Document Retention And Destruction Policies - The Time To Implement Is Now

As sure as the sun rises in the east every morning, a contractor can count on being involved in litigation if it is working on enough jobs. One particularly onerous part of the litigation process is compliance with document production requests. Such requests can be quite broad in scope, and place a substantial burden on the parties upon whom they are served. It is especially vexing when, despite the conduct of diligent searches, the actual document production is incomplete. A document production that fails to fully comply with a document production request can result in negative consequences for the producing party – even if the production is made in good faith. Such consequences may include financial sanctions or other adverse court rulings. The best way to minimize these consequences is to develop and implement sound document retention and destruction policies.

Document retention and destruction policies became more important after enactment of changes to the federal rules of civil procedure that pertain to electronic discovery. Once a party is aware that a dispute may result in litigation, or a complaint is already filed, such party must preserve all documents, including electronic evidence, in its possession that relate to the disputed matter. It should not be lost upon the reader that electronic files such as emails and other data in computers are usually considered to be “documents” for litigation purposes. Other information such as photographs, drawings, charts and the like are also considered to be “documents.” Preserving electronic documents can be difficult when one considers that “metadata” may still exist on a computer after an electronic file has been deleted. This metadata may contain backup information relating to deleted emails and files on a computer and can be discoverable via a document production request. Absent implementation of a sound document destruction policy, it can be very damaging in the litigation process if for no other reason than the difficulty and disruption in retrieving such data. Sanctions during the litigation process can also result if a party cannot prove that it preserved documents as required by the rules.

When drafting a document retention policy, a company needs to be aware of two legal requirements: First, as stated previously, the policy should state that once litigation is either anticipated or filed with regard to a particular matter, documents pertaining to such litigation should be preserved. Second, to the extent statutes, regulations or other rules or laws require documents to be retained for a certain period of time, the document retention policy should comply with such requirements. Therefore, a document retention policy should set forth different categories of documents. For example, there should be different policies in effect with regard to retention of financial data such as tax returns as opposed to those policies in effect for retention of documents relating to work performed such as plans, drawings and the like. The time periods and methods of retention will likely differ with respect to each separate category of documents.

An effective document retention and destruction policy should, as one of its goals, ensure that the company retains only those documents that have value to the organization or are otherwise required to be retained by law. It should also provide for methods of easy access to retained documents. Documents that are useless to the organization should be destroyed under the policy. This will require coordination with the company’s IT department so that destruction of metadata may be accomplished as well. Also, due consideration should be given to those documents that are not necessary for current business operations but that otherwise must be retained for a period of time. A critical part of a document retention policy will address methods and procedures for archiving and storing such documents. As well, with regard to document destruction, an effective policy will often provide for procedures to record the destruction of certain documents.

Once the company has established an effective document and retention and destruction policy, the next step is to implement the policy. This can sometimes be more difficult than it seems. Effective implementation requires communication to the company staff, coordination with the company IT professionals, and follow up oversight to ensure that retention and destruction procedures set forth in the policies are properly implemented. It is suggested that once drafted, the document retention and destruction policy be copied and distributed to all company employees who retain custody and/or control over documents. An initial meeting in which employees are educated about these policies should be held. Follow up meetings should be set at regularly scheduled intervals to see that procedures are implemented properly.

By establishing and implementing a proper document retention and destruction policy, a company can protect itself from charges that it improperly destroyed documents that are relevant to litigation. It will also to free up company resources and rid the organization of documents that are no longer required to be retained by law or otherwise necessary for the conduct of its business.

This article was first published in the December 2007 issue of Southeast Construction.

Update:

Recent court decisions illustrate the pitfalls of failure to properly implement document retention and destruction policies. In one case, a party involved in patent litigation implemented its document retention and destruction policy. The problem for this party was that the policy violated the law. Documents were destroyed after the party seeking to enforce the patent became aware that litigation would likely be forthcoming – documents that could bear on enforceability of the patent. As a sanction, the court ruled that the patent would not be enforced.

A prison was sued by an inmate alleging that it served pork products to religious objectors. The prison destroyed documents relating to the lawsuit. The document destruction was in violation of the prison’s policies relating to document retention and destruction. The court ruled that the prison should be sanctioned as the prison’s conduct constituted “willful spoliation of evidence.” As a result, the jury was instructed that the documents which were destroyed were adverse to the prison’s defense of the lawsuit – an instruction known as an “adverse inference” sanction.

A former employee sued his former employer. The employer disposed of the former employee’s laptop computer – a computer which contained electronic data that was relevant to the lawsuit. The destruction occurred at a time when the employer reasonably could have anticipated that litigation would be filed by the former employee. This, held the court, was sufficient to warrant the sanction of an adverse inference instruction to the jury – an instruction that the jury could infer that the computer contained information that was adverse to the interests of the employer in the lawsuit.