Decide What to Keep and When to Keep It

The Legal Department
Paul R. Gary
March 15, 2008
COLUMN : Legal | Management

We don’t need new laws; we just have to enforce the ones we have…” This line has been applied in innumerable ways to issues which have been the subject of a cry for more legislation. Sometimes, the furor results in old laws being enforced with new vigor. It’s good to know when that happens.

We are seeing newly vigorous enforcement of an “old law” that has come about in a curious way. It can easily affect you. The law has to do with retention of documents and other forms of information that are likely relevant to a legal dispute. Let’s call it a “litigation hold.”

I think you would agree that it is fair to punish a party that intentionally throws away evidence so that it cannot be used in the evaluation or adjudication of a lawsuit (I know some will throw it away anyway, but they secretly know it’s not fair). We tend to give more weight to what people wrote and said in the past—prior to a formal dispute—than we do to statements made in heat of the case. Peoples’ jobs, fortunes and freedom can hang in the balance. So, proof of the facts which was generated as those facts actually occurred is important. That proof is often recorded in documents or data which comprise company records.

There have been rules (laws) about when evidence should be retained and what should be kept for a long time. Yet, many of you—even those involved with claims—never came face to face with this notion, in part because it was never really enforced in a way that made “news.” That is changing and the reason is somewhat curious.
“Discovery” is the process by which information is extracted from parties to a piece of litigation with legal penalties for serious abuse of the system. Most state rules of discovery are patterned after the Federal Rules of Civil Procedure, which govern cases in federal court. So over time, the FRCP winds up controlling almost all cases.

DOCUMENTS AND DATA
In the fairly recent past, the FRCP have been modified to require mandatory “voluntary” disclosure of certain types of information early in a case. More recently, the rules were changed to address the realities of applying mandatory disclosure to electronic data, which has become the principal vessel for storage of information in the American economy. 

So, that the evidence of what was “said” and done before the dispute became formal is likely preserved electronically, not in ink. I want to warn you that this emphasis on the preserving of electronic evidence will result in aggressive enforcement of the basic, pre-existing law concerning preservation of all evidence; not just that maintained electronically. The “old rules” are getting dusted off and this will cause a resurgence in the importance of them to your company.

It is without question beneficial to have a meaningful “document retention program,” (really an information retention program) by which you establish the rules as to what gets kept (and for how long) and what gets pitched. You may even use a document retention policy to be able to explain to the court your reasons to have discarded information, even though it now appears to have been crucial to a given case. Beyond this, you also need to know the basics regarding a “litigation hold.” A litigation hold is the required tool that pre-empts the destruction of information pursuant to the document retention program (such as it may be) within your company. In other words, a litigation hold trumps the document retention program. The litigation hold takes the form of a communication within the company that directs retention of information (hard copy or electronic) that may be relevant to what is seen to be a likely claim. 

The definition of when a claim has become foreseeable and what is to be kept is so factually dependent on the nature of the claim that my walking down that path in this venue causes more harm than good. However, stop and think for a second about what is likely to be important to, say, a construction defect claim involving windows and doors. It’s not too tough to make a reasonable effort at it. 

In fact, a “reasonable effort” is exactly what’s required. How do you act/look reasonable in this context? First, be able to show you thought about the matter. Courts do not like companies that ignore responsibility. Next, demonstrate that the items to be retained made sense and included what appears to be needed by both sides of the dispute. Lastly, take solid steps to assure that the selected information was in fact identified and kept. 

Don't Ignore Obligation
The flip side is what happens if you ignore the obligation to make a reasonable effort to retain information relevant to a foreseeable claim.  In the worst case you not only lose the case, but the court refers the matter to the attorney general to initiate an investigation. Note, I mentioned people’s “freedom” above–that is exactly what can be in jeopardy.

A less harsh result would be the jury being advised that they should presume that all the information relevant to the claim, but lost by the company, would have all been adverse to the company’s interest in the case. Not good. I’d say it’s easier to just have a good document retention plan and do the litigation hold when it looks like a formal claim will be asserted. What about you?

Paul R. Gary is principal of The Gary Law Group, a law firm based in Portland, OR, emphasizing legal issues facing manufacturers of windows and doors. He welcomes feedback about articles published in Window & Door and can be reached at 503/227-8424 or paul@prgarylaw.com.

Paul R. Gary is the prinicipal of The Gary Law Group, a law firm based in Portland, Ore., emphasizing legal issues facing manufacturers of windows and doors. He welcomes feedback about articles published in Window & Door and can be reached at 503/227-8424 or paul@prgarylaw.com.