December 1 is Approaching – Do You Know What Your Electronic Records Retention Policy Is?

According to The Sedona Guidelines for Managing Information and Records in the Electronic Age, “organizations that comprehensively address electronic data issues in their policies and practices are better positioned to meet their legal duties (regulatory as well as in litigation) and are also more likely to maximize the value of internal business data.” If that statement alone does not motivate organizations to review their records retention policy to determine whether it addresses electronic data issues, then the amendments to the Federal Rules of Civil Procedure, which take effect on December 1, 2006, should prod organizations to do so.

Court decisions, such as the Zubulake v. UBS Warburg cases, have already recognized the discoverability of electronically stored information (“ESI”). In addition, there are a number of cases where organizations that have failed to comply with electronic discovery requests have been sanctioned and have incurred multi-million dollar fines. New Rule 34 specifically add ESI as a category of documents subject to a discovery request. The committee notes to the amendment interpret the definition of ESI to be broad. The committee also states that the amendment confirms that discovery of ESI stands on equal footing with the discovery of paper documents.

The amendment to Rule 26(f) requires the parties, within 120 days of the filing of litigation, to “discuss any issues relating to preserving discoverable information.” These discussions will lead to a discovery plan that will include any “issues relating to disclosure or discovery of electronic information.” This rule provides a very short window for the parties to identify and evaluate their ESI for potential production. Those organizations with effective electronic records retention policies and procedures will help avoid the high costs entailed of searching and collecting potentially responsive ESI.

The amendments add a new section, Rule 37(f), which provides a safe harbor from sanctions arising from evidence spoliation. This section states that “absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information as a result of routine, good faith operation of an electronic information system.” This section focuses on the routine alteration and deletion of information during the ordinary use of computer systems. However, the good faith component of this section provides that a party may not exploit this routine operation of a computer system to get around its discovery obligations by allowing that operation to continue so as to destroy specific ESI that it is required to preserve. From a records retention perspective, this section highlights the need for a clear, well executed, and uniformly enforced records retention program’s ability to provide some level of protection from "adverse inference" rulings arising from spoliation.

This note examined briefly the impact of the amendments to the Federal Rules of Civil Procedure on an organizations electronic records retention policy. Organizations should be aware of their obligations to produce ESI in the context of civil litigation and must act proactively to manage their ESI by having a detailed Electronic Records Retention Policy, including detailed procedures on how to manage and communicate litigation hold orders.