E-MAIL RETENTION: HOW MUCH RISK CAN YOU AFFORD? William
F. Savarino, Esq.* Like the western wildfires which each summer grow uncontrolled from smoldering sparks into raging infernos, the unmanaged use, storage, and destruction of e-mail has the potential to have disastrous and costly repercussions for business. As e-mail has become the communication method of choice for most businesses, the legal consequences of e-mail usage and storage have correspondingly grown in importance. E-mail is a possible source of liability to businesses arising from both the contents of the communications themselves and the failure to properly manage them. This paper focuses on the potentially costly consequences of businesses failing to manage or mismanaging the organization and storage of e-mail. As will be shown below, businesses and organizations which fail to implement an adequate record retention policy that includes the management, preservation, and controlled deletion of e-mail may find themselves paying a high price for this omission. A. The Price of Failing to Heed Federal & State Regulatory Requirements The obligation on businesses to preserve e-mail arises from several different sources. First, various federal and state statutes and regulations impose record keeping obligations associated with government regulatory activity. These retention requirements apply to electronic documents and e-mail in addition to paper documents and are intended to ensure that records are available for review by the agencies with oversight authority for a particular industry or activity. Thus, the nature of a company’s business will determine some of the specific regulatory retention requirements that apply. For example, different industry-specific retention requirements apply to financial institutions, issuers of securities, insurers, health care providers, manufacturers, and government contractors. In addition, some record keeping requirements, such as those applicable to tax and employment records, apply across-the-board to all types of businesses. Often, multiple bodies of law, each with its own record retention requirements, will apply to a business and to individual e-mails generated by that business. Nowhere is the cost of failing to properly manage and retain e-mails more dramatically illustrated than in the recent scandals involving the Wall Street financial industry. Pursuant to SEC rules, brokerages are required to preserve e-mail related to the firm’s business for three years. For two years, these messages must be maintained in an accessible place. In April 2003, a $1.4 billion settlement was entered by 10 Wall Street brokerage firms which were accused of issuing biased research to support their investment banking business. Included in the settlement amount was $100 million to be paid by Merrill Lynch. E-mails were essential in developing the case against Merrill Lynch for conflict-of-interest. The New York State Attorney General was able to assemble and support his case against the firm with volumes of e-mails between Merrill Lynch securities analysts in which the analysts derided particular internet stocks as “such a piece of crap” and “a piece of junk” while at the same time giving the companies positive stock ratings. The e-mails produced by Merrill Lynch were used by the NY Attorney General to tie contemporaneously dated internal communications among the analysts to published stock ratings. Closely related to the conflict-of-interest case was another $8.25 million in regulatory fines levied in December 2002, by the Securities and Exchange Commission (SEC), National Association of Securities Dealers (NASD), and New York Stock Exchange (NYSE) on Deutsche Bank Securities, Goldman Sachs, Morgan Stanley, Salomon Smith Barney, and U.S. Bancorp Piper Jaffray for their failure to retain e-mails as required under federal securities law. Each brokerage firm was fined $1.65 million and was required to review internal procedures to ensure that their record keeping practices comply with SEC regulations in the future. As the investigation of Wall Street proceeds, regulators continue to demand internal e-mails and other documents from the heads of the major investment banks. New subpoenas were issued by SEC and NYSE as recently as May 2003. The lesson learned from these Wall Street firms is that a high price attaches to non-compliance with federal and state record retention rules. Whether uncovered by an investigation, as in the case of the Wall Street firms, or by the request of an aggressive plaintiff in a civil lawsuit, you don’t want to be exposed when it really matters. Companies that think “it’ll never happen to me” fail to recognize the myriad ways in which non-compliance with e-mail retention requirements can surface. A few real-life examples from our practice spring to mind: the small power company, whose non-compliance with various federal and state record retention