presents Developing Document Retention Strategies Crafting Effective Records Management and Destruction Programs A Live 90-Minute Audio Conference with Interactive Q&A Today's panel features: Robert B. "Barry" Wiggins, Of Counsel, Morgan Lewis & Bockius, Washington, D.C. Jonathan M. Wilan, Partner, Hunton & Williams, Washington, D.C. John S. "Chip" Rainey, Shareholder, Greenberg Traurig, Houston Wednesday, April 22, 2009 The conference begins at: 1 pm Eastern 12 pm Central 11 am Mountain 10 am Pacific The audio portion of this conference will be accessible by telephone only. Please refer to the dial in instructions emailed to registrants to access the audio portion of the conference. CLICK ON EACH FILE IN THE LEFT HAND COLUMN TO SEE INDIVIDUAL PRESENTATIONS. If no column is present: click Bookmarks or Pages on the left side of the window. If no icons are present: Click View, select Navigational Panels, and chose either Bookmarks or Pages. If you need assistance or to register for the audio portion, please call Strafford customer service at 800-926-7926 ext. 10
New Document Retention Strategies Amid Heightened Scrutiny of Corporate Counsel: Meeting Preservation Challenges Robert B. Barry Wiggins Of Counsel Morgan, Lewis & Bockius LLP April 22, 2009
Today s Talking Points Origins where the obligation comes from Timing when the obligation to issue a litigation hold is triggered Scope what must be preserved Compliance implementing and monitoring compliance Consequences the possible consequences for counsel and their clients for failure to establish or monitor a record preservation plan for the course of the litigation. 2
Origins Of The Obligation
Two Basic Sources... Preservation is referenced, but not defined, in Fed. R. Civ. P. 26(f)(2) Common law Duty to avoid spoliation of relevant evidence Inherent power of the court to manage its docket Cases construing Rule 37 Statutes or regulations Civil Criminal Federal State 4
Timing Is Everything!
Timing... Reasonably anticipated litigation Threatened litigation The obligation to preserve evidence arises when the party has notice that the evidence is relevant to litigation or when a party should have known that the evidence may be relevant to future litigation. (Zubulake IV) 6
Timing... [A] duty to preserve is triggered only when an organization concludes, based on credible facts and circumstances, that litigation or a government inquiry is likely to occur. The Sedona Conference, Reasonable Anticipation of Litigation and Legal Holds (August 2007 Public Comment Version) Cache la Poudre Fees v. Land O Lakes, 2007 WL 684001 (March 2, 2007) ( the duty to preserve relevant documents should require more than a mere possibility of litigation ) 7
Timing... Credible Facts and Circumstances... Specificity of the complaint or threat Party making the claim Business relationship between the parties Whether the party making the claim is known to be litigious The experience of the industry Whether the party has learned of similar claims See The Sedona Conference Commentary on Legal Holds The Trigger & The Process at 9 (August 2007 Public Comment Version) 8
Obligation Applies To All Potential Litigants
An Equal Opportunity Obligation Duties apply to potential/actual defendants Duties apply to potential/actual plaintiffs Shred day See Rambus, Inc. v. Infineon Techs. AG, 220 F.R.D. 264 (E.D. Va. 2004) (plaintiff, knowing that it was likely to commence patent litigation, could not employ a computer program designed to destroy relevant evidence), subsequent determination, 222 F.R.D. 280 (May 18, 2004). Third parties Auto Club Family Ins. Co. v Ahner, 2007 WL 2480322 (E.D. La., Aug. 29, 2007) Rules 26(c) and 45 applied Non-party had to make a particular and specific demonstration of fact as distinguished from stereotyped and conclusory statements, in support of its motion. Motion to quash denied. Guy Chemical Co., Inc. v. Romaco AG, 2007 WL 1521468 (N.D. Ind. May 22, 2007) Rule 45 subpoena enforced Non-party to bear cost of production if determined to be de minimis 10
What Must Be Preserved?
