When an organization becomes the target of a claim or lawsuit, it is required to retain all material evidence, ideally dating back to the period before the litigation when you reasonably should have known that the evidence may be relevant to anticipated litigation. Failure to retain documents and records can result in significant court sanctions, including monetary penalties and even an instruction to a jury that it can infer from the destruction of the evidence that it contained information harmful to the case.
To prevent such issues during litigation, it is crucial for organizations to develop and implement a record retention and litigation readiness policy. Such policies govern how long to retain various categories of documents across your enterprise and further identify appropriate and mandated protocols when the threat of investigation, claim or litigation first arises.
Crafting a Document Retention Policy
A good record retention policy will typically begin by identifying the general purpose of effective records management, such as better organization and decision-making; maximization of available workspace; business continuity in the event of a catastrophic event; prompt response to investigations, claims and litigation; and compliance with federal, state and international legal and regulatory requirements. The policy should also contain guidelines for how long the organization needs to keep certain documents and the proper way to destroy documents after this period.
An effective policy should list the types of documents and information included, such as all final forms of communications, data and recordings of the information listed in the attached schedule. The policy should further address what documents and information will not be covered, such as unannotated duplicates, preliminary drafts of certain documents that do not reference significant decision-making, texts and materials originating outside the business, spam or junk mail, and certain private materials involving personal affairs.
The policy should also address handling hard copy and electronic records, focusing on the latter since electronic records may take many forms and be in numerous storage media. For example, to underscore to employees the importance of not casually destroying certain electronically stored information, a record retention policy can broadly define electronic data as all text files, spreadsheets, emails, voicemail, recorded conversations, databases, calendar and scheduling information, data generated by calendaring, task and personal information management, computer system activity logs, electronic control modules, electronic data records, GPS tracking devices, and all file fragments and backup files containing electronic data.
This requirement applies not only to individual employees, but also to those responsible for managing electronically stored information interfaces, such as IT employees who may have implemented certain defaults to maintain system space. Such defaults can result in the automatic destruction of business emails after a specific period, usually two years. These emails may constitute records that need to be maintained outside the automated deletion course, requiring a prompt response to avoid improper destruction given a potential triggering event.
To avoid confusion, list the triggering events in the policy in some detail, including an investigation, claim or litigation. Your obligations may be triggered when you should have reasonably anticipated such an event, not necessarily when it was filed or served.
Ultimately, the policy should conclude with a robust schedule of all departments where subject records could be found, all categories of documents, the responsible record holder or manager, the retention period for each category of documents and the reason for such retention period, for example, a relevant law or regulation dictating the retention period, or simply best practice.
Due to the complexity of identifying and shepherding the development and implementation of the policy, it is wise to have a records retention attorney or specialist actively involved in the initial process and subsequent refreshers. Moreover, the internal records management team should consist of diverse stakeholders within the business, including a C-suite representative, to ensure appropriate visibility and accountability.
Implementing a Hold Order
Once there is a reasonable anticipation of an investigation, claim or lawsuit, the organization is required to institute a hold order pursuant to its retention policy. The hold order will suspend standard retention policy activities and direct certain respondents to retain specific categories of documents that may be in their possession. The order should define the scope of time subject to preservation, with both a beginning and anticipated end date or range of dates, and it should be clear about whether it extends to future documents, also known as an evergreen hold. In the event of an evergreen hold, the order should instruct recipients on how to create and retain documents created on an ongoing basis.
The hold order should define the issues in dispute and issues related to claims and defenses. If the hold order pertains to a filed lawsuit, mention the lawsuit by name in the order. Regarding specific instructions, the order should generally describe the types of documents that must be preserved without attempting to list every possible data source (for example, "among other documents, this includes handwritten notes, emails and other electronic documents"). The instructions should further explain the consequences of noncompliance, including civil or criminal penalties for the company and disciplinary measures for employees. Also, consider the key players regarding the recipients of the hold order. Relevant IT staff should be part of the preservation process because of their e-data experience and ability to stop regularly scheduled deletion of key players’ emails.
You may be required to produce your retention policy during an investigation, claim or lawsuit to demonstrate that you are not destroying relevant and material evidence to the proceedings. However, you will likely not want to produce the hold order or the list of employees receiving it. Instead, the hold order should come from the company’s legal department or outside lawyer as part of a confidential and privileged attorney-client communication containing specific advice and instructions.
Once the investigation, claim or lawsuit concludes, make sure to forward a “release of hold order” to the recipient list to let them know the standard retention procedures are back in effect.