Publications: Digital Document Retention Policies (DDRPs): Protecting Documents and the Companies That Use Them

• Companies that fail to preserve digital documents can face severe fines, sanctions and other penalties during litigation.
• This article spells out exactly the steps necessary to avoid those penalties.

Long before a case goes to trial, parties have a responsibility to act with care in preserving potentially relevant documents. In fact, the duty to preserve documents typically extends to a date far before the actual filing of a lawsuit. This duty to preserve must be taken seriously. The failure to do so can expose a company to severe repercussions including allegations of document destruction, evidence spoliation issues, and ultimately court ordered sanctions and fines. This article addresses what a company must do to protect itself from such risk.

The Transition from Paper to Electronic Documents
Most companies realize that they have certain responsibilities with respect to maintaining paper documents. That preservation duty used to mean retaining certain paper documents for a period of time and taking care not to engage in “shredding parties.” Now, the duty to preserve goes far beyond the realm of paper discovery and reaches into the domain of electronic documents. Today, key documents are no longer merely stacks of paper in a box. Crucial information lies in e-mails, Microsoft Word files, Microsoft Excel files, and PowerPoint presentations. The danger is that many companies – both small and large – lack the required plans and policies to handle the collection and production of digital documents.

The failure to understand and navigate through the legal issues that spring from digital documents can prove disastrous. Not only are the reputations of the parties on the line, but a judge can issue orders sanctioning a party for such failures. The sanctions can include: (1) fines, including reimbursement of the opposition’s attorneys’ fees; (2) shifting the burdens of proof at trial; and (3) adverse factual inferences. In fact, in 2005 a Florida court in Palm Beach County issued each of these sanctions against Morgan Stanley for failing to preserve and recover responsive e-mails from its computer systems(i). Since then, courts across the country have followed with similar if not harsher rulings. In order to face these challenges, a company must adopt and enforce a Digital Document Retention Policy (“DDRP”). These DDRPs not only protect a party before and during litigation, but they allow a company to control the crushing amount of digital data currently burdening today’s businesses.

What is Proper Preservation of Electronic Documents?
Electronic documents pose unique questions of handling and processing when compared to paper documents. Currently federal and state case law – as well as the recently revised Federal Rules of Civil Procedure – require that a company be able to produce its files in their native format (ii). In other words, Microsoft Word files, Microsoft Outlook e-mails and calendars, or Excel spreadsheet files must be produced on disc or other electronic medium. This means that a company typically cannot side-step its duties by merely “printing out” e-mails or word processing documents.

Before even considering drafting and implementing a DDRP, a company should recognize that it will have to commit to retaining documents in their native format. Then, a company should meet with its information services staff – if it has one – in order to better understand the process of retaining and maintaining such digital data. This can also be done in conjunction with legal counsel in order to insure the integrity and adequacy of the process. Regardless, companies must be comfortable with what they have and how they are storing the information. Not having the right staff to do this can be a fatal error.

The Elements of a DDRP
The development of a DDRP is unique to each company and that company’s business and practice. It is a detailed analysis which should be conducted with the assistance of counsel, but most DDRPs have the following characteristics in common:

1. Appropriate Scope -- Document Types
   The appropriate scope of a DDRP addresses what kind of digital documents should be maintained and retained. Typically, this would include Microsoft Outlook e-mails (and their attachments) and calendars, Microsoft Word files, Excel files, and PowerPoint presentations. This, however, is just the beginning. Depending on the business a company engages in, it may be required to maintain client database information, various sales databases, or other information.
   
   Ultimately, the files that a company generates and circulates in its day-to-day business should be retained. By doing so, the company can maintain control of its documents and when the time comes it will be able to protect potentially relevant documents from inadvertent destruction. The final decision regarding the scope of retention, however, should be made in conjunction with counsel.
2. Retention Time Period
   The most frequently asked question with regard to DDRPs is how long a company should maintain the digital documents. The frequent – though unsatisfying – answer is that it depends. Typically, companies opt for a retention period of 60 to 90 days. In reality, courts will examine a DDRP to determine if the retention period is reasonable and practical (iii). This allows a sufficient time for a company to maintain certain documents but also allows for the company to avoid being crushed by an overwhelming backlog of data.
   
   Again, this is a question that must be uniquely tailored to the company adopting the DDRP. For instance, a company may run on a business cycle of 120 days. Accordingly, a typical 60-90 day retention time period would not be reasonable. Alternatively, a retention period of 2 years would – in most cases – be impractical and would not likely be required by a court.
3. Application of the DDRP -- Enforcement and Operation
   Once a company decides on which documents should be retained and how long they should be preserved, a company still must work to ensure that the DDRP is properly implemented. This, at the very least, means: (1) educating its workers about the DDRP; and (2) making efforts to ensure that workers are obeying the DDRP. A company may choose to inform workers via e-mail, company handbook, meetings, or any other manner to ensure compliance. To be sure, a DDRP that is ignored by a company’s workers is almost worse than not having one at all.
   
   A company should also designate a representative to act as a liaison to answer questions and address concerns. Additionally, a company must make efforts to determine if its employees have saved relevant material on their own personal computer systems rather than a company’s systems. These outliers still must be addressed as their actions can be imputed to the company. Again, counsel can assist in this process.
4. Litigation Holds
   Perhaps the most important aspect of a DDRP is a “Litigation Hold.” A Litigation Hold is a device where a company freezes or “holds” its usual DDRP because of an impending or recently filed lawsuit. Once issued, any deletion of documents must be suspended.
   
   The implementation of the Litigation Hold requires a company to promptly notify its employees of the suspension of the DDRP. A company must work in concert with the company’s legal counsel to ensure that digital documents are not being destroyed when litigation is pending. If a company engages in litigation and it is later determined that relevant documents have been destroyed, then the consequences will be dire.

Conclusion
Ultimately, a company must keep pace with technology. In the realm of litigation, this means paying attention to the issues related to digital documents. The tool for reasonably and practically maintaining these digital documents is by engaging counsel to draft an appropriate DDRP. It is only through a well-constructed DDRP that a company can avoid the risks associated with improper digital document maintenance and destruction.

James Carlson is a litigation partner and member of the E-Discovery and Document Management subgroup at Ungaretti and Harris LLP. If you have any questions about how this information applies to your company, please call him at 312.977.4143.

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(i)  Coleman (Parent) Holdings, Inc. v. Morgan Stanley & Co., Inc., 2005 WL 679071 (Fla.Cir.Ct., Mar. 1, 2005).

(ii) Fed R. Civ. P. 34; McNally Tunneling Corp. v. City of Evanston, No. 00 C 6979, 2001 WL 1568879 (N.D. Ill. Dec. 10, 2001).

(iii) Sedona Principles: Best Practice Recommendations & Principles for Addressing Electronic Document Production, Principle No. 5; Zubulake v. UBS Warburg, 229 F.R.D. 422 (S.D.N.Y. 2004).

This white paper has been prepared by Ungaretti & Harris LLP solely for informational purposes and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Readers should not act upon this information without seeking professional counsel.

Ungaretti & Harris’ Litigation Practice is widely respected for its results-oriented approach and courtroom skills, producing a long record of success for our clients in state, federal, and arbitration venues throughout the country. Our group includes highly seasoned lawyers with a broad range of both specialized and general litigation skills and negotiation backgrounds. Since our clients range from Fortune 100 corporations to emerging start-up enterprises with both long- and short-term litigation needs, our group prides itself in providing each client with individually tailored services.

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