What Must Be Preserved? While a litigant is under no duty to keep or retain every document in its possession... it is under a duty to preserve what it knows, or reasonably should know, is relevant in the action, is reasonably calculated to lead to the discovery of admissible evidence, is reasonably likely to be requested during discovery and/or is the subject of a pending discovery request. Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 217 (S.D.N.Y. 2003) (Zubulake IV). 12
Potentially Quite Broad In re Flash Memory Antitrust Litig., 2008 WL 1831668 (N.D. Cal. Apr. 22, 2008) All parties and their counsel are reminded of their duty to preserve evidence that may be relevant to this action. The duty extends to documents, data, and tangible things in the possession, custody and control of the parties to this action, and any employees, agents, contractors, carriers, bailees, or other non-parties who possess materials reasonably anticipated to be subject to discovery in this action. Until the parties reach an agreements on a preservation plan or the Court orders otherwise, each party shall take reasonable steps to preserve all documents, data, and tangible things containing information potentially relevant to the subject mater of this litigation. Counsel shall exercise all reasonable efforts to identify and notify parties and non-parties of their duties, including employees of corporate or institutional parties, to the extent required by the Federal Rules of Civil Procedure. 13
Transitory Data? Arista Records LLC v. Usenet.com, Inc., 2009 WL 185992 (S.D.N.Y. Jan. 26, 2009) (court finds defendant on notice to preserve transitory data usage data, digital music files, web pages that was highly relevant to action once those sources identified by plaintiff) Columbia Pictures Indus. Inc. v. Bunnell, 2007 U.S. Dist. LEXIS 63620 (C.D. Cal. August 24, 2007) (server log data stored in RAM defined as ESI and described as extremely relevant to that matter) Healthcare Advocates, Inc. v. Harding, Earley, Follmer & Frailey, 2007 WL 2085358 (E.D. Pa. July 20, 2007) (court denies motion for sanctions for loss of internet cache data) 14
What Must Be Preserved? The fact that the relevant data is located on a source that may make it difficult or expensive to preserve does not diminish a litigant s preservation obligations. In re Brand Name Prescription Drugs Antitrust Litig., No. 94C897, 1995 WL 360526, at *5 (N.D. Ill. June 15, 1995) (court holds that defendant must bear the burden and expense of preserving and ultimately producing relevant information to the plaintiffs even though those efforts would be costly, given that the necessity for a retrieval program or method is an ordinary and foreseeable risk associated with keeping information in the form chosen by the defendant) Toledo Fair Hous. Ctr. v. Nationwide Mut. Ins., 703 N.E. 2d 340, 354 (Ohio Ct. Comm. Pleas 1996) (a party cannot avoid discovery when its own record keeping system makes discovery burdensome ) The Sedona Conference, The Sedona Principles: Best Practices Recommendations & Principles for Addressing Electronic Document Production, cmt 5.b (2d ed. June 2007) ( Organizations must prepare for electronic discovery to reduce cost and risks. ) 15
What Must Be Preserved? Back to basics... Who has potentially discoverable data? What form is the data in? Where is the data? 16
A Return to the Basics Back to basics... Remember: ESI can take a variety of forms and can be stored in a number of ways. See, e.g., Standing Order for All Judges of the Northern District of California Contents of Joint Case Management Statement: Parties must state the [s]teps taken to preserve evidence relevant to the issues reasonably evident in the action, including the interdiction of any documentdestruction program and any on going erasures of e-mails, voice mails, and other electronicallystored material.) 17
Are There Any Limits On This? Zubulake IV, 220 F.R.D. at 217: What is this scope of the duty to preserve? Must a corporation, upon recognizing a threat of litigation, preserve every shred of paper, every e-mail or electronic document, and every backup tape? The answer is clearly, no. Such a rule would cripple large corporations... that are almost always involved in litigation. At the same time, anyone who anticipates being a party or is a party to a lawsuit must not destroy unique relevant evidence that might be useful to an adversary. 18
Are There Any Limits On This? Sedona Principle 5: The obligation to preserve ESI requires reasonable and good faith efforts to retain information that may be relevant to pending or threatened litigation. However, it is unreasonable to expect parties to take every conceivable step to preserve all potentially relevant ESI. See also Miller v. Holzmann, 2007 WL 172327 (D.D.C. Jan. 17, 2007) (describing Principle 5 as reasonable and reflecting evolving standards); see also Convolve, Inc. v. Compaq Computer Corp., 223 F.R.D. 162, 177 (S.D.N.Y. 2004) (party need not preserve ephemeral oscilloscope data where doing so would have required heroic efforts far beyond those consistent with [the other party s] regular course of business. ) 19
Are There Any Limits On This? Sedona Principle 6: Responding parties are best situated to evaluate the procedures... appropriate for preserving... their own ESI. See also Zubulake, 220 F.R.D. at 218 ( [L]itigants are free to choose how this task is accomplished. ) 20
Preservation v. Production Rule 26(b)(2)(B) Party may object to discovery of ESI not reasonably accessible because of undue burden or cost If confronted with a motion to compel, party must then demonstrate inaccessibility and, for good cause, may still be subject to judicial discovery order compelling the production of the data Production (not preservation) oriented 21
Get Your Hands Off My Hold!
