Rambus' retention policy did not contain any directive to discard documents relating to specific companies or to certain subjects.   The evidence does not suggest that Karp the generator of the policy generated the policy to target selective and harmful documents.  Hynix neither impugned the propriety and validity of any of the written provisions of the Rambus document retention policy itself nor contended that any of its provisions was inconsistent with industry custom or practice.   I think that lack of vigorous and emphatic challenges to Rambus' retention policy by Hynix might be one of the factors to sway Judge White for taking a different view than that of Judge Payne of Virginia district.

 

A formal document retention policy will likely shield the company form negative inferences for destruction of documents, unless the policy was instituted in bad faith or exercised in order to extinguish damaging evidence available to potential parties to the future litigation.   Whether a litigation is "possible" or "probable",   there should be an internal procedure for a committee to review and determine whether the company "reasonably anticipates" litigation.  A decision should be made in good faith and on an informed basis.   While many businesses may favor a widespread destruction in order to cut its cost of storage, those entities may pick to pieces over retaining too much documents and risk incurring exorbitant costs of retaining and producing documents in litigation, or retaining too little documents and risk being sanctioned by the courts for spoliation of evidence, or, possibly worse, throwing out the "good with the bad," or loosing favorable along with the unfavorable material.

Once the duty to preserve evidence arises, the attorneys must take affirmative steps to ensure that no relevant information or records are destroyed.  This is commonly called as putting a "litigation hold."    This duty includes putting routinish document destruction procedure in abeyance.   The duty to preserve documents can trigger earlier, at any time when a party should have known that the evidence may be relevant to future proceedings.  When litigation is reasonably anticipated, the courts now expect that the parties will put litigation holds into effect to prevent the destruction of relevant information and documents and to ensure that newly created relevant documents are preserved for disclosure in the litigation.  In Dillon's case [16] the court viewed the “totality of the circumstances” to determine whether a reasonable person would have anticipated the litigation based on the information available.  The duty to preserve, therefore, may attach even before a party manifests or is manifested with an intent to sue. 

In Anderson case[17], Anderson was accused of knowingly corruptly persuading or instructing its employees to destroy documents under a retention policy.  The Supreme Court centered its discussion to define the meanings of “knowingly corruptly persuade” another person with an intent to cause that person to destroy documents.   According to the Court, the act of persuading a person with the intent to cause that person to withhold documents from a government official or proceeding “is not inherently malign.”    The Court noted that document retention policies are common and often created, at least in part, “to keep certain information from getting into the hands of others, including the Government.” 

 

The Zubulake [18] court indicated that the duty to preserve is based on "what [the preserving party] knows or reasonably should know, is relevant in the action, is reasonably calculated to lead to the discovery of admissible evidence, is reasonably likely to be requested during discovery and/or is the subject of a pending discovery request".   However, as further noted by the Zubulake court, the litigation hold is not the end of a lawyer's obligation; rather, it is "only the beginning.  The litigation hold "should be periodically re-visited so that it remains "fresh in the minds of all employees," including new employees.

 

How a Document Retention Policy is evaluated?

The first and foremost question relating to evaluation and review of a document retention policy arises whether such a policy is a privileged document because of its drafting by an attorney.  If it is considered as a privileged document then how could a court or other forum evaluate or review the reasonableness and validity of such policy.   Does a volunteer production of its policy by a client stops the client from claiming privilege on any other privileged document?  The attorney-client privilege is waived when a privilege holder, without coercion and with knowledge of his right or privilege, makes disclosure of any part of the privileged matter or consents to such a disclosure being made by anyone else.[19]  The tearing of or dropping down the veil of attorney-client privilege for one document may affect the same for claiming other documents 

In Rambus' case,  Rambus produced its document retention policy in discovery that had been drafted by its outside counsel.  The court found that the production of that policy may have waived any attorney-client privilege in the subject matter of the policy.  Voluntary disclosure of privileged communications has been held to waive the privilege with respect to the communications disclosed and also with respect to communications regarding the same subject matter. Although Rambus' production of the policy was undoubtedly intended to explain its destruction and although the policy was apparently intended to be a document that governed the corporation's general affairs, the court indicated that its production likely waived the attorney-client privilege with respect to all advice received as to the scope of the document retention policy. [20]   "How could a court review or weigh a retention policy without its production in the court"  is a question needs to be answered in case of claiming such retention policy a privileged document.

