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Does your company have a formal policy for retaining and disposing of its records? Do you even know which records need to be retained, how long they should be retained, and which disposal techniques apply to which record types? While retaining too much information can increase legal exposure, disposing of too few records increases the costs associated with record storage. Faced with these issues for records management, many companies are struggling to build an appropriate records management program. Having a carefully planned and documented, records-retention policy supports internal accounting and documentation efforts, and also addresses state and federal legal compliance requirements. At the same time, proper retention of records is necessary for litigation management. Companies seeking to formulate records-retention policies need to start by understanding that records is the collective term used to capture both documents and compiled data. Records generally have a life cycle that consists of creation, distribution, storage, retrieval, regeneration, and final disposition. The question is: When should a particular type of record be disposed of — or how long should it be retained? A record should be retained only for as long as necessary, based on the following factors: • It is required by local or federal law; • It is required for financial reporting, including tax audits; • It is the subject of a legal records hold; or • It is deemed to be a knowledge asset and has longer-term value for the company. A comprehensive, indexed records-retention schedule should be designed to guide records custodians in determining which records are required to be retained, and for how long. And in the case of a legal hold, a formalized record hold process must be developed that provides for specific communication from the legal department to the custodians of subject records. CONSISTENCY COMES FIRST The most important hallmark of a legally credible records management program is consistency. However, most companies’ records management programs are fragmented, with various business units operating under their own separate policies, archiving rules, and processes. This can be dangerous, especially in relation to litigation. Managing records retention in light of potential litigation often presents the most difficulty. While it is usually clear which documents are required to be retained by law or regulation, it’s difficult to balance business interests (which are often aligned with destruction of documents) and the lawyer’s instinct to save everything and avoid any potential chance of spoliation In addition, it can be very expensive not to purge your electronic files, partly because plaintiffs’ attorneys have become so aggressive. They frequently file motions to compel and hire consultants and IT specialists to find any and all smoking guns. Plus, there has been a spate of recent cases, such as Enron, where courts or regulators are punishing defendants for records management deficiencies. Yet in a recent American Bar Association survey of outside counsel, 83 percent claimed that their corporate clients have no established protocol to deal with discovery requests for electronic data. Since the field of electronic discovery is so new, and the stakes are so high, a group of experts was convened to address the issue. The Sedona Conference Working Group on Electronic Document Production is a group of 37 corporate counsel, law firm attorneys, consultants, and suppliers. According to its final report, members of the group were selected “based on their knowledge and practical experience with electronic discovery issues.” The group met in October 2002 with the goal to develop reasonable principles of electronic discovery that could be implemented in actual practice. Despite its name, “The Sedona Principles for Electronic Document Production,” released in March 2003, recognizes the close relationship between electronic discovery and records management. Law departments seeking guidance on how to set up a records-retention policy and system to properly manage electronic discovery can look to some of these principles. When it comes to reasonable efforts to preserve electronic documents, for example, the second principle recommends that courts and parties take into account “technological feasibility and realistic costs.” And the fifth principle recognizes that parties cannot reasonably be expected to preserve every potentially relevant record. Current case law simply requires that parties take reasonable steps to preserve data reasonably related to the facts of current or anticipated litigation. In regards to potential litigation, both the courts and the Sedona Principles have clearly distinguished documents stored for search and retrieval from those backed up only for disaster recovery purposes. Many companies are struggling to define their records management program to properly address their business needs and compliance procedures, as well as potential litigation. The Sedona Principles, as well as recent case law, provide some guidance, especially in light of potential discovery. To sum up, first, create a clear records-retention policy and apply it consistently. Second, make sure that all unnecessary documents are regularly purged. And, finally, make sure that any document that may be reasonably necessary for future discovery remains intact and accessible. Andrew Dumas is technology counsel at nMatrix (www.nMatrix.com) in New York. nMatrix offers electronic discovery consulting and services to law firms and law departments engaged in litigation or antitrust review. He may be contacted at [email protected].

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