Retaining e-documents without losing your mind

Without a doubt, the most critical part of a document-retention policy is actually having one. Yet, shockingly, it seems few Canadian businesses actually do, leaving corporate counsel scrambling when a litigation hold letter lands on their desk. 

When you couple the statistics that say more than 99 per cent of all documents created and stored are done so electronically with the success of document-storage facilities like Iron Mountain, you get a unique set of challenges that can quickly amount to a crisis waiting to happen for any in-house counsel.

But adopting the “save everything” approach to document management comes with a hefty price tag, as the storage fees and costs of maintaining outdated computer programs and hardware increase year after year.
So with the competing interests of risk management and the bottom line, what’s counsel to do?

Enter the document-retention policy. It’s an all-encompassing, umbrella-type policy that deals with everything from e-mail and instant messaging to court documents and correspondence. It takes into account the creation date of a particular document, its type and context, and the relevant regulatory and legislative requirements.

A document retention policy isn’t just critical when your business becomes involved in litigation, but according to the experts, it can help internally to monitor and analyze the company’s business, and respond to legislative and regulatory requirements.

Depending on the size of your business, drafting these policies can be a mammoth undertaking that often requires the help of outside consultants, but what results is a cohesive plan to address the retention and destruction of business documents in both paper and electronic forms.

“Clients have a ‘save everything’ mentality,” says Kelly Friedman, partner with Ogilvy Renault LLP, adding that it’s not a strategy she recommends. “Usually, they’re concerned about the time and costs associated with setting a document-retention policy up, but ‘save everything’ has a whole host of problems as well.”

While initially the cost of saving everything might not seem prohibitive, it will quickly become so, especially where electronic data is concerned. Friedman says that one of several issues that is particularly problematic when saving everything is what to do with legacy data. Anyone with an old PC in their basement understands this concept: it still holds important files, but the new computer lacks the ability to read them, so the old one just stays put on the off chance a document might need to be retrieved, or until someone decides the information is not worth keeping anymore.

“If a company says they’re going to play it safe and save everything, they’re going to have to keep transferring all that information that has not already been culled onto new software,” says Friedman. When the new software becomes obsolete and can no longer accommodate the old data, forensic experts are needed to recreate it.

Another problem that’s created when a formal document-retention policy isn’t in place has to do with “gatekeepers.” These are the people who have been with the company for years and are intimately familiar with what files are stored where, how long they’ve been there, and what to do if anything should go missing.

“One of the worst situations I’ve seen,” says William Platt of Platinum Legal Group Inc., a litigation-support service provider, “was where I walked in the door of a law firm and very quickly came to the realization that the people who knew the information, and where it was stored, had retired.”  

Platt says that, in his experience, many organizations don’t have the proper mechanisms in place to deal with document retention and that they tend to manage it on an ad hoc basis. “I tell people not to look for a Band-Aid solution, but to go back and look at the root cause of the problem.”

Platt consults with his clients on a host of issues, including document retention and records management and e-discovery. He stresses that having a document-retention policy is certainly a step in the right direction, but there need to be guidelines in place that actually show the people within the organization how to operate. “It really just needs to have teeth,” he says.

Platt says his consultants will go into a corporate environment where litigation has begun or is impending, and work with staff to find out where the relevant documents are. On one file, he says, his team went in, “trying to figure out what those 300 boxes on the 28th floor really represented.” With a formal policy in place, the data and documents can be located efficiently because they have been stored, or destroyed, systematically.

It is often the threat of litigation that gets executives and their counsel thinking about document-retention policies in the first place, but that wasn’t the case at Calgary-based Agrium Inc. For this major retail supplier of agricultural products and services in North and South America, “there was no triggering event,” says its associate general counsel Kathryn Heath. “The company recognized that it needed a formal program, more to manage the systematic and proper destruction of documents when they were past their relevance,” she says. “It was also about regulatory compliance and managing legal risk.”

According to Heath, Agrium started developing its document-retention policy about four years ago by classifying its records and setting up a disposition and destruction schedule for those specific record types.

Among the company’s considerations in formulating the policy were the rising costs of storage and the difficulty with document retrieval.

“We’re really operating three businesses, so we had to tailor to each one, designing retention policies in accordance with each jurisdiction.” The process is still being rolled out across the organization, and Heath says they continue to look at changing technology to determine whether and how it fits into the overall policy. Where the policy was first geared toward paper documents, it now includes e-mail and electronic data.

The best advice on the subject, according to Friedman, is “once you have a policy, adhere to it.”

She says that the case law is clear, in that if your policy says you’re going to keep contractual documents for a period of 15 years, and you find yourself in court where it’s revealed that a relevant document was destroyed in year 12, there will likely be an adverse inference drawn.

Friedman, who lectures often on the subject of document retention, says that, in this situation, courts will ask why the policy wasn’t followed and make certain presumptions based on the response.

In many cases it’s a presumption that could prove fatal.

Citing several Canadian cases on the issue of a corporation’s need for a document-retention policy, Friedman says the jurisprudence demonstrates that an adverse inference can also be drawn where a party fails to produce a document.

In Ontario v. Johnson Controls Ltd., a negligence case involving a piece of ice that fell from an office building in Sudbury, Justice Donald R. Cameron said, “The absence of a document retention policy also constitutes a failure to recognize the court’s ability to draw an adverse inference in certain circumstances for failure to produce a document and a failure to address the practical need to retain documents once notice of a proceeding has been received.”

While the experts agree that document-retention policies can often provide the means to effectively navigate the stormy world of litigation, the difficulty facing in-house counsel is getting “buy-in” from the top.

One strategy could be demonstrating the cost-savings associated with proper storage and retrieval services, while another might involve a presentation on the litigation costs of a hypothetical claim.

“With this issue, you’re always trying to capture people’s attention and make them understand that this is something valuable,” says Heath.

“Especially when they’re balancing competing business interests, deadlines, and managing a bottom line.” IH

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