 

Whether the policy complies with the state or federal statutes of limitation for retention of documents?  Federal and state laws prescribe a certain period of limitation during which a cause of action could be pleaded or filed, and its remedial process expires with the expiry of limitation.  The documents relevant or material to that cause of action must be preserved at least for a reasonable period including the period of limitation.

 

Whether a policy and its implementation are uniform, consistent and reasonable?    

A reasonably and consistently implemented document retention policy reduces a company's risk by ensuring that documents are handled properly.  A pick and choose or selective policy could invite sanctions and penalties when tested on the anvil of judicial review.  Rule 37(f) of Federal Rules of Civil Procedure  enshrines the leading phrase " absent exceptional circumstances" a court may not impose sanctions on a party for failing to produce ESI that is lost or deleted under good faith operation of electronic system.  This leading phrase requires the court  first to ensure presence of exceptional or extraordinary circumstances before  invoking its discreation in rare  circumstances to impose sacntions for routinish destruction of evidence under a good-faith operation of the sytem or policy.

 

 [1] The author is a paralegal holding fifteen years experience of law firms' records.

[2]  Tekctron Inc. v. Overhead Door Corp., 116 ER.D. 107 (S.D. Fla, 1987)

[3] J. Messina and D. Trinkle, "Document Retention Policies After Enron," 46 Boston Bar Journal 18 (September-October 2002).

 [4]   "Motion of Federal Trade Commission's Counsel for Sanction due to Rambus' Spoliation of Documents" Docket No. 9302 of  US Federal Trade Commission

 [5]  Lewy  v. Remington Arms Co., 836 F.2d 1104 (8th Cir, 1988).

[6] Hynix Semiconductor v. Rambus, No. C-00-20905 RMW, 2006 WL 565893, at *20 (N.D. Cal. Jan 5, 2006)

 [7]  Kronish v. United States., 150 F.3d 112,127 (2d Cir.1998)

 [8]  Thomson v. US 219 F.R.D. 93,101(D.MD 2003)

 [9]  Rambus, Inc. v. Infineon  Tech. AG,  222 F.R.D at 298

[10] The Sedona Guidelines: Best Practice Guidelines & Commentary for Managing Information & Records in the Electronic Age

[11]  Carlucci v. Piper Aircraft Corp. 102 F.R.D. 472 (S.D. Fla. 1984)

[12]  Williard v. Caterpillar, Inc. 40 Cal App. 4th 895(923)

[13]  Hvnix Semiconductor Inc. v. Rambus, Inc., No. C-00-20905 RMW, 2006 WL 565893 (N.D. Cal. Jan. 5, 2006)

[14]  Rambus, Inc. v. Infineon  Tech. AG, (supra)

 [15]    Hvnix Semiconductor Inc. v. Rambus, Inc ( supra)

[16]  Dillon v. Nissan Mot. Co., 986 F.2d 263, 267 (8th Cir. 1993)

[17]  Arthur Andersen LLP v. U.S., 125 S.Ct. at 2131

[18]  Zubulake v. UBS Warburg LLC, 229 F.R.D. 422 (S. D.N. Y. 2004); see also Zubulake v. UBS Warburg LLC 382 F. Supp. 2d 536 (S.D.N.Y. 2005)

[19] Williams v. Sprint/United Management Co., 2006 WL 1867478; Curto v. Medical World Communications, Inc., 2006 WL 1318387 (S.D.N.Y. May 15, 2006); Ciba-Geigy Corp. v. Sandoz Ltd., 916 F. Supp. 404, 411 (D.N.J. 1995)

[20] Nixon Peabody LLP Attorney at Law, " Court Finds Attorney-Client Privilege Waived by Failure to Preserve Evidence When IP Enforcement Was Contemplated"    http://www.nixonpeabody.com/linked_media/publications/TIPA_04282004.pdf
 

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