Records Retention

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Records Retention Powered By Docstoc

       Robert L. Levy
    Haynes and Boone, LLP

       APRIL 17, 2007
• Role of Technology in Today’s Business
• Legal Issues Impacting Electronic
• Best Practices
• Records Retention
• Changes in Federal Rules that Might Impact
  Non Profits
Rule #1 – Lawyers are your Friends

• “Look, I’m not saying its going to be today. But
  someday – someday – you guys will be happy
  you’ve taken along a lawyer.”
• Key data never hits paper
• Electronic discovery is more than the content of the
  documents – it can identify original authors, edit dates
  and in some cases determine who has seen the
• Data that is deleted is often very accessible
   – The Current U.S. Attorney Controversy is a case in
• The ease of electronic communication impacts all
  business, including non-profits
   Electronic Data Challenges
• The number of e-mails delivered in one day is the
  same number of letters delivered by the USPS in
  one year.
• Over ½ of all business documents are never
• Avg. business document (including e-mail) is
  stored in 4 or more places.
• Humans took 300k years to generate
  12,000,000,000,000,000 bytes (12 Exabytes) of
  info. This will double in the next 2 years
     How Does this Impact You
•   If a lawsuit is filed – what then
•   Manage costs of electronic data management
•   Understand Records Retention Obligations
•   Understand the questions to ask
•   Understand information storage
•   Understand simple tape backup scenarios
•   Understand how computers and networks operate
  E-Mails – The New Smoking Gun
• Companies use E-mail to replace conversation – but
  it is on the record
• Statements that would never be put in business
  documents are found in E-mails
    – Casual comments
    – Often highly prejudicial
• Many E-mails contain “smoking guns”
• All companies should sensitize employees to the risk
  of E-mails
             Words Can Hurt
Examples of documents that cost millions
“If we don’t improve our process, the market will
be flooded with bad products.”

“Our testing methodology is suspect and just does
not seem to catch the product’s flaws.”

“When will our sales people stop overselling this
product – they must know it can’t do this function.”

“It’s only an unproved complaint – but you know
the old adage ‘where there’s smoke there’s fire.’”

[Firm] Partner's E-Mail Causes Upset Over
Racial Insensitivity
Anthony Lin
New York Law Journal
“Please don’t let these puppies go to a Chinese
       Even Attorneys Make Mistakes
I'm busy doing jack $#&!. Went to a nice 2hr sushi lunch today at
Sushi Zen. Nice place. Spent the rest of the day typing emails and bull
$#&!ing with people. Unfortunately, I actually have work to do — I'm
on some corp finance deal, under the global head of corp finance,
which means I should really peruse these materials and not be
a #%*?up.

So yeah, Corporate Love hasn't worn off yet... But just give me time..


Jonas L. Blank
Summer Associate
Skadden, Arps, Slate, Meagher & Flom, LLP
[June 2003]
       Even Attorneys Make Mistakes
                  Part 2
I am writing you in regard to an e-mail you received from me earlier today. As I
am aware that you opened the message, you probably saw that it was a personal
communication that was inadvertently forwarded to the underwriting mailing list.
Before it was retracted, it was received by approximately 40 people inside the
Firm, about half of whom are partners.

I am thoroughly and utterly ashamed and embarrassed not only by my behavior,
but by the implicit reflection such behavior could have on the Firm.

With sincere regret,
Jonas Survived
                  Emails are Forever
    From: *******, Richard
    Sent: 25 May 2005 15:27
    To: ********, Jenny
    Subject: Ketchup trousers
    Hi Jenny
    I went to a dry cleaners at lunch and they said it would cost £4 to remove the
    ketchup stains. If you cd let me have the cash today, that wd be much
    Richard ******
•   Senior Associate
    Commercial Department
    Baker & McKenzie
    100 New Bridge Street
    London EC4V 6JA
• From: ******, Jenny
  Sent: 03 June 2005 10:25
  To: *******, Richard
  Subject: RE: Ketchup trousers
  With reference to the email below, I must apologise for not getting back
  to you straight away but due to my mother's sudden illness, death and
  funeral I have had more pressing issues than your £4.
  I apologise again for accidentally getting a few splashes of ketchup on
  your trousers. Obviously your financial need as a senior associate is
  greater than mine as a mere secretary. Having already spoken to and
  shown your email and Anne-Marie's note to various partners, lawyers and
  trainees in ECC&T and IP/IT, they kindly offered to do a collection to
  raise the £4. I however declined their kind offer but should you feel the
  urgent need for the £4, it will be on my desk this afternoon.
Richard did not Survive
Even Techies

       From:         much mileage as possible out of our browser
    I want to get as Bill Gates
    and JAVA relationship here. In other words a real advantage
    against SUN and Netscape. Who should Avic be working with?
    Do we have a clear plan on what we want Apple to do to
    undermine SUN?