The Application of Privilege to Litigation Holds Protected by the work product doctrine. See Gibson v. Ford Motor Co., 2007 WL 41954 (N.D. Ga. 2007) Protected attorney-client communication. See Capitano v. Ford Motor Company Maremont Exhaust Products, Inc., N.Y.S.2d, 2007 WL 586586 (N.Y.Sup.), 2007 N.Y. Slip Op. 27074 (Feb. 26, 2007). Protection furthers public policy Be prepared for in camera inspection? 23
Are We There Yet?
Our Job Is Never Done: The Continuing Duties of Counsel A lawyer s obligations go beyond the drafting and issuance of a litigation hold An attorney s obligations continue throughout the hold period Zubulake v. UBS Warburg LLC, 229 F.R.D. 422 (S.D.N.Y. 2004) (Zubulake V). We can t just issue a hold and hope for the best! 25
Our Job Is Never Done: The Continuing Duties of Counsel Counsel has a duty to communicate effectively to the client its discovery obligations so that all relevant information is discovered, retained, and produced. Once the duty to preserve attaches, counsel must identify sources of discoverable information, such as Key players IT personnel 26
Our Job Is Never Done: The Continuing Duties of Counsel When the duty to preserve attaches, counsel must put in place a litigation hold and make the fact of the hold known to all relevant employees. The instructions must be reiterated regularly. Compliance with the instructions must be monitored and, when needed, corrective action taken. 27
Our Job Is Never Done: The Continuing Duties of Counsel In addition, when it comes to electronic media Counsel must also call for employees to produce copies of relevant electronic evidence. Counsel must arrange for the segregation and safeguarding of any archival media that the party has a duty to preserve. 28
Why We Need To Get This Right!
Increased Litigation Risks More is not always better... Processing Costs Review Costs Delay and Distractions Confusion The importance of knowing what you have and what you can readily get... Ill-advised representations that come back to haunt you Setting the stage for later preservation disputes Inefficient allocation of search and review resources Discovery about discovery 30
The Price of Failure: Adverse Inference After concluding that this discovery has all the earmarks... of blind man s bluff, court orders adverse inference. 3M Innovative Props. Co. v. Tomar Elecs., 2006 WL 2670038 (D. Minn. 2006) Jury allowed to infer that evidence UBS failed to produce would have been unfavorable. Zubulake V, 229 F.R.D. 422 (S.D.N.Y. 2004) (Zubulake V) (also awarding fees and costs) Similar adverse instruction given for failure to issue litigation hold resulting in non-production of any email. Mosaid Tech., Inc. v. Samsung Elec. Co., 224 F.R.D. 595 (D.N.J. 2004) (also issuing monetary sanction). 31
The Price of Failure: Adverse Inference What s the standard? Compare 32
The Price of Failure: Adverse Inference Zubulake, 229 F.R.D. 422, 430-431 (S.D.N.Y. July 20, 2004) (Zubulake V) Party in control of records had an obligation to preserve data Culpable state of mind Ordinary negligence Bad faith (i.e., intentional or willful acts; relevance presumed) Destroyed evidence relevant to party s claim or defense Proven by the party seeking sanctions 33
The Price of Failure: Adverse Inference Morris v. Union Pacific Railroad, 373 F.3d 896, 899-903 (8 th Cir. 2004) Party in control of records had an obligation to preserve data Culpable state of mind Intentional destruction indicating a desire to suppress the truth Facts and circumstances test Prejudice/unfairness 34
The Price of Failure: Fees & Costs Assessed Against the Company and/or Counsel Bray & Gillespie Management, LLC v. Lexington Ins. Co., 2009 WL 546429 (M.D. Fl. March 4, 2009) (court, in an exercise of its discretion and without motion by opposing counsel, sanctions counsel for willful blindness [that] unreasonably prolonged and multiplied the proceedings regarding the ESI discovery dispute. ) Defendant fined $2.5M for destroying email and barred from presenting key witnesses at trial who failed to follow litigation hold. U.S. v. Philip Morris, Inc. No. 99-2496 (D.D.C. July 21, 2004) Prudential fined $1M for failure to prevent unauthorized destruction of discovery materials. In Re Prudential Insurance Co. of America Sales Practice Litigation, 169 F.R.D. 598 (D. N.J. 1997) 35
