documentation and record retention in the business setting abi brunch-n-learn – march 7, 2012...

Documentation and Record Retention in the Business Setting

ABI Brunch-n-Learn – March 7, 2012

REBECCA A. BROMMELBrownWinick

666 Grand Avenue, Suite 2000Des Moines, IA 50309-2510Telephone: 515-242-2452Facsimile: 515-323-8552

E-mail: [email protected]

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Developing aDeveloping a Document Document Retention PolicyRetention Policy

• Purpose: Set forth how business will preserve and destroy information

• Purpose: Ultimately save time in searching for up to date and necessary information

• Purpose: Helps business deal with documents if and when litigation occurs

• Includes both paper and electronic information/data

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Who is involved in development?Who is involved in development?

• Attorney (identify legally required periods and provisions)

• Information Technology personnel (electronic document issues)

• Senior Management (approval and enforcement role)

• All employees (input is essential)

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First Step - Records Inventory & First Step - Records Inventory & AppraisalAppraisal

• What documents exist?

• Where are these documents currently?

• How are these documents stored?

• Who has control over these documents currently?

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Decisions, Decisions, DecisionsDecisions, Decisions, Decisions

• Decide how long to keep documents

• Decide who will be “in charge” to enforce policy on department level

• Decide the “how” of retention and destruction

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Identifying Applicable LawsIdentifying Applicable Laws

• SEC

• OSHA

• IRS

• FDA

• HIPAA

• ERISA

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Identifying Applicable Laws (con’t)Identifying Applicable Laws (con’t)

• International laws if doing business outside of United States

• State specific– Agencies that regulate your business– Laws regarding statute of limitations for claims

• Also consider any contracts or other obligations that may require maintenance of certain documents

• If there are inconsistencies – go with the longer period

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Sample Retention PeriodsSample Retention PeriodsWARNING: Not exhaustive, MUST be specific

to your business

• IRS – tax documents – see 26 C.F.R.– agreements related to property where depreciation claimed –

permanent– state and federal tax returns – permanent– info supporting tax returns – at least 7 years

• Department of Labor – see 29 C.F.R.– federal contracts or subcontracts – 3 years from end of contract– If subject to Fair Labor Standards Act – 3 years for payroll records

and agreements; 2 years for billing and deduction records– FMLA – documents related to dates of leave, payroll info, etc. – 3

years

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Sample Retention Periods (con’t)Sample Retention Periods (con’t)

• Organizational Records (articles of incorporation, by-laws) – permanent

• Board and Committee Materials– Meeting minutes – permanent in company minute

book– Other board and committee materials – no less than 3

years• Press Releases and publicly filed documents –

permanent (allows you to test accuracy of any document the public could try to use against you)

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• Correspondence/Emails – should be kept for same time period as the category to which they relate

• Banking and Accounting – – accounts payable ledgers and schedules – 7 years– bank reconciliations, statements, deposit slips, checks

- 3 years, unless they relate to a major purchase– inventories and invoices for products, materials,

supplies – 7 years

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• Audits– External reports – permanent– Internal reports – 3 years

• Insurance Records– Property Insurance – life of property insured– Liability Insurance – life of policy plus 3 years– Claim documents – settlement/resolution plus 3 years

• Personnel Records– Applications – 1 year if not hired; 3 years after employment if

hired– Promotions, warnings, etc. – 5 years after employment– Accident reports – 6 years

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Destruction IssuesDestruction Issues

• Consider an automatic e-mail destruction system (ie: all emails after a certain time)

• If you do this, employees need to be diligent about “moving” or saving e-mails that are subject to a longer retention period

• Work with IT professionals on how this would work and what back-ups exist

• Policy should describe how destruction will occur – shredding, deletion, etc.

