Your Electronic Records and the Law Companies have a legal obligation to retain and preserve certain electronic information.
By Clay Barker
Although most business records are stored electronically, many small businesses remain unaware of their legal obligations when it comes to preserving these electronic records. Electronic stored information encompasses anything stored in an electronic form, including e-mails, spreadsheets, word processing documents, databases, presentations, scanned documents, digital pictures and voice files. Small businesses should ensure they are handling electronic information properly.
Document Retention Requirements Although every business is different, generally there are three reasons to preserve electronic information:
Every business decides for itself what records it will keep based on operational needs and balances those needs against storage costs and system capability.
Government regulations often mandate that you retain certain records.
When there is reasonably anticipated litigation, a duty to preserve relevant records is created.
Electronic data can be problematic because, unlike paper records where doing nothing ensures that records are maintained, doing nothing regarding electronic information can result in automatic and unintended destruction.
It is critical to properly deal with electronic information when facing the possibility of bringing or defending a lawsuit, or when ordered by a court to make records available to others. Courts can and will impose sanctions for spoliation against companies that fail to do so. Spoliation refers to destroying, altering or failing to preserve evidence for another's use in pending or reasonably foreseeable litigation. Sanctions take various forms, including fines, allowing jurors to infer that the missing information would have helped the other side or making the transgressor pay the other side's costs.
The benefits of implementing sound electronic data retention and preservation policies, therefore, greatly outweigh the costs. The retention process occurs in three steps.
Step 1: Establish a Policy Before litigation looms, create a comprehensive record retention and destruction policy. The policy must establish what electronic information is kept, where and for how long. And it must be followed. Not following an established plan is worse than having no plan at all. Creating a plan requires an understanding of your computer system. You need to know how long electronic documents and e-mail are kept and where they are kept. If they are automatically destroyed, you should know when, what back-up systems are used and whether outdated data is still maintained.
Step 2: Prepare for Possible Litigation Create a general "litigation hold" policy. First, this policy should designate criteria to identify anticipated litigation. These criteria include not only being sued or receiving a subpoena, but also receiving threats of litigation, substantial business disputes or plans to bring a lawsuit. Second, the policy must establish procedures to identify and preserve electronic records relevant to the anticipated litigation. Lastly, the policy must designate an implementation team and assign responsibilities. Team members may include a lawyer, a manager familiar with the issues and a computer specialist.
Step 3: Evaluate and Preserve Data If litigation is expected, the team assesses the litigation, determines what electronic data is relevant and where it is kept-including on home computers and PDAs-and which employees or contractors may have it. The team also ensures that automatic destruction stops (including routine overwriting of backup tapes and employees deleting e-mails), issues specific company-wide instructions to implement the litigation hold and then gathers and preserves the relevant electronic information.
Courts will sanction companies that intentionally or inadvertently fail to take these actions. Failing to make a thorough search for relevant electronic information, failing to stop routine automatic destruction, failing to periodically update and reissue the litigation hold instructions, and failing to meet with key employees to explain their ongoing duty to preserve information are all sanctionable acts.
What You Can Expect in Litigation Electronic stored information discovery plays a large role in most litigation and creates unique issues. First is selecting the format for producing electronic information to the other side. Sometimes printing off documents or e-mails is sufficient. Sometimes scanning readable images onto a CD is enough. Other times, downloading the information in its "native format," with all the associated metadata, is necessary.
In some cases, a court will grant others direct access to your computer system and software to view your records. This can occur when the other side samples your records, or, if your software is not generally available to the other side. Even if you are not directly involved in the litigation, a court may grant others the same access to your electronic information by enforcing a subpoena.
No matter how the electronic data is stored, expect to produce it. Generally courts will not compel production of information that is not reasonably available. This can occur when the electronic information is legacy data; that is, it is so old it can no longer be read because the appropriate software is unavailable. Back-up tapes and fragmentary data found on hard drives also usually fall into this category. This is, however, not a license to ignore or destroy this electronic stored information. The court will compel production of the information if good reason exists; for example, if it is the only source for the particular electronic information.
Clay Barker is a partner with the law firm of Spencer Fane Britt & Browne, LLP, specializing in commercial litigation. You can reach him at .
