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Record Retention Presentation

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Record Retention Presentation Powered By Docstoc
					Legal Requirements for Electronic
Records and Records Retention for
Law Firms and Legal Departments
          Iron Mountain

    Donald S. Skupsky, JD, CRM, FAI, MIT

    Information Requirements Clearinghouse
                Denver, Colorado
             dskupsky@irch.com
                www.irch.com
                                             IRCH
             Overview

• What is a records retention
  program?
• Records retention for general
  business records
• Records retention for client files
• Email, electronic records and other
  issues


                                        IRCH
      Records Management

The systematic control of records
during creation, maintenance and
disposition




                                    IRCH
  Records Retention Program

A component of a Records
Management Program that
  • Systematically determines the
    appropriate period for preserving
    records
  • Systematically controls the
    destruction of records at the
    appropriate time


                                        IRCH
  Records Retention Schedule

A record prepared as part of the
Records Retention Program
identifying an organization’s records
and records retention information




                                        IRCH
    Record Values Affecting
      Records Retention
• Operational / User
• Legal
   • Legal Requirements:
     What you must do!
   • Legal Considerations:
     What you may want to do!
• Historical


                                IRCH
       Why Develop A
 Records Retention Program?
• Cost savings
   • Space
   • Staff
   • Equipment
• Information management
   • Improved access to valuable
     information
   • Better management of valuable
     information

                                     IRCH
       Why Develop A
 Records Retention Program?
• Legal Protection
   • Compliance with laws — records
     exist for legally-required periods
   • Litigation, government
     investigation and audit
       • Records that should exist . . .
         do exist!
       • Records that should not exist . . .
         do not exist!

                                               IRCH
       Why Develop A
 Records Retention Program?
• Conflict with client’s retention
  program
• Liability due to materials found in
  client file
• Problems related to conflicts
  checking
• Conflict between abandoned property
  laws and client confidences
• Practice opportunities

                                        IRCH
     Consequences of Improper
      Destruction of Records
•   Loss of rights
•   Loss of time and money
•   Fines / Penalties
•   Obstruction of justice
•   Contempt of Court
•   Adverse inference in litigation
•   Sanctions

                                      IRCH
 Court Concerns with Improper
    Destruction of Records
• Evidence of guilt or liability
• Destruction of evidence /
  Obstruction of justice
• Unfair advantage given to one party
• Innocent party disadvantaged or
  incurs unnecessary costs




                                        IRCH
 Formula for Legally-Sufficient
    Destruction of Records
• Records retention program
  systematically developed
   • Adequate legal research
   • Reasonable records retention
     periods
      • Consistent for comparable
        records
      • Complies with legal
        requirements

                                    IRCH
Formula for Legally-Sufficient
   Destruction of Records
• Reasonable records retention
  periods
    • Reflects reasonable industry
      practices
    • Reflects reasonable / prudent
      business judgment
    • Does not reflect ―bad faith‖ or
      ―evil intent‖
• Internal review and approval

                                        IRCH
 Formula for Legally-Sufficient
    Destruction of Records
• Records systematically and
  consistently destroyed under the
  records retention program
• Audits confirm program accuracy
• Documentation maintained of
  program development, records
  destruction and audit



                                     IRCH
       Legal / Audit Holds

• Identify records / documents subject to
  pending or imminent litigation,
  government investigation and audit.
• Place ―holds‖ to prevent destruction
  (even under Retention Schedule)
• Manage ―holds‖ – creation, update,
  removal
• Permit destruction when ―holds‖
  removed
                                        IRCH
        Approval of Destruction
• Authorization of Destruction
   • Not recommended
   • Require specific approval
• Notice of Destruction
   • Provide listing of records for destruction
   • Requests exceptions
• No Notice or Approval
   • Recommended when hold system in
     place
   • Results is most consistent retention
                                             IRCH
      Destruction of Records

• Destroy when
   • Record retention period over
   • All Holds have been released
• Paper Records
   • Print ―pull list‖
   • Physically Identify and destroy records
• Electronic Records
   • Software prepares ―pull list‖
   • Software destroys records


