Record Retention Program Overview

Transcription

1 Business/Employee Record Retention and Production: Strategies for Effective and Efficient Record Retention Business & Commercial Litigation Seminar Peoria, Illinois January 17, 2013 Presented by: Brad Keller, Patrick Poston, & Stacy Crabtree **The cases and materials presented here are in summary and outline form. To be certain of their applicability and use for specific claims, we recommend the entire opinions and statutes be read and counsel consulted. Record Retention Program Overview Why does my business need a record retention policy? What does a sensible record retention policy look like? What is a Litigation Hold Letter and when do I need to send one to employees? What are the legal consequences of failing to retain certain records? What is Spoliation and why should I be concerned about it? My business has been subpoenaed, what do I do now? Record Retention Policy: Why does my business need one? Larson v. Bank One Corp., No. 00-C-2100, 2005 WL (N.D. Ill. Aug. 18, 2005). Class Action suit brought by bank shareholders alleging fraudulent misrepresentations made during merger of two banks. Bank unable to produce documents related to its methodology and calculations regarding financial impact of faulty payment processing. Held: Bank breached its duty to preserve these documents through faulty and ineffective record retention policy. Bank barred from cross-examination of Plaintiffs expert regarding damages. Jury instructed as to Bank s inability to produce documents. Plaintiffs request for attorney s fees reserved until conclusion of case.

2 Record Retention Policy: Why does my business need one? 1) Business Needs: Essentially all businesses have an operational need for the maintenance of records related to current or future business use. 2) Legal Needs: Litigation may arise out of transactions or events memorialized in written or electronic records. Local, State, and Federal agencies may require retention of certain records for audit purposes. Proof of ownership- i.e. deeds, titles, loan documents. 3) Maintenance Costs and Efficiency: Sensible retention policy offsets expense of preservation and enhances ease of access. Objectives: Identify and keep those records that are necessary to the conduct of the organization s business; Protect those records which are required to be kept by statute or regulation or which are relevant to pending or foreseeable investigations or litigation; Establish reasonable retention periods for such records; and Provide for the destruction of unneeded records in a documentable and systematic manner. 1) Written 2) State policy goals 3) Provided to all employees 4) Stress compliance and effects of non-compliance 5) Identify who to contact with problems/questions 6) inboxes not record retention systems. 7) How and when to preserve . 8) Easy to understand document categories 9) Clear retention periods 10) No employee discretion as to retention periods. 11) Off-site records (home or personal electronic devices) 12) Destruction Protocol 13) Identify responsible parties. 14) Employee acknowledgment and signature.

3 Cataloging Existing Records Determine what records it has and how the records are best cataloged for purposes of a retention system. Define Records -not limited to tangible items and can/should include electronic data and physical objects. Consider items that may have legal significance but are not typically thought of as records: Advertising materials; Superseded web pages; Internet publications; or Representations concerning an organization or its products. Categorizing Records Categorize in fashion which allows for efficient and reliable access and, ultimately, destruction. Should be categorized by subject matter, such as: Corporate organizational records; Financial records; Product development records; Sales records; Litigation files; Create subcategories based on the nature of the business, the category itself, the number of records involved, and frequency of access. Determining Retention Periods Should be category-appropriate and reflect: Organization s business need for the records Legal need for the records- federal, state, and local laws and potential for litigation. Records reflecting ownership will need to maintained for duration of ownership. Should reflect managerial, legal and accounting input. Should be easily calculable and unambiguous. Can use current plus _ years or expiration plus _ years.