requirements was uncovered when responding to an unexpected subpoena a congressional committee investigating the power industry in the wake of the Enron scandal; the government contractor, whose non-compliance with federal e-mail retention requirements was spotlighted during a perfunctory audit by the Defense Contract Audit Agency; and the large software manufacturer, whose non-compliance with various federal and state e-mail retention requirements was uncovered during discovery in an innocuous lawsuit brought by a disgruntled former employee. In today’s highly regulated business environment, the belief that “it won’t happen to me” is not only irrational, it is reckless. B. The Cost of Obstructing Pending & Ongoing Investigations Another recent high-profile case provides a clear example of the costs of failing to properly apply an adequate corporate record retention policy and the consequences of failing to preserve potential evidence once there is notice of a potential investigation or official proceeding. As the successful prosecution of Arthur Andersen for obstruction of justice vividly demonstrates, notice of a potential or pending investigation creates an affirmative duty to retain records related to the subject matter of the investigation. Arthur Andersen was convicted for the last-minute shredding of volumes of Enron-related documents many of which would likely have been already destroyed under the firm’s record retention policy had it been properly implemented and enforced. Among the many pieces of evidence the Government had against Arthur Andersen were several “smoking gun” e-mails including an e-mail from Andersen’s in-house counsel, Nancy Temple, advising company officials as problems with Enron's financial statements were becoming public that, "It might be useful to consider reminding the engagement team of our documentation and retention policy." Immediately following receipt of this e-mail, Arthur Anderson’s Houston office undertook a massive campaign of Enron-related document shredding which did not stop until the day after the SEC issued a subpoena for the documents on November 8, 2002. The firm was convicted of obstruction of justice in June 2002. The federal obstruction of justice statute under which Arthur Andersen was prosecuted prohibits persons from “corruptly persuad[ing]” others to improperly destroy documents to prevent their availability for use in an official proceeding. 18 U.S.C. § 1512. Other federal obstruction statutes apply to document destruction in judicial proceedings, 18 U.S.C. § 1503; proceedings before governmental agencies and committees, 18 U.S.C. § 1505; and criminal investigations. 18 U.S.C. § 1510. Many states have comparable laws designed to prevent the destruction of evidence related to potential or pending state proceedings and prosecutions. Do not be lured into complacency by thinking that only mega companies like Arthur Andersen are at risk for obstruction crimes. Take the case of one of our clients, a small government contractor, who was tried and convicted of obstruction for deleting e-mail during a mundane Government audit of one of his federal contracts. He lost his company, much of his assets, and several years of his freedom. To eliminate potential liability for obstruction of justice, a business must have a company-wide record retention policy in place which enables it to take immediate measures to protect and preserve potential evidence, including e-mails, when it has notice of an anticipated or ongoing civil or criminal investigation or proceeding. C. The Cost of Triggering Criminal Liability Under Sarbanes-Oxley The Sarbanes-Oxley Act of 2002, Pub L. 107-204, 116 Stat. 745 (2002), which marked its one-year anniversary on July 30, 2003, increased the potential costs to businesses of failing to have a comprehensive e-mail retention program in place. The Act, which was enacted in response to the Enron, Global Crossing, and Worldcom corporate accounting scandals is intended to improve corporate disclosure and financial reporting and increase the accountability of accounting firms for their audits of public companies. Sarbanes-Oxley contains three separate, and potentially inconsistent, document retention requirements. First, the Act establishes a five-member Public Company Accounting Oversight Board (PCAOB) that is subject to SEC oversight. Under rules developed by the PCAOB, registered CPA firms are required to prepare and maintain for at least seven years audit work papers and other information related to an audit in sufficient detail to support the conclusions reached in the audit report. Pub. L. No. 107-204 § 103(a)(2)(i). In addition, the PCAOB may require retention of additional documents for inspection purposes. Finally, under the criminal provisions of the Act, accountants are required to retain all audit and review work papers for five years from the end of the fiscal year in