                                MICROSOFT INTERNAL E-MAIL

                             TO:          Paul Maniz, VP Microsoft
                             FROM:        Bill Gates, CEO Microsoft
Even the Government Makes
The Impact - Arthur Andersen
           To: David B. Michael C. Odom Chicago 33 W Monroe,
           From:         Nancy A. Temple,
                        Duncan @ ANDERSEN WO
           Subject:     Document retention policy
           Attachments: Document retention policy
           It might be
           More help useful to consider reminding the engagement team
           of our document and retention policy. It will be helpful to make
           sure that we have complied with this policy. Let me know if you
           have any questions.

                                       ARTHUR ANDERSEN INTERNAL EMAIL
                                      TO:   David B. Duncan
                                            Andersen’s Chief Auditor for Enron Account
                                            Michael C. Odom
                                            Andersen's Chief Risk Management Partner
                                      FROM: Nancy A. Temple
                                            Andersen’s In-House Attorney
                                      DATE: 10/12/01
Arthur Andersen
     Retention Guidelines

     4.4.1 When working papers are no longer needed to support or
     defend our work, they should be destroyed. As a general rule,
     all working papers should be retained for six years and then

                                     ARTHUR ANDERSEN INTERNAL
                                     DOCUMENT RETENION POLICY
                               Section 4.4
- suggested are a few Duncan
From:- Here deletingB. suggested comments forsuggest the
To:recommended deleting reference to consultation with we
             Nancy some language that might consideration.
             David A. Temple
             10/16/2001      08:39 PM
have concluded the release name on the memo.
legal group and deleting my is misleading.

                       ARTHUR ANDERSEN INTERNAL MAIL
                       TO:   David B. Duncan
                             Andersen’s Chief Auditor for Enron Account
                       FROM: Nancy A. Temple
                             Andersen’s In-House Attorney
                       DATE: 10/16/2001
             Think Before Writing
     Actual Federal Employee Performance
1.      This employee is this employee has somewhere
6. Since my last report, depriving a village reached
    rock bottom and has started to dig
        of an idiot
7. This employee is really not so much of a has-been
        Got a full six-pack but lacks the plastic thing to
         more all definite
    buthold itof atogether won’t-be
3.      He well when of joy whenever he leaves and
8. Works brings a lot under constant supervision the
    cornered like a rat in a trap
4.      When his IQ has delusions should sell
9. This young lady reaches 50, he of adequacy
5.      sets low personal to science before he was done
10. He Donated his brain standards and then consistently
    fails to achieve them
        using it
              Best Practices
• Employees have the power to do great good and
  also damage by their actions
• We are in an age of heightened sensitivity
• Most communications are forever
• Never assume that any communication is transient
   – Voice mail
   – Email
   – Even conversations
        Katy Freeway Rule

Wilbow officer of
KRATON said that one
of their lilkued
        E-mail in the workplace

Question   1:   Who am I writing this to?
Question   2:   What am I trying to say?
Question   3:   When do I need to send it?
Question   4:   Where do I want it sent?
Question   5:   Why do I need to put it in writing?

Question 6: Who is likely to get it?
Question 7: What harm could it cause?
Question 8: When should it be deleted?
Question 9: Where could it end up?
Question 10: Why did I think it was important to say that?
  Just when you thought you were safe
          on your computer…
                (sexually harassing e-mail)

Question 1: Would you cc your mom with that one?
Question 2: Are you wondering if you should “send”?
Question 3: Is it really that funny?
Question 4: Could this possibly offend someone?
Question 5: Do I really want someone archiving this
            with my name one it?
                 BEFORE YOU WRITE