4 Compliance Essential to success of program and requires advance thought of current and future employee training on policy. Set forth disciplinary actions for violations of policy. Employee signature and acknowledgment of policy. May require amendment of other corporate documents or HR policies. Each department should have at least one designee who knows the policy, understands the nomenclature, understands the philosophy, knows how to categorize files consistent with the policy, and can monitor compliance. Assigning Administrative Responsibility Clearly identify who will have local and overall responsibility for: The policy; On-going education; Compliance and discipline issues; Outside storage vendor oversight; and Record destruction issues. Organizations with multiple offices should assign administrative responsibility at each location. One person or department with ultimate responsibility for overall administration of policy. Outside Vendors Records no longer in active use often require storage with outside vendors. Choose vendor based on reliability of protecting and retrieving records. Allocation of responsibility and protocol for record destruction should be clearly specified with vendor and always in writing. Vendor must be able to provide appropriate guarantees of privacy. Advisable that record owner have access to vendor s database.

5 Review and Spot Check At appropriate intervals, there should be a system for review and spot check of records. Ensure records in storage have been maintained and have not been destroyed. Ensure records which were to be destroyed were in fact destroyed. Designate person or department with responsibility for such review and the frequency with which it is to be completed. Destruction of Records Destruction done in accordance with retention period identified. Create Destruction Log identifying the destroyed records, indicating that a check was made to ensure the retention period had expired, and confirming the date the record was destroyed. Destruction Logs should be maintained for reasonable period after the destruction of the records. Record Retention Policies are essential to every organization. Reflect the business, legal, and efficiency needs of the organization and the records themselves. Written to clearly articulate the necessary components of the policy. Include provisions for compliance, oversight, training, and discipline. Provide to all employees with acknowledgment.

6 Litigation Hold Letters What is a Litigation Hold Letter Letter directing an entity or persons to segregate and protect from destruction certain documents, data, and objects that are, or arguably may be, relevant to a threatened or pending litigation, regulatory investigation, or audit. Sent to any person or entity that is obligated to provide materials in the discovery or investigatory process. May be sent by an attorney or company to: Employees Adversarial party in litigation Third parties suspected to possess or control relevant information. What is a Litigation Hold Letter 1) Define the Corporate Audience: Depending on the size of the organization, may be companywide or only certain individuals or departments. Careful advance investigation and planning is crucial to ensure all potentially relevant departments and personnel are identified. 2) Define what needs to be Preserved and its Location: Clearly define subject matter and scope of preservation Traditional paper documents and records Electronically Stored Information Smart Phones, personal computers, flash drives, etc. Data retention/back-up systems Records currently in existence or that may come into existence.

7 What is a Litigation Hold Letter 3) Give Clear and Simple Direction: Usually intended for a wide audience across organizational levels. Offer general guidance on how to comply with the obligation and a resource for assistance. 4) Identify Risks of Non-Compliance Stress importance of preserving data Outline serious consequences to company if data is intentionally or unintentionally lost or compromised. 5) Communicate Promise of Follow Up Identify personnel responsible and establish timeline for follow up. To Whom Should I Send the Litigation Hold Letter From an organizational standpoint: A Litigation Hold Letter is a directive to all potentially relevant personnel of a company advising them that there is a specific subject matter which has resulted or is likely to result in litigation. Better to be reasonably over-inclusive than under-inclusive to reduce the risk of evidence destruction. Preferably sent by a high level corporate officer or director. When do I send a Litigation Hold Letter When you are named a party to litigation. Trigger Event often occurs prior to the filing of any lawsuit or initiation of formal investigation. When an event has occurred that has resulted or likely will result in litigation, regulatory investigation, or audit. When litigation against your company is threatened seriously or seems imminent. Upon knowledge of litigation to which you are not a party but to which you possess or control relevant documents, objects, or records. Upon receipt of a subpoena as a non-party to litigation.