which an audit or review was completed. Id. § 802, 18 U.S.C. § 1520(a). The penalty for the willful violation of this provision is a fine or 10 years in prison or both. 18 U.S.C. § 1520(b). It is the document destructions provisions of the Sarbanes-Oxley Act, however, that are of greater concern to most businesses because they have applicability beyond businesses engaged in auditing or the securities industry. Section 802 of the Act established a new criminal statute relating to the destruction, alteration, or falsification of records in a federal investigation or bankruptcy. The Act provides that anyone who knowingly “alters, destroys, mutilates, conceals, covers up, falsifies, or make[s] 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 any case filed under [the Bankruptcy Code], or in relation to or in contemplation of any such matter or case, shall be fined . . . , imprisoned not more than 20 years, or both.” 18 U.S.C. § 1519. Most notably, the scope of the statute extends to document destruction related to any matter within the jurisdiction of an executive branch department or agency and any pending or contemplated bankruptcy. In addition, exposure to criminal prosecution exists even if no investigation or proceeding has commenced or has been threatened. Congress has deemed criminal the destruction of documents “in contemplation of” an investigation or administrative action. The potential breadth and reach of this criminal statute is staggering. Sarbanes-Oxley also expanded the obstruction of justice provision used in the Arthur Andersen prosecution. The prior version of the statute was directed at witness tampering and therefore extended only to persons who “corruptly persuade[d]” others to improperly destroy documents. The amended statute creates primary liability for anyone who “corruptly” engages in alteration or destruction of a document “with the intent to impair the object’s integrity or availability for use in an official proceeding.” 18 U.S.C. § 1512. Anyone found guilty of violating this provision will be subject to a fine, up to 20 years imprisonment, or both. Id. Sarbanes-Oxley has clearly expanded the scope of the obligation to preserve documents, records, and other evidence related to investigations, bankruptcies, and federal agency matters and amplified the penalties for failing to comply with these expanded requirements. The enhanced penalties represent yet another potential price to be paid by businesses for failing to adequately maintain an e-mail management and retention system that ensures the preservation of relevant documents. D. The Cost of Incurring Sanctions in Civil Litigation Perhaps the most significant area in which businesses face potential costs for their lack of an effective e-mail management and retention program is civil litigation. First, court-ordered sanctions are available for failing to preserve e-mails relevant to anticipated or ongoing litigation. Also, poorly managed e-mail may result in the inadvertent disclosure of privileged or proprietary materials in the course of responding to discovery. Finally, an unmanaged e-mail system may require an enormous expense by a business required to cull the system in order to respond to requests for electronic discovery. Businesses have an affirmative legal obligation to preserve all evidence relating to a dispute as soon as the potential for litigation arises. If documents are not properly retained, the responsible party may be subject to discovery sanctions under the Federal Rules of Civil Procedure or equivalent state court rules. Such sanctions may include fines, the preclusion of testimony, an adverse inference instruction to the jury, or even the entry of judgment against the party responsible for the improper document destruction or alteration. In some states, a party may recover damages in a separate cause of action for the tort of spoliation. Currently, Alabama, Alaska, the District of Columbia, Florida, Idaho, Illinois, Indiana, Kansas, Louisiana, Montana, New Mexico, and Ohio recognize spoliation as an independent basis E.g., Margaret M. Koesel, David A. Bell, Tracey L. Turnbull, Daniel F. Gourash, Spoliation of Evidence: Sanctions & Remedies for Destruction of Evidence in Civil Litigation at 50-51 (ABA 2000). Courts have imposed sanctions for the alteration or destruction of electronic records whether or not the destruction or alteration was intentional. Sanctions have been ordered even when the alteration or destruction occurred in the regular course of business. Therefore, the obligation to preserve evidence related to civil litigation requires a company to take immediate action when it has notice of a potential dispute. Upon learning of an anticipated claim against the business, the company must be able to suspend the destruction or alteration of any documents or e-mails which may relate to the matter. The need to preserve these materials