                                               IRCH
 The Legal Risk of a Retention
   Program for Client Files
• Destroying records that are:
   • Needed by clients
   • Needed for client work
   • Required by Law or Legal Ethics
• Not destroying records




                                       IRCH
    Problem with Destroying
          Client Files
• Non-billable / overhead
• Attorneys too busy to review
  records prior to destruction
• Records ―may be needed in the
  future‖
• Attorney’s believe client files belong
  to client


                                           IRCH
      Creation of Client File

• Client file not goal of legal
  engagement
• Client file merely byproduct of legal
  engagement
• No duty to to create client file




                                          IRCH
 Basis for Duty to Retain Client
              Files
• Client Property
   • Client file is all client property
   • Client file contains some client
     property
• Client Interest
   • Client file may protect client’s
     interests


                                          IRCH
   Duty to Retain Client Files

• Rules of Professional Conduct does
  not establish rules on retention
• ABA, New York Bar, L.A. County
  Bar, and other guidelines for
  retention
• ABA:
   • No required retention period
   • Common sense should provide
     answers

                                       IRCH
    ABA Considerations for
        Retention – 1977
    (Informal Opinion 1384)
• Without client consent, lawyers
  should not destroy client property
• Lawyer should not destroy materials
  needed for client’s defense
• Lawyer should not destroy materials
  needed by client
• Lawyer should exercise discretion to
  determine retention

                                         IRCH
    ABA Considerations for
      Retention (cont.)
• Lawyer should keep trust fund
  receipts/disbursements indefinitely
• Lawyer should protect
  confidentiality of files disposed
• Lawyer should not destroy materials
  without screening first
• Lawyer should preserve information
  about files destroyed

                                        IRCH
  Problems With Following the
  ABA Approach to Retention
• You must notify clients before
  destroying records
• You will need to review all records
  prior to destruction
• You will need to return records to
  some clients
• Result: You will probably not
  destroy client files

                                        IRCH
  An Alternative Approach to
   Retention of Client Files
• Determine the real risks,
  responsibilities and liabilities for
  destroying client files
• Establish an appropriate retention
  scheme
• Notify attorneys’ prior to destruction
• Destroy client records according to the
  retention scheme
• Incorporate retention into all future
  client contracts
                                        IRCH
  Burdens Under ABA Opinion

• Presumption: Client file probably
  contains property belonging to client
• Duty to notify client prior to destruction
• Duty to inspect and screen client files
  prior to destruction
• Duty to protect client confidences in
  destruction
• Duty to maintain information on records
  destroyed
                                          IRCH
   ABA Rules of Professional
        Conduct 1.16
• Upon termination of representation,
  lawyer should protect client interest
• Lawyer should surrender papers and
  property to client
• Lawyer may retain papers related to
  client for period permitted by law




                                          IRCH
   Basis for ABA R.P.C. Duty

• Upon termination of representation,
  lawyer has duty to provide client
  with materials on request
• Client may already have paid for
  materials
• Client may need materials to protect
  legal rights



                                         IRCH
    Client File Is Not Client’s
             Property
• During representation, client
  received products and services
• Legal options available if client does
  not receive products and services
• Client files is ―remnant‖ of
  representation, not the
  representation itself



                                           IRCH
   Who Owns the Client File?

• L.A. Opinion 330 (1972)
   • Client must pay to copies of
     attorney file
   • Client need not pay for documents
     already paid for
   • Work product for which client
     pays separate charge belong to
     client already: transcripts, expert
     reports

                                           IRCH
 Conclusion: L.A. Opinion 330

• Client does not own client file
• Client does not pay for copies of
  documents for which client has
  specifically paid
• All other materials in the client file
  do not belong to client




                                           IRCH
Importance of L.A. Opinion 330

• Weiss v. Marcus: attorney ―work
  product‖ belongs to client,
  incorrectly citing LA Op 330
• Kellen v. Delug: incorrectly cites
  Weiss that attorney ―work product‖
  belongs to client
• L.A. Op 405 (1982): incorrectly cites
  L.A. Op 330 and Weiss that attorney
  work product belongs to client.