Question 1: Would I say this to their face?
Question 2: Would I still have a job if I did?
Question 3: Could what I say harm the company?
Question 4: Could this possibly offend someone?
Question 5: Do I really want someone archiving this
            with my name one it?
       Internal Communications
Question 1: Does this message advance the ball?
Question 2: Is there any proprietary information in
            this message?
Question 3: Could what I say harm the company?
Question 4: Could this possibly offend someone?
Question 5: Do I really want someone archiving this
            with my name one it?
                 The Rule
• Consider what you write every time you
  prepare a memo, email, or leave a voice
  – Your email might end up on the front page of
    the Chronicle,
    The World of Electronic
• Not Just E-Mail
• Other Types of Electronic Records
   – Servers
      •   Word Processing
      •   Excel and other spreadsheet programs
      •   Calendar programs
      •   Document management programs
      •   PowerPoint
      •   Lotus Notes
      •   Facsimile
      •   Billing systems
    Other Types of Electronic
         Systems, cont.
–   Databases
–   Tape Backups
–   Hard Drives/Plug in Drives
–   Floppy Disks
–   Websites
–   PDAs
–   Digital Voice Mail
–   Instant Messages
–   Office Access Systems
Electronic Data is Often More
       Than It Seems
 •   Hidden fields in many documents
      – Can miss key information
 •   Formulas in spread sheets
 •   Meta Data can identify source information
 •   Backup systems often prevent effective
     deletion – the duplication effect
 •   Outlook standard settings save all draft
              What should it be marked, this one was marked public.
     Sunday                Monday                             Tuesday               Wednesday               Thursday        Friday        Saturday

1         9      2                                    3                       4                        5               6             7

                Should we wait to reduce staff
                 9Should we wait to reduce staff
                  until Wednesday so that we can
                                                          11:am PSO Meeting
                                                                                  9:am Staff meeting
                                                                                                       12              13            14
                  match our staff reductions to the

                until Wednesday so that we
                  momentum we see at the PSO
                  meeting (we might need to go
                  deeper than planned

                can match our staff reductions
                 16                                   17                      18                       19              20            21

                to the momentum we see at the
                 23                                   24                      25                       26              27            28

                PSO meeting (we might need
                to go deeper than planned).
                 30                                   31
     Electronic Discovery Issues
            In Litigation
• Timing of Data Preservation – When the
  Obligation arises
• Addressing Archived and Backup Media
• Decided whether to follow forensic retrieval
• Issues of Changes in Technology
   – System issues involving Office 2003
   – Legacy systems
What the User Sees
What the Forensic Examiner Sees
What the Forensic Examiner Sees
Metadata Example:
   Microsoft Word
Metadata Example:
   Microsoft Excel
Metadata Example:
       The Sarbanes/Oxley Act
• § 1519 – Destruction, Alteration or Fabrication of
  Corporate Records
   – Whoever knowingly alters, destroys, mutilates,
     conceals, covers up, falsifies, or makes a false entry in
     any record, document, or tangible object with the intent
     to impede, obstruct or influence the investigation or
     proper administration of any matter within the
     jurisdiction of any department or agency of the United
     States, or in relation to or contemplation of any such
     matter or case, shall be fined under this title,
     imprisoned for no more than 20 years or both.
• § 1520 – Documents created, sent or received in
  connection with audits or reviews
        Litigation Hold Issues
• When is litigation anticipated or known
   – Includes cases involving investigations and
     governmental proceedings
   – Includes cases involving third parties
   – Includes matters where the company is a plaintiff
• What records are included
   – Backup tapes
   – Former employees
• When should the hold be removed
Courts Are Struggling to Apply
•   Zubulake v. UBS Warburg Line
    – Standards for Data Retention
    – Standard for costs of production
    – Zubulake V – Sanctions for loss of emails
        •   Costs
        •   Backup restoration
        •   Adverse Inference
•   United States v. Phillip Morris
    – Exclusion of key witnesses
    – $2,750,000 sanction
•   Coleman v. Morgan Stanley
    – Withheld emails resulted in directed finding of fraud
    – Total verdict $1.45 billion ($850 million punitive damages)
            Privileged Documents
•    Privileged Documents are typically exempt from
    – Communications between client and counsel for
        the purposes of rendering legal advice, and
    – Work product (also called trial preparation
        privilege) covers materials and communications
        in connection with investigating, preparing for an
        actual or threatened adversarial proceeding
    Privileges are Subject to Waiver
•   Failure to limit access to document
•   Disclosure
•   Participation in a crime or fraud
•   Privilege typically belongs to the company, not the
    individual in business proceedings
     – But employees can effectively waive the
       privilege by disclosure
Data Discovery In Litigation
                   How Does Tape
                    Backup Work?