must be disseminated throughout the company and users must be given clear instructions to enable them to identify the materials that must be preserved. This point is best illustrated with a fish story. In the winter of 1993, Louis Testa, a truck driver for a tropical fish wholesaler, Heavenly Fish, drove his van up to a loading dock in the rear of a newly opened Wal-Mart store in Hinsdale, New Hampshire. Mr. Testa alerted Wal-Mart to his arrival, unloaded his shipment of tropical fish, and proceeded up Wal-Mart’s delivery ramp. The ramp was coated with snow and ice, causing Mr. Testa to fall and hurt himself. As Mr. Testa was leaving, he threatened to sue Wal-Mart for his injuries. A Wal-Mart employee, presumably present on the loading dock, heard Mr. Testa’s threat and made note of it in an internal report of the incident. In addition, Wal-Mart noted that an invoice clerk had put a hold on the order placed with Heavenly Fish for that day, which was the store’s grand opening. Wal-Mart informed all vendors that it would not accept deliveries on that day, which is why Wal-Mart did not bother to clear the ramp of snow and ice that day. The invoice clerk also followed-up with a phone call to Heavenly Fish confirming that deliveries were cancelled for that day. Wal-Mart had a written record of the purchase order and phone call to Heavenly Fish. Wal-Mart had a two-year document retention policy, which it faithfully followed. Accordingly, two years after the incident involving Mr. Testa, Wal-Mart destroyed all its records relating to the incident, including the purchase order and phone record. Unfortunately for Wal-Mart, the statute of limitations in New Hampshire for personal injury exceeded two years. Shortly after Wal-Mart had destroyed its records consistent with its destruction policy, Mr. Testa filed suit. Wal-Mart defended against the suit by claiming Mr. Testa ignored Wal-Mart’s explicit direction not to make deliveries that day. During discovery, Wal-Mart was unable to produce either the purchase order to Heavenly Fish or the telephone records for the day Wal-Mart claimed it had cancelled the delivery. Wal-Mart testified that it had destroyed the records a few months before the lawsuit was filed more than two years after the incident in accordance with a standard record retention policy. During the trial of the matter, the court provided the following instruction to the jury regarding the documents Wal-Mart could not produce: A reasonable inference is a deduction which common sense and reason lead you to draw from the evidence. An example is one inference that the plaintiff seeks to have you draw here is to the effect that the defendant, having known that a lawsuit was pending, destroyed certain records and did so because defendant knew the records to be harmful to its own case. But the law hold that such an inference can be drawn only if the plaintiff proves by a preponderance of the evidence that [the defendant] not only knew of the potential claim of the plaintiff, but also knew of the potential relevance of the destroyed documents. And even where plaintiff satisfies this burden of proof, any inference that may be drawn is permissive and may or may not be drawn by the jury. Id. at 176-77. After the jury awarded a verdict for the plaintiff, Wal-Mart appealed challenging the trial court’s adverse inference instruction as improper. The Court of Appeals concluded that a rational jury could have concluded that Wal-Mart was on notice of the plaintiff’s claim because it had conducted an investigation and generated an internal accident report, which noted Testa’s threat to sue, immediately after the accident occurred. The court also concluded that a rational jury could conclude that Wal-Mart was on notice of the relevance of the destroyed documents. In response to Wal-Mart’s argument that there was no evidence that the Wal-Mart employee who discarded the records had any notice of Testa’s claim or the relevance of the records to it, the court explained that only institutional notice – “the aggregate knowledge possessed by the party and its agents, servants, and employees” -- was required for purposes of the adverse inference instruction Testa v. Wal-Mart Stores, Inc., 144 F.3d 173 (1st Cir. 1998). The Testa case spotlights the perils of relying on a broad-based, general retention policy. Consistent application of Wal-Mart’s two-year document retention policy was of no avail to Wal-Mart in the face of Testa’s threat to sue and the three-year statute of limitations. Testa also underscores the need for companies to devise and implement early detection measures for potential lawsuits. A properly implemented record retention policy, which considers extended retention requirements due to potential lawsuits, will provide protection against sanctions for a business accused of destroying documents in the face of litigation. However, the policy must be