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Electronic Information Storage: Reducing the Risk of Sanctions During Discovery

Derek D. Samz

To stay competitive and keep up with others, businesses have had to rely increasingly on electronic documents, storage, and communications. These requirements have created a volume of electronic documents that is increasing at an exponential rate. Businesses now also must make the difficult decision of what information needs to be retained, and what can be deleted or destroyed. Complicating this decision is the increasing demand to find and produce these documents during the course of litigation.

Failure to retain and produce electronic documents can have adverse effects on the prospects of successful litigation. Courts have imposed sanctions on parties that have destroyed relevant electronic media, ranging from monetary fines to instructing the jury to infer that the deleted evidence was damaging to the case of the non- producing party. Therefore, it is critical that businesses establish general electronic document retention policies, as well as means to identify items which may be critical to success in future litigation. Unfortunately, a necessary corollary to establishing these policies is increased costs in terms of time and storage space.

The hardest task is simply identifying what material safely can be deleted. Federal Rule of Civil Procedure 37, which went into effect January 1, 2007, attempts to provide a guideline to avoid sanctions for failure to produce electronic information. The Rule provides that “absent exceptional circumstances, the court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.” The Rule does not give an example of “routine, good faith operation.” However, it seems that a party would be protected from sanctions by establishing a reasonable document destruction policy, i.e., one that sets guidelines for destruction based on the passage of time rather than human determination.

While creating a document retention policy that operates based on a set time period is a good start, businesses must be careful to follow statutory document retention periods for their industry, and to preserve any information related to suspected litigation. For example, a party may not be protected from sanctions under Rule 37 if the court determines that the party knew litigation was likely to occur in the future, but failed to save relevant electronically stored information from being destroyed. This situation can arise when a terminated employee storms out of the employer’s building threatening to sue for discrimination, and the employer has the employee’s personnel file electronically stored. The personnel information likely will be at issue in the event the employee carries out his threat. If the employer does not save this information, and it is subsequently destroyed, even pursuant to a “routine, good faith operation,” the employer may face sanctions, including the inference that the destroyed file was harmful to the employer’s case.

“The dog ate my homework” excuse didn’t work in school and won’t work in court.

We recommend that you establish and follow a document retention and deletion policy. It should be in writing, distributed to your employees, and enforced. If you have a plan, we can review it for you. If you do not have a plan, we can help craft one.

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