The Price of Failure: Executive Officer Fined The failure to take reasonable steps to preserve data at the outset of discovery resulted in a personal fine levied against the defendant s CEO. Danis v. USN Communications, 53 Fed. R. Serv. 3d 828 (N.D. Ill. 2000) 36
The Price of Failure: Evidence Precluded Defendant prohibited from cross-examining plaintiff's expert. United Med. Supply Co., Inc. v. United States, 2007 WL 1952680 (Fed. Cl. June 27, 2007) Defendant precluded from introducing 80K emails into evidence, even to refresh witness recollection, for failure to produce until after discovery cutoff; plaintiff permitted to use records on direct and cross. Thompson v. United States Dept. of Housing and Urban Development, 219 F.R.D. 93 (D. Md. 2003) Alleged patent infringer precluded from offering any evidence of invalidity or unenforceability where found to have used Evidence Eliminator to destroy requested records. Kucala, Enter., Ltd v. Auto Wax Co., Inc., 2003 WL 22433095 (N.D. Ill. May 27, 2003) 37
The Price of Failure: Default Default judgment entered on behalf of plaintiff in the face of defendant s willful spoliation of data and obstreperous conduct. Columbia Pictures Inc. v. Bunnell, C.D. Cal., No. 2:06-cv-01093 (Dec. 13, 2007) Default judgment entered where defendant reformatted hard drive before production to plaintiff. QZO, Inc. v. Moyer, 594 S.E.2d. 541 (S.C. Ct. App. 2004) Default judgment entered where defendant engaged in systematic discovery abuse, including refusal to produce and making outlandish excuses, such as earthquake. Computer Task Group, Inc. v. Brotby, 364 F.3d 1112 (9th Cir. 2004) Dismissal with prejudice for systematic discovery abuse, including violation of three discovery orders and late production on eve of depositions. Mariner Health Care, Inc. v. PricewaterhouseCoopers LLP, No. 02VS037631-F, slip op. (Ga. Fulton Cty. Nov. 9, 2004) 38
The Price of Failure: Default A default judgment was entered against a defendant corporation when its counsel (1) failed to give adequate instructions to the client about client s overall discovery obligations; (2) failed to implement a systematic procedure for the retention of documents, knowing that the client had no document retention plan in place; and (3) delegated the document production tasks to a lay person who lacked an understanding of how broadly the term document was defined by the document request. Metropolitan Opera Ass n, Inc. v. Local 100 Hotel Employees & Restaurant Employees Int l Union, 212 F.R.D. 178 (S.D.N.Y. 2003), motion for reconsideration denied, 2004 WL 1923760 (S.D.N.Y. Aug. 27, 2004) (court criticized counsel and client for their parallel know-nothing, do-nothing, head-in-the-sand behavior in an effort consciously to avoid knowledge of or responsibility for their discovery obligations....) 39
The Price of Failure: Criminal Sanctions? Sarbanes-Oxley (18 U.S.C. 1519): Whoever knowingly alters... any record, document, or tangible object with the intent to impede or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or in relation to or contemplation of any such matter shall be fined imprisoned not more than 20 years, or both. 40
The Price of Failure: Some Conclusions Factors: culpability prejudice Frequency: Defendants 4x as often as plaintiffs For destruction of edata - 84% of the time Courts are becoming more creative with the sanctions they impose Enough is enough! 41
New Document Retention Strategies Amid Heightened Scrutiny of Corporate Counsel: Meeting Preservation Challenges Robert B. Barry Wiggins Of Counsel Morgan, Lewis & Bockius LLP April 22, 2009
Document Retention Requirements Under Law Jonathan M. Wilan Hunton & Williams April 22, 2009
Implications of Sarbanes-Oxley SOX significantly raised the stakes for failing to employ a consistent and thorough document retention policy in certain contexts Criminalized failure to adopt and adhere to appropriate document retention policies in face of federal government and regulatory investigations Institutes specific retention periods for certain corporate records For example, 802 directs accountants to maintain certain corporate audit records for a period of five years from the end of the fiscal period during which the audit or review was concluded (realistically, at least seven years) Some records are on a permanent retention period i.e. bank statements, charts of account, contracts and leases, employee payroll records, training manuals, union agreements, etc.