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EnforcementEnforcement• A poorly enforced policy is the same as having

no policy at all• Document retention and destruction must be a

part of basic duties of certain employees• All employees must understand it and follow it• Discipline employees who do not follow the

policy• Make the policy as clear as possible to remove

as much employee discretion as possible – the more automatic, the better

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Best Practices for PoliciesBest Practices for Policies

• Train/inform employees

• Consistent Enforcement

• Periodically audit compliance

• Periodically evaluate and update – law, technology updates

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The Litigation HoldThe Litigation Hold

• Exception to document destruction schedule – “overrides” the existing schedule

• Instructs employees how to behave with respect to documents that are relevant to potential litigation

• Relates to duty to preserve evidence

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Elements of a Good Elements of a Good Litigation HoldLitigation Hold

• Clear instructions as to what to do when a hold is placed

• Clear statement regarding who is in control of deciding when a litigation hold is placed

• Clear statement of how the litigation will be communicated

• Clear statement of how to determine the scope of the litigation hold

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When should a litigation hold When should a litigation hold be effective?be effective?

• When litigation is “reasonably foreseeable”• Examples:

– service of lawsuit– demand letter– request for information/records (subpoena or informal)– legitimate verbal threat of litigation– initiation of investigation by law enforcement or

agency– formal employee complaints to management– incident involving property or personal injury

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When should a litigation hold When should a litigation hold be effective? (con’t)be effective? (con’t)

• Applies even if you are not a party, but are a third party holding information that is relevant

• You know you fit in this category if you…– receive a subpoena– receive a hold letter from another party/counsel

• If you regularly receive subpoenas or request for information (ie: health care records), your policy should include a process for responding to these subpoenas/requests

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What are my duties once subject to a What are my duties once subject to a litigation hold?litigation hold?

• Assess scope of necessary hold• Discuss with others internally who “hold”

those documents• Determine whether there are those

“outside” who also hold relevant documents

• Discuss and determine the costs of review, retrieval, costs and strategy of the hold and any necessary response

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Are you subject to sanctions?Are you subject to sanctions?

OLD test: Is the document retention policy reasonable? Was it instituted in bad faith? Did you intend to destroy to obstruct or suppress the truth?

NEW test: Were you negligent in preserving and producing? Or, was your conduct grossly negligent? Or were your actions willful, wanton and reckless? (“the continuum of fault” test)

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Sanctions for Failing to PreserveSanctions for Failing to Preserve• Payment of reasonable expenses, including

attorneys’ fees, incurred relating to the particular discovery dispute

• An order stating that certain facts are taken to be established for purposes of the action

• An order refusing to allow the disobedient party to support or oppose certain claims or defenses

• An order prohibiting the disobedient party from introducing certain matters into evidence

• An order striking out pleadings or parts thereof

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Sanctions for Failure to Sanctions for Failure to Preserve (con’t)Preserve (con’t)

• An order staying proceedings until an order is obeyed

• An order dismissing the action or part thereof

• An order rendering judgment by default against the disobedient party

• An order treating as contempt the failure to obey an order

• Prohibit the use of duplicative evidence

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Failure to Preserve – Failure to Preserve – The Adverse Inference Jury InstructionThe Adverse Inference Jury Instruction

(Name of party asserting the conclusion) claims that (name of party) has intentionally [altered] [destroyed] [failed to produce] evidence consisting of (describe evidence). You may, but are not required to, conclude that such evidence would be unfavorable to (name of party).

Before you can reach this conclusion, (name of party asserting the conclusion) must prove all of the following:

1. The evidence exists or previously existed.2. The evidence is or was within the possession

or control of (name of party).

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Failure to Preserve – Failure to Preserve – The Adverse Inference Jury Instruction The Adverse Inference Jury Instruction

(con’t)(con’t)

3. (Name of party)'s interests would call for production of the evidence if favorable to that party.

4. (Name of party) has intentionally [altered] [destroyed] or [failed to produce] the evidence without satisfactory explanation.

For you to reach this conclusion, more than the mere [alteration] [destruction] [non-production] of the evidence must be shown. It is not sufficient to show that a third person [altered] [destroyed] [is withholding] the evidence without the authorization or consent of (name of party).

