Alignment of Document Retention and Litigation Hold Strategies is Key to Defensible Data Deletion

From the moment we sit down at our work desks to our last Smartphone check before bed, we are constantly reminded of the sheer volume of e-mails and data directed at us. In 2010, averages indicated that approximately 294 billion emails were sent each business day. Statistics from 2011 reveal that the typical business email account sent or received an average of 105 emails each day. (“How Much Do You Know About Your Email?” www.dynamicbusiness.com.au, September 1, 2011) More difficult to quantify are enterprise electronic documents (reports, spreadsheets, wikis, SharePoint entries, MS Office documents, etc.) because the volume of those depends on the type of corporation and the industry vertical. However, the trend is clear and this ever-growing wave of data has—or should have—a huge impact on document retention and litigation hold strategies, particularly in consideration of the bottom line.

Data storage is expensive on such a large scale and has a direct relationship to costs associated with risk management, especially for companies that are exposed to litigation or government regulation. Full blown processing, review and production can have a litigation cost of $2.70 to $4.00 per document. (Degnan D. Accounting for the Costs of Electronic Discovery. Minnesota Journal of Law, Science & Technology. 2011;12(1):151-190.) While no one wants to risk sanctions for spoliation, clearly it is in a company’s best interest to defensibly reduce the millions of documents that are often needlessly preserved. Not only will this practice reduce the cost of litigation by disposing of data that is either old, useless, or not business related, it will also mitigate some of the risk and costs that may arise from the unnecessary retention of potentially damaging data in as yet to be filed or anticipated litigation.

Aligning a company’s document retention policy with its litigation hold strategy can be a challenge when competing interests exist. In order to achieve the cost-optimal balance between the two plans, Legal and IT departments must better coordinate their efforts. Risk management may be the ultimate objective of both departments, but their perspectives differ enough that they often fail to appreciate each other’s contributions to the accomplishment of this goal. In order to formulate the ideal document retention policy, these departments need to rely on each other’s expertise.

All document retention policies are subject to scrutiny if litigation or government regulation comes into the equation. This level of scrutiny is based on a reasonableness standard—is your particular document retention policy “reasonable” for your organization’s needs and exposure to litigation or regulation? To gauge this threshold of reasonableness, an organization needs to ask itself a series of questions concerning business needs, obligations, industry standards, and exposure to litigation. In answering these questions, Legal will want to consult with IT. Meanwhile, IT will need to rely on Legal in regards to what types of documents undergo specific retention policies.

An appropriate document retention policy will also take into consideration the statutes of limitations or regulatory requirements that govern retention periods of certain documents. Each type of document, including contracts, personal injury / product liability, tax, Sarbanes-Oxley, EPA and OSHA related documents should be retained and disposed of accordingly. For instance, depending on the jurisdiction, the period of time during which a contract dispute can be brought ranges from three to twenty years, measured from the date of the breach. However, most contract disputes are brought during the term of the contract in question or just after termination, allowing companies to narrowly tailor their contract related document retention. The best document retention policy will also have procedures in place concerning back-up tapes and other forms of deeper archive storage because of the high costs associated with identifying, accessing and producing data from these.

When does the focus shift from document retention to an obligation to put a litigation hold in place? The duty to preserve attaches when a party is first put on notice of potential litigation. “Once a party reasonably anticipates litigation, it is obligated to suspend its routine document retention / destruction policy and implement a ‘litigation hold’ to ensure the preservation of relevant documents.” Goodman v. Praxair Services, Inc. , __ F.Supp.2d __, 2009 WL 1955805 at *14 (D.Md. July 7, 2009) (quoting Zubulake IV, 220 F.R.D. at 218). There are some obvious (and more subtle) “trigger events” that can necessitate the litigation hold. Subpoenas, court ordered production, receipt of process or a complaint are clear indicators that you and your organization have an obligation to retain relevant data. In addition, threats of litigation by an employee, customer, or contract partner, such as in a demand letter or by email, will also obligate the company to safeguard relevant data against spoliation. Complaints of labor related issues by an employee, such as hostile work environment, sexual harassment, and age discrimination would also trigger a litigation hold for related, relevant documents.

The litigation hold process can be extremely difficult, time consuming, and costly to carry out in full compliance with discovery rules and case law. Fortunately, along with the proliferation of electronically stored information over the last decade, several Software as a Service (SaaS) solutions have become available to assist with this cumbersome process. These tools help outside counsel and in-house corporate counsel quickly transmit litigation hold memos to the appropriate custodians and then track acceptance of hold notices.

Collaboration, reasonable practices and policies, and varying retention periods for different documents are all instrumental in preemptively reducing your company’s litigation spend. Not only will the cost of storage be reduced, but when the time comes to review and produce these documents, your company is likely to experience significant savings. To further maximize efficiency, your company may incorporate new technologies that will off-set the daunting task of enforcing a legal hold. Despite the constant influx of emails, reports, spreadsheets, and other data, the management of your document retention and litigation hold implementation need not be overwhelming.