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For many organizations, one of the key drivers to invest in records management and information governance initiatives is to balance recordkeeping risks in discovery during litigation. In normal business operations, organizations must retain and dispose of records in accordance with their records retention schedule. However, when there is a known or anticipated litigation, government audit, or investigation, organizations have the duty to preserve records and information, across all media, that may potentially be relevant to the matter. The organization must suspend records destruction of such material through a legal hold notification.

What Should You Preserve?

A well-implemented legal hold process reasonably ensures that an organization properly identifies and preserves relevant records and information—both physical and electronic media. In addition to official records, this includes all related drafts, handwritten notes, work files, and marked copies, among other things, that otherwise might normally be eligible for disposal. Back-up tapes, if used for archiving purposes, should also be preserved as well as paper documents stored off-site.

Why Is It Necessary to Preserve Records and Information?

The Federal Rules of Civil Procedure in Title V (Rule 26 to 37) set forth various requirements for discovery of opposing litigants.

Rule 26 describes the duty to disclose and the general provisions that govern discovery, including the need for both parties to “meet and confer” and plan for discovery under Rule 26(f).

Rule 34(a)(1) specifies the scope of items that may be subject to discovery and production as “(A) any designated documents or electronically stored information—including writings, drawings, sound recordings, images, and other data or data compilations—stored in any medium from which information can be obtained either directly or, if necessary, after translation by the responding party into a reasonably usable form; or (B) any designated tangible things.”

Prior to 2015, under Rule 37(e), failure to make disclosures or to cooperate in discovery could lead to sanctions and judgments that presume an unfavorable adverse inference (a rule in which a judge can instruct a jury to infer that the evidence is unfavorable to the party's case). However, in May 2015, this Rule was amended to limit and lessen the duty to preserve the ever-growing amount of electronically stored information, to now read, “The court upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice.”

Although this is less consequential and somewhat eases the burden of preservation and production, organizations must still act in good faith and reasonableness to preserve and produce evidence. Under the amended Rule, the court may still order the jury to presume culpability if there is proven intent to deprive another party of information.

Weighing the Litigation Risks

A well-managed and systematic program with documented processes for records retention and disposal is critical to mitigating recordkeeping risks. It demonstrates to the court that the organization has been conducting its business affairs properly and appropriately managing its records and information throughout the normal record life cycle. It balances the need to discard unnecessary records and satisfies the duty to preserve records, when needed, so that it has the right information at the right time.

An organization must schedule the regular disposal of its records and information (at least once a year) to ensure that records and information are discarded in a timely and appropriate manner. It cannot be arbitrary and must be executed in compliance with the organization’s policies and schedules. This is essential so that records that should be discarded in normal business operations are not available and exposed during litigation.

On the other hand, premature disposal of records and information prior to reaching the proper retention period or failure to meet the legal hold obligations may result in the appearance of intentionally hiding or destroying evidence, known as spoliation of evidence, which could have negative consequences to the organization.

Of course, once a matter settles, it is imperative to release the legal hold at the conclusion of a case, so that the materials under preservation are not held longer than necessary and possibly be exposed again in future litigations. This is essential to balancing the risk equation.

Cindy Zuvich, CRM, is the Principal of Unigrated Global, an information governance consultancy and records management services company based in White Plains, New York. Contact Cindy at cindy.zuvich@unigrated.com.
 

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