consistently and universally implemented and may not be used merely as an excuse for the destruction of pertinent records. Although only paper-based discovery was involved, the case of Carlucci v. Piper Aircraft Corp., 102 F.R.D. 472 (S.D. Fla. 1984), demonstrates the perils of relying on a sham record retention policy as the reason for document destruction. Carlucci involved a wrongful death claim arising from the crash of an airplane. During discovery, the plaintiffs sought engineering documents concerning the development and testing of aircraft components that allegedly failed, crash investigation documents, and safety studies. After raising several objections, the manufacturer, Piper, produced some but not all of the requested documents. There was evidence that some responsive documents had been destroyed by Piper during the course of discovery while older, less useful documents had been retained and produced. Piper claimed that some of the documents had been destroyed pursuant to its two-year document retention policy that had not been suspended during the litigation. Former employees of the manufacturer testified that some documents had been destroyed prior to the commencement of the litigation according to instructions from the manufacturer to purge categories of documents that might be detrimental to the manufacturer in a lawsuit. The court rejected Piper’s attempt to defend its actions based on its record retention policy. After noting the inconsistency with which the policy had been carried out, the court pronounced the policy a “sham” and proceeded to strike Piper’s answer and enter a default judgment against it on the issue of liability. Linnen v. A. H. Robins Co., Inc., No. 97-2307, 1999 WL 462015 (Mass. Super. June 16, 1999), is another example where sanctions were imposed based in part on the defendant’s poorly implemented record retention policy. The litigation in Linnen was commenced in May 1997 and discovery was served in June 1997. The defendant typically kept e-mail backup tapes for three months before recycling them. That policy was suspended in September 1997 due to the pending litigation. During discovery, the defendant eventually disclosed that some older backup tapes had not been recycled pursuant to the company’s policy. However, the defendant objected to producing these tapes because of the costs involved in restoring the data -- almost $2 million -- and the vast amount of data contained on the tapes. The plaintiff sought all of the e-mails and also requested sanctions for the e-mails lost from May 1997 to September 1997 when the defendant failed to suspend its recycling of backup tapes. The plaintiff asked for an order making all of the e-mail admissible at trial, reimbursing all costs and fees associated with having to re-take depositions based on the new e-mails to be disclosed, and reimbursing costs and fees associated with the depositions necessary to discover the scope of the data available. The court declined to order all the e-mails admissible but granted the other requested sanctions as well as an adverse inference instruction at trial regarding the records destroyed according to the defendant’s record retention policy. Finally, in Prudential Ins. Co. of America Sales Practices Litigation 169 F.R.D. 598 (D.N.J 1997), sanctions were awarded against the defendant insurer for the destruction of documents in violation of a court order. The defendant violated the order by failing to preserve the documents and not informing its field offices of the litigation and the court-ordered requirement to preserve documents. The court determined that the defendant’s haphazard approach to apprising its employees of their record retention obligations warranted sanctions requiring the payment of $1 million to the court, payment of some of the plaintiffs’ fees and costs, a mailing to every employee of a copy of the court order with an explanation of the litigation, creation of a manual of guidelines for document retention, the dedication of a telephone hotline to facilitate the reporting of document destruction, and the establishment of a certification process for compliance with the manual. In support of the sanctions the court noted: Prudential has violated the Order of the Court on at least four occasions. It has no comprehensive document retention policy with informative guidelines and lacks a protocol that promptly notifies senior management of document destruction. These systemic failures impede the litigation process and merit the imposition of sanctions. Id. at 617. The above cases demonstrate that while a record retention policy may provide a business with some measure of protection from claims of spoliation, a haphazard approach to retention could result in discovery sanctions or tort liability. Frequently, parties find that the destruction or alteration of records brings about more damage than would have been caused by the