Don't wait until litigation arises to adopt a document-retention policy.

• Author: Shanahan, Kieran J
• Position: LAW JOURNAL 2009 - Law overview

In today's economy, businesses are more likely to become involved in litigation. Whether you are a plaintiff or a defendant, it is important for a corporate entity involved in a lawsuit to understand its obligations to identify, preserve and produce documents--particularly electronic documents--and the potential negative consequences for not doing so: sanctions, or the dreaded "spoliation" instruction to the jury. For this reason, it is critically important to establish and follow a document-retention policy prior to litigation. A key component should be a "litigation hold" directive to preserve documents pertinent to threatened or pending litigation.

Document-retention policies and litigation

What documents do you keep? How should they be organized? What documents do you destroy? When do you destroy them? Every company should address these basic questions as part of its operating procedures. Ideally, it should be done prior to any litigation. A comprehensive formal DRP should govern organization, safe-keeping and destruction of documents on a fixed schedule. The policy is part of a company's overall risk-management and cost-management strategies. A sound DRP can guard against a charge that any specific document was destroyed to prevent it from being disclosed in litigation. In forming a policy, the company should work with its legal counsel to identify the information the company keeps, the company's document-retention needs and the optimal balance of those needs with the costs and risks attendant to document retention. Keep in mind that there are often statutory reasons for retaining certain documents (i.e., tax returns and records) for certain periods of time. Those issues should be carefully considered in crafting a document-retention policy. In addition to having a policy, the company must follow it and should designate a person or committee to ensure companywide compliance.

A systematic, organized procedure for maintaining and retaining documents helps legal counsel quickly review relevant documents when litigation arises. This enables rapid identification of legal issues and facilitates the effective defense or prosecution of the case. Civil cases often are won or lost on the documents, and ready access to them can provide a tremendous advantage.

What happens after a lawsuit arises?

You have been sued, you have sued someone else or a lawsuit is imminent. What do you do with your documents? The duty to preserve pertinent documents in...