 Non-Segregated Backup

“Tape Farm”

                    File Servers
                            How Does Tape
                             Backup Work?

          Segregated Backup

                         File Servers

“Tape Farm #1”

“Tape Farm #2”
                                                    How Does Tape
                                                     Backup Work?

          Common Backup Schedules

Sunday   Monday    Tuesday   Wednesday   Thursday    Friday   Saturday
                                                    How Does Tape
                                                     Backup Work?

          Common Backup Schedules

Sunday   Monday    Tuesday   Wednesday   Thursday    Friday   Saturday

         Reusable Tapes                             Save
                                                    How Does Tape
                                                     Backup Work?

          Common Backup Schedules

         x        x          x           x x
Sunday   Monday    Tuesday   Wednesday   Thursday    Friday   Saturday

         x        x          x           x x
         x        x          x           x x
         x        x          x           x
How is Data Collected for Litigation

   User’s Workstations Imaged
   Snapshots taken of Network File Servers
   Snapshots taken of e-Mail servers
   Snapshots taken of database servers
                       How Collected Data
                             Is Reviewed

Image (NOT COPY) Relevant
Client Computer Workstations
                                  How Collected Data
                                        Is Reviewed

12 Gb of data = stack of paper as tall as the Sears Tower
     How Collected Data
           Is Reviewed

Data Collected on HD
 Images and Backup

   Data Restored

 Files De-duplicated
    How Collected Data
          Is Reviewed

Files converted to
Bates numbered TIFF
 Text of files converted
to database format –
keeping track of dummy
Bates numbers
Search Scope: The Obvious

   File Servers
   Database Servers
   e-Mail Servers
   Web Servers
   Office Workstations (PC’s)
   Laptops
Search Scope: The Not-So Obvious

   Home Computers
   Backup Tapes
   Portable Media
   Storage Appliances
   Voice Mail Servers
   Instant Messaging Logs
            New Problem Areas:

                         Virtual Workrooms
Instant Messaging        Bulletin Boards
 • Public (Yahoo, AOL)   • Public (Yahoo)
 • Corporate (Lotus)     • Private (Intranet)
                         Chat Rooms
What Questions Should I be Asking?

•   What data do I have?
•   What data is deleted/destroyed on a timer?
•   Who knows what data is being deleted?
•   What data do I have to preserve?
Preservation Checklist
    Identify all material that should be disclosed or
    may be discoverable and take steps to ensure
    that it is preserved
   Identify sources of information
   Identify relevant computer records
   Identify location of relevant computer records
   Has routine document deletion been
   Have relevant archival media been segregated
    and secured?
Preservation Checklist (cont.)
 Have “bit-stream” copies of relevant desktop
  hard drives, laptops, and other similar
  hardware been created?
 Have archival or “snap-shot” copies of relevant
  network file servers been made?
 Have you considered entering into an
  agreement to preserve evidence?
 Does either party plan on seeking a
  preservation order from the court?
Preservation Checklist (cont.)
    Has all this been done and documented in a
    manner such that it could be audited by a third
   Has the work been done in a forensically sound
   Could independent advice help in negotiating
    with opposing counsel, the court or the
    government regarding scope and cost issues?
   Have judgment calls been made? Will
    independent expert testimony be needed to
    support what has been done?
Managing Costs
   Narrowing the time frame
   Eliminating duplicate files
   Search by user or department
   Eliminate files by type
   Create a search term list
   Alternative methods of review and production
     – Native file review for relevance and/or privilege
     – Internet repository
     – Hybrid or all native file production
With Lawyers – Assured Success!
     Records Retention Issues
• Records are Corporate Assets – the Legacy of the
• Many statutes/regulations require record retention
• Records can bind the company and create liability
• Records includes documents, electronic files,
  maps, video tapes, diaries, notes and other
• Company records are not just those created or
  maintained in the office
   The Records Retention Policy
• Designed to Address the Retention and Destruction of
  Corporate Records
   – Observance of Retention Statutes and Regulations
   – Control of Costs Associated with Records
   – Appropriate Method to Manage Risk
• Effective Records Retention Policies
   – Education
   – Uniform Observance
      The Retention System
• Company Records Should be In Retention System
• The Challenge of Electronic Records
• Challenge of Need for Documents Versus Policy
   – The policy is designed to incorporate
   – Documents kept for other uses
• The Retention Policy Should Incorporate Vital
• Records Subject To Litigation are Retained
      Records Retention Issues
• Enforce The Records Retention Program
   – Compliance is the key to enforceability
   – Discard documents pursuant to policy
• Rely on Records Custodian to be responsible for
   – That is their job
   – Don’t volunteer to be a witness in a lawsuit
• Protect Privileges
• Think Before Creating Records
  Test for Records Retention –
      The Legal Standard
  If the Company knows or should have known that
 the documents or information in its possession
 may become material in the future and is relevant
 to potential litigation, there is an affirmative duty
 to retain that information
• Always Consult Counsel
Sometimes its Hard to Tell