documents and data had they been produced. Therefore, businesses should record retention policies that can be suspended or modified immediately in response to notice of anticipated litigation in order to avoid the ramifications of inadvertent e-mail destruction. E. The Allocation of Costs Associated with E- Discovery Unmanaged e-mail is so dangerous to business because it is frequently the principal focus of discovery. Electronic discovery is considered by many lawyers to be the “digital smoking gun” of litigation and e-mail is often referred to as “evidence mail.” See Susan J. Silvernail, Electronic Evidence: Discovery in the Computer Age, 58 Ala. Law 176, 181 (1997); Michael E. Scott, Scott on Computer Law § 18.02 (2d ed. 1997). This focus on electronic discovery (“e-discovery”) has fundamentally changed the way that discovery is conducted and has presented courts with a new dilemma. As the popularity of e-discovery has grown, courts have struggled with containing its scope and associated costs. In traditional paper-base discovery, the producing party is usually responsible for the entire cost of its production. However, determining which party should be required to pay the costs of e-discovery has become a matter of much controversy and contention. Because of the vast amounts of information that can be stored on a computer system and backup tapes, and because of the extremely high costs which may be involved in restoring archived data and reviewing vast volumes of electronic data prior to production, producing parties frequently claim that responding to e-discovery requests impose an undue burden or expense. The debate was recently summarized by one federal court judge as follows: [M]aking the producing party pay for all costs of restoration as a cost of its “choice” to use computers creates a disincentive for the requesting party to demand anything less than all of the tapes. American lawyers engaged in discovery have never been accused of asking for too little. To the contrary, like the Rolling Stones, they hope that if they ask for what they want, they will get what they need. They hardly need any more encouragement to demand as much as they can from their opponent. The converse solution is to make the party seeking the restoration of the backup tapes pay for them, so that the requesting party literally gets what it pays for. Those who favor a “market” economic approach to the law would argue that charging the requesting party guarantee that the requesting party would demand only what it need. Under that rationale, shifting the cost of production solves the problem . . . . A fairer approach borrows, by analogy, from the economic principle of “marginal utility.” The more likely it is that the backup tape contains information that is relevant to a claim or defense, the fairer it is that the governmental agency search at its own expense. The less likely it is, the more unjust it would be to make the agency search at its own expense. The difference is “at the margin.” Finally, economic considerations have to be pertinent if the court is to remain faithful to its responsibility to prevent undue burden or expense. Fed.R.Civ.P. 26(c). If the likelihood of finding something was the only criterion, there is a risk that someone will have to spend hundreds of thousands of dollars to produce a single e-mail. That is an awfully expensive needle to justify searching the haystack. It must be recalled that ordering the producing party to restore backup tapes upon a showing of likelihood that they will contain relevant information in every case gives the plaintiff a gigantic club with which to beat his opponent into settlement. No corporate president in her right mind would fail to settle a lawsuit for $100,000 if the restoration of backup tapes would cost $300,000. While that scenario might warm the cockles of certain lawyers’ hearts, no one would accuse it of being just. McPeek v. Ashcroft, 202 F.R.D. 31, 33-34 (D.D.C. 2001). Two recent cases in the United States District Court for the Southern District of New York have addressed in considerable detail the issue of cost shifting in e-mail discovery disputes. In Rowe Entertainment, Inc. v. William Morris Agency, Inc., 205 F.R.D. 421, 430 (S.D.N.Y. 2002), a federal court established a framework for determining which party should be assessed the costs of responding to e-discovery. In Rowe, the court evaluated eight factors to determine which party should bear the costs of production, including: (1) the specificity of the discovery request; (2) the likelihood of discovering critical information; (3) the availability of such information from other sources; (4) the purposes for which the responding party maintains the requested data; (5) the relative benefit to the parties of obtaining the information; (6) the total cost associated with the production; (7) the relative ability of each party to control costs