Records Tampering or Impending Official Proceeding 18 U.S.C. 1512 (Sarbanes-Oxley 1102) was amended by SOX to add a new subsection: (c) Whoever corruptly (1) Alters, destroys, mutilates, or conceals a record, document, or other object, or attempts to do so, with the intent to impair the object s integrity or availability for use in an official proceeding; or (2) Otherwise obstructs, influences, or impedes any official proceeding, or attempts to do so shall be fined and/or imprisoned for up to 20 years. Section 1512(b) similarly criminalizes causing or inducing a person to destroy objects that could be used in an official proceeding
Attempts & Conspiracies to Commit Criminal Fraud Offenses 18 U.S.C. 1349 Any person who attempts or conspires to commit any offense under this chapter shall be subject to the same penalties as those prescribed for the offense, the commission of which was the object of the attempt or conspiracy.
Criminal Penalties for Altering Documents 18 U.S.C. 1519 Section 1519 renders unlawful: 1. the knowing; 2. alteration, destruction, falsification, mutilation, concealment or false entry in any record, document, or tangible object; 3. with intent to impede, obstruct or influence the investigation or proper administration of any matter; 4. within the jurisdiction of any department or agency of the United States. Penalty fine and/or imprisonment for up to 20 years
Criminal Penalties for Altering Documents 18 U.S.C. 1520 Destruction of Corporate Audit Reports Auditors must keep records for 5 years Penalty fine and/or up to 10 years imprisonment
More Obstruction: 18 U.S.C. 1503 and 1505 18 U.S.C. 1503 Prohibits the obstruction of a judicial proceeding Elements of the offense: 1. whoever corruptly; 2. influences, obstructs, or impedes; 3. or endeavors to influence, obstruct, or impede; 4. the due administration of justice; could be found guilty of obstruction of justice 18 U.S.C. 1505 Prohibits the obstruction of a government agency proceeding Elements of the offense: 1. whoever corruptly; 2. obstructs or impedes; 3. the due and proper administration of the law under which any pending proceeding is being heard before any department or agency of the United States; may be convicted under 18 U.S.C. 1505
Case Law Arthur Andersen 125 S. Ct. 2129 (2005) Charges under federal Obstruction of Justice Crime (pre-sox version) - 18 U.S.C. 1512(b)(2)(A)-(B) Supreme Court reversed obstruction conviction based upon jury charge Must find nexus between act of destruction and intent to influence judicial or grand jury proceedings Must have a relationship in time, causation, or logic with the judicial proceedings Lacking knowledge that actions are likely to affect judicial proceedings, then lacking requisite mens rea Key Lesson: It is, of course, not wrongful to comply with a valid document retention policy under ordinary circumstances but missteps and failure to deviate from that policy when a duty to preserve arises can lead to severe results, even if exonerated
Case Law U.S. v. Quattrone 441 F.3d 153 (2 nd Cir. 2006) Built on Andersen District court found nexus (inference logical between knowledge of proceedings and reminder email to employees to observe retention policy), but appellate court reversed on the basis that the actual charge given merely required finding that an investigation had called for certain documents and Defendant ordered their destruction The district court instruction had failed to require corrupt intent on the part of the Defendant Key Lesson: Courts will evaluate intent to find destruction to be obstruction
Case Law Morgan Stanley 2005 WL 679071 (Fla. Cir. Ct. Mar. 1, 2005) 1.4 billion reasons to have an effective document retention policy Adverse Inference Instruction Order read to jury, and the facts in the case deemed established for all purposes resulting in $1.4 billion verdict Failure to search in good faith Failure to disclose scope and workings of backup system Lack of diligence Scripting errors False statements And evidence of this failure was used to investigate further failings in other proceedings. Morgan also fined $12.5 million by FINRA in a separate claim for failure to have an effective document retention policy Key Lesson: Know what data you have and always make accurate and well-informed representations to courts and opposing parties; otherwise, you face severe collateral impact
Case Law EEOC v. Target Corp. 460 F.3d 946, 955 (7 th Cir. 2006) 4 Plaintiffs claimed discrimination in hiring; Target accused of destroying employment applications in bad faith Resumés thrown out pre-suit, but in violation of Target s own retention policy Court of Appeals reversed dismissal, and reinstated EEOC claim of failure to conform with regulations regarding document retention Postscript: In December 2007, Target agrees to $510,000 fine and to 30 month consent decree to revise document retention policies and procedures specifically with respect to employee training Key Lesson: Take care in the creation of your document retention policy, comply with it, and deviate in favor of more preservation when litigation becomes anticipated
