Uncovering hidden profits: Corporate records and e‑discovery

published in The Journal Record | October 2, 2008

By Drew D. Webb

At this very moment your company is almost certainly harboring a dirty off-site warehouse of disorganized, dusty boxes brimming with really old, musty documents. You haven’t been there, but you’ve heard of it. Nobody in management really wants to even think about it much less take on the issue of how to get rid of it. You can only hope that the company isn’t served a subpoena or discovery request that will require you to pay a law firm to sift through it all. Given that electronic information is even more easily duplicated and retained, how can you avoid accumulating an equivalent trash bin of disorganized electronic information over the next few years, which may be even harder to review and/or destroy?

Averting this scenario requires comprehensive planning for the creation, use, storage and disposal, i.e., the entire “life-cycle,” of business records before the records are created. This enables employees to identify and classify records at the time they are created, which increases efficiency by facilitating the availability of content in the most useful forms at the correct times and places. It also facilitates moving data from active repositories to archival repositories, allowing a business to retain and utilize archived records as needed and then destroy the records automatically at the appropriate time, without having to re-examine them. By adopting appropriate policies and procedures now, companies can begin to gain control of the records being created and to plan for new systems as they are brought on line. The result will be better access to more usefully organized information and reduced costs for information storage and destruction, all of which of which lead to greater profits.

Courts require businesses to retain electronic information pertaining to anticipated litigation. The transient nature of electronic information increases the risk of failing to identify, destroying or altering relevant information, which may result in sanctions. Businesses need a documented litigation hold procedure to address this risk. The procedure needs to include a means of identifying and reporting anticipated litigation, identifying and notifying the appropriate records and records custodians, and actively monitoring and verifying compliance. Optimally, businesses should have regularly-updated inventories of records, and documented procedures and policies covering all types of records. For businesses with recurring litigation, implementing this program now will increase profits by reducing the costs of providing discovery, increasing the effectiveness of litigation counsel by arming them with more and better information, and reducing the risk of negative consequences from inappropriate destruction of relevant records, as courts will be less likely to sanction a party that has a reasonable hold program and makes a good faith effort to implement it.

Businesses have the opportunity to integrate their life-cycle records management and e-discovery programs, with several important benefits. First, the cost of e-discovery will be reduced. Proper records creation and advance planning for discovery processes allows information to be gathered automatically or with significantly reduced effort, reducing costs and increasing profits. This in turn increases the effectiveness of outside counsel and reduces their time commitment and attendant legal fees. Program integration is also likely to minimize the risks of improper records destruction and court sanctions. These benefits are in addition to the core gains in business operations offered by proper life-cycle records management.

Executives can begin by questioning their company’s annual expenditures for records management, the sustainability of their current systems, and their readiness to respond to an investigation into their electronic records. In all likelihood, this review will reveal records management, information technology, and legal issues that need and deserve prompt attention.