and its incentive to do so; and (8) the resources available to each party. Id. at 421. See also Murphy Oil USA, Inc. v. Fluor Daniel, Inc., No. 99-33564 T(1), 2002 WL 246439 (E.D.La. Feb 19, 2002) (applying Rowe factors); Byers v. Illinois State Police, No. 99 C 8105, 2002 WL 1264004, at *12 (N.D. Ill. June 3, 2002) (following Rowe). In Zubulake v. USB Warburg LLC, No. 02 Civ 1243(SAS), 2003 WL 21087884 (S.D.N.Y. May 13, 2003), Judge Scheindlin criticized the Rowe framework and established a new seven-factor test. Judge Scheidlin emphasized that cost shifting in e-mail discovery should be the exception, not the rule in accordance with the established presumption that the responding party must bear the expense of complying with discovery requests. Furthermore, Judge Scheindlin noted that cost shifting may effectively end discovery for private parties suing large corporations. Accordingly, Judge Scheindlin ruled that courts should consider the following factors in determining whether to shift the cost of e-mail discovery: (1) ; (2); (3); (4); (5); (6); and (7) The Rowe and Zubulake cases illustrate that the courts are wrestling with this issue. The allocation of costs for e-discovery is still an area of great uncertainty. Many courts still do not perceive a significant distinction between the burden associated with paper-based discovery and that of e-discovery. As a result, prudent businesses should develop and maintain e-mail retention systems which will allow them to respond to e-discovery requests in the most cost-efficient manner. A well-designed, properly maintained retention program should help businesses avoid the types of pitfalls that would make the court more likely to impose the costs of e-discovery entirely on the producing party. For example, courts have made it clear that they will not shift the burden of discovery onto the discovering party where the costliness of the production is entirely a product of the producing party’s record keeping over which the requesting party has no control. See Delozier v. First Nat’l Bank of Gatlinburg, 109 F.R.D. 161 (E.D. Tenn. 1986); Kozlowski v. Sears, Roebuck & Co., 73 F.R.D. 73 (D. Mass. 1976)(high cost of discovery was result of producing party’s indexing scheme). Furthermore, the costs associated with reviewing a massive production in order to cull out privileged and proprietary materials usually will not be shifted to the requesting party where the producing party’s record keeping system has not segregated these types of documents from others. Rowe Entertainment, Inc., supra, at 431 (producing party required to bear expense of full-scale privilege review where confidential documents intermingled with discoverable documents); Murphy Oil USA, Inc., supra at ___ (same). Finally, a company’s failure to purge records in accordance with established retention policy may result in the company being forced to bear the exorbitant costs associated with reviewing and producing a tremendous volume of data in discovery. In Murphy Oil USA, Inc., supra, the defendant failed to follow its policy of rewriting tapes every 45 days and thus had in its possession 93 backup tapes at the time that the plaintiff served discovery seeking the data on all backup tapes. Fortunately for the defendant, the court engaged in a Rowe analysis and shifted some of the costs of the production to the plaintiff. Courts have proven to be less than receptive to the argument that the production of electronic information is unduly costly or cumbersome where the complexity and costs involved are the result of the business choice of the producing party. A properly implemented retention policy can alleviate some of the burdens of production and substantially reduce costs. F. Conclusion E-mail retention is no longer simply about storing records – its about managing risks. As the discussion above illustrates, the risks of not properly managing e-mail are significant and increasing with time. According to a new survey by the American Management Association, only 34 percent of employers have a written e-mail retention policy in place today. It would appear that the vast majority of companies today either don’t appreciate the significant risks that face them or are in denial. Either way, the old adage is proved once again: “an ounce of prevention is worth a pound of cure.” ______________________ * William F. Savarino is a partner with the Washington, D.C. law firm of Cohen Mohr, LLP. He has 20 years experience in representing companies and individuals in diverse matters involving government contracts, litigation, security clearances, and record retention issues. He has a national speaker on e-mail retention issues. * Rowena E. Laxa is an associate at Cohen Mohr, LLP. She is a graduate of the George Mason University School of Law and practices in the areas of Employment Law; Commercial Litigation; Government Contracts; and record retention. |