Case Law - Rambus Litigation hold (destruction suspension) "[O]nce... reasonably anticipate[ ] litigation,... Duty to suspend any routine... purging system... and to put in place a litigation hold to ensure the preservation of relevant documents failure to do so... Spoliation Rambus v. Infineon, 222 F.R.D. 280, 288 (E.D. Va. 2004) ("Rambus I") (dismissing plaintiff s patent claims based on "Shred Days" and plan to seek high royalties to force targets into lawsuits) Adoption and implementation of document retention policy was a permissible business decision and shred days did not constitute unlawful spoliation Hynix Semiconductor v Rambus, 2006 WL 565893 (N.D. Cal. 2006) ( Rambus II ) Pre-filing destruction under a document retention plan may be spoliation, however, if adopted and implemented during or in anticipation of litigation, and documents destroyed are relevant Employees should be told what constitutes relevant documents in a document hold instruction letter Samsung Elecs. Co v Rambus, 2006 WL 2038417 (E.D. Va. 2006) ( Rambus III ) Micron Tech. Inc. v. Rambus, 255 F.R.D. 135 (D. Del. 2009) [T]he court finds that Rambus knew, or should have known, that a general implementation of the policy was inappropriate because the documents destroyed would become material at some point in the future. Therefore a duty to preserve arose in December 1998 and any documents purged from that time forward are deemed to have been intentionally destroyed, i.e. destroyed in bad faith. Key Lesson: Design, circulate, and enforce a sufficiently descriptive legal hold notice; be cautious of company-wide destruction efforts in face of significant litigation
Case Law Cache La Poudre 244 F.R.D. 614 (D. Col. Mar. 2, 2007) Mailing of letter inviting negotiations to resolve a trademark dispute did not trigger hold requirements Counsel s letter seeking to resolve dispute without litigation and media exposure negated finding of threatened or pending litigation But once complaint filed, hold requirements trumped defendant s routine procedure for wiping hard drives, which failed the safe harbor provisions of FRCP 37(f) regarding document retention programs Counsel has duty to act to verify that the hold is being implemented and that the production is complete Key Lesson: Whether a demand letter triggers a preservation duty is fact-intensive; counsel has a duty to ensure hold is delivered and complied with
Case Law - Disability Rights Council v. WMATA 2007 WL 1585452 (D.D.C. June 1, 2007) For more than 2 years after filing of complaint, WMATA neither suspended its email system auto-delete function of emails older than 60 days (regardless of location) nor instructed its employees to relocate relevant email to an archive preserve it Court found failure to suspend the automatic deletion feature indefensible Judge Facciola commented on WMATA s chutzpah: I am anything but certain that I should permit a party who has failed to preserve accessible information without cause to then complain about the inaccessibility of the only electronically stored information that remains Court decided, over objections of burden and expense, that backup tapes must be restored to obtain the relevant information and ordered a meet and confer to define search protocol Key Lesson: Suspend auto-delete for relevant custodians; a party s affirmative effort to make data inaccessible will not prevent a court from ordering them to restore and produce it
Case Law Keithley v. Home Store.com, Inc. 2008 WL 3833384 (N.D. Cal. Aug. 12, 2008) The company never had a written litigation hold policy in place during any of the relevant time periods, leading to the destruction of earlier versions of source code by technical personnel who had not been informed of defendants preservation duties Magistrate judge found that the discovery misconduct was "among the most egregious" the court had seen, and imposed sanctions of fees and expenses incurred with respect to the motion, future expenses plaintiffs expected to incur as a result of the need to do over certain tasks due to defendants' belated production of documents and ESI, expert fees, and partial future attorneys' fees Key Lesson: Communicate with your IT department regarding potentially relevant data; have a written legal hold notice; source code can be relevant