                                          IRCH
Importance of L.A. Opinion 330

• L.A. Op 420 (1983): incorrectly cites L.A.
  Op 330 and 405 that attorney work
  product belongs to client
• While L.A. Op 330 only permitted clients
  to copy client file; subsequent cases
  and ethical opinions incorrectly created
  a property right
• All subsequent ethical opinions
  perpetuate this error

                                          IRCH
           Other Support

• L.A. Op 197 (1952): Client file belongs
  to attorney
• FL. Op 88-11 (1993): Client file belongs
  to lawyer
• N.Y. State Opinion 623 (1991): After
  representation attorney may destroy
  client file without client’s permission
• ABA Informal Opinion 1384: Ethics
  Committee cannot determine
  ownership of lawyer’s file
                                         IRCH
         Logical Support

• Client needing materials can request
  it within reasonable time
• If client does not request material,
  client does not need it
• If client does not request material,
  client has forgotten about the
  property or abandoned it



                                         IRCH
Client File Under Contract Law

• Contract is for representation; not
  work papers (unless stated)
• Client is provided documents under
  the contract
• If client is dissatisfied with
  representation, legal action possible
• Client otherwise has no right to the
  client file

                                          IRCH
      Abandoned Property

• Unclaimed property escheats to
  state
• Unclaimed client ―property‖ in
  attorney’s possession escheats to
  state
• Attorney must give state unclaimed
  property
• BUT: Attorney cannot divulge client
  confidences

                                        IRCH
   Co-Mingling Attorney and
       Client Property
• ABA R.P.C. 1.15 prohibits co-
  mingling property
• Co-mingling: if client file contain
  both attorney and client property
• No record of client property like
  required in 1.15
• Attorney cannot distinguish between
  attorney and client property

                                        IRCH
 Records Retention Guideline
       for Law Firms
• Establish a traditional retention
  program for general business records
• Establish reasonable retention for
  client files
   • Normal: 10 years after representation
   • Special: 10 years after subject of
     representation ends (trusts, bonds)
• Do not review files before destruction

                                        IRCH
   Recommendation for Old
   Engagements: Client Files
• Recommended: Destroy records
  after retention period ends, or
• Alternative:
   • Send notice to client’s last known
     address
   • Destroy records if no response
   • Give clients opportunity to review
     records

                                          IRCH
   Recommendation for New
   Engagements: Client Files
• Include recordkeeping clause in client
  engagement agreement
• Return client ―property‖ when
  engagement closes
• Implement reasonable retention




                                           IRCH
     Risks for Destruction of
            Client File
• The Rules of Professional Conduct are
  met with an appropriate retention
  program
• Ethical opinions are not legally binding
• Ethical opinions based on incorrect
  assumptions
• Many ethical opinions support
  destruction of client files
• Ethical review very unlikely

                                         IRCH
         Andersen Obstruction of
           Justice Conviction
• Andersen had a reasonable retention program
   • Identified records to be retained in audit files
     with appropriate retention – 6 years
   • Retention only for ―essential information to
     support our conclusions‖
   • Permitted destruction of drafts, notes, and
     other non-final documents when no longer
     need or after engagement complete
   • No destruction if threatened litigation


                                                        IRCH
   Arthur Andersen Obstruction of
         Justice Conviction
• Problem:
   • Andersen under investigation regarding
     Enron audit
   • Andersen lawyer reminded company to
     destroy records under the policy –
     looked suspicious
   • Andersen destroyed records while
     litigation / government investigation in
     progress
                                            IRCH
  Sarbanes-Oxley Act of 2002

• Response to Andersen
• Response to corporate accounting
  abuses
• Goal:
   • Improve accuracy of financial
     reporting
   • Restore confidence in the stock
     market

