New Year’s Resolutions on Electronic Recordkeeping, Prompted by the Federal Rules of Civil Procedure

January 4th, 2007

Since I don’t do any litigation in my practice, I find it surprising to get some good advice from the Federal Rules of Civil Procedure- I barely know how to find them, never mind use them!  Still, there are a couple of new rules on electronic discovery that highlight the need for good business practice in the area of electronic document retention.
The basic idea behind the new rules is that they (i) require participants in a lawsuit in the federal courts to agree on e-discovery practices early in the suit’s life, and (ii) define “electronic records” much more broadly than before. Essentially all information in electronic form is now clearly subject to the discovery rules, including not just traditional “documents” but also email and IM communication, blogs, database records, backup files, etc. Parties claiming they are unable to produce requested data will be required to provide a good reason for the failure- though the new rules only went into effect December 1, 2006 and have not been tested, presumably “I can’t find it” won’t be good enough in most cases.

In my experience, most businesses that aren’t in highly regulated industries like banking or health care aren’t required to have e-recordkeeping policies, and therefore don’t. For businesses that face litigation as an inevitable cost of doing business, the new rules may push recordkeeping policies higher on the to-do list. Smart companies will view the requirements as an opportunity to focus on data security as well, and try to make sure that they (a) only retain data they need to, and (b) store data securely in a way that can be readily searched and produced on demand.

Smaller businesses generally don’t think of litigation as a cost of business and preparing for e-discovery probably sits permanently at the bottom of the to-do list. As Eric Sinrod points out, though, e-discovery is expensive and the new rules move the process earlier in the litigation calendar, such that litigants may have no choice but to dive in early. Thus, the new rules could make the already crushing prospect of litigation to a growing business potentially life-threatening.

However, another way to look at it is that the new rules really only codify something that is a good idea anyway- figure out what data to retain and what to delete, then follow the plan you develop. I admit to being a data packrat myself- I tend not to empty my Trash folders (email especially), but to use them as long-term out-of-the-way storage for stuff I might need someday. The rules tell me that electronic recordkeeping should receive the same kind of attention as physical records. I don’t store physical drafts of documents permanently, so why should I keep electronic versions?

The same goes for my clients. I certainly hope that none of them are dragged into federal court (or any other, for that matter), but the rules really do just put a price tag on one risk of not having a good e-records management policy. We know what the costs could be if something should go to litigation and good business practice says we should be have and follow a records policy anyway, so logic says the wise company moves that item up the list and gets a policy in place during 2007, preferably sooner rather than later.  Hence, my new year’s resolution is to get more serious about my own e-document retention, and to periodically remind my clients to put their own policies into place as well.

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