New Case - Phillip M. Adams & Assoc., LLC v. Dell, Inc. 2009 WL 910801 (D. Utah Mar. 30, 2009) Patent infringement case Motion for sanctions granted when party did not have a document retention policy and relied on employees to determine what needed to be saved for business purposes Failure to produce practically any relevant documents led court to criticize information management practices and infer spoliation No written document retention policy Immediate overwrite of email that was not affirmatively saved No backup system No central repository for business documents Reliance solely on employees A court--and more importantly, a litigant--is not required to simply accept whatever information management practices a party may have. A practice may be unreasonable, given responsibilities to third parties. While a party may design its information management practices to suit its business purposes, one of those business purposes must be accountability to third parties. Key Lesson: Create and enforce a written retention policy rather than rely on employees to determine what should be retained; provide alternative sources of preservation for business continuity purposes
Developing Effective Records Management and Destruction Programs For Strafford Publications April 22, 2009 Teleconference Chip Rainey Greenberg Traurig, L.L.P. 600 Congress, Suite 300 Austin, Texas 78701 (512) 320-7211 raineyc@gtlaw.com
Document Retention and Information Management Information Management Goals Improve Organizational Success Legal v. Business Reduce Storage Costs Reduce Liability Improve Reaction Time 2
Document Retention and Business Risks Delays Retrieval time Recreation time Lack of all relevant information to assess risk, and make decisions Costs of storing unnecessary info Costs in storage media Costs of personnel in reviewing many, sometimes hundreds, of documents to find the right one Making a wrong decision based upon outdated information stored Relevant information lost to decision makers forever Not knowing what you don t know. 3
Organizational Risks Part of a good compliance program Required by many industry regulations E.g. GLBA U.S. Sentencing Guidelines May affect decision to prosecute corporate defendant May provide affirmative defense Being able to quickly identify exculpatory Documents Costs of discovery requests 4
Best Practices Adopt Reasonable Policies and Procedures Realistic, Practical and Tailored Define Scope of Retention and Destruction Procedures Are As Important As Policies The Documents of the Document Retention Policies and Procedures Legal Holds 5
Adoption of Reasonable Policies and Procedures Most data is electronic, and virtually all data is converted and stored electronically. Reasonableness is circumstantial Adoption and monitoring should involve senior management and governing boards No requirement to retain everything, or to retain forever all records stored for some period of time 6
Reasonable, Practical and Tailored Development of the Policies must involve relevant stakeholders Legal Accounting Business unit managers Compliance Governing Board Information Technology department 7
Reasonable, Practical and Tailored Determine legal and business needs for retention Develop a culture of retaining records only for as long as reasonably needed and no longer Recognize the very different needs of different stakeholders within an organization, by document type and content 8
Reasonable, Practical and Tailored Recognize the difference between a records custodian and an information custodian Determine if the form of the message is important, or merely the content The problem of e-mail, IM, Twitter, Blogs, v-mail For different organizations, and different business units within an organization, these items will have different implications Process oriented businesses will have different needs that project oriented businesses. 9
Reasonable, Practical and Tailored Operational and Strategic value of information Your records are, frequently, part of the intellectual property of the company Ownership of this information is by the organization, not the employee Distinguish between disaster recovery and records retention 10
Scope of Retention Policies 1st step determine the legal requirements for retention Statutes Regulations IRS SEC DOD Dept of Labor and EEOC EPA FTC Statutes of limitations Other internal policies Privacy policies Contractual commitments 11
Scope Statutory Sources In the U.S., no universal law of document retention Federal Tax SEC Rule 17a-4 under the 34 Act GLBA SOX HIPAA Regulatory agencies State Regulated Industries Employment and Labor Statute of limitations e.g. In Texas, alone, 115 different statute of limitations periods pursuant to statute 12
Scope of Retention Policies Destruction is an acceptable, in fact for some data, necessary, part of the information life cycle Decide when information has little value to an organization Decide when data must be destroyed, even if there remains some residual value E.g. GLBA may mandate destroying records with SSN information, even if there is some value to the organization in retaining customer information Retention of excess information has an organizational cost 13