                                       IRCH
Sarbanes-Oxley Key Provisions

• Establishes federal oversight of public
  accounting firms auditing public
  companies.
• Requires CEO and CFO to personally
  certify the accuracy of financial
  statements
• Provides penalties, up to 20 years:
   • Knowingly altering, destroying,
     mutilating, concealing, covering up,
     making false entry in any record
   • With the intent to interfere with any
     government investigation or proper
     administration of any matter.
                                             IRCH
 Impact of Sarbanes-Oxley Act

• CEO’s, CFO’s, officers personally
  liable
• Concern whether record system
  adequate to support financial
  statement
• Concern whether records
  destruction can be viewed as a
  violation


                                      IRCH
Sarbanes-Oxley Recordkeeping
       Requirements
• Public Auditors
   • Confirm accuracy of corporate financial
     statements
   • 7-year retention for audit reports and
     audit workpapers
• Corporation
   • Maintain audit / accounting complaints
   • Manage outside auditors
   • Section 404: For annual audit
      • Establish internal accounting
        controls
      • Demonstrate controls works             IRCH
    Sarbanes-Oxley Practical
          Operation
• Public auditors confirm accuracy of
  financial system and reporting
    • Traditional audit
    • Review corporate controls
• Except for public auditors, corporation
  has no long-term retention for SEC
• SEC may not ever directly review
  corporate controls or Sarbanes-Oxley
  compliance


                                            IRCH
          Uniform Laws

• Uniform Rules of Evidence
• Uniform Photographic Copies of
  Business and Public Records as
  Evidence Act
• Uniform Preservation of Private
  Business Records Act
• Uniform Records Act
• Uniform Electronic Transactions Act
  (UETA)

                                        IRCH
     Evidence — Historical
          Perspective
• Records Historically NOT Admitted
  in Evidence
• Live testimony preferred
• Records are ―Hearsay‖




                                      IRCH
               Hearsay

A statement other than one made by
the declarant while testifying at the
trial or hearing, offered in evidence to
prove the truth of the matter asserted.
       - Uniform Rules of Evidence, Rule 801.




                                                IRCH
  Uniform Rules of Evidence
  Definition: ―Records‖ - Rule
             1001(a)
• Records: . . . letters, words, sounds
  or numbers, or their equivalent, set
  down by handwriting, typewriting,
  printing, photostating,
  photographing, magnetic impulse,
  chemical or electronic recording, or
  other form of data compilation.
• Data compilation = computer record


                                          IRCH
   Uniform Rules of Evidence
       Authentication and
    Identification - Rule 901
• ―Foundation‖ required before all
  records (and evidence) admitted into
  evidence
• Evidence sufficient to support a
  finding that the matter in question is
  what its proponents claim




                                           IRCH
   Uniform Rules of Evidence
       Authentication and
    Identification - Rule 901
• Example: Rule 901(b)(9)
   • Evidence describing a process or
     system used to produce the
     result, and
   • Showing that the process or
     system produced an accurate
     result



                                        IRCH
    System Components for
   Compliance with Rule 901
• Components
   • Procedures
   • Training
   • Audit
• Documentation




                              IRCH
      Authentication and
          Identification
   Certificate of Authenticity
• Not required for evidence
• Often required by law for
  government records




                                 IRCH
   Uniform Rules of Evidence
     Original - Rule 1001(c)
• Writing and recording itself
• Counterpart intended to have the
  same effect as the original
• Computer printout or other output
   • Readable by sight
   • Shown to reflect the data
     accurately


                                      IRCH
   Uniform Rules of Evidence
    Duplicate - Rule 1001(d)
• Counterpart produced from
   • Same impression as the original,
   • Same matrix as the original,




                                        IRCH
Uniform Rules of Evidence
 Duplicate - Rule 1001(d)
• By means of photography,
  including enlargements and
  miniatures, or by mechanical or
  electronic rerecording, or by
  chemical reproduction, or
• By other equivalent techniques
  which accurately reproduces the
  original.


