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Electronic Records Management: Are You Compliant?

BOB GREG
Boardman & Clark LLP

We live in an electronic society.  Virtually all transactions, records and conversations are increasingly electronic (both business and personal).  There is an electronic trail to almost everything. 

All organizations are now required to have a process to categorize, preserve and be able to produce electronic records in litigation.  Sometimes, years later. 

Develop a Process for Preserving Electronic Records

If you do not yet have a system, this is not something you should think about "getting around to sometime."  It is required!  It has been required for the past several years.  The courts are now assessing sanctions of up to $1 million or even granting summary judgment without trial against organizations which just "hadn't gotten around to" developing an effective and comprehensive Records Management Policy and Process. 

The same sanctions apply to those who did develop a process but then failed to reassess and keep it up to date with changing technology.  They should have known their policy and procedures were now antiquated and ineffective.  They pay the price. 

The Court’s Rules on Electronic Discovery

Both federal and most state court systems have adopted electronic discovery rules.  The federal rule is Rule 26(a), which requires that employers disclose, at the beginning of litigation and prior to any discovery by plaintiffs, a copy of or a description by category and location of any documents (paper or electronic) that may support its claims or defenses. 

Absence of computer records creates the appearance that one is trying to hide the truth.  It can create the presumption that any unproduced record should be viewed as an admission of fault.  This created a $2.1 million verdict against the employer in Arndt v. First Union Bank (N.C. Ct. App., 2005). 

Sanctions for Deleting Records Related to a Lawsuit

Employers lose cases and are sanctioned by the courts because they did not preserve email and other electronically stored information (ESI) even before an actual lawsuit is filed.  A sanction of $175,000 was imposed for deleting emails after the company should have been on notice of a potential claim (legal counsel, HR and IT failed to effectively communicate) in the case of Zubulake v. UBS Warburg LLC. The defendant may have to bear the full cost of retrieval and restoration of improperly deleted electronic records.

Other sanctions for spoliation include:

  • You pay penalties;
  • The court "suppresses" your evidence;
  • Presumption of guilt; and
  • You lose!  Court grants summary judgment due to your bad faith.

Creating a Policy for Electronic Records Management

An effective policy and process for electronic records management requires serious assessment.  It is not something which can be copied from some forms manual and plugged in.  There must be detailed analysis of your own organization, its operations, business, the extent and type of electronic communications and records.   Information storage and retention itself is becoming more and more complex.  Depending on the amount of data they have, some companies need to turn to external providers for storage. 

At a minimum, all records policies and procedures should cover: 

  • Creation of records (including prohibitions on what not to have on the system);
  • Retention and security (including back-up storage media);
  • Retrieval (and authenticity); and
  • When and how to destroy.

This system should comply with all relevant laws and regulations, not just the court discovery rules.  Various laws require keeping records in different ways.  Make sure you know the specific requirements for your company and types of data! 

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Topics: Transportation