Electronic Information Retention

A significant legal matter that may directly impact your business is the recent changes in the Federal Rules of Civil Procedure with regard to electronic discovery; similar changes are pending in our state court system as well. If you should find yourself in any type of litigation, you should be aware of the discovery rules regarding electronically-stored information, as well as the significant consequences of spoliation of evidence, e.g., destruction or loss of electronically stored data. As with traditional paper documents, parties in litigation have an affirmative duty to provide a copy, or description by category and location, of all electronically-stored information in their custody or control that they may use to support their claims or defenses. If you have not already done so, you should implement data preservation of electronically-stored information. All electronically-stored information must be identified and accounted for, even if only remotely relevant to the case.

To satisfy the Federal Rules, every employer should implement or update a document-retention policy to include electronically-stored information. Every company should have a global document-retention policy that limits how long information is kept and sets forth the procedures for uniform and timely destruction of both paper documents and electronic data. The policy should also define what type of information is being retained for a specified period, where it will be stored, and who shall have access to it. In addition, the company should make sure the retention policies are actively enforced and periodically audited. The policy should be implemented in all company locations, including subsidiaries and affiliated companies. Failure to have such a policy can result in countless litigation headaches, extra costs, and even a negative jury instruction allowing an inference that prematurely destroyed documents would have been adverse if made available.

How long must electronically stored information be kept? Normally, a company is bound by regulatory obligations and may have a pre-determined retention period if one falls under Rule 17A-4 of the federal Securities and Exchange Act, which requires companies to retain emails for at least three years. Courts typically expect companies to retain electronic information only as long as necessary and practical for business purposes. In any event, if threatened with a claim, companies should place a “litigation hold” on document destruction.

A good document-retention policy may also become a company’s defense against spoliation by an opposing party. Under Rule 37 of the Federal Rules of Civil Procedure, i.e. the “safe-harbor provision,” a court normally will not impose sanctions on a party for data loss as a result of routine, good-faith operation of an electronic information system policy. Ultimately, there must be a balance between the need to archive electronic information against the expense of storing and maintaining that information. Thus, a company’s data retention policy should strive toward an efficient and economical information management system, which in turn will help reduce some of the burden attributed to document production in litigation.

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