                                    IRCH
   Uniform Rules of Evidence
  Other Evidence of Contents -
           Rule 1004
• Originals not required
   • Originals lost or destroyed,
     without bad faith
   • Originals not obtainable
   • Originals in the possession of
     another
   • Records collateral to controlling
     issues

                                         IRCH
  Uniform Rules of Evidence
  Admissibility of Duplicates -
          Rule 1003
• Duplicates admissible to the same
  extent as originals, unless
   • Genuine question raised as to the
     authenticity or the continuing
     effectiveness of the originals, or
   • It would be unfair to admit the
     duplicates in place of the originals



                                            IRCH
 Uniform Photographic Copies
    of Business and Public
Records as Evidence Act (UPA)
• Organization (public or private)
  creates records
• Originals kept in the regular course
  of business
• Duplicates kept in the regular course
  of business




                                          IRCH
 Uniform Photographic Copies
    of Business and Public
Records as Evidence Act (UPA)
• Duplicates produced by
   • photographic, photostatic,
     microfilm, microcard, miniature
     photographic, or
   • other process which
      • accurately reproduces the
        original, OR
      • forms a durable medium for
        reproducing the original

                                       IRCH
 Uniform Photographic Copies
    of Business and Public
Records as Evidence Act (UPA)
• Originals may be destroyed in the
  regular course of business, unless
   • Originals required by law
   • Originals held in a custodial or
     fiduciary capacity




                                        IRCH
 Uniform Photographic Copies
    of Business and Public
Records as Evidence Act (UPA)
• When satisfactorily identified
  duplicates admissible in evidence as
  the originals
   • Judicial proceedings
   • Administrative proceedings
• Duplicates admissible whether or
  not originals still exist


                                         IRCH
 Uniform Photographic Copies
    of Business and Public
Records as Evidence Act (UPA)
• Enlargement or facsimile of
  duplicates admissible, if
   • Original duplicates exist (first
     generation)
   • Original duplicates available for
     court inspection




                                         IRCH
    Internal Revenue Service

• Microfilm: Rev. Proc. 91-59
• Electronic Imaging: Rev. Proc. 97-22
• Computer Records: Rev. Proc. 98-25




                                         IRCH
     Uniform Electronic
Transactions Act (UETA: 1999)
• Adopted as Uniform Law by over 28
  states
• Similar to ―E-Sign‖ – Electronic
  records law adopted by U.S. Federal
  Government.




                                        IRCH
       UETA: Applicability

• Does not require electronic record
  or signature
• Applies to parties who ―agree to
  conduct transactions by electronic
  means
   • Prior agreement
   • Previous conduct – e.g., exchange
     of e-mail forming contracts

                                         IRCH
       UETA: Conclusions

• Just because Record, signature or
  contract is electronic
    • Cannot be denied legal effect
    • Cannot be excluded from
      evidence
• If law requires Record/Signature,
  electronic record meets
  requirements

                                      IRCH
    UETA: Time/Location of
        Transaction
• Record sent: When transmitted out
  of control of sender
• Record received:
   • When sent to receivers correct
     address, and
   • When received by receiver’s
     electronic records system.
• Receiver does not have to read

                                      IRCH
       UETA: Special Issues

• Receiver does not have to read for
  record to be received
• Electronic record not enforceable
  against recipient if sender inhibits
  the recipients ability to file and print




                                             IRCH
   UETA: Signature Validation

• Electronic signature is attributable
  to a person if it is an ―act‖ of that
  person
• Look to circumstances regarding
  creation, execution, security, etc.




                                          IRCH
         UETA: Retention

• Retain electronic record for required
  period
• Maintenance of electronic record for
  required period meets requirements
  to retain record
• Note: ―Retention of record‖ does
  NOT include information whose sole
  purpose is to enable record to be
  sent, communicated or received.

                                          IRCH
   Arbitration Case Example:
    Improper Destruction of
             Records
• Facts
   • Computer records destroyed while
     litigation in progress
   • Required search of e-mail not
     performed
   • Plaintiff claimed unable to prove
     case without missing information
   • Defendant claimed request too
     costly and burdensome

                                         IRCH
         Filing Systems:
         The Court Cases
To allow a defendant whose business
generates massive records to
frustrate discovery by creating an
inadequate filing system, and then
claiming undue burden, would defeat
the purpose of the discovery rules.

