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Avoid spoliation problem with solid records policyRichard M. Burnham
It is the intentional destruction of evidence for the purpose of affecting the outcome of litigation, including not only existing litigation, but also litigation that is a distinct possibility. "We'd never intentionally destroy evidence," you say, "so we'd never be involved in spoliation issues." Think again. Assume CFO Smith runs into VP Jones: Smith: Jones, we're spending a lot of money on records storage. We've got boxes of documents stored all over town and servers full of old e-mails taking up space we need. I'd like to get rid of some of it. For example, we've got tons of material relating to that old contract with XYZ that expired 5 years ago. Jones: Well, you certainly can get rid of all the stuff relating to that old contract. We'll figure out what else we can get rid of after I've talked with department heads. The next week, after the XYZ materials have been destroyed, the general counsel mentions to Jones the darn frivolous lawsuit served upon the company last week that alleges that the company breached various provisions of the "old" XYZ agreement. As the case progresses, XYZ asks for all documents and e-mails referencing or relating to that agreement and, as is typically done in litigation, also asks whether any documents responsive to the request have been destroyed. Your company responds: "We used to have documents and emails like that, but without knowledge of the lawsuit, VP Jones ordered the destruction of all such materials the week after the lawsuit was served on the company." Ouch! What could follow are 1) a wide variety of sanctions such as fines, payment of opponent's costs and/or attorney fees, dismissal of one or more defenses or entry of summary judgment for XYZ; or 2) horrors, an instruction to the jury that it may assume the destroyed documents supported XYZ's claims in the litigation. Will VP Jones be able to persuade the judge that the destruction of documents immediately after service of the lawsuit was merely a coincidence? That the direction to dispose of documents was made without knowledge of the lawsuit? Maybe. What if XYZ had not yet filed suit, but had a few conversations with others at the company in which it made known its feelings that the company had not abided by certain provisions in the old agreement? Was litigation then a "distinct possibility" at the time of the document-destruction direction? Maybe. In either case, the company would be in a far less vulnerable position if it could have answered XYZ's document request: "at one time we had documents responsive to your request, but prior to any knowledge of the lawsuit, the documents were destroyed pursuant to the company's record retention policy, a copy of which is attached." A record retention policy provides a useful arrow in the quiver for defending against claims that a party destroyed evidence under suspicious circumstances. However, once adopted, a record retention policy must be strictly adhered to. If requested documents have been destroyed, but older documents of a similar type remain, explaining why can be problematic. How long documents should be retained requires consideration of federal and state tax and regulatory requirements, international requirements and the company's operational needs. Of course, adherence to a record retention policy cannot justify the destruction of evidence when a company knew or should have known litigation existed or was likely. One has an obligation to preserve evidence that might be relevant to a known claim or potential claim. Therefore, key portions of any record retention policy will include a clear delineation of when the destruction of documents must cease regardless of the age of the material; who is responsible for communicating the direction to cease destruction; when, how and to whom the communication is to be made; and who will be responsible for determining which documents will be preserved and for how long. Despite a record retention policy strictly adhered to, a company may still find itself defending against claims that it destroyed evidence after it knew of a lawsuit or knew a lawsuit was a distinct possibility; however, the company will likely be in a far better position to address that issue than it would be trying to explain why it is that only documents relevant to the lawsuit seem to be missing. As the U.S. Supreme Court wrote in the Arthur Andersen case: "Document retention policies, which are created in part to keep certain information from getting into the hands of others, including the government, are common in business. It is, of course, not wrongful for a manager to instruct his employees to comply with a valid document retention policy under ordinary circumstances." There is no better time than the present to protect against spoliation. A careful review of your company's policies and procedures regarding retention, storage and accessibility of information could save your company headaches in the future. madison.com ©2009 Capital Newspapers. All rights reserved. |
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