Archiving – Retain Only What You Need to Comply
A significant majority of business communication is conducted via e-mail and other forms of electronic communication, such as social media and instant messaging.
As such, organizations that are heavily regulated and litigated face increasingly significant risks that are tied to the manner in which electronic information is managed and stored. Growing data volumes coupled with decreasing human resources in many organizations require a proactive, thoughtful approach to managing data. Corporations are well-advised to take steps now to manage the mountainous volume of electronically stored information (ESI) while ensuring proper preparedness processes to comply with regulations and civil discovery rules.
The Problem: Records Management
Corporations today must balance the need to comply with legal and regulatory requirements with the business efficiency and storage capacity concerns of IT. To achieve this objective, companies should find a way to retain records as required for compliance, while appropriately disposing of non-essential data to free storage space. Engaging in these proper retention protocols will also allow companies to prevent risks and inefficiencies caused by duplicate copies and over-retention.
One factor that increases the complexity of proper records management is the various state, federal and international regulations, such as Sarbanes-Oxley, SEC 17a, Gramm-Leach Bliley Act and HIPPA, that pose strict records retention requirements. In actuality, these regulations merely represent the tip of the regulatory iceberg. Each industry faces unique and numerous regulatory requirements, and it is important to consult with an expert regarding how a corporation can cost-effectively and efficiently demonstrate compliance with the applicable regulatory obligations.
Another factor corporations must consider is the risk of over-preservation. Simply preserving everything is not scalable and poses additional significant concerns. One such concern is the ability to produce relevant information in the event of litigation or an investigation. The larger the data stores, the more data there is to be reviewed for relevancy and responsiveness. Proactively managing this data by instituting retention and disposal protocol will decrease data storage leading to smaller sets of ESI that may be requested in an investigation or litigation. Companies will also save on IT staffing and storage needs, which is invaluable during a time of tighter budgets.
The Solution: Archiving
Implementing a high-quality archiving solution will help companies manage the problems and risks inherent in managing corporate records. Archiving can actually help control electronic discovery costs by providing structure to what is often an unchartered morass of ESI. Instead of searching through disparate mediums for responsive data (wasting valuable time and money), teams can simply refer to the archive and meet short deadlines for preserving, collecting, processing, reviewing and producing electronic data.
Archiving also allows for the quick and efficient implementation of legal holds when investigations, litigation or regulatory issues arise. According to Kroll Ontrack’s Third Annual ESI Trends Report, only 57% of U.S. companies have an identified means to preserve potentially relevant data. Not possessing the ability to administer legal holds to comply with legal and regulatory requirements poses a great risk to companies (and counsel) in the courtroom.
For example, the Middle District of Florida recently sanctioned in-house counsel for the defendant corporation for failing to issue a legal hold.1 Despite receiving preservation notices from the plaintiffs, the in-house counsel only forwarded a copy of the letters to senior-level employees and did not follow up to ensure the key custodians were properly preserving data. This failure to issue a legal hold and monitor compliance led to the imposition of an adverse inference sanction and the awarding of attorneys’ fees and costs, holding both the defendant company and the in-house counsel jointly and severally liable.
Another reason companies are putting themselves at risk by not possessing a legal hold implementation policy is the fact that courts are not accepting the excuse that an organization lacks the tools needed to identify, retain, preserve and retrieve electronically stored data given the modern technological era. For example, in Starbucks Corporation v. ADT Security Services., Inc.,2 the Western District of Washington was incredulous that a “sophisticated” company – the defendant – failed to migrate electronic data to its now-functional archive system. Despite estimates from the defendant’s IT employee ranging from $88,000 to $834,285 to produce the e-mails, the court ordered the defendant to “implement an immediate plan to make copies of the archive…disks, and to save them to an appropriate storage medium.” Proper retention management (in this case scheduled disposal) could have alleviated the issue in the first place. This case makes it clear that if data is being stored, even in an antiquated form, the courts will no longer tolerate poor or outdated IT infrastructure as a reason to not order the production of that ESI.
The above cases demonstrate that it is far more cost-effective for organizations to proactively implement archiving technology and properly manage retention and legal holds, rather than incur the costs to file and defend motions for preservation failures later. It is important to remember that the courts do not require perfection but rather expect necessary steps to be taken to properly preserve relevant records for collection, review and production. Investing resources in proper preservation and legal hold management from the outset will return dividends by ensuring discovery practices withstand judicial scrutiny in the unfortunate event opposing counsel files a motion seeking spoliation sanctions.
1 Swofford v. Eslinger, 2009 WL 3818593 (M.D. Fla. Sep. 28, 2009). 2 2009 WL 4730798 (W.D. Wash. Apr. 30, 2009).