    - Koslowski v. Sears, Roebuck & Co.



                                          IRCH
   Arbitration Case Example:
            Continued
• Court Decision
   • Large fine for failure to search
   • Requirement to conduct computer
     search regardless of cost
   • Presumption on merit:
      • Plaintiff: some evidence of claims
      • Defendant: cannot defend
• Result: Defendant forced to settle
  under unfavorable terms
                                         IRCH
  Electronic Mail - Problem
• Tool of communication
   • Replacement for telephone or
     face-to-face conversation
   • Produces ―recorded material‖
• Content
   • Authors don’t go through a formal
     process to create or manage
   • Language not the same standard
     as formal letter or memo

                                         IRCH
  Electronic Mail - Problem
• Authors / recipients ―selectively‖
  destroy
• Many are not ―records‖ of the
  organization
• Restrictions reduces efficiency of
  employees




                                       IRCH
 Electronic Mail - Perspectives

• In litigation, all ―recorded
  materials‖ subject to discovery
• Organizations have always
  determined which recorded
  materials are ―record‖
   • Reflect the position or policy
   • Preserve evidence of
     transactions

                                      IRCH
     Electronic Mail - Value

• Important:
   • Records: 0 – 5%
   • Work-In-Progress: 10 – 30%
• Junk: 65 – 100%




                                  IRCH
       Electronic Mail - Strategy

•   Isolate important emails
•   Limit choices for classification
•   Provide adequate tools
•   Retention
     • Records: Assign classification linked to
       retention
     • Work-In-Progress: Keep until complete
     • Junk: Self-destruction in 30 days.


                                                  IRCH
          Electronic Mail –
    Retention Recommendations
•   Define email as ―non-record material‖
•   30-day backup cycle
•   Self-destruct email in 30 days
•   Retain E-Mail ―records‖
     • Assign record series code plus
       retention period and store in
       electronic filing system, or
     • Print and store in paper file

                                            IRCH
        Electronic Document
            Management
•   Classify document
•   Link retention to classification
•   Implement retention functionality
•   Note: possible to ―purge‖ based on
    documents with different retention




                                         IRCH
  Electronic Records - Backup
            Strategy
• Problem: Cannot destroy records
  with different retention periods from
  backup tapes
• Distinguish ―backups‖ from Off-Line
  storage
   • Backup: Disaster recovery / vital
     records
   • Off-Line Storage: Long-term, low
     access information

                                          IRCH
Electronic Records - Retention
           Strategy
• Off-Line Storage
   • Treat separate from back-up
   • Segregate records with different
     retention periods
• Backups
   • Segregate backup for records with
     very short-term retention -- e-mail
   • Recycle tape after short period

                                           IRCH
       Migration Strategy
    for Long Term Retention
• Media migration
• Software / Format migration
• Technology migration
   • Active: electronic
   • Inactive: microfilm




                                IRCH
      Distribution / Storage
          Methodology
• Goal: ―Central Files‖
   • Records in one location
   • Central control and management
   • Trained people implement
     company policy
• Permit distributed creation and use



                                        IRCH
      Distribution / Storage
          Methodology
• Examples:
   • E-mail
      • Current: Download to workstation
      • Better: Maintain on server
   • Distribution
      • Current: Send files to everyone
      • Better: Send links to everyone
        and store files in one place
                                       IRCH
 Absence of Legal Guidance -
        ―The Void‖
• Skupsky’s Basic Principle of
  American Law
   • You may do anything you want,
     unless the act is
      • Prohibited, or
      • Regulated




                                     IRCH
Absence of Legal Guidance -
       ―The Void‖
• You may use any system of
  records, unless the system is
   • Prohibited, or
   • Regulated




                                  IRCH
The End




          IRCH

				
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