    • “Would every
• Records Management is no longer
  the sole province of file clerks
• Corporations must consider policies
  to address the management of
  records and circumstances when
  records must be retained
• Records Retention policies include
  provisions for appropriate
  destruction of records
The Supreme Court Has Affirmed the Role
 of Records Retention Policies in Purging
“[d]ocument retention policies,’ which are
created in part to keep certain information
from getting into the hands of others,
including the Government, are common in
business. [citation omitted] It is, of
course, not wrongful for a manager to
instruct his employees to comply with a
valid document retention policy under
ordinary circumstances.”
        Electronic Records
• Obligation to Suspend automatic deletion
• Suspension of backup recycling
• Forensic backups/network images
  – Normal backups not always sufficient
  – Forensic programs such as Encase.
  – Cleaning programs can be detected
• Evaluate Costs
• Follow Retention policy
• Involve IT Early
   Effective Records Retention
• Not a Form Document
• Must be designed for the company
  – Consistent with the way people operate
  – Addresses unique legal issues and
• Courts look beyond the four corners of
  the policy
  – Education to workforce
  – Consistent application and re-enforcement
    Rule Changes
    impacting Records

   Scheduling Conference
    and Meet and Confer
   Backup Tapes
    (Inaccessible vs.
    Accessible ESI)
   Privilege Issues
   Safe Harbor
Early attention to EDD issues

      Rule 26(a)(B) – General Provisions

Initial Disclosures:

   (B) a copy of, or a description by category and
location of, all documents, electronically stored
information, and tangible
Early attention to EDD issues

    Conference and Scheduling Order issues

Reference to electronically stored information,
including the form or forms in which it should be
Potential provisions relating to claims of privilege or
of protection as trial-preparation material, including
— if the parties agree)
Inaccessible vs. Accessible ESI

               Rule 26(b)(2)

A party need not provide discovery of
electronically stored information from
sources that the party identifies as not
reasonably accessible because of undue
burden or cost. Producing party must show
that the discovery is not reasonably
accessible because of undue burden or cost.
Inadvertent Production

                     Rule 26(b)(5)(B)

A party inadvertently producing privileged or documents subject to
protection may notify the opposing party who must then sequester,
return or destroy the information and may not use the information
until the claim of privileged is resolved.*

        * This rule does not directly address whether the
          production constitutes waiver of the privilege.
Changes impacting Discovery Requests and

Rule 33(b) – Interrogatories may be answered
by reference to ESI

Rule 34(b) – Requests for Production may
request the format for production of ESI.
The Safe Harbor

               Rule 37(f) – Sanctions

Safe harbor for companies who delete
electronic data in the course of routine

*Destruction must be in good faith and not for the
purpose of avoiding application of the discovery rules
   Impact of Failure to Follow
       Retention Policy
• Sanctions
   – Monetary Sanction - Dannis
   – Loss of rights in court –-Disney case
• Adverse Inference
   – Jury Instructed that absence of document means
     the documents were harmful - Lewy
   – Even if documents would help, the inference
     can be devastating
• Default Judgment - Carlucci
• Tex. R. Civ. P. 196.4
   – Must produce electronic evidence if requested
   – Must be reasonably available
   – Mandatory cost shifting when responding party
     shows data cannot be produced through
     reasonable efforts
   – Court can require responding party to make
     computer system available
• Must raise in response to Document Request
       Other Important Issues
• Email and electronic records policies
  –   Emails belong to the company
  –   No expectation of privacy
  –   policy on web use
  –   policies on harassment
  –   Password management
• Copyright issues
  – Password management
• Copyright issues

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