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Likelihood of SanctionsLikelihood of Sanctions

• Sanctions decreased in 2010 to being awarded 55% of time where they were sought

• E-discovery sanctions reached all-time high prior to 2010

– Of 410 cases where sanctions were sought, Court awarded sanctions 230 times

– Most common misconduct was failure to preserve electronic evidence (or failure to advise client to preserve evidence), followed by failure to produce and delays in production

– Rarely sanctioned attorney without also sanctioning client

– Most severe sanctions: dismissal, adverse jury instruction, significant money awards

– Most common sanction: payment of attorneys fees and costs

Source: Weiss, Debra Cassens, E-Discovery Sanctions Reach All-Time High for Litigants and Lawyers (Jan. 13, 2011) posted on www.abajournal.com

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Electronic Document IssuesElectronic Document Issues

• Clearly, not all documents are in paper format

• “Documents” includes electronically stored information

• Don’t forget about the Blackberry, IPhone, IPod, memory sticks/flash drives, lap tops home/personal email accounts and computers, etc.

• Creates a new “wrinkle” in document production

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Production of Electronic Production of Electronic DocumentsDocuments

• Parties required to identify from start of lawsuit whether and what their ESI (“electronically stored information”) includes

• Party does not have to provide ESI if the source is “not reasonably accessible because of undue burden or cost”

• Even if the producing party shows that its ESI is not reasonably accessible because of undue burden or cost, the Court may still order discovery from that source if the requesting party can show good cause

• Fed. R. Civ. P. 26(b)(2)(B)• States may have similar rules that apply to state court

cases

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Factors in comparing “good cause” Factors in comparing “good cause” against “undue burden or cost”against “undue burden or cost”

1. Is the ESI is unreasonably cumulative or duplicative?

2. Can the ESI be obtained from some other source that is more convenient, less burdensome or less expensive?

3. Does the burden or expense of the proposed discovery outweigh its likely benefit, considering the needs of the case, the amount in controversy, the parties’ resources, the importance of issues at stake in the action and the importance of the ESI in resolving the issues?

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How do you produce/provide How do you produce/provide ESI?ESI?

• Manner in which it is ordinarily maintained or in a reasonably useable form

• Request/subpoena can require a certain format, but response can object and indicate that it is providing such information in a different format

• Things to consider: organization of materials, native format, with or without metadata, searchability of information, programs in which to “load” the files

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ESI and Document ESI and Document Destruction IssuesDestruction Issues

• Rules state that the Court, absent exceptional circumstances, may not impose sanctions for a party failing to provide ESI when it is lost as a result of the routine, good-faith operation of an electronic information system

• Compare with the tests for sanctions

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Practical Advice for Practical Advice for Gathering and Producing ESIGathering and Producing ESI

1. Determine what ESI you have2. Engage the assistance of in-house IT staff or outside

document production experts3. Develop estimates of costs and time for producing the

ESI. Determine the separate costs and time requirements for collecting, accessing, processing and producing the data (or hosting the data on another system).

4. Determine who, within your organization, will bear responsibility for leading the charge for responding to the request for ESI.

5. Determine whether the litigation hold needs to be implemented and if so, the scope of the hold.

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Dealing with Privileged and Dealing with Privileged and Confidential DocumentsConfidential Documents

• Privileged Documents – most common - attorney-client, work product

• Confidential Documents– medical records – HIPAA issues– trade secrets – may need a Confidentiality

Agreement to protect information

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Dealing with Privileged and Dealing with Privileged and Confidential Documents (con’t)Confidential Documents (con’t)• Consider these issues regardless of

whether you are a party to litigation or a recipient of a subpoena

• Why? Once privilege is waived or confidential documents given out, may lose protection completely

• Issues are made more complex by ESI

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Website: www.brownwinick.comToll Free Phone Number: 1-888-282-3515

OFFICE LOCATIONS:

666 Grand Avenue, Suite 2000Des Moines, Iowa 50309-2510

Telephone: (515) 242-2400Facsimile: (515) 283-0231

616 Franklin PlacePella, Iowa 50219

Telephone: (641) 628-4513Facsimile: (641) 628-8494