8 SPOLIATION IN ILLINOIS What is spoliation? Spoliation includes the non-preservation of evidence, as well as the destruction or significant alteration of evidence, relevant to pending or reasonably foreseeable litigation Does not have to be intentional to have harmful consequences Spoliation in Illinois Parties to litigation can be penalized for spoliation as a discovery sanction Parties can also be sued for spoliation Cause of action- Negligent spoliation of evidence No separate cause of action for intentional spoliation

9 Spoliation as Discovery Sanction Discovery rules in Illinois require full disclosure regarding any matter relevant to the subject matter involved in the pending action, whether it relates to the claim or defense of the party seeking disclosure or of any other party, including the existence, description, nature, custody, condition, and location of any documents or tangible things (Supreme Court Rule 201) Spoliation as Discovery Sanction Sanctions are imposed under Supreme Court Rule 219 When deciding whether to impose sanction, court considers: (1) the surprise to the adverse party; (2) the prejudicial effect of the proffered testimony or evidence; (3) the nature of the testimony or evidence; (4) the diligence of the adverse party in seeking discovery; (5) the timeliness of the adverse party s objection to the testimony or evidence; and (6) the good faith of the party offering the testimony or evidence. Spoliation as Discovery Sanction Possible sanctions Up to court- many options listed in SCR 219 Usual sanctions in this context Barring the party who spoliated evidence from maintaining a particular claim, counterclaim, thirdparty complaint, or defense relating to that issue; Allowing adverse inferences against the spoliating party (possible jury instruction); Precluding the presentation of evidence or barring testimony related to the issue: or Default judgment or dismissal.

10 Spoliation as Discovery Sanction Can be sanctioned for pre-suit dismissal Even if there is no specific statute mandating that records be maintained Shimanovsky v. General Motors Corporation, 181 Ill.2d 112 (1998) Negligent Spoliation of Evidence Boyd v. Travelers Insurance Company, 166 Ill.2d 188 (1995) is the landmark case Elements of claim: Defendant had a duty to preserve Defendant breached that duty The breach proximately injured the plaintiff Actual damages resulted from the breach Negligent Spoliation of Evidence Biggest issue in these cases- Was there a duty to preserve? If not, there is no claim for negligent spoliation of evidence Boyd established a two prong test for determining if there is a duty to preserve 1) Relationship prong 2) Foreseeability prong

11 Relationship Prong Plaintiff must prove that a duty to preserve arose from: an agreement or contract between the parties to the spoliation claim; a statute; another special circumstance; or by the defendant s voluntarily assuming the duty through affirmative conduct. Foreseeability Prong Plaintiff must prove that a reasonable person in the defendant s position should have known the evidence would be material to potential litigation. Negligent Spoliation of Evidence If there was a duty to preserve, Plaintiff must also prove: Breach Proximate cause Plaintiff must show that it would have had a reasonable probability of succeeding on the merits of the underlying case but for the spoliation Damages Plaintiff must show that the defendant s loss or destruction of the evidence caused the plaintiff to be unable to prove an otherwise valid, underlying cause of action Some difference in how to determine amount of damages

12 Responding to a Subpoena What is a subpoena? Writ of court that compels a person or organization not a party to a case to either appear to testify or to produce documents identified in the subpoena Because a subpoena is issued by a court, there are legal penalties for not responding or appearing as requested Subpoena in Illinois Civil Cases Two kinds of subpoenas (1) Subpoena calling for a person to testify under oath At either a deposition or trial (2) Subpoena calling for production of documents Subpoena duces tecum Will usually list a date to appear. However, appearance is generally unnecessary if documents are produced prior to that date.

13 What Should You Do When You Receive a Subpoena? Do NOT ignore it You can be held in contempt of court for ignoring it If you continue to ignore attempts to compel your appearance or production, you could be put in prison What Should You Do When You Receive a Subpoena? Options in Responding Contact your attorney or in-house legal counsel Determine what lawsuit is about and respond to subpoena Object to subpoena Motion to Quash This is one option in responding to a subpoena This is a request to the court that it quash or invalidate the subpoena Several possible grounds Privilege Unduly burdensome Done for the purpose of harassment

14 Is there information that is protected in the documents requested? Attorney-client privilege Who is protected? Work product Other sources of protection? Any Questions? If you have additional questions please feel to contact one of us. Patrick Poston: Brad Keller: Stacy Crabtree: If you would an electronic version of our handouts please visit our website at THANK YOU FOR ATTENDING!!