With the proliferation of electronically stored data across the enterprise, companies increasingly rely on electronic records retention policies to limit associated risk and improve operational efficiencies. When implemented and managed properly, these policies are very beneficial. Properly disposing data in the normal course of business reduces enormous burdens on IT systems and improves business efficiencies, while at the same time saving a large organization up to hundreds of millions annually in litigation costs and reduced associated risk.
As stated by the United States Supreme Court, "Document retention policies, which are created in part to keep certain information from getting into the hands of others, including the Government, are common in business ... It is, of course, not wrongful for a manager to instruct his employees to comply with a valid document retention policy under ordinary circumstances." Arthur Andersen LLP v. United States, 125 S.Ct. 2129, 2135 (2005)
However, written policies by themselves don't protect corporations. Without stringent implementation and enforcement, such policies won't reduce the volume of discoverable data in litigation. And as provided by recent case law and underscored by the new amendments to the Federal Rules of Civil Procedure (FRCP), accounting for the discovery of electronically stored information (ESI), courts now routinely punish parties who destroy ESI in bad faith. Purported compliance with records retention policies will only serve to increase liability and exposure if the court determines that a company failed to manage and execute such policies in a reasonable and good faith manner. Sanctions resulting from this form of spoliation of evidence are often severe and can cost the offending party millions (and in some cases billions) in fines and case-determining evidentiary sanctions.
Once companies establish electronic records retention policies, they often step on three very severe, but unfortunately common compliance landmines:
1. The failure to consistently enforce their electronic records retention policies in a systemized and objective manner.
2. The failure to execute timely and effective litigation preservation efforts to override those polices.
3. The failure to document the execution of and the parameters for the actual purging or preservation of ESI.
This article addresses how to avoid each of these three pitfalls, illustrated by practice examples, corresponding case law, and other legal authorities. Additionally, the article explores proposed solutions and enhanced processes to address these challenges.