Every business has an obligation to preserve electronic data that may be relevant to litigation. That obligation arises when the business reasonably anticipates that it will be involved in litigation, either as a party asserting a claim or as a party against whom a claim may be asserted. Any business that receives a subpoena for records likewise has an obligation to preserve all electronic data responsive to the subpoena. Too often, businesses learn of this obligation only after they become involved in a lawsuit or arbitration, or after they receive a subpoena. If a business does not manage the retention and production of electronic information effectively, the result may be unnecessary legal fees, IT consultant fees, or sanctions from the court overseeing the production.
FEDERAL RULES AND ELECTRONIC DATA PRESERVATION
The Federal Courts recently amended their Rules of Civil Procedure governing electronic discovery to bring their rules into line with the realities of the world of electronic commerce. The recent amendments emphasize the need for businesses to prepare for the day when they will be required to produce electronic data as a party to litigation, or as a non-party witness responding to a subpoena. Specifically, they emphasize the need for businesses to develop and implement document retention policies that ensure preservation of electronic data whenever litigation is pending or reasonably anticipated.
A well-prepared, consistently executed document retention policy will help your business respond efficiently to production obligations and reduce potential exposure to sanctions or other problems that may result from the destruction or loss of electronic data. For example, if a business fails to maintain electronic data once it reasonably anticipates litigation, a court may compel the business to undertake the costly process of recovering as much of the data as possible. In the event the data cannot be recovered, the court may impose sanctions on that business. Such sanctions may include a monetary sanction or the loss of rights to bring or to defend against claims. As an example, a Connecticut Federal Court judge recently imposed monetary and non-monetary sanctions on a party after the court determined that the party was “grossly negligent, if not reckless,” in its failure to preserve electronic data after it reasonably anticipated litigation. See Jane Doe v. Norwalk Community College, 2007 U.S. Dist. LEXIS 51084 (D. Conn. July 16 2007).
The Federal Rules contain a “safe harbor” provision that, “absent exceptional circumstances”, prohibits the Federal Courts from sanctioning a party that deletes electronic data during the routine, good-faith operation of its electronic information system. Fed. R. Civ. P. 37(a). The test of what constitutes “exceptional circumstances” depends on the facts of the particular case, and courts will likely refine this test over time. However, it is clear that Federal Courts will consider a welldefined, consistently followed document retention policy as a factor when determining whether the loss of electronic data was the result of normal good faith business operations or involves “exceptional circumstances” justifying sanction.
KEY ELEMENTS OF SOUND DOCUMENT RETENTION POLICY
In general, the Federal Courts are not likely to find fault with a party that deletes documents or electronic data in good faith in accordance with its document retention policy. Such a policy, however, must recognize the need to suspend the normal retention and destruction of email and other electronic data through normal business operations when the party reasonably determines that the data may be relevant to pending or anticipated litigation. In such situations, the organization must take reasonable steps to preserve the relevant data even though it would normally be destroyed through regular business operations.
A good document retention policy that applies to electronic data should do the following: (1) establish an appropriate and workable retention schedule for paper and electronic data; (2) address the retention of e-mail and other communications, such as instant messaging and voicemail; (3) address other forms of electronic information created in the ordinary course of business; and (4) include a “legal hold” policy that addresses the need for all employees to retain relevant electronic data and documents once litigation is reasonably anticipated.
INITIAL ELECTRONIC DATA PRODUCTION IN FEDERAL LAWSUITS
When a Federal lawsuit is filed, the new rules require each party to provide the other parties with a copy of, or description by category and location of, electronic data. Fed. R. Civ. P. 26(a)(1)(B). For quite some time, the rules have required parties’ counsel to meet and confer for purposes of discussing and planning the discovery process. Under the new rules, counsel for the parties must discuss the preservation and production of electronic data. This discussion must include the form in which electronic data should be produced, as well as issues relating to privileged or proprietary information. The parties must also discuss the inability to produce electronic data or documents from sources that a party identifies as not reasonably accessible because of undue burden or expense. As a result of these new requirements, it is very important that the client and counsel speak at the outset of the litigation about the operation of the client’s IT system and the location of its electronic data.
The new rules also apply to subpoenas issued to a non-party witness that seeks the production of documents. Subpoenas may require a business to produce electronic data and also specify the form in which it will be produced. If the subpoena does not specify the form in which the data is to be produced, then the party responding to the subpoena must produce the electronic data information either in the form in which it is ordinarily maintained, or in a form that is reasonably usable.
CONCLUSION
Although Connecticut state courts have not yet adopted rules governing the preservation and discovery of electronic data, it is reasonable to assume that they, as well as other state courts, will likely impose rules similar to those imposed by the Federal Courts in the very near future. Therefore, it is important for businesses to recognize the possibility that their electronic data may be discoverable, and to implement a policy in order to preserve and produce such information in the event of a lawsuit, subpoena or arbitration. It is not enough for a business to simply create a document retention policy – it must implement and enforce the policy in order to reduce the risk that electronic data relevant to a lawsuit will be destroyed, and to reduce the risk of sanctions for failure to preserve the data.