Procedures as Important as Policies Reasonably following destruction schedules is not spoliation Organizations can alter the from in which information is stored, but must be consistent Governing boards must adopt procedures designed to determine if policies are materially complied with Procedures must include periodic compliance testing Procedures must include employee education and reeducation Governing boards must follow up on indications that the organization is not complying with its policies 14
Documents of the Document Retention Process Development of the ESI Data Map Written overview of regarding electronically stored information containing: Information content by category Likely custodians of both records and content Relevant electronic systems An ESI DATA Map is not A listing of individual documents Employee-level Matter specific Opinion as to value or relevance 15
What is in an ESI Data Map All centrally manage applications Document management software SharePoint sites and e-rooms Email, blogs, v-mail and IM Web servers Core applications Business unit specific applications Process control Project management Budgeting and estimating Relationship management Supporting infrastructure Development, production and backup server environments Disaster recovery and backup systems Firewalls and security systems End user devices Laptops and desktops PDA s and smart phones USB thumb drives Other devices that have drives imbedded in them. 16
Building the ESI Data Map Existing source documents Business continuity plans (dust of the Y2K files) Application and equipment inventories Third-party contracts for IT services Interviews with business unit representatives Interviews with IT personnel Indexing software Update semi-annually or more frequently, if business is rapidly growing or morphing As hardware and software is cycled in or out of the organization, needs to be reflected in the ESI Data Map Custodian of the ESI Data Map should be copied on all IT purchase orders 17
Documents of the Document Retention Process In addition to the Document Retention Policy and the ESI Data Map, must document the compliance process Since the Company owns the Data, it must take responsibility for guiding employees on how to identify the business purpose of data and its retention FAQ s Document Management Document the rationale for each retention period for each type of information retained Document the testing undertaken by the organization to demonstrate compliance with the policy Document the training given to employees Document the extent to which metadata is part of the informational content being retained Use of metadata, especially that which is automatically generated, may greatly simplify document retention issues. Consider implications of unified messaging and the internet cloud May need to distinguish between records management and document management, and allocation of information between the two systems Compliance documents (policies, education, testing) will be part of a records management system Certain accounting records will need to be part of a records management system 18
Records Management vs. Document Management RM Prevents records from being modified Prevents records from being deleted except under strict control Includes rigorous retention controls Includes rigorous arrangement structures Secure repository for meaningful records DM Allows multiple versions and modification May allow for a document to be deleted by its owner/author May include some retention controls Flexible document storage structure, possibly under the users control Supports day-to-day use of the business 19
Litigation Holds Suspension of normal document retention policies with respect to some data The policies should explicitly provide for this suspension Only expressly designated persons should have the authority to suspend retention policies Tailored to the circumstances Electronic systems not so rigid so as to make a litigation hold ineffective 20
Litigation Holds (continued) Predefined method for communicating litigation holds The person giving the notice Sufficient authority and seniority so as to reasonable assure that sufficient attention and resources are devoted to preservation (e.g. GC, CFO or CEO) Detailed scope (so as to reduce or eliminate guess work and ambiguity) Describes means in which documents are to be preserved or segregated from normal retention procedures Means and extent of communicating the records hold Decide if 3 rd parties are to be included How often should this be updated 21
Litigation Holds (continued) Document the steps taken to implement the litigation hold Implement testing procedures to reasonably police compliance with litigation hold Lift the litigation hold when the circumstances underlying the hold no longer exist Modify retention policies if mandated by court proceeding (e.g. as part of settlement, a company agrees to maintain a record of all resumes received from job applicants for 5 years, even if no requirement exists by law or regulation) 22